Delaware
(State or other jurisdiction of incorporation or organization) |
3674
(Primary Standard Industrial Classification Code Number) |
04-3444218
(I.R.S. employer identification number) |
||
50 Old Webster Road
Oxford, Massachusetts 01540 (508) 373-1100 |
Robert W. Ericson, Esq.
David A. Sakowitz, Esq. Winston & Strawn LLP 200 Park Avenue New York, New York 10166- 4193 (212) 294-6700 |
Robert G. Day, Esq.
Wilson Sonsini Goodrich & Rosati Professional Corporation 650 Page Mill Road Palo Alto, California 94304- 1050 (650) 493-9300 Adam M. Dinow, Esq. Wilson Sonsini Goodrich & Rosati Professional Corporation 1301 Avenue of the Americas New York, New York 10019 (212) 999-5800 |
Proposed Maximum | Proposed Maximum | |||||||||||
Title of Each Class of Securities to be | Amount to be | Offering Price | Aggregate Offering | Amount of | ||||||||
Registered | Registered(a) | Per Share(b) | Price(a) | Registration Fee | ||||||||
Common Stock, par value $0.0001 per share
|
10,350,000 shares | $15.50 | $160,425,000 | $17,166(c) | ||||||||
(a) | Includes shares of Common Stock which may be purchased by the underwriters from selling stockholders to cover over-allotments, if any. | |
(b) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(a) promulgated under the Securities Act. | |
(c) | In connection with the initial filing of this Registration Statement on August 11, 2006, IPG Photonics Corporation paid a filing fee of $13,910. Prior to the filing of this Amendment No. 3 to the Registration Statement, IPG Photonics Corporation has transmitted $3,256, representing the additional filing fee payable in connection with the increase in the proposed maximum aggregate offering price. | |
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 is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. |
Per Share | Total | |||
Public offering price
|
$ | $ | ||
Underwriting discount
|
$ | $ | ||
Proceeds, before expenses, to IPG Photonics
|
$ | $ | ||
Proceeds, before expenses, to selling stockholders
|
$ | $ |
Merrill Lynch & Co. | Lehman Brothers |
Jefferies & Company |
Thomas Weisel Partners LLC |
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F-1 | ||||||||
Ex-4.1 Specimen Stock Certificate | ||||||||
Ex-5.1 Opinion of Winston & Strawn LLP | ||||||||
Ex-10.32 Confidential Settlement Agreement | ||||||||
Ex-10.45 Sublease Agreement | ||||||||
Ex-10.46 Right of First Offer Agreement (Dr. Valentin P. Gapontsev) | ||||||||
Ex-10.47 Right of First Offer Agreement (Igor Samartsev) | ||||||||
Ex-23.1 Consent of Deloitte & Touche LLP |
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F-11
F-12
F-13
F-14
F-15
F-16
F-17
F-18
F-19
F-20
F-21
F-22
F-23
F-24
F-25
F-26
F-27
F-28
F-29
F-30
II-1
II-2
II-3
II-4
II-5
II-6
II-7
This summary highlights information contained elsewhere in
this prospectus. Because it is a summary, it does not contain
all of the information that you should consider before investing
in our common stock. You should read the entire prospectus
carefully, including our financial statements and the related
notes and the risks of investing in our common stock discussed
under Risk Factors before making an investment
decision.
Superior Performance.
Fiber lasers provide high
beam quality over the entire power range.
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Lower Total Cost of Ownership.
Fiber lasers offer
strong value to customers because of their generally lower total
operating costs due to their lower required maintenance costs,
high reliability and energy efficiency.
Ease of Use.
The all solid-state design and
integrated fiber delivery of fiber lasers make them easy to
operate, maintain and integrate into laser-based systems.
Compact Size and Portability.
Fiber lasers are
typically smaller and lighter than traditional lasers, and their
portability and versatility allow them to be used in new laser
applications.
Choice of Wavelengths and Precise Control of Beam.
The design of fiber lasers generally provides a broad range of
wavelength choices and increased beam control, allowing users to
select the precise wavelength and beam parameter that best match
their application and materials.
Differentiated Proprietary Technology Platform.
Our proprietary technology platform allows our products to have
higher output powers and superior beam quality than are
achievable through traditional techniques. In addition, we have
developed a wide range of advanced proprietary optical
components that contribute to the superior performance and
reliability of our products.
Leading Market Position.
As a pioneer and
technology leader in fiber lasers, we have built leading
positions in our various end markets with a large and diverse
customer base.
Breadth and Depth of Expertise.
We have extensive
know-how in materials sciences, which enables us to make our
specialty optical fibers, semiconductor diodes and other
critical components. We also have expertise in optical,
electrical, mechanical and semiconductor engineering which we
use to develop and manufacture our products.
Vertically Integrated Development and
Manufacturing.
We believe that we are the only fiber
laser manufacturer that is vertically integrated. We develop and
manufacture all of the key components of our fiber lasers,
including semiconductor diodes, specialty optical fibers and
other advanced optical components. We believe our vertical
integration enhances our ability to meet customer requirements,
accelerate development, manage costs and improve component
yields, while maintaining high performance and quality standards.
Diverse Customer Base, End Markets and
Applications.
Our diverse customer base, end markets and
applications provide us with many growth opportunities. We have
shipped more than 21,000 units and, in 2005, we shipped to
more than 300 customers worldwide.
Broad Product Portfolio and Ability to Meet Customer
Requirements.
We offer a broad range of standard and
custom fiber lasers and amplifiers ranging in power from one
watt to 50 kilowatts. As a result of our modular, scalable
technology platform, we are able to easily customize and upgrade
our products to meet customer requirements.
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Leverage Our Technology to Gain Market Share.
We
plan to leverage our brand and position as the leader in
developing and commercializing fiber lasers to increase our
market share in the broader market. We believe that our fiber
lasers will continue to displace traditional lasers in many
existing applications due to their superior performance and
value.
Target New Applications for Lasers.
We intend to
continue to enable and penetrate additional applications where
lasers have not traditionally been used. We believe that fiber
laser technology can overcome many of the limitations that have
slowed the adoption of traditional lasers.
Expand Our Product Portfolio.
We plan to continue
to invest in research and development to add additional
wavelengths, power levels and other parameters, improve beam
quality and develop new products.
Optimize Our Manufacturing Capabilities.
We plan
to seek further increases in the automation of our component
manufacturing processes and device assembly to improve component
yields and increase the power outputs and capacities of the
various components that we make.
Expand Global Reach to Attract Customers
Worldwide.
We intend to capitalize on and grow our
global customer base by opening new application development
centers as well as sales and service offices in Asia, Europe and
the United States.
Application Penetration and Increasing Market
Share.
Our future growth depends upon our ability to
penetrate new applications for fiber lasers and increase our
market share in existing applications.
Acceptance and Rate of Penetration.
If fiber
lasers do not achieve broader market acceptance or if market
penetration occurs more slowly than we expect, prospects for our
growth and profitability may be negatively impacted.
Effectively Managing Our Growth.
We may not be
able to effectively manage our growth, which may harm our
business and operating results.
High Levels of Fixed Costs.
Our vertical
integration strategy results in high levels of fixed costs, and
our manufacturing capacity may not be at the appropriate size
for future levels of demand.
Intellectual Property Infringement Claims.
We are
currently subject to claims that we are infringing third-party
intellectual property rights and other claims may arise in the
future, which could result in costly and lengthy litigation, the
outcome of which is unknown.
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4,411,923 shares issuable upon exercise of stock options
outstanding as of September 30, 2006, which have a weighted
average exercise price of $2.68 per share;
3,131,384 additional shares reserved as of September 30,
2006 for future issuance under our stock-based compensation
plans;
warrants to purchase shares of our common stock that will be
repurchased at the closing of this offering; and
17,746 shares issued upon the exercise of options after
September 30, 2006.
gives effect to the conversion of our outstanding preferred
stock into a combination of common stock and subordinated notes;
gives effect to a 2-for-3 reverse stock split to be effective
prior to the pricing of this offering;
gives effect to amendments to our certificate of incorporation
and by-laws that will become effective upon completion of this
offering; and
assumes no exercise of the option to purchase up to
1,350,000 additional shares of common stock from the
selling stockholders that has been granted to the underwriters.
Table of Contents
Nine Months Ended
Year Ended December 31,
September 30,
2001
2002
2003
2004
2005
2005
2006
(in thousands, except per share data)
Operations Data:(1)
$
26,490
$
22,180
$
33,740
$
60,707
$
96,385
$
62,238
$
101,128
26,223
23,277
38,583
42,274
62,481
41,763
57,983
267
(1,097
)
(4,843
)
18,433
33,904
20,475
43,145
21,240
19,910
2,110
2,363
3,236
2,354
4,111
8,407
8,383
10,063
4,831
5,788
4,177
4,314
18,875
13,354
9,998
8,179
10,598
6,689
9,352
15,042
9,474
63,564
51,121
22,171
15,373
19,622
13,220
17,777
(63,297
)
(52,218
)
(27,014
)
3,060
14,282
7,255
25,368
1,857
(1,089
)
(1,505
)
(2,150
)
(1,840
)
(1,410
)
(1,051
)
6,862
2,518
(3,664
)
(615
)
(745
)
(477
)
(4,356
)
975
2,414
1,647
196
236
196
143
(53,603
)
(48,375
)
(30,536
)
491
11,933
5,564
20,104
3,985
(1,175
)
2,205
1,601
(4,080
)
(2,037
)
(6,597
)
(4
)
165
121
(80
)
(426
)
(25
)
(910
)
$
(49,622
)
$
(49,385
)
$
(28,210
)
$
2,012
$
7,427
$
3,502
$
12,597
$
(2.17
)
$
(2.13
)
$
(1.40
)
$
(0.01
)
$
0.16
$
0.06
$
0.34
$
(2.17
)
$
(2.13
)
$
(1.40
)
$
(0.01
)
$
0.16
$
0.06
$
0.31
23,973
24,317
25,534
25,698
26,232
26,105
27,052
23,973
24,317
25,534
25,698
30,167
30,040
32,987
$
0.21
$
0.42
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(1)
Due primarily to certain stock-based compensation awarded
primarily in 2000 and 2001, we have recorded significant
stock-based compensation during the years ended
December 31, 2001, 2002 and 2003. Those awards became fully
vested during the year ended December 31, 2004. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Critical
Accounting Policies and Estimates Stock-Based
Compensation.
(2)
The change in value of the series B warrants is a non-cash
charge related to recording the increase or decrease in the fair
value of the warrants. The change in fair value for this
derivative instrument is directly related to the probability
that the warrants will be exercised prior to their expiration in
April 2008. We intend to use a portion of the net proceeds from
this offering to repurchase the series B warrants. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Factors and
Trends That Affect our Operations and Financial
Results Effect of Preferred Stock On Net Income and
Net Income Per Share.
(3)
The supplemental pro forma disclosures are intended to
demonstrate the effects on net income per share of the
completion of this offering and the related impacts of the
conversion of our preferred stock and the repurchase of the
series B warrants with a portion of the net proceeds of
this offering. The number of shares used in the calculation of
supplementary pro forma net income per common share includes
(a) the basic weighted average common stock outstanding,
(b) 9,914,217 shares of common stock, which will be
issued upon completion of this offering upon the conversion of
our preferred stock, assuming an offering price of $14.50 per
share, the midpoint of the range set forth on the cover page of
this prospectus and (c) 3,407,383 shares related to
the additional dilutive impact of existing assuming options
assuming that the fair value of the common stock increases to
$14.50. Supplementary pro forma net income used in the
calculation of supplementary pro forma net income per share
reflects the elimination of the increase in value of the
series B warrants, which will be repurchased upon the
completion of this offering, totaling $745,000 for the year
ended December 31, 2005 and $4.4 million for the nine
months ended September 30, 2006. In addition, all accretion
of preferred stock has been eliminated in the determination of
net income attributable to common stockholders. See Use of
Proceeds, Managements Discussion and Analysis
of Financial Condition and Results of Operations
Critical Accounting Policies and Estimates Fair
Value Adjustment of Warrants and Certain
Relationships and Related Party Transactions.
As of September 30, 2006
Actual
Pro Forma
Pro Forma as Adjusted
(unaudited)
(in thousands)
$
11,357
$
11,357
$
40,652
37,994
37,994
85,200
141,401
141,401
170,041
23,151
43,151
20,000
19,000
19,000
97,902
4,880
(31,411
)
46,491
125,168
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Our future growth depends upon our ability to penetrate
new applications for fiber lasers and increase our market share
in existing applications.
demonstrate the effectiveness of fiber lasers in new
applications;
increase our direct and indirect sales efforts;
extend our product line to address new applications for our
products;
continue to reduce our manufacturing costs and enhance our
competitive position; and
effectively service and support our installed product base.
If fiber lasers do not achieve broader market acceptance
or if market penetration occurs more slowly than we expect,
prospects for our growth and profitability may be negatively
impacted.
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We may not be able to effectively manage our growth and we
may need to incur significant costs to address the operational
requirements related to our growth, either of which could harm
our business and operating results.
Our vertically integrated business results in high levels
of fixed costs that may adversely impact our gross profits and
our operating results in the event of a reduction in demand for
our products.
We are subject to lawsuits alleging that we are infringing
third-party intellectual property rights. Intellectual property
claims could result in costly litigation and harm our
business.
Table of Contents
stop selling our products or using the technology that contains
the allegedly infringing intellectual property;
pay actual monetary damages, royalties, lost profits or
increased damages and the plaintiffs attorneys fees;
attempt to obtain a license to use the relevant intellectual
property, which may not be available on reasonable terms or at
all; and
attempt to redesign the products that allegedly infringed upon
intellectual property of others, which may be costly or
impractical.
Our inability to protect our intellectual property and
proprietary technologies could result in the unauthorized use of
our technologies by third parties, hurt our competitive position
and adversely affect our operating results.
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We depend upon internal production and on outside single
or limited-source suppliers for many of our key components and
raw materials. Any interruption in the supply of these key
components and raw materials could adversely affect our results
of operations.
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We rely on the significant experience and specialized
expertise of our senior management and scientific staff and if
we are unable to retain these key employees and attract other
highly skilled personnel necessary to grow our business
successfully, our business and results of operations could
suffer.
Failure to effectively build and expand our direct field
service and support organization could have an adverse effect on
our business.
The laser and amplifier industries may experience
declining average selling prices, which could cause our gross
margins to decline and harm our operating results.
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A few customers account for a significant portion of our
sales, and if we lose any of these customers or they
significantly curtail their purchases of our products, our
results of operations could be adversely affected.
We have experienced, and expect to experience in the
future, fluctuations in our quarterly operating results. These
fluctuations may increase the volatility of our stock
price.
the increase, decrease, cancellation or rescheduling of
significant customer orders;
the timing of revenue recognition based on the installation or
acceptance of certain products shipped to our customers;
the timing of customer qualification of our products and
commencement of volume sales of systems that include our
products;
the rate at which our present and future customers and end users
adopt our technologies;
the gain or loss of a key customer;
product or customer mix;
competitive pricing pressures;
the relative proportions of our U.S. and international sales;
our ability to design, manufacture and introduce new products on
a cost-effective and timely basis;
the incurrence of expenses to develop and improve application
and support capabilities, the benefits of which may not be
realized until future periods, if at all;
different capital expenditure and budget cycles for our
customers, which affect the timing of their spending;
foreign currency fluctuations; and
our ability to control expenses.
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Our manufacturing capacity may not be at the appropriate
size for future levels of demand.
Future downturns in the economy, particularly in the
materials processing and communications markets, could have a
material adverse effect on our sales and profitability.
We depend on our OEM customers and system integrators and
their ability to incorporate our products into their
systems.
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Because we lack long-term purchase commitments from our
customers, our sales can be difficult to predict, which could
adversely affect our operating results.
The markets for our products are highly competitive and
increased competition could increase our costs, reduce our sales
or cause us to lose market share.
Our inability to manage risks associated with our
international customers and operations could adversely affect
our business.
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longer accounts receivable collection periods;
changes in the values of foreign currencies;
changes in a specific countrys or regions economic
conditions, such as recession;
compliance with a wide variety of domestic and foreign laws and
regulations and unexpected changes in those laws and regulatory
requirements, including uncertainties regarding taxes, tariffs,
quotas, export controls, export licenses and other trade
barriers;
certification requirements;
environmental regulations;
less effective protection of intellectual property rights in
some countries;
potentially adverse tax consequences;
different capital expenditure and budget cycles for our
customers, which affect the timing of their spending;
political, legal and economic instability, foreign conflicts,
and the impact of regional and global infectious illnesses in
the countries in which we and our customers, suppliers,
manufacturers and subcontractors are located;
preference for locally produced products;
difficulties and costs of staffing and managing international
operations across different geographic areas and cultures;
seasonal reductions in business activities; and
fluctuations in freight rates and transportation disruptions.
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Foreign currency transaction risk may negatively affect
our net sales, cost of sales and operating margins and could
result in exchange losses.
Our products could contain defects, which may reduce sales
of those products, harm market acceptance of our fiber laser
products or result in claims against us.
We may pursue acquisitions and investments in new
businesses, products or technologies. These may involve risks
which could disrupt our business and may harm our financial
condition.
We are subject to various environmental laws and
regulations that could impose substantial costs upon us and may
adversely affect our business, operating results and financial
condition.
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We are subject to export control regulations that could
restrict our ability to increase our international sales and may
adversely affect our business.
The market price of our common stock may be volatile,
which could result in substantial losses for investors
purchasing shares in this offering.
general market conditions;
U.S. and international economic factors;
actual or anticipated fluctuations in our quarterly operating
results;
changes in or failure to meet publicly disclosed expectations as
to our future financial performance;
Table of Contents
changes in securities analysts estimates of our financial
performance or lack of research and reports by industry analysts;
changes in market valuations or earnings of similar companies;
announcements by us or our competitors of significant products,
contracts, acquisitions or strategic partnerships;
developments or disputes concerning intellectual property or
proprietary rights, including increases or decreases in
litigation expenses associated with intellectual property
lawsuits we may initiate, or in which we may be named as
defendants;
failure to complete significant sales;
any future sales of our common stock or other securities; and
additions or departures of key personnel.
We could be the subject of securities class action
litigation due to future stock price volatility, which could
divert managements attention and adversely affect our
operating results.
Dr. Valentin P. Gapontsev, our chairman, chief
executive officer and principal stockholder, will control more
than 46.0% of our voting power after the completion of this
offering, and will have a significant influence on the outcome
of director elections and other matters requiring stockholder
approval, including a change in corporate control.
election of our directors;
amendment of our certificate of incorporation or by-laws; and
approval of mergers, consolidations or the sale of all or
substantially all of our assets.
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Dr. Valentin P. Gapontsev, our chairman, chief
executive officer and principal stockholder, owns a material
portion of one of our operating subsidiaries, which creates the
possibility of a conflict of interest.
Anti-takeover provisions in our charter documents and
Delaware law could prevent or delay a change in control of our
company, even if a change in control would be beneficial to our
stockholders.
authorizing the issuance of blank check preferred
stock;
establishing a classified board;
providing that directors may only be removed for cause;
prohibiting stockholder action by written consent;
limiting the persons who may call a special meeting of
stockholders;
establishing advance notice requirements for nominations for
election to the board of directors and for proposing matters to
be submitted to a stockholder vote; and
supermajority stockholder approval to change these provisions.
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Substantial sales of our common stock could cause our
stock price to decline.
We will incur increased costs and demands upon management
as a result of complying with the laws and regulations affecting
public companies, which could adversely affect our operating
results.
We will be required to evaluate our internal control over
financial reporting under Section 404 of the Sarbanes-Oxley
Act of 2002, and any adverse results from such evaluation could
result in a loss of investor confidence in our financial reports
and have an adverse effect on our stock price.
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Investors in this offering will experience immediate and
substantial dilution.
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approximately $22.1 million to repurchase the warrants to
purchase shares of our common stock that are owned by holders of
the series B preferred stock;
approximately $5.5 million to repay Euro-denominated
construction loans due from 2006 to 2010 that bear annual
interest at 5.25%;
approximately $5.6 million to repay a
U.S. construction loan due January 2007 that bears annual
interest at 7.9%;
approximately $10.6 million to repay other Euro-denominated
term debt with various maturities ranging from 2006 to 2019 with
fixed and variable interest rates ranging from 4.2% to 6.5%;
approximately $0.2 million to repay Euro-denominated
line-of-credit facilities that bear annual interest at rates
ranging from 6.0% to 7.6%;
approximately $4.5 million to repay a U.S. demand
line-of-credit facility that bears interest at a variable rate
of LIBOR plus 3.0% (8.3% at September 30, 2006);
approximately $3.3 million to repay Japanese Yen
line-of-credit facilities that bear interest at approximately
2.0%; and
the balance of the net proceeds for general corporate purposes.
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on an actual basis;
on a pro forma basis to give effect to the conversion of all
outstanding shares of preferred stock upon the closing of this
offering into 9,914,217 shares of common stock, assuming an
initial offering price of $14.50 per share, and the issuance of
subordinated notes totaling $20.0 million to the holders of
our series B preferred stock; and
on a pro forma as adjusted basis to give effect to the
transactions described above as well as our sale of
6,241,379 shares of our common stock in this offering and
the application of the estimated net proceeds therefrom as
described in Use of Proceeds.
As of September 30, 2006
Pro Forma As
Actual
Pro Forma
Adjusted
(unaudited)
(in thousands, except share and per share data)
$
7,886
$
7,886
$
20,000
20,000
23,151
23,151
31,037
51,037
20,000
19,000
19,000
92,802
5,100
4,880
4
4
5
94,714
177,496
259,260
(23
)
(23
)
(23
)
(137,028
)
(137,028
)
(140,116
)
6,042
6,042
6,042
(31,411
)
46,491
125,168
$
116,528
$
116,528
$
145,168
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$
14.50
$
1.25
1.63
2.88
$
11.62
Shares Purchased
Total Consideration
Average
Price Per
Number
Percent
Amount
Percent
Share
37,257,547
85.7
%
$
122,937
57.6
%
$
3.30
6,241,379
14.3
90,500
42.4
14.50
43,498,926
100.0
%
$
213,437
100.0
%
4.91
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Shares Purchased
Total Consideration
Average
Price Per
Number
Percent
Amount
Percent
Share
37,257,547
77.8
%
$
122,937
54.6
%
$
3.30
4,411,923
9.2
11,845
5.3
2.68
41,669,470
87.0
134,782
59.9
3.23
6,241,379
13.0
90,500
40.2
14.50
47,910,849
100.0
%
$
225,282
100.0
%
4.70
Table of Contents
Nine Months Ended
Year Ended December 31,
September 30,
2001
2002
2003
2004
2005
2005
2006
(in thousands, except per share data)
Consolidated Statement of
Operations Data:(1)
$
26,490
$
22,180
$
33,740
$
60,707
$
96,385
$
62,238
$
101,128
26,223
23,277
38,583
42,274
62,481
41,763
57,983
267
(1,097
)
(4,843
)
18,433
33,904
20,475
43,145
21,240
19,910
2,110
2,363
3,236
2,354
4,111
8,407
8,383
10,063
4,831
5,788
4,177
4,314
18,875
13,354
9,998
8,179
10,598
6,689
9,352
2,156
900
9,474
11,986
63,564
51,121
22,171
15,373
19,622
13,220
17,777
(63,297
)
(52,218
)
(27,014
)
3,060
14,282
7,255
25,368
1,857
(1,089
)
(1,505
)
(2,150
)
(1,840
)
(1,410
)
(1,051
)
6,862
2,518
(3,664
)
(615
)
(745
)
(477
)
(4,356
)
975
2,414
1,647
196
236
196
143
(53,603
)
(48,375
)
(30,536
)
491
11,933
5,564
20,104
3,985
(1,175
)
2,205
1,601
(4,080
)
(2,037
)
(6,597
)
(4
)
165
121
(80
)
(426
)
(25
)
(910
)
$
(49,622
)
$
(49,385
)
$
(28,210
)
$
2,012
$
7,427
$
3,502
$
12,597
$
(2.17
)
$
(2.13
)
$
(1.40
)
$
(0.01
)
$
0.16
$
0.06
$
0.34
$
(2.17
)
$
(2.13
)
$
(1.40
)
$
(0.01
)
$
0.16
$
0.06
$
0.31
23,973
24,317
25,534
25,698
26,232
26,105
27,052
23,973
24,317
25,534
25,698
30,167
30,040
32,987
$
0.21
$
0.42
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As of December 31,
As of September 30,
2001
2002
2003
2004
2005
2006
(in thousands)
$
8,851
$
1,379
$
536
$
2,548
$
8,361
$
11,357
44,711
35,669
16,303
20,934
23,550
37,994
128,230
117,166
105,481
110,545
115,481
141,401
21,668
38,143
34,268
31,454
26,081
23,151
12,138
9,620
13,284
13,899
14,644
19,000
81,842
84,194
91,646
93,997
96,348
97,902
18,660
5,000
5,000
4,880
4,880
4,880
12,090
(19,516
)
(51,947
)
(49,038
)
(46,504
)
(31,411
)
(1)
Due primarily to certain stock-based compensation awarded
primarily in 2000 and 2001, we have recorded significant
stock-based compensation during the years ended
December 31, 2001, 2002 and 2003. Those awards became fully
vested during the year ended December 31, 2004. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Critical
Accounting Policies and Estimates Stock-Based
Compensation.
(2)
The change in value of the series B warrants is a non-cash
charge related to recording the increase or decrease in the fair
value of the warrants. The change in fair value for this
derivative instrument is directly related to the probability
that the warrants will be exercised prior to their expiration in
April 2008. We intend to use a portion of the net proceeds from
this offering to repurchase the series B warrants. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Factors and
Trends That Affect our Operations and Financial
Results Effect of Preferred Stock On Net Income and
Net Income Per Share.
(3)
The supplemental pro forma disclosures are intended to
demonstrate the effects on net income per share of the
completion of this offering and the related impacts of the
conversion of our preferred stock and the repurchase of the
series B warrants with a portion of the net proceeds of
this offering. The number of shares used in the calculation of
supplementary pro forma net income per common share includes
(a) the basic weighted average common stock outstanding,
(b) 9,914,217 shares of common stock, which will be
issued upon completion of this offering upon the conversion of
our preferred stock, assuming an offering price of $14.50 per
share, the midpoint of the range set forth on the cover page of
this prospectus and (c) 3,407,383 shares related to
the additional dilutive impact of existing options assuming that
the fair value of the common stock increases to $14.50.
Supplementary pro forma net income used in the calculation of
supplementary pro forma net income per share reflects the
elimination of the increase in value of the series B
warrants, which will be repurchased upon the completion of this
offering, totaling $745,000 for the year ended December 31,
2005 and $4.4 million for the nine months ended
September 30, 2006. In addition, all accretion of preferred
stock has been eliminated in the determination of net income
attributable to common stockholders. See Use of
Proceeds, Managements Discussion and Analysis
of Financial Condition and Results of Operations
Critical Accounting Policies and Estimates Fair
Value Adjustment of Warrants and Certain
Relationships and Related Party Transactions.
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factors that affect the prices we can charge, including the
features and performance of our products, their output power,
the nature of the end user and application, and competitive
pressures;
factors that affect the cost of our net sales, including the
cost of raw materials and components, manufacturing costs and
shipping costs;
production volumes of specific product lines; and
in the case of our OEM customers, the type of market that they
serve and the competitive pricing pressures faced by our OEM
customers.
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Nine Months Ended
Year Ended December 31,
September 30,
2001
2002
2003
2004
2005
2005
2006
(unaudited)
(in thousands)
$
2,574
$
789
$
577
$
218
$
4
$
$
83
19,148
17,260
18
6
1
35
1,608
314
1,062
669
1
16
9,403
3,326
546
10
1
183
$
32,733
$
21,689
$
2,203
$
903
$
7
$
$
317
Table of Contents
independent valuation reports that we received;
the agreed-upon consideration paid in arms-length transactions
in the form of convertible preferred stock and common stock;
the superior rights and preferences of securities senior to our
common stock at the time of each grant;
historical and anticipated fluctuations in our net sales and
results of operations, which reflect our dependence on certain
key customers, the cyclical nature of certain of our end markets
and market acceptance of our products; and
the risk of owning our common stock and its non-liquid nature.
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Year Ended December 31,
Nine Months Ended September 30,
2003
2004
2005
2005
2006
(unaudited)
(in thousands, except percentages)
$
33,740
100.0
%
$
60,707
100.0
%
$
96,385
100.0
%
$
62,238
100.0
%
$
101,128
100.0
%
38,583
114.4
42,274
69.6
62,481
64.8
41,763
67.1
57,983
57.3
(4,843
)
(14.4
)
18,433
30.4
33,904
35.2
20,475
32.9
43,145
42.7
2,110
6.3
2,363
3.9
3,236
3.4
2,354
3.8
4,111
4.1
10,063
29.8
4,831
8.0
5,788
6.0
4,177
6.7
4,314
4.3
9,998
29.6
8,179
13.5
10,598
11.0
6,689
10.7
9,352
9.2
22,171
65.7
15,373
25.4
19,622
20.4
13,220
21.2
17,777
17.6
(27,014
)
(80.1
)
3,060
5.0
14,282
14.8
7,255
11.7
25,368
25.1
(1,505
)
(4.5
)
(2,150
)
(3.5
)
(1,840
)
(1.9
)
(1,410
)
(2.3
)
(1,051
)
(1.0
)
(3,664
)
(10.9
)
(615
)
(1.0
)
(745
)
(0.8
)
(477
)
(0.8
)
(4,356
)
(4.3
)
1,647
4.9
196
0.3
236
0.2
196
0.3
143
0.1
(30,536
)
(90.6
)
491
0.8
11,933
12.3
5,564
8.9
20,104
19.9
2,205
6.5
1,601
2.6
(4,080
)
(4.2
)
(2,037
)
(3.3
)
(6,597
)
(6.5
)
121
0.4
(80
)
(0.1
)
(426
)
(0.4
)
(25
)
(0.0
)
(910
)
(0.9
)
$
(28,210
)
(83.7
)%
$
2,012
3.3
%
$
7,427
7.7
%
$
3,502
5.6
%
$
12,597
12.5
%
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Three Months Ended
Mar. 31,
June 30,
Sep. 30,
Dec. 31,
Mar. 31,
June 30,
Sep. 30,
2005
2005
2005
2005
2006
2006
2006
(in thousands)
$
18,788
$
22,843
$
20,607
$
34,147
$
32,743
$
32,184
$
36,201
12,937
15,501
13,325
20,718
20,278
18,841
18,864
5,851
7,342
7,282
13,429
12,465
13,343
17,337
650
887
817
882
1,080
1,263
1,768
1,370
1,504
1,303
1,611
1,235
1,387
1,692
1,793
2,559
2,337
3,909
2,659
3,154
3,539
3,813
4,950
4,457
6,402
4,974
5,804
6,999
2,038
2,392
2,825
7,027
7,491
7,539
10,338
(514
)
(454
)
(442
)
(430
)
(355
)
(354
)
(342
)
(155
)
(159
)
(163
)
(268
)
(1,862
)
(357
)
(2,137
)
(2
)
143
55
40
8
4
131
1,367
1,922
2,275
6,369
5,282
6,832
7,990
(468
)
(751
)
(818
)
(2,043
)
(1,927
)
(1,939
)
(2,731
)
77
5
(107
)
(401
)
(288
)
(110
)
(512
)
$
976
$
1,176
$
1,350
$
3,925
$
3,067
$
4,783
$
4,747
Table of Contents
Three Months Ended
Mar. 31,
June 30,
Sep. 30,
Dec. 31,
Mar. 31,
June 30,
Sep. 30,
2005
2005
2005
2005
2006
2006
2006
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
100.0
%
68.9
67.9
64.7
60.7
61.9
58.5
52.1
31.1
32.1
35.3
39.3
38.1
41.5
47.9
3.5
3.9
4.0
2.6
3.3
3.9
4.9
7.3
6.6
6.3
4.7
3.8
4.3
4.7
9.5
11.2
11.3
11.4
8.1
9.8
9.8
20.3
21.7
21.6
18.7
15.2
18.0
19.3
10.8
10.4
13.7
20.6
22.9
23.5
28.6
(2.7
)
(2.0
)
(2.1
)
(1.3
)
(1.1
)
(1.1
)
(0.9
)
(0.8
)
(0.7
)
(0.8
)
(0.8
)
(5.7
)
(1.1
)
(5.9
)
(0.0
)
0.6
0.3
0.1
0.0
0.0
0.4
7.3
8.3
11.1
18.6
16.1
21.3
22.1
(2.5
)
(3.3
)
(4.0
)
(6.0
)
(5.9
)
(6.0
)
(7.5
)
0.4
0.0
(0.5
)
(1.2
)
(0.9
)
(0.3
)
(1.4
)
5.2
%
5.0
%
6.6
%
11.4
%
9.3
%
15.0
%
13.2
%
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Description
Available Principal
Interest Rate
Maturity
Security
Euro 4.6 million ($5.9 million)
7.5%-8.6%, depending upon principal outstanding
Euro 3.5 million ($4.5 million) available through
September 2007
Euro 1.1 million ($1.4 million) available through
March 2010
Common pool of assets of German subsidiary
80% of eligible receivables, up to $7,000,000
LIBOR plus 3.0%
June 2008
All assets held by our U.S. parent company (IPG Photonics
Corporation)
JPY 600 million ($5.1 million)
2.0%-2.13%
September 2007
Pool of assets of Japanese subsidiary
(1)
This loan has a minimum debt service coverage covenant, which
requires that we maintain a ratio of not less than 1.20:1.00 of
(i) earnings before interest, taxes, depreciation and
amortization, plus stock-based compensation and fair value
adjustments to the series B warrants, less unfunded capital
expenditures and cash taxes paid, divided by (ii)(a) current
maturities of long-term debt and capital leases, plus
(b) interest expense, measured as of each fiscal quarter.
After the completion of this offering, we also will be required
to maintain a ratio of not less than 2.50:1.00 of current assets
to current liabilities and a ratio of not less than 2.01:1.00 of
total liabilities to tangible net worth, measured each fiscal
quarter.
Table of Contents
Description
Principal
Interest Rate
Maturity
Security
$5.7 million
7.9%
January 2007
Property and plant in United States
$6.3 million
5.25%
March 2007 to March 2010
Property and plant in Germany
$11.1 million
4.2-6.5%
October 2006 to December 2019
Property, plant and equipment, receivables and other assets in
Germany
(1)
The construction loan has a minimum debt service coverage
covenant, which requires that we maintain a ratio of not less
than 1.20:1.00 of (i) net profit plus depreciation and
amortization divided by (ii)(a) current maturities of long-term
debt and capital leases, plus (b) interest expense,
measured each fiscal year.
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Payments Due in
Less Than
More Than
Total
1 Year
1-3 Years
3-5 Years
5 Years
$
3,386
$
1,094
$
1,679
$
613
$
28,573
11,845
12,900
1,346
2,482
$
31,959
$
12,939
$
14,579
$
1,959
$
2,482
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Materials Processing.
Our fiber lasers are used in a
diverse range of materials processing applications: marking,
engraving and printing; welding, cutting, drilling, soldering
and hardening; and high precision machining. Examples of such
processes using our low and mid-power fiber lasers include
razorblade, stent and pacemaker manufacturing, integrated
circuit marking and trimming; semiconductor memory repair and
trimming; and computer disk manufacturing and texturing.
Examples of such processes using our high-power fiber lasers
include cutting and welding metal blanks, sheets, frames and
transmissions in the automotive industry; welding aluminum and
titanium air frames in the aerospace industry; hardening,
cutting and welding in heavy industries such as nuclear power,
pipelines, ships and rail cars; and drilling and cutting
concrete and rock.
Communications.
Our fiber amplifiers are used in the
deployment of interactive and advanced triple-play
broadband services that include video, high-speed internet and
telephony services, as well as in wireline transport networks.
We also sell integrated transport systems for ultra-long-haul
optical dense wavelength multiplexing networks.
Medical.
Our lasers are used for applications as
components in medical laser systems, driven by aesthetic
applications such as skin resurfacing and rejuvenation. Other
soft-tissue applications include dentistry, urology, surgery and
vision correction.
Advanced Applications.
Our fiber lasers and amplifiers
are utilized by commercial firms and by academic, government and
other institutions worldwide for commercial products and for
research in advanced technologies and products. Our products are
used in the aerospace, research, scientific and test and
measurement markets.
Table of Contents
Traditional Laser Technologies
Introduction of Fiber Lasers
Table of Contents
Advantages of Fiber Lasers over Traditional Lasers
Superior Performance.
Fiber lasers provide high
beam quality over the entire power range. In most traditional
laser solutions, the beam quality is sensitive to output power,
while in fiber lasers, the output beam is virtually
non-divergent over a wide power range, meaning the beam can be
highly focused to achieve high levels of precision, increased
power densities and greater distances over which processing can
be completed. The superior beam quality and greater intensity of
a fiber lasers beam allow tasks to be accomplished rapidly
and with lower-power units than comparable traditional lasers.
Lower Total Cost of Ownership.
Fiber lasers offer
strong value to customers because of their generally lower total
operating costs due to their lower required maintenance costs,
high reliability and energy efficiency. The initial purchase
price for fiber lasers is generally below that of YAG lasers and
comparable to that of
CO
2
lasers. Fiber lasers convert electrical energy to optical energy
2 to 3 times more efficiently than diode-pumped YAG lasers, 3
times more efficiently than
CO
2
lasers and 15 to 30 times more efficiently than lamp-pumped YAG
lasers. Because fiber lasers are much more energy-efficient and
place lower levels of thermal stress on their internal
components, they have substantially lower cooling requirements
compared to conventional lasers and lower or no maintenance
costs. For example, single-emitter diodes used in fiber lasers
have estimated lives of over 200,000 hours. In contrast,
diode bars used in YAG lasers are typically replaced every
10,000 to 20,000 hours and lamps are typically replaced
every 1,000 hours, involving substantial costs and lost
production time.
CO
2
lasers also utilize components that require frequent
replacement, such as resonator mirrors, fluids and filters.
Ease of Use.
Many features of fiber lasers make
them easy to operate, maintain and integrate into laser-based
systems, providing a turnkey solution. Unlike traditional
solutions that require frequent adjustments, fiber lasers have a
monolithic solid-state design that does not require fine
mechanical alignment or adjustment of mirrors or other
components. An additional benefit is that fiber lasers deliver
their energy through an integrated flexible optical fiber that
can be up to 100 meters long.
Compact Size and Portability.
Fiber lasers are
typically smaller and lighter in weight than traditional lasers,
saving valuable floor space. While conventional lasers are
delicate due to the precise alignment of mirrors, fiber lasers
are more durable and able to perform in variable working
environments. These qualities permit fiber laser systems to be
transported easily. The portability and versatility of fiber
lasers also allow them to be used in new laser applications,
such as nuclear facility pipe welding and welding on ships.
Choice of Wavelengths and Precise Control of Beam.
The design of fiber lasers generally provides a broad range of
wavelength choices, allowing users to select the precise
wavelength
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that best matches their application and materials. Conventional
lasers generally have limited wavelength options. In addition,
the greater stability of the output and improved control of
output beam parameters in fiber lasers, such as beam shape,
allow users to more effectively use lasers in their applications.
Adoption of Fiber Lasers and Amplifiers
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Table of Contents
Table of Contents
Table of Contents
Lasers
Amplifiers
Table of Contents
Table of Contents
Materials Processing
Table of Contents
Communications
Medical
Advanced Applications
Table of Contents
Specialty Optical Fibers
Semiconductor Diode Laser Processing and Packaging
Technologies
Table of Contents
Specialty Components and Combining Techniques
Side Pumping of Fibers and Fiber Block Technologies
High-Stress Testing
Contec, Inc.
EOS GmbH Electro Optical Systems
Esko-Graphics
European Aeronautic
Defence and
Space
Company EADS N.V.
GSI Lumonics, Inc.
Harmonic Inc.
HM Laser Machinery Co., Ltd.
Mitsubishi Heavy Industries, Ltd.
Reliant Technologies Inc.
Sahajanand Laser Technology
SUNX Limited
Tada Electric Co., Ltd.
Telesis Technologies
TEM Incorporated
Toyota Tsusho Corporation
Table of Contents
Year Ended December 31,
Nine Months
Ended
September 30,
2003
2004
2005
2006
$
23,685
70.2
%
$
41,990
69.2
%
$
60,399
62.7
%
$
73,855
73.0
%
5,250
15.6
9,697
16.0
15,751
16.3
10,923
10.8
181
0.5
1,544
2.5
7,422
7.7
8,284
8.2
4,624
13.7
7,476
12.3
12,813
13.3
8,066
8.0
$
33,740
100.0
%
$
60,707
100.0
%
$
96,385
100.0
%
$
101,128
100.0
%
Year Ended December 31,
Nine Months
Ended
September 30,
2003
2004
2005
2006
$
10,365
30.7
%
$
20,911
34.4
%
$
38,512
40.0
%
$
33,653
33.3
%
12,963
38.4
19,339
31.9
23,882
24.8
32,391
32.0
10,412
30.9
20,232
33.3
33,569
34.8
35,084
34.7
225
0.4
422
0.4
$
33,740
100.0
%
$
60,707
100.0
%
$
96,385
100.0
%
$
101,128
100.0
%
maintaining a technological lead over competitors;
reducing component and final product costs as volumes increase;
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ensuring access to critical components, enabling us to better
meet customer demands;
controlling performance, quality and consistency; and
enabling rapid development and deployment of new products and
technologies.
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product performance and reliability;
quality and service support;
price and value to the customer;
ability to manufacture and deliver products on a timely basis;
ability to achieve qualification for and integration into OEM
systems;
ability to meet customer specifications; and
ability to respond quickly to market demand and technological
developments.
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Owned or
Lease
Approximate
Location
Leased
Expiration
Size (sq. ft.)
Primary Activity
Owned
123,000
Diodes, components, complete device manufacturing, administration
Owned
143,000
Optical fiber, components, final assembly, complete device
manufacturing, administration
Leased
April 2007
57,000
Components, complete device manufacturing, administration
Leased
March 2012
12,000
Complete device manufacturing, administration
Table of Contents
Table of Contents
Name
Age
Position(s)
67
Chief Executive Officer and
Chairman of the Board
59
Managing Director of IPG Laser and Director
37
Chief Financial Officer and
Vice President
42
General Counsel, Secretary and
Vice President
34
Vice President-Research & Development
51
Vice President-Telecommunications Products
45
Vice President-Components
43
Acting General Manager of
NTO IRE-Polus and Director
60
Director
51
Director
64
Director
66
Director
62
Director
69
Director
(1)
Member of the compensation committee.
(2)
Member of the nominating and corporate governance committee.
(3)
Member of the audit committee.
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appoints, approves the compensation of, and assesses the
independence of our independent registered public accounting
firm;
reviews the audit committee charter periodically and recommends
any necessary amendments to such charter to our board of
directors;
oversees the work of our independent auditor, which includes the
receipt and consideration of certain reports from the
independent registered public accounting firm;
resolves disagreements between management and our independent
registered public accounting firm;
pre-approves auditing and permissible non-audit services, and
the terms of such services, to be provided by our independent
registered public accounting firm;
reviews and discusses with management and the independent
registered public accounting firm our annual and quarterly
financial statements and related disclosures;
coordinates the oversight of our internal and external controls
over financial reporting, disclosure controls and procedures and
code of business conduct and ethics;
establishes, reviews and updates our code of business conduct
and ethics;
reviews and approves all related-party transactions;
establishes procedures for the receipt of accounting-related
complaints and concerns;
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meets independently with our independent registered public
accounting firm and management; and
will prepare the audit committee report required by SEC rules to
be included in our proxy statements.
annually reviews and approves base salary and incentive
compensation for our chief executive officer, other officers and
key executives;
reviews and approves corporate goals and objectives relevant to
compensation of our chief executive officer, other officers and
key executives;
evaluates the performance of our chief executive officer in
light of our corporate goals and objectives and determines the
compensation of our chief executive officer; and
periodically reviews compensation practices, procedures and
policies throughout our company.
develops and recommends to the board of directors criteria for
board membership;
recommends to the board of directors changes that the committee
believes to be desirable with regard to the appropriate size,
functions and needs of the board of directors;
identifies and evaluates director candidates, including nominees
recommended by our stockholders;
identifies individuals qualified to fill vacancies on any
committee of the board of directors;
reviews procedures for stockholders to submit recommendations
for director candidates;
recommends to the board of directors the persons to be nominated
for election as directors and to each of the boards
committees;
reviews the performance of the committee and evaluates its
charter periodically; and
develops and recommends to the board of directors a set of
corporate governance guidelines.
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We granted options to purchase 20,000 shares of common
stock to each of Messrs. Blair, Child and Dalton and
Dr. Krupke on June 12, 2005, at an exercise price of
$1.50 per share;
We granted options to purchase 20,000 shares of common
stock to each of Messrs. Gauthier and Hurley on
April 18, 2006, at an exercise price of $5.37 per
share; and
We granted options to purchase 6,667 shares of common
stock to each of Messrs. Blair, Child and Dalton and
Dr. Krupke on June 21, 2006, at an exercise price of
$6.45 per share.
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Long-Term
Compensation
Annual Compensation
Awards
Other Annual
Securities
All Other
Compensation
Underlying
Compensation
Name and Principal Position
Salary($)
Bonus ($)(1)
($)(2)
Options(#)
($)(3)
$
383,284
$
604,243
$
2,945
Chief Executive Officer and
Chairman of the Board(4)(5)
256,515
138,935
Managing Director and
Director(4)(5)
254,248
147,567
13,334
8,913
(6)
Vice President, General
Counsel and Secretary
200,000
142,500
13,334
8,550
(7)
Vice President and
Chief Financial Officer
227,479
94,250
470
Vice President, Research
and Development(5)
(1)
The bonuses paid in 2005 include an annual performance bonus for
the achievement of certain performance objectives which were met
during 2005. Bonuses paid in 2005 also include a one-time,
non-recurring loyalty bonus intended to reward officers for
their long-term contributions to us in the following amounts:
Dr. V. Gapontsev, $368,823; Dr. Shcherbakov, $72,236;
Mr. Lopresti, $68,750; Mr. Mammen, $82,500; and
Dr. D. Gapontsev, $29,750.
(2)
We have concluded that the aggregate amount of perquisites and
other personal benefits paid to each of the named executive
officers for fiscal year 2005 did not exceed the lesser of 10%
of such named executive officers total annual salary and
bonus for 2005 or $50,000; such amounts are not included in the
table.
(3)
All Other Compensation consists of our matching contributions to
retirement accounts under our 401(k) plan and our payment of
premiums on group term life insurance on behalf of our
employees. The group term life insurance does not have a cash
surrender value and premiums paid are not refunded upon
termination.
(4)
A portion of the amounts paid to Dr. Shcherbakov and
Dr. V. Gapontsev were denominated in Euros. These amounts
are translated into U.S. dollars at the exchange rate as of
December 30, 2005.
(5)
A portion of the amounts paid to Dr. Shcherbakov,
Dr. V. Gapontsev and Dr. D. Gapontsev were denominated
in Rubles. These amounts are translated into U.S. dollars
at the exchange rate as of December 30, 2005.
(6)
Reflects our contribution of $8,430 to Mr. Loprestis
retirement account under our 401(k) plan and payment of $483 of
premiums on Mr. Loprestis group term life insurance.
(7)
Reflects our contribution of $8,294 to Mr. Mammens
retirement account under our 401(k) plan and payment of $256 of
premiums on Mr. Mammens group term life insurance.
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Value at Assumed
Annual Rates of
Securities
% of Total
Stock Price
Underlying
Options
Appreciation for
Options
Granted to
Exercise
Option Term (1)
Granted
Employees in
Price Per
Name
(#)
Fiscal Year
Share
Expiration Date
5%
10%
13,334
1.60
$
1.88
September 22, 2015
$
202,451
$
231,585
13,334
1.60
$
1.88
September 22, 2015
$
202,451
$
231,585
(1)
Potential realizable values are net of exercise price, but
before any taxes associated with exercise. The assumed rates of
stock price appreciation are provided in accordance with SEC
rules based upon an assumed initial public offering price of
$14.50 per share, and do not represent our estimate of our
future stock price.
Number of Securities
Value at Assumed Annual
Underlying Unexercised
Rates of Stock Price
Options at Fiscal
Appreciation for
Shares
Year-End (#)
Option Term ($)(1)
Acquired on
Value
Name
Exercise (#)
Realized ($)
Exercisable
Unexercisable
Exercisable
Unexercisable
237,251
3,202,889
36,810
533,745
23,184
312,984
50,000
725,000
189,139
24,444
2,553,377
318,327
33,334
483,343
180,840
24,444
2,441,340
318,327
46,680
11,111
630,180
149,999
(1)
There was no public trading market for our common stock as of
December 31, 2005. Accordingly, the value of unexercised
in-the
-money options is
based on an assumed initial public offering price of
$14.50 per share, minus the per share exercise price,
multiplied by the number of shares underlying the option.
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2000 Incentive Compensation Plan, 2006 Incentive
Compensation Plan and Non-Employee Directors Stock Plan
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accelerate the time for exercise or payout of all outstanding
awards;
cancel the award after notice to the holder of an outstanding
award as long as the holder receives a payment equal to the
difference between the fair market value of the award on the
date of the change of control and the exercise price per share,
if any, of such award; or
provide that all outstanding awards will be assumed by the
entity that acquires control or substituted for similar awards
by such entity.
any person becomes a beneficial owner of our securities
representing at least 50% of the combined voting power of our
then-outstanding securities;
persons who, at the beginning of any period of two consecutive
years, were members of the board of directors cease to
constitute a majority of the board of directors unless the
election or nomination for election by the stockholders of each
new director during that two-year period is approved by at least
two-thirds of the incumbent directors then still in office;
the occurrence of a merger, sale of all or substantially all of
our assets, cash tender or exchange offer, contested election or
other business combination under circumstances in which our
stockholders immediately prior to such merger or other such
transaction do not, after such transaction, own shares
representing at least a majority of our voting power or the
surviving or resulting corporation, as the case may be; or
our stockholders approve a complete liquidation.
401(k) Plan
Senior Executive Short-Term Incentive Plan
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any person becomes a beneficial owner of our securities
representing at least 50% of the combined voting power of our
then-outstanding securities; or
our stockholders approve a reorganization, merger or
consolidation, or a sale or other disposition of all or
substantially all of the assets of our company.
Employment Agreements
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any breach of the directors duty of loyalty to us or our
stockholders;
any act or omission not in good faith or that involves
intentional misconduct or a knowing violation of law;
any unlawful payments related to dividends or unlawful stock
repurchases, redemptions or other distributions; or
any transaction from which the director or officer derived an
improper personal benefit.
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each person or group of affiliated persons known by us to own
beneficially more than 5% of our common stock;
each of our named executive officers;
each of our directors;
all of our executive officers and directors as a group; and
each selling stockholder.
Pro Forma
Beneficial Ownership
Beneficial Ownership
Beneficial Ownership
Additional
Prior to Offering
Prior to Offering
Shares
After Offering
Shares for
Being
Overallotment
Name of Beneficial Owner
Number
Percentage
Number
Percentage
Offered
Number
Percentage
Option
Directors, Officers and 5% Stockholders
20,265,917
63.0
%
20,265,917
54.4
%
266,672
19,999,245
46.0
%
8,204,003
25.5
%
8,204,003
22.0
%
8,204,003
18.9
%
1,478,197
4.6
%
4,139,971
11.1
%
4,139,971
9.5
%
1,683,169
5.2
%
1,683,169
4.5
%
1,063,585
619,584
1.4
%
474,564
1,718,902
5.3
%
1,718,902
4.6
%
1,718,902
3.9
%
365,000
1.1
%
365,000
1.0
%
50,000
315,000
*
331,289
1.0
%
331,289
*
17,333
313,956
*
335,630
1.0
%
335,630
*
335,630
*
259,994
*
259,994
*
259,994
*
281,728
*
281,728
*
281,728
*
281,361
*
281,361
*
281,361
*
105,000
*
105,000
*
105,000
*
1,549,863
4.8
%
4,211,637
11.3
%
4,211,637
9.6
%
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Pro Forma
Beneficial Ownership
Beneficial Ownership
Beneficial Ownership
Additional
Prior to Offering
Prior to Offering
Shares
After Offering
Shares for
Being
Overallotment
Name of Beneficial Owner
Number
Percentage
Number
Percentage
Offered
Number
Percentage
Option
203,333
*
203,333
*
203,333
*
97,778
*
97,778
*
97,778
*
25,795,796
78.5
%
28,457,565
75.0
%
334,005
28,123,560
63.6
%
665,188
2.1
%
1,241,987
3.3
%
670,510
571,477
1.3
%
437,718
221,729
*
413,996
1.1
%
223,503
190,492
*
145,906
221,729
*
413,996
1.1
%
223,503
190,492
*
145,906
133,038
*
248,397
*
134,102
114,295
*
87,544
88,692
*
165,598
*
89,401
76,197
*
58,362
17,525
*
18,706
*
3,741
14,964
*
7,010
*
7,482
*
1,496
5,986
*
17,525
*
18,706
*
3,741
14,965
*
7,010
*
7,482
*
4,489
2,993
*
7,010
*
7,482
*
1,496
5,986
*
7,010
*
7,482
*
1,496
5,986
*
3,505
*
3,741
*
748
2,993
*
2,341
*
2,499
*
500
1,999
*
2,334
*
2,492
*
498
1,994
*
2,334
*
2,492
*
498
1,994
*
1,753
*
1,871
*
935
936
*
1,753
*
1,871
*
374
1,497
*
24,052,863
74.8
%
25,211,653
67.6
%
2,758,621
22,453,032
51.6
%
1,350,000
*
Less than 1.0%.
(1)
Includes shares beneficially owned by IPFD, of which
Dr. Valentin Gapontsev is the managing director.
Dr. Valentin Gapontsev has voting and investment power with
respect to the shares held of record by IPFD and is the father
of Dr. Denis Gapontsev. Dr. Valentin Gapontsev has a
53% economic interest in IPFD.
(2)
Amounts shown reflect the aggregate number of shares of common
stock held by TA IX L.P., TA/Atlantic and Pacific IV L.P.,
TA/Advent VIII L.P., TA Executives Fund LLC, and TA
Investors LLC (collectively, the TA Associates
Funds), assuming the conversion of 2,000,000 shares
of our series B preferred stock. Investment and voting
control of the TA Associates Funds is held by TA Associates,
Inc. No stockholder, director or officer of TA Associates, Inc.
has voting or investment power with respect to our shares of
common stock held by the TA Associates Funds. Voting and
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investment power with respect to such shares is vested in a
four-person investment committee consisting of the following
employees of TA Associates: Messrs. Michael C. Child,
Jonathan M. Goldstein, C. Kevin Landry and Kenneth T. Schiciano.
Mr. Child is a Managing Director of TA Associates, Inc.,
the manager of the general partner of TA IX L.P. and TA/Advent
VIII L.P.; the manager of TA Investors LLC and TA Executives
Fund LLC; and the general partner of the general partner of
TA/Atlantic and Pacific IV L.P. Mr. Child has been a
member of our board of directors since November 2000. See
note 11 below. The address of TA Associates, Inc. is John
Hancock Tower, 56th Floor, 200 Clarendon Street,
Boston, Massachusetts 02116.
(3)
Amounts shown reflect the aggregate number of shares of common
stock held by JDS Uniphase Corporation, assuming the conversion
of 2,684,211 shares of our series D preferred stock.
The address of JDS Uniphase Corporation is 1768 Automation
Parkway, San Jose, California 95131. We have been informed
that David Vellequette, the Chief Financial Officer of
JDS Uniphase Corporation, has voting and investment power
with respect to the shares held by JDS Uniphase.
(4)
Includes 52,235 shares of common stock issuable upon exercise of
options. Does not include shares held by IPFD. Dr. Denis
Gapontsev has a 15% economic interest in IPFD but does not
possess voting or investment power with respect to such interest.
(5)
Includes 5,000 shares of common stock issuable upon
exercise of options.
(6)
Includes 2,297 shares of common stock issuable upon exercise of
options. Does not include shares held by IPFD.
Mr. Samartsev has an 8% economic interest in IPFD but does
not possess voting or investment power with respect to such
interest.
(7)
Does not include shares held by IPFD. Dr. Shcherbakov has
an 8% economic interest in IPFD but does not possess voting or
investment power.
(8)
Includes 189,728 shares of common stock issuable upon exercise
of options.
(9)
Includes 181,361 shares of common stock issuable upon exercise
of options.
(10)
Includes 5,000 shares of common stock issuable upon exercise of
options.
(11)
Includes 71,667 shares of common stock issuable upon exercise of
options and 1,478,197 shares prior to the offering and
4,139,971 shares after the offering held by
TA Associates, Inc. Mr. Child is a managing director
of TA Associates, Inc. and may be considered to have beneficial
ownership of TA Associates, Inc.s interest in us.
Mr. Child disclaims beneficial ownership of all such
shares. Mr. Child has been a member of our board of
directors since September 2000. See note 2 above.
(12)
Includes 183,333 shares of common stock issuable upon
exercise of options.
(13)
Includes 3,333 shares of common stock issuable upon
exercise of options.
(14)
Includes 693,955 shares of common stock issuable upon
exercise of options.
(15)
Amount shown reflects the aggregate number of shares owned by
Merrill Lynch Taurus Fund 2000, L.P., ML IBK Positions, Inc.,
Merrill Lynch Ventures L.P. 2001, Merrill Lynch KECALP L.P.
1999, and KECALP Inc., as Nominee for Merrill Lynch KECALP
International L.P. 1999, assuming the conversion of 600,000
shares of series B preferred stock. The address of each of
the investment funds described in this footnote is c/o Merrill
Lynch Global Private Equity, 4 World Financial Center, 23rd
Floor, New York, NY 10080.
The general partner of Merrill Lynch Taurus 2000 Fund, L.P. is
ML Taurus, Inc., which is a wholly owned subsidiary of Merrill
Lynch Group, Inc., which in turn is a wholly owned subsidiary of
Merrill Lynch & Co., Inc. Decisions regarding the voting or
disposition of shares of our equity securities held of record by
Merrill Lynch Taurus 2000 Fund, L.P. are made by the board of
directors of ML Taurus, Inc., which is comprised of four
individuals. Each of ML Taurus, Inc., because it is the general
partner of Merrill Lynch Taurus 2000 Fund, L.P.; Merrill Lynch
Group, Inc. and Merrill Lynch & Co., Inc., because they
control ML Taurus, Inc.; and the four members of the ML Taurus,
Inc. board of directors, by virtue of their shared
decisionmaking power, may be deemed to beneficially own the
shares held by Merrill Lynch Taurus 2000 Fund, L.P. Such
entities and individuals expressly disclaim beneficial ownership
of the shares that Merrill Lynch Taurus 2000 Fund, L.P. holds of
record or may be deemed to beneficially own.
ML IBK Positions, Inc. is a wholly owned subsidiary of Merrill
Lynch Group, Inc., which in turn is a wholly owned subsidiary of
Merrill Lynch & Co., Inc. Decisions regarding the voting or
disposition of shares of our equity securities held of record by
ML IBK Positions, Inc. are made by the Private Equity Investment
Committee of its board of directors, which is comprised of three
individuals. Each of Merrill Lynch Group, Inc. and Merrill Lynch
& Co., Inc., because they control ML IBK Positions, Inc.,
and the three members of the ML IBK Positions, Inc. Private
Equity Investment Committee, by virtue of their shared
decisionmaking power, may be deemed to beneficially own the
shares held by ML IBK Positions, Inc. Such entities and
individuals expressly disclaim beneficial
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ownership of the shares that ML IBK Positions, Inc. holds of
record or may be deemed to beneficially own.
The general partner of Merrill Lynch Ventures L.P. 2001 is
Merrill Lynch Ventures, LLC, which is a wholly owned subsidiary
of Merrill Lynch Group, Inc., which in turn is a wholly owned
subsidiary of Merrill Lynch & Co., Inc. Decisions regarding
the voting or disposition of shares of our equity securities
held of record by Merrill Lynch Ventures L.P. 2001 are made by
the Management and Investment Committee of the board of
directors of Merrill Lynch Ventures, LLC, which is composed of
three individuals. Each of Merrill Lynch Ventures, LLC, because
it is the general partner of Merrill Lynch Ventures L.P. 2001;
Merrill Lynch Group, Inc. and Merrill Lynch & Co., Inc.,
because they control Merrill Lynch Ventures, LLC; and the three
members of the Merrill Lynch Ventures, LLC Management and
Investment Committee, by virtue of their shared decisionmaking
power, may be deemed to beneficially own the shares held by
Merrill Lynch Ventures L.P. 2001. Such entities and individuals
expressly disclaim beneficial ownership of the shares that
Merrill Lynch Ventures L.P. 2001 holds of record or may be
deemed to beneficially own.
The general partner of Merrill Lynch KECALP L.P. 1999 is KECALP
Inc., which is a wholly owned subsidiary of Merrill Lynch Group,
Inc., which in turn is a wholly owned subsidiary of Merrill
Lynch & Co., Inc. The investment manager of Merrill Lynch
KECALP International L.P. 1999 is KECALP Inc., which is a wholly
owned subsidiary of Merrill Lynch Group, Inc., which in turn is
a wholly owned subsidiary of Merrill Lynch & Co., Inc.
Decisions regarding the voting or disposition of shares of our
equity securities held of record by Merrill Lynch KECALP L.P.
1999 and KECALP Inc. are made by the Affiliated Co-Investor
Committee of the board of directors of KECALP Inc., which is
comprised of three individuals. Each of Merrill Lynch Group,
Inc. and Merrill Lynch & Co., Inc., because they control
Merrill Lynch KECALP L.P. 1999 and KECALP Inc., and the three
members of the KECALP Inc. Affiliated Co-Investor Committee, by
virtue of their shared decisionmaking power, may be deemed to
beneficially own the shares held by KECALP Inc., as Nominee for
Merrill Lynch KECALP International L.P. 1999. Such entities and
individuals expressly disclaim beneficial ownership of the
shares that KECALP Inc., as Nominee for Merrill Lynch KECALP
International L.P. 1999, holds of record or may be deemed to
beneficially own.
(16)
Amount shown reflects the aggregate number of shares owned by
SOG Fund I, LP and SOG Fund II, LP assuming the
conversion of 200,000 shares of series B preferred stock.
We have been informed that The Special Opportunities Group LLC
has voting and investment power with respect to shares held by
such funds. Chris Miller is the Chief Executive Officer of The
Special Opportunities Group LLC.
(17)
Amount shown reflects the conversion of 200,000 shares of
series B preferred stock. We have been informed that Telnet
PLC, a U.K. public limited company, as the parent company of
Allard Way Capital Funds Limited, has voting and investment
power with respect to shares held by such fund.
(18)
Amount shown reflects the conversion of 120,000 shares of
series B preferred stock. We have been informed that the
Investment Committee of Winston/ Thayer Management, L.L.C., as
manager of Winston/ Thayer Partners, L.P. has voting and
investment power with respect to shares held by such fund.
A. Scott Andrews, Marvin P. Bush and Frederick V.
Malek comprise the Investment Committee of Winston/ Thayer
Management, L.L.C.
(19)
Amount shown reflects the conversion of 80,000 shares of
series B preferred stock. We have been informed that
Bayview Recovery Group LLC has voting and investment power with
respect to shares held by such fund. Kank Helley,
Richard G. Bianchina, Sr., and Angela K. Lyons are the
principal officers and managers of the Bayview Recovery Group
LLC.
(20)
Amount shown reflects the conversion of 25,000 shares of
series A preferred stock. We have been informed that
Michael S. Egan, as President and sole owner of RBI I,
LLC, has voting and investment power with respect to shares held
by such fund.
(21)
Amount shown reflects the conversion of 25,000 shares of
series A preferred stock. We have been informed that
Patricia Kluge has voting and investment power with respect to
shares held by such fund.
(22)
Includes shares to be sold by directors, officers and 5%
stockholders. Includes 5,000 shares of common stock issuable
upon exercise of options.
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we intend to adopt a board policy that the audit committee of
our board of directors will review and approve any distributions
and dividends to stockholders of NTO IRE-Polus;
Dr. Valentin P. Gapontsev and Mr. Samartsev intend to
grant a proxy to us to vote their shares with respect to NTO
IRE-Polus, giving us the ability to vote 82.6% of its total
shares and allowing us to have sufficient votes to elect the
general manager of NTO IRE-Polus and approve other changes that
require the approval of
66
2
/
3
%
of NTO IRE-Poluss stockholders; and
Dr. Valentin P. Gapontsev and Mr. Samartsev intend to
grant a right of first refusal to us on any sale of their shares
of NTO IRE-Polus to existing stockholders of
NTO
IRE-Polus
at a
price equal to the lesser of the per-share fair value or book
value of NTO IRE-Polus as of June 30, 2006. The charter
documents of NTO IRE-Polus and applicable Russian law also
provide that existing stockholders, including us, have a right
of first refusal up to their respective pro rata interests with
respect to transfers of shares of NTO IRE-Polus to third
parties.
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$13.50 Per Share
$15.50 Per Share
IPG Common Stock Price Per Share
All Holders
TA Associates
All Holders
TA Associates
$
111,247
$
58,551
$
116,920
$
61,537
20,000
10,526
20,000
10,526
$
131,247
$
69,077
$
136,920
$
72,063
(1)
Represents 8,240,532 and 4,337,122 shares, respectively,
for all series B preferred stockholders and
TA Associates at $13.50 per share and 7,543,252 and
3,970,133 shares, respectively, for all series B
preferred stockholders and TA Associates at $15.50 per
share.
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before the stockholder became an interested stockholder, the
board of directors approved either the business combination or
the transaction that resulted in the stockholder becoming an
interested stockholder;
upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
excluding, for purposes of determining the voting stock
outstanding, shares owned by persons who are directors and also
officers and some employee stock plans; or
at or after the time the stockholder became an interested
stockholder, the business combination was approved by the board
of directors of the corporation and authorized at an annual or
special meeting of the stockholders by the affirmative vote of
at least two-thirds of the outstanding voting stock that is not
owned by the interested stockholder.
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Number of
Shares Eligible
for Future Sale
Date
Immediately after the date of
this prospectus
After 180 days from the
date of this prospectus
one percent of the then-outstanding shares of common stock
(approximately 435,000 shares immediately after this
offering); or
the average weekly trading volume on the Nasdaq Global Market
during the four calendar weeks before the date on which the
seller files a notice of the proposed sale with the SEC.
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a citizen or resident of the United States;
a corporation, or other entity treated as a corporation for U.S.
federal income tax purposes, created or organized in or under
the laws of the United States, any state thereof or the District
of Columbia;
an estate the income of which is subject to U.S. federal income
taxation regardless of its source; or
a trust (i) which is subject to primary supervision by a
court situated within the United States and as to which one or
more U.S. persons have the authority to control all substantial
decisions of the trust, or (ii) that has a valid election
in effect under applicable U.S. Treasury regulations to be
treated as a U.S. person.
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the gain is effectively connected with a trade or business of
the
Non-U.S.
Holder in the United States and, where a tax treaty applies, is
attributable to a United States permanent establishment or fixed
base of the
Non-U.S.
Holder;
the
Non-U.S.
Holder is
an individual who is present in the United States for 183 or
more days during the taxable year of disposition and meets
certain other requirements; or
we are or have been a U.S. real property holding
corporation within the meaning of Section 897(c)(2)
of the Code, also referred to as a USRPHC, for United States
federal income tax purposes at any time within the five-year
period preceding the disposition (or, if shorter, the
Non-U.S.
Holders
holding period for the common stock).
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Number of
Underwriter
Shares
Incorporated
Per Share
Without Option
With Option
$
$
$
$
$
$
$
$
$
$
$
$
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offer, pledge, sell or contract to sell any common stock;
sell any option or contract to purchase any common stock;
purchase any option or contract to sell any common stock;
grant any option, right or warrant for the sale of any common
stock;
lend or otherwise dispose of or transfer any common stock;
enter into any swap or other agreement that transfers, in whole
or in part, the economic consequences of ownership of any common
stock whether any such swap or transaction is to be settled by
delivery of shares or other securities, in cash or otherwise; or
publicly announce any of the foregoing.
during the last 17 days of the
180-day
restricted
period, we issue an earnings release or material news or a
material event relating to us occurs; or
prior to the expiration of the
180-day
restricted
period, we announce that we will release earnings results during
the
16-day
period
beginning on the last day of the
180-day
period,
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the valuation multiples of publicly traded companies that the
underwriters believe to be comparable to us;
our financial information;
the history of, and the prospects for, our company and the
industry in which we compete;
an assessment of our management, its past and present
operations, and the prospects for, and timing of, our future
revenues;
the present state of our development; and
the above factors in relation to market values and various
valuation measures of other companies engaged in activities
similar to ours.
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it has only communicated or caused to be communicated and will
only communicate or cause to be communicated an invitation or
inducement to engage in investment activity (within the meaning
of Section 21 of the Financial Services and Markets Act
2000, or FSMA) received by it in connection with the issue or
sale of the shares in circumstances in which Section 21(1)
of the FSMA does not apply to us; and
it has complied with, and will comply with, all applicable
provisions of the FSMA with respect to anything done by it in
relation to the shares in, from or otherwise involving the
United Kingdom.
to legal entities which are authorized or regulated to operate
in the financial markets or, if not so authorized or regulated,
whose corporate purpose is solely to invest in securities;
to any legal entity which has two or more of (1) an average
of at least 250 employees during the last financial year,
(2) a total balance sheet of more than
43,000,000 and
(3) an annual net turnover of more than
50,000,000, as
shown in its last annual or consolidated accounts; or
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in any other circumstances which do not require the publication
by us of a prospectus pursuant to Article 3 of the
Prospectus Directive.
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F-2
F-3
F-4
F-5
F-6
F-7
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Nine Months Ended
Years Ended December 31,
September 30,
2003
2004
2005
2005
2006
(unaudited)
(in thousands except per share data)
$
33,740
$
60,707
$
96,385
$
62,238
$
101,128
38,583
42,274
62,481
41,763
57,983
(4,843
)
18,433
33,904
20,475
43,145
2,110
2,363
3,236
2,354
4,111
10,063
4,831
5,788
4,177
4,314
9,998
8,179
10,598
6,689
9,352
22,171
15,373
19,622
13,220
17,777
(27,014
)
3,060
14,282
7,255
25,368
(1,505
)
(2,150
)
(1,840
)
(1,410
)
(1,051
)
(3,664
)
(615
)
(745
)
(477
)
(4,356
)
1,647
196
236
196
143
(3,522
)
(2,569
)
(2,349
)
(1,691
)
(5,264
)
(30,536
)
491
11,933
5,564
20,104
2,205
1,601
(4,080
)
(2,037
)
(6,597
)
121
(80
)
(426
)
(25
)
(910
)
$
(28,210
)
$
2,012
$
7,427
$
3,502
$
12,597
$
(1.40
)
$
(0.01
)
$
0.16
$
0.06
$
0.34
$
(1.40
)
$
(0.01
)
$
0.16
$
0.06
$
0.31
25,534
25,698
26,232
26,105
27,052
25,534
25,698
30,167
30,040
32,987
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Convertible
Convertible Redeemable Preferred Stock
Preferred Stock
Series B
Series D
Series A
Common Stock
Note
Accumulated
Other
Additional
Receivable
Other
Comprehensive
Par
Paid-In
From
Deferred
Accumulated
Comprehensive
Income
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Value
Capital
Stockholders
Compensation
Deficit
Income
Total
(Loss)
(In thousands, except share and per-share data)
3,800,000
$
84,194
$
500,000
$
5,000
25,293,693
$
3
$
100,077
$
(463
)
$
(2,613
)
$
(130,854
)
$
747
$
(28,103
)
(28,210
)
(28,210
)
$
(28,210
)
4,508
4,508
4,508
$
(23,702
)
2,684,211
5,100
(4,991
)
(251
)
5,242
4,991
7,343
251
(7,594
)
(7,343
)
333,333
5
5
496
(496
)
2,203
2,203
1,583
2
2
3,800,000
86,546
2,684,211
5,100
500,000
5,000
25,628,609
3
98,228
(463
)
(906
)
(159,064
)
5,255
(51,947
)
2,012
2,012
$
2,012
2,077
2,077
2,077
$
4,089
2,351
(2,351
)
(2,351
)
66,000
(3
)
3
903
903
(12,000
)
(120
)
296,967
388
268
3,800,000
88,897
2,684,211
5,100
488,000
4,880
25,991,576
3
96,262
(463
)
(157,052
)
7,332
(49,038
)
7,427
7,427
$
7,427
(3,550
)
(3,550
)
(3,550
)
$
3,877
2,351
(2,351
)
(2,351
)
118
(118
)
7
7
667,636
1
1,000
1,001
3,800,000
91,248
2,684,211
5,100
488,000
4,880
26,659,212
4
95,029
(463
)
(111
)
(149,625
)
3,782
(46,504
)
12,597
12,597
$
12,597
2,260
2,260
2,260
$
14,857
440
440
(111
)
111
1,554
(1,554
)
(1,554
)
317
317
684,118
1,033
1,033
3,800,000
$
92,802
2,684,211
$
5,100
488,000
$
4,880
27,343,330
$
4
$
94,714
$
(23
)
$
0
$
(137,028
)
$
6,042
$
(31,411
)
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1.
NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
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Category
Economic Useful Life
30 years
3-5 years
3-5 years
3-5 years
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$
278
172
(153
)
25
322
35
(185
)
172
43
(24
)
7
198
71
(23
)
(7
)
$
239
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2.
STOCK-BASED COMPENSATION
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Nine Months
Ended
September 30,
2003
2004
2005
2005
2006
$
577
$
218
$
4
$
$
83
18
6
1
35
1,062
669
1
16
546
10
1
183
$
2,203
$
903
$
7
$
$
317
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2003
2004
2005
$
(28,210
)
$
2,012
$
7,427
2,203
903
7
(2,241
)
(915
)
(22
)
$
(28,248
)
$
2,000
$
7,412
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Number of
Weighted-Average
Options
Exercise Price
2,207,997
$
1.55
1,432,651
1.50
(1,583
)
1.61
(756,617
)
1.52
2,882,448
1.53
1,357,966
1.50
(296,967
)
1.31
(123,170
)
1.50
3,820,277
1.53
834,667
1.79
(667,636
)
1.50
(67,589
)
1.50
3,919,719
1.59
1,203,867
5.58
(684,118
)
1.52
(27,545
)
3.41
4,411,923
2.68
September 30, 2006
Number Exercisable at
Weighted-Average
Remaining
December 31,
Exercise
Number
Contractual Life
September 30,
Price
Outstanding
(Years)
2003
2004
2005
2006
2,573,580
7.11
32,351
2,679,086
2,396,186
2,077,099
615,557
9.74
1,573,233
142,389
149,347
5.28
2,916
3,887
3,887
692,210
5.85
9,167
13,200
17,134
307,895
4.60
15,784
16,600
16,600
32,207
73,334
4.60
15,784
16,600
16,600
4,411,923
1,649,235
2,729,373
2,450,407
2,251,695
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3.
INVENTORIES
December 31,
September 30,
2004
2005
2006
$
15,473
$
9,985
$
15,498
5,900
10,010
11,983
8,204
8,593
12,886
$
29,577
$
28,588
$
40,367
December 31,
September 30,
2004
2005
2006
$
4,284
$
5,817
$
6,375
27,212
35,397
39,509
42,023
43,783
49,663
4,875
5,625
6,950
4,182
1,084
6,271
82,576
91,706
108,768
(36,594
)
(40,711
)
(47,536
)
$
45,982
$
50,995
$
61,232
December 31,
September 30,
2004
2005
2006
$
2,562
$
4,248
$
4,224
2,166
2,078
4,805
593
1,065
1,496
1,853
2,516
2,780
$
7,174
$
9,907
$
13,305
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6.
FINANCING ARRANGEMENTS
December 31,
September 30,
2004
2005
2006
$
3,259
$
3,060
$
155
400
1,000
4,450
3,281
4,600
4,686
$
8,259
$
8,746
$
7,886
$
6,347
$
5,983
$
5,691
3,350
4,695
4,942
0
10,232
7,588
6,343
6,343
651
595
6,179
6,973
4,774
31,454
26,081
23,151
(5,995
)
(10,438
)
(10,025
)
$
25,459
$
15,643
$
13,126
$
10,025
3,403
3,265
2,480
1,696
2,282
$
23,151
Revolving
Line-of
-Credit
Facilities:
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7.
CONVERTIBLE REDEEMABLE PREFERRED STOCK, PREFERRED STOCK AND
WARRANTS
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8.
RELATED-PARTY TRANSACTIONS
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9.
NET INCOME (LOSS) PER SHARE
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Nine Months Ended
Year Ended December 31,
September 30,
2003
2004
2005
2005
2006
(unaudited)
25,534
25,698
26,232
26,105
27,052
2,349
357
357
354
1,789
1,789
1,770
1,789
1,789
1,462
25,534
25,698
30,167
30,040
32,987
Year Ended
Nine Months Ended
December 31,
September 30,
2003
2004
2005
2005
2006
(unaudited)
2,882
3,820
3,920
4,140
73
366
357
2,890
2,890
2,890
2,890
2,808
1,789
1,789
1,789
1,789
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Nine Months Ended
Year Ended December 31,
September 30,
2003
2004
2005
2005
2006
(unaudited)
$
(28,210
)
$
2,012
$
7,427
$
3,502
$
12,597
(2,352
)
(2,351
)
(2,351
)
(1,761
)
(1,554
)
(5,242
)
$
(35,804
)
$
(339
)
$
5,076
$
1,741
$
11,043
100
%
100
%
84
%
84
%
84
%
(35,804
)
(339
)
4,258
1,462
9,276
25,534
25,698
26,232
26,105
27,052
$
(1.40
)
$
(0.01
)
$
0.16
$
0.06
$
0.34
$
(35,804
)
$
(339
)
$
4,258
$
1,458
$
9,276
247
183
158
348
120
731
(35,804
)
(339
)
4,853
1,761
10,165
25,534
25,698
30,167
30,040
32,987
$
(1.40
)
$
(0.01
)
$
0.16
$
0.06
$
0.31
Nine Months Ended
Year Ended December 31,
September 30,
2003
2004
2005
2005
2006
(unaudited)
25,534
25,698
26,232
26,105
27,052
2,146
2,146
2,124
3,726
5,046
2,890
2,890
2,907
29,260
30,744
31,268
31,141
32,083
87
%
84
%
84
%
84
%
84
%
0
%
0
%
7
%
7
%
7
%
10.
COMMITMENTS AND CONTINGENCIES
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Years Ending December 31
Facilities
Equipment
Total
$
231
$
173
$
404
914
430
1,344
857
161
1,018
563
20
583
262
3
265
43
43
$
2,870
$
787
$
3,657
11.
LEGAL PROCEEDINGS
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12.
EMPLOYEE BENEFIT PLANS
13.
INCOME TAXES
Nine Months Ended
Year Ended December 31,
September 30,
2003
2004
2005
2006
$
(21,040
)
$
(1,637
)
$
1,211
$
884
(9,496
)
2,128
10,722
19,220
$
(30,536
)
$
491
$
11,933
$
20,104
Nine Months Ended
Year Ended December 31,
September 30,
2003
2004
2005
2006
$
$
1,569
$
$
(331
)
(430
)
(1,348
)
(6,521
)
(331
)
1,139
(1,348
)
(6,521
)
5,280
(189
)
(682
)
337
(97
)
(56
)
2,536
586
(2,992
)
(3,076
)
(5,617
)
162
998
3,000
2,536
462
(2,732
)
(76
)
$
2,205
$
1,601
$
(4,080
)
$
(6,597
)
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Nine Months Ended
Year Ended December 31,
September 30,
2003
2004
2005
2006
$
10,517
$
(167
)
$
(4,057
)
$
(6,835
)
(1,010
)
492
(658
)
(1,079
)
337
97
(18
)
(56
)
1,569
(1,246
)
(209
)
(253
)
(1,481
)
(749
)
(307
)
(5,617
)
162
998
3,000
(27
)
(36
)
(92
)
(146
)
$
2,205
$
1,601
$
(4,080
)
$
(6,597
)
December 31,
September 30,
2004
2005
2006
$
(918
)
$
(790
)
$
(465
)
6,779
4,961
4,338
2,832
3,433
1,400
1,055
1,056
980
17,050
13,654
10,706
(20,389
)
(19,391
)
(17,026
)
$
6,409
$
2,923
$
(67
)
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14.
GEOGRAPHIC AND PRODUCT INFORMATION
Nine Months Ended
Year Ended December 31,
September 30,
2003
2004
2005
2005
2006
(unaudited)
$
10,349
$
20,911
$
38,512
$
26,521
$
33,207
16
446
7,583
11,898
13,137
7,814
18,029
5,380
7,441
10,745
6,160
14,362
10,412
16,022
25,354
14,584
25,582
4,210
8,215
7,159
9,502
225
422
$
33,740
$
60,707
$
96,385
$
62,238
$
101,128
Nine Months Ended
Year Ended December 31,
September 30,
2003
2004
2005
2005
2006
(unaudited)
$
23,685
$
41,990
$
60,399
$
39,198
$
73,855
5,250
9,697
15,751
9,867
10,923
181
1,544
7,422
6,028
8,284
4,624
7,476
12,813
7,145
8,066
$
33,740
$
60,707
$
96,385
$
62,238
$
101,128
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December 31,
September 30,
2004
2005
2005
2006
(unaudited)
$
23,391
$
27,071
$
25,409
$
30,586
21,024
22,107
21,221
27,398
1,344
1,438
1,415
2,386
223
379
270
862
$
45,982
$
50,995
$
48,315
$
61,232
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Merrill Lynch & Co.
Lehman Brothers
Table of Contents
ITEM 13.
Other Expenses of Issuance and Distribution.
Amount to be Paid
$
17,166
16,543
5,000
150,000
800,000
600,000
530,000
281,291
$
2,400,000
ITEM 14.
Indemnification of Directors and Officers.
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ITEM 15.
Recent Sales of Unregistered Securities.
(1) On December 15, 2004, we sold 66,000 shares
of our common stock to Sujay Shetty, an individual, in exchange
for 277,000 shares of IPG Photonics (India) Private Limited;
(2) On August 13, 2003, in connection with the
settlement of a litigation between us and JDS Uniphase
Corporation (JDSU), we issued to JDSU 2,684,211 shares of
our series D preferred stock having an aggregate
liquidation value of $5,100,000, which shares are convertible
into up to 1,683,169 shares of our common stock, and we
issued to JDSU a subordinated convertible note in the principal
amount of $5,100,000, which note was convertible into
2,684,211 shares of our series D preferred stock and
was repaid in August 2006;
(3) On April 4, 2003, we sold 333,333 shares of
our common stock to TEM Incorporated for $1,000,000; and
(4) Since January 1, 2003, we have granted options to
purchase 4,829,150 shares of our common stock at
exercise prices ranging from $1.50 to $6.45 per share to
employees, consultants and directors under our 2000 Incentive
Compensation Plan, our 2006 Incentive Compensation Plan and our
Non-Employee Directors Stock Plan. Since January 1, 2003,
we have issued 1,655,306 shares of our common stock
pursuant to the exercise of stock options for aggregate
consideration of $2.4 million.
ITEM 16.
Exhibits.
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ITEM 17.
Undertakings.
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of
Prospectus filed as part of this Registration Statement in
reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4), or 497(h) under the Securities Act
shall be deemed to be part of this registration statement as of
the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) For the purpose of determining liability under the
Securities Act to any purchaser if the registrant is subject to
Rule 430C, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to
an offering, other than registration statements relying on
Rule 430B or other than prospectuses filed in reliance on
Rule 430A, shall be deemed to be part of and included in
the registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the
registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will,
as to a purchaser with a time of contract of sale prior to such
first use, supersede or modify any statement that was made in
the registration statement or prospectus that was part of the
registration statement or made in any such document immediately
prior to such date of first use.
(4) That, for the purpose of determining liability of the
registrant under the Securities Act to any purchaser in the
initial distribution of the securities, the undersigned
registrant undertakes that in a primary offering of securities
of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered
or sold to such purchaser by means of any of the following
communications, the undersigned registrant will be a seller to
the purchaser and will be considered to offer or sell such
securities to such purchaser:
Table of Contents
(i) Any preliminary prospectus or prospectus of the
undersigned registrant relating to the offering required to be
filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used
or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about
the undersigned registrant or its securities provided by or on
behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the
offering made by the undersigned registrant to the purchaser.
Table of Contents
IPG Photonics Corporation
By:
/s/
Valentin P.
Gapontsev
Chief Executive
Officer
and
Chairman of the
Board
Table of Contents
Signature
Title
*
Director
November 14, 2006
*
Director
November 14, 2006
*By:
/s/
Valentin P.
Gapontsev
as
Attorney-in-fact
Table of Contents
Number
Description
1
.1*
Form of Underwriting Agreement
3
.1**
Amended and Restated Certificate of Incorporation of the
Registrant
3
.2**
Form of Second Amended and Restated Certificate of Incorporation
of the Registrant, to be effective at the completion of this
offering
3
.3**
By-laws of the Registrant
3
.4**
Form of Amended and Restated By-laws of the Registrant, to be
effective at the completion of this offering
4
.1
Specimen Stock Certificate
4
.2**
Registration Rights Agreement by and among the Registrant and
the Investors named therein, dated as of August 30, 2000,
as amended
4
.3**
Registration Rights Agreement by and among the Registrant and
JDS Uniphase Corporation, dated as of August 13, 2003,
as amended
5
.1
Opinion of Winston & Strawn LLP
10
.1**
2000 Incentive Compensation Plan
10
.2**
2006 Incentive Compensation Plan
10
.3**
Non-Employee Directors Compensation Plan
10
.4**
Non-Employee Directors Stock Plan
10
.5**
Senior Executive Short-Term Incentive Plan
10
.6**
Form of Subordinated Note of the Registrant to be issued to
holders of series B preferred stock
10
.7**
Form of Warrant to Purchase Common Stock of the Registrant
issued to holders of series B preferred stock, as amended
10
.8**
Employment Agreement by and between the Registrant and Valentin
P. Gapontsev, dated as of March 1, 2006
10
.9**
Service Agreement by and between the Registrant and Eugene
Shcherbakov, dated as of March 1, 2006
10
.10**
Employment Agreement by and between the Registrant and Tim
Mammen, dated as of March 1, 2006
10
.11**
Employment Agreement by and between the Registrant and Angelo P.
Lopresti, dated as of March 1, 2006
10
.12**
Employment Agreement by and between the Registrant and Denis
Gapontsev, dated as of March 1, 2006
10
.13**
Form of Indemnification Agreement between the Registrant and
each of its Directors and Executive Officers
10
.14**
Form of Stock Option Agreement under the 2000 Incentive
Compensation Plan
10
.15**
Form of Stock Option Agreement under the 2006 Incentive
Compensation Plan
10
.16**
Form of Stock Option Agreement under the 2006 Non-Employee
Directors Stock Plan
10
.17**
Form of Confidentiality, Non-Competition and Confirmatory
Assignment Agreement
10
.18**
Construction Loan Agreement, dated as of April 28, 2000,
between the Registrant and Family Bank, FSB, as amended
10
.19**
Loan and Security Agreement, dated as of November 15, 2004,
between the Registrant and BankNorth, N.A. as Lender, as amended
10
.21**
Assignment, Research and Development Agreement between the
Registrant, IPG Laser GmbH, IPG Fibertech S.R.L. and NTO
IRE-Polus, dated as of August 30, 2000
10
.22**
Investment Agreement between NTO IRE-Polus and IPG Laser GmbH,
dated as of March 1, 2001
10
.23**
Loan and Security Agreement between the Registrant and IP Fibre
Devices (UK) Ltd., dated as of August 23, 2002
10
.24**
Non-Recourse Promissory Note by Valentin P. Gapontsev,
dated April 1, 2003
10
.25**
Amended and Restated Non-Recourse Promissory Note by
John H. Dalton, dated April 13, 2001
Table of Contents
Number
Description
10
.26**
Stock Purchase Agreement of John H. Dalton, dated
December 14, 2004
10
.27**
Guaranty of Valentin P. Gapontsev, dated as of
August 9, 2006
10
.28**
Stock Purchase Agreement between the Registrant and the
Investors named therein, dated as of August 30, 2000
10
.29**
Loan Agreement between IP Fibre Devices (UK) Ltd. and NTO
IRE-Polus, dated January 3, 2002, as amended
10
.30**
Exchange Agreement between the Registrant and Valentin P.
Gapontsev, dated as of July 31, 2006
10
.31**
Subscription Agreement between the Registrant and JDS Uniphase
Corporation, dated August 13, 2003
10
.32
Confidential Settlement Agreement between the Registrant and JDS
Uniphase Corporation, dated as of June 25, 2003
10
.33**
Convertible Promissory Note between the Registrant and JDS
Uniphase Corporation, dated August 13, 2003
10
.34**
Secured Promissory Note between the Registrant and JDS Uniphase
Corporation, dated August 13, 2003
10
.35**
Non-Recourse Promissory Note by Robert A. Blair, dated
September 30, 2003
10
.36**
Non-Recourse Promissory Note by Robert A. Blair, dated
December 3, 2003
10
.37**
Pledge Agreement between the Registrant and Robert A. Blair,
dated September 30, 2003
10
.38**
Pledge Agreement between the Registrant and Robert A. Blair,
dated December 3, 2003
10
.39**
Pledge Agreement between the Registrant and John H. Dalton,
dated April 13, 2001, as amended
10
.40**
Pledge Agreement between the Registrant and Dr. Valentin P.
Gapontsev, dated March 5, 2001, as amended
10
.41**
Pledge Agreement between the Registrant and Vincent Au-Yeung,
dated January 22, 2001
10
.42**
Promissory Note by Vincent Au-Yeung, dated January 22, 2001
10
.43**
Stockholders Agreement by and among the Registrant, the Founders
named therein and the Investors named therein, dated as of
August 30, 2000, as amended
10
.44**
Series D Preferred Stockholders Agreement by and among the
Registrant and JDS Uniphase Corporation, dated as of
August 13, 2003
10
.45
Sublease Agreement between IP Fibre Devices (UK) Ltd. and
IPG Photonics (UK) Ltd., dated October 31, 2006
10
.46
Right of First Offer Agreement between IPG Laser GmbH and
Dr. Valentin P. Gapontsev, dated November 1, 2006
10
.47
Right of First Offer Agreement between IPG Laser GmbH and Igor
Samartsev, dated November 1, 2006
21
.1**
List of Subsidiaries
23
.1
Consent of Deloitte & Touche LLP
23
.2
Consent of Winston & Strawn LLP (included in
Exhibit 5.1)
24
.1**
Power of Attorney
*
To be filed by amendment.
**
Previously filed.
Portions of this exhibit are the subject of a confidential
treatment request and have been omitted. These portions have
been submitted separately to the Securities and Exchange
Commission.
Stock Certificate Cusip 44980X 10 9 |
Exhibit 5.1
[LETTERHEAD OF WINSTON & STRAWN LLP]
November 14, 2006
IPG Photonics Corporation
50 Old Webster Road
Oxford, Massachusetts 01540
Re: Form S-1 Registration Statement (Registration No.
333-136521)
Ladies and Gentlemen:
We have acted as counsel for IPG Photonics Corporation, a Delaware corporation (the "Company"), in connection with the preparation and filing of its Registration Statement on Form S-1 (Registration No. 333-136521) initially filed with the Securities and Exchange Commission (the "Commission") on August 11, 2006 (as amended through the date hereof, the "Registration Statement"), under the Securities Act of 1933, as amended (the "Securities Act"). The Registration Statement relates to the registration of the offer and sale by the Company and certain selling stockholders (the "Offering") of up to 10,350,000 shares (the "Shares") of common stock, par value $0.0001 per share (the "Common Stock"), including (i) 6,241,379 shares (the "Primary Shares") of Common Stock that may be offered by the Company pursuant to the Registration Statement, (ii) 2,758,621 shares of Common Stock that may be offered by certain selling stockholders pursuant to the Registration Statement and (iii) 1,350,000 shares of Common Stock that may be offered by certain selling stockholders to cover over-allotments pursuant to the Registration Statement (the Shares described in subclauses (ii) and (iii) being herein referred to as the "Secondary Shares").
This opinion letter is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act.
In rendering the opinion set forth below, we have examined and relied upon such certificates, corporate records, agreements, instruments and other documents that we considered necessary or appropriate as a basis for the opinion, including (i) the Registration Statement, (ii) the Amended and Restated Certificate of Incorporation of the Company, (iii) the form of the Second Amended and Restated Certificate of Incorporation of the Company and (iv) the Amended and Restated By-laws of the Company. In our examination, we have assumed the
IPG Photonics Corporation
November 14, 2006
legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such latter documents. As to any facts material to this opinion that we did not independently establish or verify, we have relied upon oral or written statements and representations of officers and other representatives of the Company and others.
Based upon the foregoing and subject to the assumptions, qualifications and limitations set forth herein, we are of the opinion that (1) when the Second Amended and Restated Certificate of Incorporation of the Company has been filed with the Secretary of State of the State of Delaware, the Primary Shares will have been duly authorized by all requisite corporate action on the part of the Company and, when duly delivered against payment therefor as contemplated by the Underwriting Agreement the form of which is to be filed as Exhibit 1.1 to the Registration Statement, will be validly issued, fully paid and nonassessable and (2) the Secondary Shares have been duly authorized by all requisite corporate action on the part of the Company and are validly issued, fully paid and nonassessable.
The foregoing opinion is limited to the General Corporation Law of the State of Delaware. We express no opinion with respect to any other laws, statutes, regulations or ordinances.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to our firm under the caption "Legal Matters" in the Prospectus included in the Registration Statement. In giving such consent, we do not concede that we are experts within the meaning of the Securities Act or the rules and regulations thereunder or that this consent is required by Section 7 of the Securities Act.
Very truly yours,
/s/ Winston & Strawn LLP |
EXHIBIT 10.32
CONFIDENTIAL SETTLEMENT AGREEMENT
This CONFIDENTIAL SETTLEMENT AGREEMENT (this "Settlement"), dated as of June 25, 2003, by and among JDS UNIPHASE CORPORATION, a Delaware corporation ("JDSU" or "Claimant"), and IPG PHOTONICS CORPORATION, a Delaware corporation ("IPG" or "Respondent");
WITNESSETH:
A. IPG and JDSU's predecessor in interest, SDL Inc., a Delaware corporation ("SDL"), entered into a purchase and sale agreement entitled IPG Photonics Corporation Purchase and Sale Agreement No. 1-99, dated May 11, 1999, which was subsequently amended by the parties on or about May 18, 2000 and amended a second time on or about November 15, 2000 (collectively, the "Agreement"); and
B. a dispute arose between IPG and SDL's successor in interest, JDSU, concerning the parties' performance, rights, and obligations under the Agreement; and
C. JDSU has commenced an arbitration proceeding against IPG before the American Arbitration Association, entitled JDS Uniphase Corporation against IPG Photonics Corporation, AAA Number 74 181 01636 02, now pending before the AAA San Jose Regional Office (the "Arbitration"), alleging that IPG has breached the Agreement and now owes JDSU in excess of $10 million;
D. JDSU also commenced a proceeding against IPG in Massachusetts state court, entitled JDSU Uniphase Corp. v. IPG Photonics Corp., No. 02-1780, now pending before the Superior Court of the Commonwealth of Massachusetts requesting, among other things, equitable relief in the form of an attachment of IPG's assets in Massachusetts (the "State Court Action").
E. IPG has asserted counterclaims against JDSU and SDL in the Arbitration and the State Court Action sounding in breach of contract, unfair competition and violation of federal and state laws governing anti-trust and unfair competition;
F. Both parties have denied the others' operative allegations contained in the Arbitration claim filed by JDSU and the counterclaims filed by IPG; and
G. IPG and JDSU each believes that it will be best served by ending the disputes reflected in the Arbitration and the State Court Action and that the continued prosecution of the Arbitration and the State Court Action will entail the expenditure of substantial legal fees and management time for both IPG and JDSU over the course of several years, resources that each of them believes would be better spent in pursuit of such business interest; and
H. Subject to the terms of this Settlement and the other instruments and documents to be entered into by it pursuant hereto, JDSU is therefore willing to dismiss the claims it has asserted against IPG in the Arbitration and the State Court Action, and IPG is willing to dismiss the counterclaims that it has asserted against JDSU in the Arbitration and the State Court Action; and
I. Accordingly, the parties hereto desire to settle their disputes reflected in the Arbitration and the State Court Action on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual representations, warranties and covenants set forth herein, the parties hereto hereby agree as follows:
1. Representations and Warranties.
Both IPG and JDSU hereby represent and warrant to the other that:
A. It has the corporate power and authority to enter into this Settlement and the other instruments and documents to be entered into by it pursuant hereto and to observe and perform its obligations hereunder and thereunder;
B. The execution and delivery of this Settlement and the other instruments and documents to be executed and delivered by it pursuant hereto, and the consummation of the transactions contemplated hereby and thereby, have been duly authorized by all necessary corporate action;
C. This Settlement and each other instrument and document to be executed and delivered by it pursuant hereto has been or, when executed and delivered, will have been, duly executed and delivered, and this Settlement and each such other instrument and document constitutes or, when executed and delivered by it, will constitute, a valid and binding agreement, enforceable against it in accordance with its terms (except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, or by principles governing the availability of equitable remedies);
D. None of the execution, delivery or performance of this Settlement and
the other instruments and documents to be executed and delivered by it
pursuant hereto, nor the consummation of the transactions contemplated
hereby and thereby, nor compliance by it with the terms hereof and
thereof, will: (i) conflict with or result in a breach of any of the
provisions of its charter, by-laws, or equivalent governing documents;
(ii) require any filing by it with, or any permit, authorization or
consent from, any court, administrative agency, or other governmental
or regulatory authority, foreign or domestic, or from any third party,
except any filings or reports required to be made under and pursuant
to applicable securities laws or the rules and regulations of any
applicable stock exchange or market quotation system; (iii) result in
a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default under, any note, bond, mortgage,
indenture, lease, license, franchise, permit or other instrument or
agreement to which it is a party or by which it is bound or any of its
assets is affected; or (iv) violate any order, writ, injunction,
decree, statute or ordinance applicable to it; and,
E. It has not relied on any representation or warranty, written or oral, that is not set forth herein or in any of the instruments or documents executed pursuant hereto in entering into this
Settlement and each other instrument and document to be executed and delivered by it pursuant hereto; it has entered into this Settlement and such other instruments and documents voluntarily and without duress, threat or undue influence; it has been represented in negotiations relating to and in the preparation of this Settlement by independent counsel of its own choosing, it has reviewed this Settlement and such other instruments and documents and each such document has been explained to it by its counsel, it is fully aware of its terms and provisions and of its legal effect; and it has conducted whatever investigation it has deemed necessary or appropriate prior to entering into this Settlement or any such other document.
F. Notwithstanding anything to the contrary in clauses B, C and D of this
Section 1, IPG shall make the representations and warranties in such
clauses B, C and D with respect to the Equity Documents (as
hereinafter defined) at the time of and conditioned on the Closing (as
hereinafter defined).
2. Stay and Dismissal of the Arbitration Claims with Prejudice.
A. Concurrently with the execution of this Settlement, IPG and JDSU shall cause their respective attorneys to execute a Stipulation and Order to Stay the Arbitration ("Stipulation and Order To Stay Arbitration"), for a thirty (30) day period.
B. Upon the Closing, IPG and JDSU shall cause their respective attorneys to execute a Stipulation and Order of Dismissal for the dismissal with prejudice of the Arbitration ("Stipulation and Order of Dismissal-Arbitration"), subject only, as stated therein, to the terms and conditions of this Settlement.
C. Upon the Closing, IPG and JDSU shall cause their respective attorneys to execute a Stipulation and Order of Dismissal to dismiss the action entitled JDS Uniphase Corp. v. IPG Photonics Corp., No. 02-1780, currently pending in the Superior Court of the Commonwealth of Massachusetts ("Stipulation and Order of Dismissal-State Court Action"), and vacating the attachment of assets to which the parties have previously stipulated in that action.
D. Each of the parties hereto shall, promptly after the execution and delivery of this Settlement, return any and all materials in its possession to the party that provided such materials, if and to the extent required by any confidentiality agreements executed by such parties or protective orders governing the return of such materials.
3. Structured Cash Payment to JDSU.
A. Promissory Note.
Concurrently with the execution of this Settlement, IPG shall execute a promissory note (the "Note") in favor of JDSU, in the form of Exhibit A attached hereto in the principal amount of $6,079,472.60 (Six million, seventy nine thousand, four hundred and seventy two dollars, and sixty cents), which shall be payable by IPG on the following schedule:
i. $666,000 shall be paid to JDSU during calendar year 2003 in two equal installments, pursuant to the terms of the Note;
ii. $2,000,000.00 shall be paid during calendar year 2004 in equal quarterly installments pursuant to the terms of the Note; and
iii. the balance of the amount to be paid during calendar year 2005 in equal quarterly installments pursuant to the terms of the Note.
Interest shall accrue on the outstanding balance of the Note at a rate of 4% (four) per annum commencing on the date of the Closing. Accrued and unpaid interest under the Note shall be payable at the same times as payments of principal.
At the Closing, IPG shall pay to JDSU $302,006.30 (which amount represents a payment to JDSU of $334,000 less $31,993.70 for an outstanding account payable of JDSU owing to IPG).
B. Attachment: The Note shall be secured by a first priority security interest in certain IPG's assets set forth in the Security Agreement (the "Security Agreement") in the form of Exhibit B attached hereto, and in certain land owned by IPG set forth in the Mortgage (the "Mortgage") in the form of Exhibit C attached hereto. JDSU and IPG shall execute the Security Agreement and IPG shall execute the Mortgage concurrently with the execution of this Settlement.
C. Release of Liens: At or promptly following the Closing, JDSU shall release its liens and attachment on the assets of IPG under the Writ of Attachment, dated February 28, 2003 (Superior Court Department of the Trial Court Civil Action 02-1780C); it being agreed that the assets subject to such Writ of Attachment shall become the assets which shall the Note pursuant to the Security Agreement and the Mortgage.
D. Acceleration. The amounts set forth in Section 3(A) shall be accelerated and shall become immediately due and payable upon the occurrence of any of the following events:
i. IPG shall have defaulted in the performance of its obligations under the Note and shall have failed to cure such default within thirty (30) days of written notice thereof given by JDSU in accordance with terms of the Note; and
ii. A Change of Control of IPG, as defined in the Note.
E. Other Prepayments.
i. In the event that IPG engages in an equity financing prior to repayment and satisfaction of the Note, it shall provide to JDSU in payment of the Note 10% of any net proceeds raised through such financing; or
ii. In the event that IPG's commercial bank (BankNorth) releases to IPG any cash collateral currently held by it, IPG shall
provide those funds to JDSU in payment of the Note as follows:
iii. If the release occurs during 2003 or 2004, then IPG shall pay JDSU 50% of such released cash in partial payment of the Note; and
a. If the release occurs during 2005, IPG shall pay to JDSU 75% of such released cash in partial payment of the Note, until such Note is paid in full.
b. All prepayments shall be applied in the reverse order of principal payments under the Note.
F. Disposition of assets. IPG shall be permitted to sell, transfer or otherwise dispose of the assets securing the Note from time to time, provided that (a) the assets are sold for fair value, and (b) that the net consideration received by IPG in connection with the sale of the assets are used within five (5) business days of the receipt thereof to prepay the Note. All payments under this Section F shall be applied in the reverse order of principal payments under the Note.
4. Commercial Relationship.
A. Concurrently with the execution of this Settlement, IPG and JDSU shall execute (a) a Master Supply Agreement, in the form of Exhibit D attached hereto, pursuant to which IPG agrees that it will supply to JDSU, pulsed Ytterbium fiber laser modules (current and new commercial versions) that it sells on the merchant market, excluding those fiber lasers as to which IPG is subject to exclusivity obligations and (b) a Master Supply Agreement under which JDSU agrees to supply to IPG, and IPG agrees to purchase from JDSU on the terms and conditions set forth in Exhibit E, commercially available Laser Diodes and packaged Laser Diodes that it sells on the merchant market.
5. Investment By JDSU.
Promptly following the execution of this Settlement, IPG and JDSU will negotiate in good faith to document and effectuate the general terms set forth below governing the terms of a new series of convertible preferred stock of IPG (the "Series D Preferred") and a convertible note (the "Convertible Note") to be to be issued to JDSU at the Closing. The parties hereto agree that IPG shall provide to JDSU drafts of the principal documents incorporating the terms of the Series D Preferred and Convertible Note (collectively, the "Equity Documents") to JDSU not later than three business days following the execution of this Settlement. It is the goal of the parties hereto to execute and deliver the Equity Documents (including obtaining all necessary approvals and consents, which IPG agrees to request in good faith) not later than three weeks following the execution of this Settlement. The terms of the Equity Documents shall reflect the following:
A. IPG would provide a new series of convertible preferred stock, the Series D Preferred, having a $5,100,000 liquidation preference. IPG would issue the Series D Preferred representing 5% of IPG outstanding shares (fully diluted, including accounting for weighted average ratchet and warrant positions) to JDSU.
i. The liquidation preference and price per share would be $1.90 per share (equal to $5,100,000);
ii. Series D Preferred rights and preferences would be substantially similar to Series A Preferred and Series B Preferred stock of IPG currently outstanding (except for ratchet and warrants, participating rights after payment of full liquidation preference, and process control rights), including same liquidation preference and weighted average anti-dilution rights. The Series D Preferred would have no superior rights or preferences;
iii. IPG would provide to JDSU copies of all financial materials submitted to its Board of Directors (e.g., balance sheets, income statements, cash flows), except for strategic marketing or product pricing materials. JDSU would agree to implement a "Chinese wall" within its organization to protect disclosure by the holder of the IPG materials to competing JDSU operating divisions and personnel; and
iv. This issuance would be subject to reasonable due diligence by JDSU and subject to reasonable confidentiality limitations on the material supplied to JDSU.
B. IPG would issue to JDSU the Convertible Note in the principal amount of $5,100,000, due three years after issuance and convertible, in whole or in part, at IPG's option, into Series D Preferred.
i. The conversion price for the Convertible Note into Series D Preferred would be $1.90 per share;
ii. The Series D Preferred shares acquired upon conversion of the Convertible Note would have a conversion price into common the same as the then conversion price for outstanding Series D Preferred shares (i.e., lower of $1.90/share or weighted average price (accounting for dilutive issuances, splits, reverse splits, etc.) of the outstanding Series D Preferred); and
iii. The full amount of the Convertible Note would be immediately payable (or convertible) in the event of a Change in Control of IPG.
6. Intellectual Property.
A. JDSU represents to its Knowledge (defined below) that no current product of JDSU violates any currently issued U.S. Patents owned by IPG for the design, manufacture or conception of fiber lasers or the components thereof. For purposes of this Settlement, "Knowledge" means the opinion of JDSU's Vice President of Intellectual Property, formed after due inquiry, including but not limited to the General Manager of JDSU's Commercial Lasers division.
B. IPG disclaims any and all rights, interests or ownership in and to any of the intellectual property used to develop or otherwise contained in the laser diodes and fiber laser products at issue in the Arbitration. IPG further agrees that JDSU's products have not
violated IPG's fiber laser related patents; provided that this covenant does not affect any of IPG's rights or assets in the future, except as expressly stated in this Section 6 or in Sections 7B or 10B.
C. IPG covenants that it will not commence an action claiming that JDSU's or its Affiliates' products infringe any patents owned by IPG or its Affiliates, or which IPG or its Affiliates have the right to assert, for any period prior to the Closing. For purposes of this Settlement, "Affiliate" means an entity which owns or controls, directly or indirectly, more than 50% of the voting interests in, or more or than 50% of the voting interests of which is owned or controlled, directly or indirectly, by a party.
D. IPG covenants that, for a period of three years from the date of the Closing, it will not bring any claims against JDSU or its Affiliates under any issued patents that exist as of the date of the Closing, or currently pending patent applications which IPG or its Affiliates own or have the right to assert. The covenant in the preceding sentence shall not prevent IPG from asserting patent infringement or intellectual property-related counterclaims or defenses against JDSU in a patent infringement lawsuit filed by JDSU against IPG, or for asserting misappropriation claims against JDSU directly related to the hiring or retention by JDSU of IPG's employees or consultants and the use by JDSU of information developed by such former IPG employee or consultant for or on behalf of IPG or others associated with IPG. In the event of any finding of liability against JDSU for patent infringement or violation of intellectual property rights of IPG, the parties agree to the following additional stipulations:
i. With respect to any existing JDSU fiber laser products, IPG foregoes recovery of any damages owed by JDSU to IPG for three years from the date of the Closing; and
ii. With respect to other JDSU products, IPG would be entitled to recover damages commencing not earlier than the date of the Closing.
E. Nothing in this Settlement shall be interpreted or construed as a grant, sale, transfer, assignment or license, directly or indirectly, by IPG or its Affiliates to JDSU of any intellectual property rights or properties, including without limitation any patent, copyright, trade secrets, trademarks or tradenames, of IPG or its Affiliates, whatsoever.
7. Worldwide Mutual Releases.
A. JDSU Release:
JDSU, on behalf of itself and its direct and indirect subsidiaries, and other Affiliates, and their respective directors, officers, employees, agents and representatives, including, without limitation, its and their attorneys, and their respective predecessors (including SDL), successors, assigns, heirs and legal representatives, hereby releases, acquits, and forever absolutely discharges IPG, its direct and indirect subsidiaries, and its other Affiliates, and its and their respective directors, officers, employees, agents and representatives, including, without
limitation, its and their attorneys, and their respective predecessors, successors, assigns, heirs and legal representatives, of and from any and all actions, causes of action, claims, demands, damages, theories, affirmative defenses, judgments, liens, indebtedness, losses, expenses (including, without limitation, attorneys' fees and disbursements) and liabilities of every kind and character, whether known or unknown, suspected or unsuspected, certain or speculative, existing or prospective, liquidated or unliquidated, whether under the laws of the United States or any state thereof or any other country, which exist as of the date of this Settlement or may have come into existence at any time prior to the date of this Settlement.
B. IPG Release.
IPG, on behalf of itself and its direct and indirect subsidiaries, and other Affiliates, and their respective directors, officers, employees, agents and representatives, including, without limitation, its and their attorneys, and their respective predecessors, successors, assigns, heirs and legal representatives, hereby releases, acquits, and forever absolutely discharges JDSU, its direct and indirect subsidiaries, and other Affiliates, and their respective directors, officers, employees, agents and representatives, including, without limitation, its and their attorneys, and their respective predecessors (including SDL), successors, assigns, heirs and legal representatives, of and from any and all actions, causes of action, claims, demands, damages, theories, affirmative defenses, judgments, liens, indebtedness, losses, expenses (including, without limitation, attorneys' fees and disbursements) and liabilities of every kind and character, whether known or unknown, suspected or unsuspected, certain or speculative, existing or prospective, liquidated or unliquidated, whether under the laws of the United States or any state thereof or any other country, which exist as of the date of this Settlement or may have come into existence at any time prior to the date of this Settlement.
C. No Release of Indebtedness.
Nothing in this Settlement shall be deemed to constitute a release of indebtedness by JDSU to IPG which obligations existing as of the date hereof are contained solely in the Note and the related Security Agreement and Mortgage, and in the Convertible Note, it being agreed that this Settlement settles and releases all claims and allegations by the parties against each other regarding obligations and rights that were in dispute by each of JDSU and IPG in the Arbitration and the State Court Action.
D. Possession of Claims.
The parties hereto represent and warrant that they are the owners of the Claims being released pursuant to this Settlement. The parties hereto further represent and warrant that they have not previously assigned, transferred, hypothecated, granted a security interest in or lien upon, or purported to assign, transfer, hypothecate or grant a security interest in or lien upon, any Claim or portion thereof which is released hereby to another person or entity which is not a signatory to this Settlement, and agree to indemnify fully the other parties hereto for any judgments,
attorneys' fees or costs incurred which result from the assertion by any person of any interest in the released Claim due to any purported agreement or dispute as to ownership of the Claims released pursuant to this Settlement.
8. California Civil Code Section 1542.
The parties hereto acknowledge familiarity with Section 1542 of the Civil Code of the State of California, which provides as follows:
A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.
The parties hereto waive and relinquish any right and benefit which they have or may have under Section 1542 and any Massachusetts statutory or common law equivalent or any other similar applicable statutes to the full extent that they may lawfully waive all such rights and benefits pertaining to the subject matter of this Settlement as described above.
9. Closing.
The consummation of the transactions and releases contemplated by this
Settlement shall occur at a closing (the "Closing"). It shall be a condition to
Closing that all of the Equity Documents shall be executed and delivered by the
parties hereto in form and substance reasonably satisfactory to both parties
hereto, and that all other documents or filings necessary or reasonably
requested by a party hereto to effectuate the Equity Document and the other
agreements set forth in this Settlement shall be executed and delivered and
shall have been made simultaneously. Subject to satisfaction of the conditions
in this Settlement, each party hereto shall deliver to the other party executed
originals of the Stipulation and Order of Dismissal-Arbitration; the Stipulation
and Order of Dismissal-State Court Action; the Note; the Security Agreement; the
Mortgage; the Master Supply Agreements; and the Equity Documents, including the
Convertible Note and a stock certificate representing the issued shares of
Series D Preferred. IPG shall also pay to JDSU at the Closing $302,006.30
referred to in Section 3(A) above. The covenants, representations and warranties
contained in Sections 6 (Intellectual Property), 7 (Worldwide Mutual Releases),
10 (Future Disputes), and 11 (Termination of Agreement) hereof shall become
effective only upon the consummation of the transactions contemplated by this
Settlement at the Closing.
10. Future Disputes.
A. Attempts To Resolve.
If, after the date of this Settlement, either IPG or JDSU (the "Alleging Party") believes it has a claim (a "New Dispute") against the other, the Alleging Party shall give notice to the other party of the New Dispute, setting forth, in reasonable detail, the nature and basis for the New Dispute. The parties, for a period of thirty (30) days (or such other longer period as determined by mutual consent of the Disputing Parties), shall use their best efforts to resolve such New Dispute between themselves and neither party shall commence any such action during such thirty (30) day period.
B. IPG's Assertion of Defenses.
In the event JDSU brings an action against IPG for breach of any term or obligation of this Settlement and the other instruments and documents to be entered into by it pursuant hereto, IPG agrees that it will not assert as a counterclaim or defense in that action, any claims contending that JDSU has engaged in unfair competition or other claims brought under the anti-trust laws of the United States, any of its states, or a foreign country. To the extent that IPG wishes to pursue any of the foregoing claims against JDSU, IPG shall be permitted to assert those claims in a separate and unrelated action but only to the extent that the basis for the claim is not JDSU's assertion of a breach of any term or obligation of this Settlement and the other instruments and documents to be entered into by it pursuant hereto.
11. Termination of Agreement.
Upon execution of this Settlement, the Agreement between IPG and JDSU shall terminate and neither party shall have any further rights or obligations thereunder.
12. Confidentiality.
The terms of this Settlement are strictly confidential and none of the parties hereto shall, nor shall it or he permit any of its or his subsidiaries or affiliates, counsel, auditors, financial advisors or other representatives or agents to, disclose the terms of this Settlement to the public generally or to any third party except as required by applicable law or regulation or the rules of any governing stock exchange or market quotation system. Notwithstanding the foregoing, (A) any party hereto may disclose the fact that this Settlement has been entered into among the parties hereto (but without disclosing its terms) and represents a full settlement of all claims in the Arbitration, (B) any party hereto may disclose this Settlement to any attorney, accountant, investors, public relations advisor, insurance carrier or other consultant engaged by such party in the ordinary course of business, in connection with tasks assigned to such person or persons, so long as such attorney, investor, accountant, public relations advisor, insurance carrier or other consultant is bound, subject to the requirements of applicable law, to confidentiality, (C) any party may disclose the existence and the terms of this Settlement if and to the extent (but only to the extent) it is required to do so by an order of a court of competent jurisdiction or by a subpoena or any other demand for discovery made in an action or proceeding pending in a court or governmental agency of competent jurisdiction, provided that, in the case of such a subpoena or other demand for discovery, the party receiving such process shall notify each other party to this Settlement of such receipt, together with delivery of a copy thereof and, in such case, any such notified party shall have the right to object, at its own cost, to compliance with any such subpoena or other demand based on the confidentiality of this Settlement.
13. Further Cooperation.
The parties hereto agree to execute and deliver any and all additional papers, documents and other assurances and shall do any and all acts or things reasonably necessary in connection with the performance of their obligations hereunder to implement the provisions of this Settlement.
14. Costs and Fees.
Each party shall bear its own attorneys' fees and costs incurred in connection with the Arbitration and State Court Action, and with respect to
the negotiation, execution and delivery of this Settlement and each document required to be delivered hereunder.
15. Miscellaneous.
A. Notices.
All notices, consents, waivers, and other communications under this Settlement and under each instrument or document executed and delivered pursuant hereto must be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt), or (ii) when received by the addressee, if sent by a nationally recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and facsimile numbers set forth below (or to such other addresses and facsimile numbers as a party may designate by written notice to the other parties):
JDSU: JDS Uniphase Corporation 1768 Automation Parkway San Jose, California 95131 Attention: General Counsel Facsimile No.: (408) 546-4350 with a copy to: Gray Cary Ware & Freidenrich, LLP 1755 Embarcadero Road Palo Alto, California 94303-3340 Attention: Jeffrey Lederman Facsimile No.: (650) 320-7401 IPG: IPG Photonics Corporation 50 Old Webster Road Oxford, Massachusetts 01540 Attention: Angelo Lopresti Facsimile No.: (508) 373-1101 with copies to: Winston & Strawn 200 Park Avenue New York, New York 10166 Attention: Joseph DiBenedetto Facsimile No.: (212) 294-4700 |
B. Successors and Assigns; Rights of Third Parties.
Except as otherwise expressly provided herein, all covenants and agreements contained in this Settlement by or on behalf of the parties hereto shall be binding on and inure to the benefit of the parties hereto and their respective heirs, legal representatives, successors and assigns. Nothing expressed or implied in this Settlement is intended or shall be construed to confer upon or give any person other than the parties hereto any rights or remedies under this Settlement, except only that each Releasee shall be entitled to enforce the releases granted hereunder in its favor.
C. Severability.
Whenever possible, each provision of this Settlement and of each instrument and document entered into pursuant hereto shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Settlement or of any such other instrument or document is held to 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 hereof or thereof, and any such prohibited or invalid provision shall be deemed to be amended to the extent necessary such that, as so amended, it will be valid and enforceable to the fullest extent possible under applicable law.
D. Governing Law.
All claims and matters arising under or in connection with, or relating to, this Settlement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to its conflicts of laws rules.
E. Modifications, Waivers and Amendments.
No amendment, change, waiver, modification, cancellation or termination of this Settlement or any part thereof, shall be valid unless expressly set forth in a written document signed by the party or parties against whom enforcement of the amendment, change, waiver, modification, cancellation or termination is sought. No waiver of any provision of this Settlement shall be deemed, or shall constitute, a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver unless it specifically so provides.
F. Nature of Settlement.
Neither this Settlement nor any instrument or document executed pursuant hereto constitutes, nor shall it or any such other instrument or document be construed as, an admission by any party hereto or thereto of any breach of contract or other violation by any of them of any right of any such other party, any harm to any such other party, or any violation by any such party of any federal, state or local statute, law, ordinance, regulation or common law duty.
G. No Fraudulent Inducement.
Each party hereto hereby irrevocably and unconditionally waives any and all claims or defenses to the full performance and enforcement of this Settlement and each instrument and document executed pursuant hereto or in connection herewith based on any allegation of fraud in the inducement or any other similar basis seeking to limit, prevent or obstruct the full performance and enforcement of this Settlement and each such other instrument and document.
H. Counterparts.
This Settlement may be executed in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same agreement, and may be executed and delivered by facsimile followed promptly by the original, with such execution and delivery by facsimile to be as binding and effective as delivery of the original.
I. Entire Agreement.
This Settlement embodies the complete agreement among the parties and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.
J. Descriptive Headings; Interpretation.
The descriptive headings of this Settlement are inserted for convenience only and do not constitute a Section of this Settlement. The use of the word "including" in this Settlement and in any instrument and document executed and delivered pursuant hereto shall be by way of example rather than by limitation. The terms and provisions of this Settlement are the result of the mutual efforts of the parties hereto and their respective attorneys, and no party, nor any of the parties' respective attorneys, shall be deemed the drafter of this Settlement or of any instrument or document executed pursuant hereto for purposes of interpreting any provision hereof in any judicial or other proceeding that may arise between or among them.
K. Survival of Representations and Warranties.
The representations and warranties contained in this Settlement shall survive the execution and delivery of this Settlement.
IN WITNESS WHEREOF, the parties hereto have executed this Confidential Settlement Agreement on the date first written above.
JDS UNIPHASE CORPORATION
By: /s/ Christopher S. Dewees ------------------------------------ Name: Christopher S. Dewees Its: Vice President |
IPG PHOTONICS CORPORATION
By: /s/ Valentin P. Gapontsev ------------------------------------ Name: Valentin P. Gapontsev Its: CEO and Chairman |
EXHIBIT A
SECURED PROMISSORY NOTE
$6,079,472.60 August 13, 2003 Oxford, Massachusetts
FOR VALUE RECEIVED, IPG PHOTONICS CORPORATION, a Delaware corporation ("Maker"), promises to pay to JDS UNIPHASE CORPORATION, a Delaware corporation ("Holder"), the principal sum of SIX MILLION, AND SEVENTY-NINE THOUSAND, FOUR HUNDRED AND SEVENTY TWO and 60/100 DOLLARS ($6,079,472.60); with interest from the date of this Note on the unpaid principal amounts owing from time to time as provided below. This Note is subject to the following terms and conditions:
1. Maturity
(a) Principal plus all accrued but unpaid interest on the principal amount outstanding shall be due and payable in the following amounts and on the following dates:
Principal Amount Date Due ---------------- -------- $333,000 September 30, 2003 $334,000 December 31, 2003 $500,000 March 31, 2004 $500,000 June 30, 2004 $500,000 September 30, 2004 $500,000 December 31, 2004 One-quarter of then unpaid principal amount March 31, 2005 One-quarter of then unpaid principal amount June 30, 2005 One-quarter of then unpaid principal amount September 30, 2005 Remaining of unpaid principal amount December 31, 2005 (the "Maturity Date") |
(b) Maker shall make the following mandatory prepayments to Holder against the
unpaid interest and principal sum, in that order, on this Note within five
business days of Maker's receipt of the cash funds: (i) 50% of all cash
collateral released to Maker by BankNorth, NA or its successor ("BankNorth"), in
calendar years 2003 and/or 2004, which cash collateral, as of the date of the
Note is being held by BankNorth under that certain Construction Loan Agreement,
dated April 28, 2000 between Maker and BankNorth, as amended from time to time
("Construction Loan Agreement"); (ii) 75% of all cash collateral released to
Maker by BankNorth in calendar year 2005, which cash collateral, as of the date
of the Note is being held by BankNorth under the Construction Loan Agreement;
(iii) 10% of the net cash proceeds received by Maker from the issuance of any
securities (including without limitation any securities convertible or
exchangeable into Common Stock), options, warrants, call rights or debt
instruments after the date of this Note, excluding exercises of stock options by
employees, directors, advisors and consultants in the ordinary course; and (iv)
100% of the net cash proceeds received by Maker from any sale of the equipment,
furniture, fixtures, inventory or land pledged to Holder under the Security
Agreement or the Mortgage (each as hereinafter defined); but in no case shall
Maker be required to pay an amount under this Section 1(b) in excess of the
unpaid interest and principal amount of this Note.
(c) On or before the 15th day of April, July, October and January of each year
for so long as there is any unpaid principal amount under this Note, any one of
the Chief Executive Officer, President, or Chief Financial Officer shall send a
written statement to Holder setting forth whether or not any of the events in
Section 1(b) has occurred in the last calendar quarter, giving short description
of any of the events that has occurred in the last calendar quarter and whether
Maker has complied with its prepayment obligations hereunder.
(d) Holder shall apply all mandatory principal prepayments received by Holder under clause (b) to the payment of accrued and unpaid interest, and then against required payments in the reverse order of maturity (i.e., applied to latest payments under Section 1(a) first).
(e) All optional principal prepayments upon this Note shall be applied to the payment of accrued and unpaid interest, and then against required payments in the order of maturity (i.e., applied to earliest payments under Section 1(a) first), it being agreed that an optional repayment of principal shall relieve the obligation of Maker to make payment of the portion of the principal amount against which the optional prepayment was applied.
2. Interest
The outstanding principal owing from time to time hereunder will bear interest at the rate of FOUR PERCENT per annum (compounded annually) until fully paid. Accrued but unpaid interest shall be payable at such time as the outstanding principal amount hereof is otherwise due and payable, commencing September 30, 2003. Computations of interest shall be based on a year of 360 days but shall be calculated for the actual number of days in the period for which interest is charged.
3. Payments
Maker shall make payments in lawful money of the United States of America and in immediately available funds. All payments under this Note shall be made to Holder at JDS Uniphase Corporation, 1768 Automation Parkway, San Jose, California 95131, ATTN: General Counsel, or at such other address as Holder shall direct Maker in writing. This Note may be prepaid in whole or in part, without penalty, at the option of Maker and without the consent of Holder.
4. Breach of Covenants and Bankruptcy
The occurrence of any of the following shall constitute an "Event of Default" hereunder:
(a) Failure to Pay. Maker shall fail to pay (i) any principal payment on the due date hereunder or (ii) any interest or other payment required pursuant to the terms hereof on the date due and such payment shall not have been made within thirty days of Maker's receipt of Holder's written notice to the Maker of such failure to pay; or
(b) Breaches of Covenants. Maker shall fail to observe or perform any covenant, obligation, condition or agreement contained herein, or in the Security Agreement or the Mortgage and (i) such failure shall continue for thirty days after Maker's receipt of Holder's written notice to the Maker of such failure, or (ii) if such failure is not curable within such thirty-day period, but is reasonably capable of cure within forty-five days, either (A) such failure shall continue for forty-five days or (B) Maker shall not have commenced and continued to prosecute a cure
in a manner reasonably satisfactory to Holder within and continuously during the initial thirty-day period; or
(c) Change of Control. A Change of Control shall have occurred with respect to Maker. For purposes hereof, the term "Change of Control" means the occurrence of one or more of the following events: (a) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of IPG and its subsidiaries, taken as a whole, to any Person or group of related Persons, as defined in Section 13(d) of the Securities Exchange Act of 1934 (a "Group"); and (b) any Person or Group (excluding owners of equity securities as of the date of this Note) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by IPG's issued and outstanding voting stock or any successor to all or substantially all of the Company's assets.
(d) Voluntary Bankruptcy or Insolvency Proceedings. Maker shall (i) apply for
or consent to the appointment of a receiver, trustee, liquidator or
custodian of itself or of all or a substantial part of its property; (ii)
admit in writing its inability, to pay its debts generally as they mature;
(iii) make a general assignment for the benefit of its or any of its
creditors; (iv) be dissolved or liquidated in full or in part; or (iv)
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts pursuant
to any bankruptcy, insolvency or other similar law now or hereafter in
effect or consent to any such relief or to the appointment of or taking
possession of its property by any official in an involuntary case or other
proceeding commenced against it; or
(e) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of the Maker or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the Maker or the debts thereof pursuant to any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within ninety days of commencement.
5. Rights of Holder upon Default
Upon the occurrence or existence of any Event of Default, and at any time thereafter during the continuance of such Event of Default, Holder may, by written notice to the Maker, declare all outstanding obligations payable by the Maker hereunder to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived; except that upon the occurrence or existence of any Event of Default set forth in Sections 4(c), (d) or (e) herein, all of the outstanding obligations payable by the Maker hereunder shall automatically become immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived. No delay or omission by Holder in exercising any right shall operate as a waiver of such right or any other right under this Note; a waiver on any one occasion shall not be construed as a bar to or waiver of any right on any future occasion. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Holder may exercise any other right, power or remedy granted to it hereunder or pursuant to applicable law. The Maker agrees to pay all taxes levied or assessed upon the outstanding principal against any holder of this Note. The prevailing party in any action (i) to collect payment on this
Note, (ii) in connection with any dispute that arises as to its enforcement, validity, or interpretation, whether or not legal action is instituted or prosecuted to judgment, or (iii) to enforce any judgment obtained in any related legal proceeding, shall be entitled to all costs and expenses incurred, including attorney fees.
6. Governing Law
This Note shall be governed by the laws of the State of New York, excluding its conflict of law rules.
7. Amendments and Waivers
Any term of this Note may be amended or waived only with the written consent of the Maker and the Holder. Any amendment or waiver effected in accordance with this Section 7 shall be binding upon the Maker, the Holder and each transferee of the Note; however, no such waiver shall affect or impair the rights of Holder to require observance, performance, or satisfaction, either of that term or condition as it applies on a subsequent occasion or of any other term or condition of this Note. Notwithstanding the foregoing, Maker expressly agrees that this Note or any payment under this Note may be extended by Holder in writing from time to time without in any way affecting the liability of Maker.
8. Transfer, Successors and Assigns
The terms and conditions of this Note shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Neither this Note nor any of the rights, interests or obligations hereunder may be assigned, by operation of law or otherwise, in whole or in part, by the Maker without the prior written consent of Holder.. This Note may not be sold or assigned by Holder without prior written consent of Maker except in the event of a merger, consolidation, or acquisition of Holder or any business unit thereof and Holder may pledge this Note to any financial institution as collateral upon written notice to Maker.
9. Notices
Any notice required or permitted by this Note shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by a nationally-recognized delivery service (such as Federal Express or UPS), or five days after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party's address as set forth below or as subsequently modified by written notice.
10. Severability
If any provision or any word, term, clause, or part of any provision of this Note shall be invalid for any reason, the same shall be ineffective, but the remainder of this Note and of the provision shall not be affected and shall remain in full force and effect.
11. Holder's Security Interest and Mortgage
THIS NOTE IS SECURED BY A SECURITY INTEREST IN CERTAIN ASSETS OF MAKER MORE FULLY DESCRIBED IN (I) THE SECURITY AGREEMENT DATED THE SAME DATE AS THIS NOTE BETWEEN MAKER, AS DEBTOR, AND HOLDER, AS SECURED PARTY ("SECURITY AGREEMENT") AND (II) THE MORTGAGE DATED THE SAME DATE AS THIS NOTE MADE BY MAKER, AS DEBTOR, AS MORTGAGOR, AND HOLDER, AS MORTGAGEE ("MORTGAGE").
IN WITNESS WHEREOF, the Maker has caused this Secured Promissory Note to be issued as of the date first written above.
MAKER: IPG PHOTONICS CORPORATION
Name: /s/ Valentin P. Gapontsev ------------------------------- Title: Valentin P. Gapontsev Address: 50 Old Webster Road Oxford, MA 01540 Attn: General Counsel |
AGREED TO AND ACCEPTED:
HOLDER: JDS UNIPHASE CORPORATION
Name: /s/ Christopher S. Dewees ------------------------------- Title: Christopher S. Dewees Address: 1768 Automation Parkway San Jose, California 95131 Attn: General Counsel |
EXHIBIT B
THIS SECURITY AGREEMENT, dated August 13, 2003 by and between IPG PHOTONICS CORPORTATION, a Delaware corporation ("DEBTOR"), and JDS UNIPHASE CORPORATION, a Delaware corporation ("SECURED PARTY").
1. Background and Purpose
Debtor and Secured Party have entered into a Confidential Settlement Agreement, dated the dated hereof (the "Settlement Agreement"), pursuant to which Debtor agreed to execute and delivered a Secured Promissory Note dated the date hereof in favor of Secured Party in the face amount of $6,076,284.66 (the "Note"). As a condition precedent to the consummation of the Settlement Agreement, Secured Party has required Debtor to grant, and Debtor has agreed to grant, to Secured Party a continuing first priority security interest in and to the Collateral (as hereinafter defined) of Debtor to secure its obligations to Secured Party under the Note.
2. Grant of Security Interest
To secure Debtor's Obligations (as defined in Paragraph 3 below), Debtor grants to Secured Party a security interest in the Collateral (as defined in Paragraph 4 below).
3. Obligations
For purposes of this Agreement, "Obligations" means any and all debts, obligations, and liabilities of Debtor to Secured Party arising out of, or relating in any way to the Note, and any obligations of Debtor to Secured Party pursuant to this Agreement, whether existing or arising after the date of this Agreement, whether voluntary or involuntary or whether absolute or contingent and whether or not from time to time increased, decreased, extinguished, created, or incurred.
4. Collateral
For purposes of this Agreement, "Collateral" means:
(a) All inventory listed on Schedule A attached hereto ("Inventory"); and
(b) All equipment, furniture and fixtures listed on Schedule A attached hereto ("Equipment"); and
(c) In addition to the collateral described above, Debtor grants to Secured Party a security interest in any and all proceeds of the Inventory and Equipment, in any and all additions and accessions to, insurance or condemnation proceeds of, and documents covering Collateral, in all property received, in whole or in part, in trade or exchange for Collateral, in all rents, revenues, issues, profits, and proceeds arising from sale, lease, license, encumbrance, collection, or any other temporary or permanent disposition of the Collateral, or in any interest on Collateral.
5. Representations and Warranties
Debtor represents and warrants to Secured Party as follows:
5.1 Title. Debtor is the owner of all right, title, and interest in the Collateral free and clear of all liens, encumbrances, and security interests, except the security interest created by this Agreement.
5.2 Truth. All information that Debtor has provided to Secured Party concerning the Collateral is true and correct in all material respects.
5.3 Defenses. No defenses, offsets, claims, or counterclaims exist against Debtor that may be asserted against Secured Party in any proceeding to enforce Secured Party's rights in the Collateral.
5.4 Conflict. The execution, delivery, and performance of this Agreement by Debtor is not in violation of any applicable law or regulation or contractual obligation of Debtor.
5.5 First Priority Lien. The liens granted to Secured Party under this Agreement will constitute a first priority lien on the Collateral on the filing of a UCC-1 Financing Statement.
5.6 Good Standing. Debtor is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware.
5.7 Due Authorization. Debtor has been duly authorized to execute and deliver this Agreement, which is a valid and binding obligation of Debtor.
6. Covenants of Debtor
6.1 Protection of Security Interest. Contemporaneously with the execution of this Agreement, Debtor shall properly execute and deliver to Secured Party one or more UCC-1 Financing Statements to enable Secured Party to perfect Secured Party's security interest in the Collateral. Debtor agrees also to execute, file, and record such other statements, notices, and agreements, take such action and obtain such certificates and documents, in accordance with all applicable laws, statutes, and regulations as may be necessary or advisable to perfect, evidence, and continue Secured Party's security interest in the Collateral.
6.2 Transactions Involving Collateral. Debtor shall not, without the prior written consent of Secured Party, (a) sell or otherwise transfer the Collateral, except that assets may be sold or transferred for fair value and Debtor shall repay the net cash proceeds from the sale or transfer to Secured Party pursuant to the terms of the Note, or (b) pledge, mortgage, encumber, or otherwise permit the Collateral to be subject to any lien, security interest, or charge, other than the security interest created by this Agreement; except for the following liens: the attachment under Writ of Attachment dated February 28, 2003 covering the Collateral in favor of Secured Party; liens for taxes, assessments, or other government charges not yet due or those which are being contested in good faith by appropriate proceedings; and liens of mechanics, materialmen or other workmen incurred in the ordinary course of business and not materially detracting from the value of the property or assets.
6.3 Compliance with Laws. Debtor shall comply in all material respects with all laws, statutes, and regulations pertaining to the Collateral.
6.4 Taxes, Assessments, and Liens. Debtor shall pay when due all taxes, assessments, and liens with regard to the Collateral. Debtor may withhold any such payment or may elect to contest any lien if Debtor is conducting appropriate proceedings in good faith to contest the obligation to pay and so long as Secured Party's interest is not jeopardized.
6.5 Notification of Change in Name or Location. The Debtor shall notify Secured Party in writing of a change in Debtor's name or corporate
structure or jurisdiction of incorporation within five business days prior to the change. The Debtor shall also cooperate with Secured Party to enable Secured Party to file either a new UCC-1 Financing Statement or an amendment to the existing UCC-1 Financing Statement to reflect the change and to continue Secured Party's security interest in the Collateral.
6.6 Insurance. The Debtor shall maintain and keep in force insurance of the types and in amounts customarily carried in lines of business similar to that of Debtor, and shall deliver to Secured Party from time to time at Secured Party's request schedules setting forth all insurance covering the Collateral then in effect.
6.7 Maintenance. The Debtor shall cause the Collateral to be maintained and preserved in good condition, repair and working order, excepting ordinary wear and tear.
6.8 Inspection. The Debtor shall furnish to Secured Party from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Secured Party may reasonably request, and will permit independent external certified professional accountants acceptable to Debtor and Secured Party (subject to execution by such accountants of a reasonable non-disclosure agreement), upon reasonable written notice to the Debtor during the Debtor's usual business hours, to inspect and/or conduct audits with respect to the Collateral.
6.9 Impairment. The Debtor shall give prompt written notice to Secured Party of any casualty or loss which has impaired in any material respect the useful live, value or operation of the Collateral.
7. Authorized Action by Secured Party
Debtor irrevocably appoints, only after an Event of Default, Secured Party as Debtor's attorney in fact to do any act that Debtor is obligated to do pursuant to this Agreement to preserve or protect the Collateral and to preserve, protect, or establish Secured Party's lien on the Collateral. Debtor further irrevocably appoints Secured Party to exercise such rights and powers as Debtor might exercise with respect to the Collateral following an Event of Default, as defined below. These powers shall include without limitation the right to:
(a) Collect by legal proceedings or otherwise, and endorse, receive, and receipt all dividends, interest, payments, proceeds, and other sums and property now or after the date of this Agreement payable on account of the Collateral;
(b) Transfer the Collateral to Secured Party's own or Secured Party's nominee's name; and
(c) Make any compromise or settlement and take any action Secured Party deems advisable with respect to the Collateral. Debtor agrees to reimburse Secured Party on demand for any reasonable out of pocket costs and expenses, including without limitation reasonable external attorney fees, which Secured Party may incur while acting as Debtor's attorney in fact under this Agreement, all of which costs and expenses are included in the Obligations secured by this Agreement. Secured Party shall have no obligation to act pursuant to this paragraph and shall not be required to make any presentment, demand, or protest, or give any notice or
take any action to preserve any rights against any other person in connection with the Collateral.
8. Defaults and Remedies
8.1 Event of Default. Any of the following events or conditions shall constitute an Event of Default by Debtor under this Agreement:
(a) An "Event of Default" shall occur as defined in the Note;
(b) Debtor shall fail to observe or perform any covenant, obligation, condition or agreement contained in this Security Agreement or the Note and (i) such failure shall continue for thirty days after Debtor's receipt of Secured Party's written notice to the Debtor of such failure, or (ii) if such failure is not curable within such thirty-day period, but is reasonably capable of cure within forty-five days, either (A) such failure shall continue for forty-five days or (B) Debtor shall not have commenced and continued to prosecute a cure in a manner reasonably satisfactory to Secured Party within and continuously during the initial thirty-day period;
(c) A breach of any representation or warranty of Debtor contained in this Agreement; or
(d) Any levy or proceeding against the Collateral or Debtor's interest in the Collateral, except if Debtor is conducting appropriate proceedings in good faith to contest the levy or proceeding.
8.2 Remedies. On the occurrence of an Event of Default as defined in this Agreement, Secured Party:
(a) Shall have and may exercise all rights and remedies accorded to Secured Party by the Massachusetts Uniform Commercial Code;
(b) May declare all unperformed Obligations, in whole or in part, of Debtor immediately due and payable in accordance with the terms of the Note; and
(c) May require Debtor to take any and all action necessary to make the Collateral available to Secured Party.
8.3 Remedies Cumulative. All of Secured Party's rights and remedies, whether evidenced by this Agreement or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Secured Party to pursue any remedy shall not exclude pursuit of any other remedy.
9. Waiver of Hearing
Debtor expressly waives any constitutional or other right to a judicial hearing prior to the time Secured Party takes possession or disposes of the Collateral on an Event of Default as provided in Paragraph 8 above.
10. Waiver
Secured Party shall not be deemed to have waived any rights under this Agreement unless such waiver is in writing and signed by Secured Party. No delay or omission on the part of Secured Party in exercising any right shall operate as a waiver of such right or any other right.
11. Additional Documentation; Cooperation
Each party shall, on the request of the other, execute, acknowledge, and deliver to the other any instrument that may be required to accomplish the intent of this Agreement. Each party agrees to cooperate to effectuate the intent of this Agreement and shall take all appropriate action necessary or useful in doing so. Secured Party shall release its security interest on Collateral which Debtor may sell or otherwise transfer provided that Maker shall comply with the terms of the Note.
12. Miscellaneous
12.1 Successors and Assigns. Subject to the provisions otherwise contained in this Agreement, this Agreement shall inure to the benefit of and be binding on the successors and assigns of the respective parties.
12.2 Notices. Any notice required or permitted by this Security Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered personally or by a nationally-recognized delivery service (such as Federal Express or UPS), or five days after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, addressed to the party to be notified at such party's address as set forth below or as subsequently modified by written notice.
12.3 Amendment. The provisions of this Agreement may be modified at any time by written agreement of the parties. Any such agreement made after the date of this Agreement shall be ineffective to modify this Agreement in any respect unless in writing and signed by Debtor and Secured Party.
12.4 Attorney Fees; Prejudgment Interest. If the services of an attorney are required by Secured Party to secure the performance of this Agreement or otherwise on the breach or default of this Agreement, or if any judicial remedy or arbitration is necessary to enforce or interpret any provision of this Agreement or the rights and duties of any person in relation to this Agreement, Secured Party shall be entitled to reasonable external attorney fees, costs, and other out of pocket expenses, in addition to any other relief to which Secured Party may be entitled. Any award of damages following judicial remedy or arbitration as a result of the breach of this Agreement or any of its provisions shall include an award of prejudgment interest from the date of the breach at the maximum amount of interest allowed by law.
12.5 Post-Judgment Attorney Fees. If the services of an attorney are required by any party to enforce a judgment rendered in connection with this Agreement, the judgment creditor shall be entitled to reasonable external attorney fees, costs, and other out of pocket expenses, and such fees, costs, and expenses shall be recoverable as a separate item. This provision shall be severable from all other provisions of this Agreement, shall survive any judgment, and shall not be deemed merged into the judgment.
12.6 Captions. All paragraph captions are for reference only and shall not be considered in construing this Agreement.
12.7 Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, the remainder of
the Agreement that can be given effect without the invalid provision shall continue in full force and effect and shall in no way be impaired or invalidated.
12.8 Governing Law. The rights and obligations of the parties and the interpretation and performance of this Agreement shall be governed by the law of the State of New York, excluding its conflict of laws rules.
12.9 Entire Agreement. This document and its Schedule constitute the entire agreement between the parties, all oral agreements being merged in this Agreement, and supersede all prior representations. There are no representations, agreements, arrangements, or understandings, oral or written, between or among the parties relating to the subject matter of this Agreement that are not fully expressed in this Agreement or its Schedule.
[END OF PAGE]
IN WITNESS WHEREOF, the parties hereto have executed this Security Agreement on the date first written above.
SECURED PARTY: JDS UNIPHASE CORPORATION
By: /s/ Christopher S. Dewees --------------------------------- Name: Christopher S. Dewees Title: Vice President Address: 1768 Automation Parkway San Jose, California 95131 Attn: General Counsel |
DEBTOR: IPG PHOTONICS CORPORATION
By: /s/ Valentin P. Gapontsev --------------------------------- Name: Valentin P. Gapontsev Title: CEO & Chairman of the Board Address: 50 Old Webster Road Oxford, MA 01540 Attn: General Counsel |
SCHEDULE A TO SECURITY AGREEMENT BETWEEN IPG PHOTONICS CORP. AND JDS UNIPHASE
CORPORATION
POS DESCRIPTION MAKE/MODEL ASSET NUMBER QTY --- ----------- ---------- ------------ ----- 1 Parallel seam sealing system Model 2300DLL3 100412 1 2 Blue M Oven, drybox and Chamber -- -- 4 3 Digital ball bonder Model: K&S 4524-D 100504 1 4 Mask Aligner Model SUSS MA6 Mask Aligner 100935 1 5 Flip chip aligner/bonder with options Model 410 1999 100968 1 6 Scriber and film expander Model LSD-105 Scriber, 7550-0069 100940 1 7 SEGI Sputtering system Fully automated system 101023 1 8 Sputtering System Perkin Elmer Model 4410 101063 1 9 Automatic dicing saw Model DAD321 100923 1 10 Goniometric Radiometer Model LD8900/In GaAS 100552 1 11 Programmable furnace Model MV-2200 100967 1 12 Wafer Polisher, lapper, bonder Model LP50 Prec 100938 1 13 Spin photo resist coater and spray Model 5110-C/PD-LV,BDC,PP CAB 100970 1 developer 14 Gold plating hood Model SQFFH-600-P 101064 1 15 Lapping/polishing hood Model WPS-SQFFH-800-P 100976 1 16 Heatpulse Model 610 100944 1 17 Tencor alpha step profiler Model Tencor AS-200 101065 1 18 ACID 1-2-3 hood -- 100962 6 19 Scrapping hood -- 100964 1 20 Scriber Breaker Model 4100-0027 100941 1 21 Channel power supply Model PMC104-.5-1.5 100713 1 22 Vacuum evaporator Model CHA SE-600 100937 1 23 Fine-Leak Detector Model DGC 1001/PPM 95/GD -- 1 24 Temperature test chamber Model S-8C 100973 1 25 Blue M Ovens -- 100933 3 26 Cleanroom furniture Model 1P61-1000-K-STR ESD CL-1000 100919 38 |
27 High vacuum pump Model Tribodyn 30/120 100922 1 28 Shelving -- 100630 231 29 Ellipsometer, Etcher/stripper Model Rudolph Auto EL III, Branson 2000 100969 1 30 Laser module Model PLM-100 100961 1 31 Goniometric Radiometer Model LD8900/In GaAs 100743 1 32 ECV profiler and hall system -- 100883 1 33 Supplied air systems Model Survivair 30 100912 2 34 Spectrophotometer Model V-570 UV/VIS 100934 1 35 Supplied air systems Model Survivair Sigma 30 100913 2 36 Digital hot plate Model HP993 Digital 7P 120V 100715 1 37 Digital hot plate Model SP992 Digital 7P 120V 100716 1 38 Digital hot plate Model HP993 Digital 7P 120V 100910 1 39 Microscope Model Olympus BH2 100942 10 40 Microscope Model Olympus BH2 100943 2 41 Descicators Model Series 100 SS 100994 15 42 Dual photodiode meter and sourcemeter -- 100799 1 43 Scanning electron microscope Model DS-130C 100792 1 44 Scanning electron microscope -- 100986 -- 45 Storage refrigerator Model VWR 21.OCF 100975 1 46 Supplied air systems Model Survivair Panther 100812 4 47 Ultrasonic Cleaner Model 3510, Branson -- 1 48 Turbomolecular pumping cart Model EXP 101321 1 49 Diesel generator Model 150ROX-150KW, Kohler 100794 1 50 UPS Model 360-480-NEMA, Best 100842 1 51 Heated viewport Model HVP-275-275TH-110-FR 100801 1 52 Sniff Leak Detector Model Gascheck 5000 101032 1 53 X-Ray Analyzer Model RD-100 101254 1 54 X-Ray Analyzer -- 101323 -- 55 Recirculators Models HX+150 D2 CP55; HX+300R D2 CP75 101120 1 |
56 Recirculators Models HX+150 D2 CP55; HX+300R D2 CP75 101095 1 57 GEN 111/MBE -- 101253 -- 58 Molecular Beam Epitaxy of III-V Model: III-V 100995 1 59 Optical Spectrum Analyzer AQ-6331/0/0 100654 1 60 Applied EPI Gen-III MBE System -- -- 1 61 PECVD Plasma Chemical Vapor Deposition SC100M -- 1 System 62 Die Bonder 410X -- 1 63 MRSI 505 -- 1 65 1550 nm Double Stage Isolators 3,600 66 1550 nm Single Stage Isolators 3,100 |
* Notes(s): Location is IPG Photonics Corporation, 50 Old Webster Road, Oxford, MA 01540
EXHIBIT C
After recording, please return to:
Office of General Counsel
Attn: Matthew Fawcett
JDS Uniphase Corporation
1768 Automation Parkway
San Jose, CA 95131
MORTGAGE
IPG PHOTONICS CORPORATION, a Delaware corporation having a usual place of business at 50 Old Webster Road, Oxford, Worcester County, Massachusetts 01540 ("Mortgagor"), for consideration paid, grants to JDS UNIPHASE CORPORATION, a Delaware corporation having a place of business at 1768 Automation Parkway, San Jose, California 95131 ("Mortgagee")
with mortgage covenants to secure the payment of SIX MILLION, AND SEVENTY-NINE THOUSAND, FOUR HUNDRED AND SEVENTY TWO and 60/100 DOLLARS ($6,079,472.60) with interest thereon as provided in a Secured Promissory Note ("Note") of even date given by Mortgagor to Mortgagee
the land in Oxford, Worcester County, Massachusetts, described on Exhibit A attached hereto and made a part hereof (sometimes hereinafter referred to as the "Collateral").
The Mortgagor, for itself, its successors and assigns, covenants with Mortgagee and its successors and assigns that it is lawfully seized in fee simple of the mortgaged premises; that it is free from all encumbrances (other than an attachment in favor of Mortgagee pursuant to that certain Writ of Attachment dated February 28, 2003); that Mortgagor has good right to sell and convey the same; and that it will, and its successors and assigns shall warrant and defend the same to Mortgagee and its successors and assigns forever against the lawful claims and demands of all persons; and that Mortgagor and its successors or assigns, in case a sale shall be made under the power of sale, will, upon request, execute, acknowledge and deliver to the purchaser or purchasers a deed or deeds of release confirming such sale; and that Mortgagee and its successors and assigns are appointed and constituted the attorney or attorneys irrevocable of the said Mortgagor to execute and deliver to the said purchaser a full transfer of all policies of insurance on the buildings upon the land covered by the mortgage at the time of such sale.
The Mortgagor shall pay when due and payable all taxes, charges and assessments to whomsoever and whenever laid or assessed, whether on the mortgaged premises or on any interest therein or on the debt or obligation secured hereby; shall keep the buildings on said premises insured against fire in a sum not less than the amount secured by the mortgage or as otherwise provided therein for insurance for the benefit of Mortgagee and its successors and assigns, in such form and at such insurance offices as they shall approve, and, at least two days before the expiration of any policy on said premises, shall deliver to it a new and sufficient policy to take the place of the one so expiring, and shall not commit or suffer any strip or waste of the mortgaged premises or any breach of any covenant contained in the mortgage.
In addition to and in furtherance of the foregoing covenants, Mortgagor represents, warrants, and covenants as follows:
1. Title. Mortgagor is the owner of all right, title, and interest in the Collateral free and clear of all liens, encumbrances, and security interests, except an attachment in favor of Mortgagee pursuant to that certain Writ of Attachment dated February 28, 2003, and the lien created by this Mortgage.
2. Truth. All information that Mortgagor has provided to Mortgagee concerning the Collateral is true and correct in all material respects.
3. Defenses. No defenses, offsets, claims, or counterclaims exist against Mortgagor that may be asserted against Mortgagee in any proceeding to enforce Mortgagee's rights in the Collateral.
4. Conflict. The execution, delivery, and performance of this Mortgage by Mortgagor is not in violation of any applicable law or regulation or contractual obligation of Mortgagor.
5. Good Standing. Mortgagor is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware.
6. Due Authorization. Mortgagor has been duly authorized to execute and deliver this Mortgage, which is a valid and binding obligation of Mortgagor.
7. Transactions Involving Collateral. Mortgagor shall not, without the prior written consent of Mortgagee, (a) sell or otherwise transfer the Collateral, except that assets may be sold or transferred for fair value and Mortgagor shall repay the net cash proceeds from the sale or transfer to Mortgagee pursuant to the terms of the Note, or (b) pledge, mortgage, encumber, or otherwise permit the Collateral to be subject to any lien, security interest, or charge, other than the security interest created by this Mortgage and except for the following liens: the attachment under Writ of Attachment dated February 28, 2003 covering the Collateral in favor of Mortgagee; liens for taxes, assessments, or other government charges not yet due or those which are being contested in good faith by appropriate proceedings; and liens of mechanics, materialmen or other workmen incurred in the ordinary course of business and not materially detracting from the value of the property or assets.
8. Compliance with Laws. Mortgagor shall comply in all material respects with all laws, statutes, and regulations pertaining to the Collateral.
9. Taxes, Assessments, and Liens. Mortgagor shall pay when due all taxes, assessments, and liens with regard to the Collateral. Mortgagor may withhold any such payment or may elect to contest any lien if Mortgagor is conducting appropriate proceedings in good faith to contest the obligation to pay and so long as Mortgagee's interest is not jeopardized.
10. Notification of Change in Name or Location. The Mortgagor shall notify Mortgagee in writing of a change in Mortgagor's name or corporate structure or jurisdiction of incorporation within five business days prior to the change. The Mortgagor shall also cooperate with Mortgagee to enable Mortgagee to file either a new mortgage or an amendment to this mortgage to reflect the change and to continue Mortgagee's security interest in the Collateral.
11. Insurance. The Mortgagor shall maintain and keep in force insurance of the types and in amounts customarily carried in lines of business similar to that of Mortgagor, and shall deliver to Mortgagee from time to time at Mortgagee's request schedules setting forth all insurance covering the Collateral then in effect.
12. Maintenance. The Mortgagor shall cause the Collateral to be maintained and preserved in good condition.
13. Inspection. The Mortgagor shall furnish to Mortgagee from time to time statements and schedules further identifying and describing the Collateral and such other reports in connection with the Collateral as Mortgagee may reasonably request, and will permit independent external certified professional accountants acceptable to Mortgagor and Mortgagee (subject to execution by such accountants of a reasonable non-disclosure agreement), upon reasonable written notice to Mortgagor during Mortgagor's usual business hours, to inspect and/or conduct audits with respect to the Collateral.
14. Impairment. The Mortgagor shall give prompt written notice to Mortgagee of any casualty or loss which has impaired in any material respect the useful live, value or operation of the Collateral.
15. Breach of Covenants and Bankruptcy. The occurrence of any of the following shall constitute an "Event of Default" hereunder:
(a) Failure to Pay. Mortgagor shall fail to pay (i) any principal payment on the due date under the Note or (ii) any interest or other payment required pursuant to the terms of the Note on the date due and such payment shall not have been made within thirty days of Mortgagor's receipt of Holder's (as defined in the Note) written notice to Mortgagor of such failure to pay; or
(b) Breaches of Covenants. Mortgagor shall fail to observe or perform any covenant, obligation, condition or agreement contained in this Mortgage or the Note and (i) such failure shall continue for thirty days after Mortgagor's receipt of Holder's written notice to Mortgagor of such failure, or (ii) if such failure is not curable within such thirty-day period, but is reasonably capable of cure within forty-five days, either (A) such failure shall continue for forty-five days or (B) Mortgagor shall not have commenced and continued to prosecute a cure in a manner reasonably satisfactory to Holder within and continuously during the initial thirty-day period; or
(c) Change of Control. A Change of Control shall have occurred with respect to Mortgagor. For purposes hereof, the term "Change of Control" means the occurrence of one or more of the following events: (a) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of Mortgagor and its subsidiaries, taken as a whole, to any Person or group of related Persons, as defined in Section 13(d) of the Securities Exchange Act of 1934 (a "Group"); and (b) any Person or Group (excluding owners of equity securities as of the date of the Note) shall become the owner, directly or indirectly, beneficially or of record, of shares representing more than 50% of the aggregate ordinary voting power represented by Mortgagor's issued and outstanding voting stock or any successor to all or substantially all of Mortgagor's assets.
(d) Voluntary Bankruptcy or Insolvency Proceedings. Mortgagor shall (i) apply
for or consent to the appointment of a receiver, trustee, liquidator or
custodian of itself or of all or a substantial part of its property; (ii)
admit in writing its inability, to pay its debts generally as they mature;
(iii) make a general assignment for the benefit of its or any of its
creditors; (iv) be dissolved or liquidated in full or in part; or (iv)
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts pursuant
to any bankruptcy, insolvency
or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it; or
(e) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the appointment of a receiver, trustee, liquidator or custodian of Mortgagor or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to Mortgagor or the debts thereof pursuant to any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within ninety days of commencement.
16. Rights of Holder Upon Default. Upon the occurrence or existence of any Event of Default, and at any time thereafter during the continuance of such Event of Default, Holder may, by written notice to Mortgagor, declare all outstanding obligations payable by Mortgagor hereunder and under the Note to be immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived; except that upon the occurrence or existence of any Event of Default set forth in Sections 15(c), (d) or (e) herein, all of the outstanding obligations payable by Mortgagor hereunder or under the Note shall automatically become immediately due and payable without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived. No delay or omission by Holder in exercising any right shall operate as a waiver of such right or any other right under the Note; a waiver on any one occasion shall not be construed as a bar to or waiver of any right on any future occasion. In addition to the foregoing remedies, upon the occurrence or existence of any Event of Default, Holder may exercise any other right, power or remedy granted to it hereunder, under the Note or pursuant to applicable law. The Mortgagor agrees to pay all taxes levied or assessed upon the outstanding principal against any holder of the Note. The prevailing party in any action (i) to collect payment on the Note, (ii) in connection with any dispute that arises as to its enforcement, validity, or interpretation, whether or not legal action is instituted or prosecuted to judgment, or (iii) to enforce any judgment obtained in any related legal proceeding, shall be entitled to all costs and expenses incurred, including attorney fees.
This mortgage is upon the STATUTORY CONDITION, for any breach of which Mortgagee shall have the STATUTORY POWER OF SALE.
[The next page is the signature page]
IN WITNESS WHEREOF, the said IPG Photonics Corporation has caused its corporate seal to be hereto affixed and these presents to be signed, acknowledged and delivered in its name and behalf by John H. Dalton, its President, and Paolo Sinni, its Treasurer, hereto duly authorized, this 13th day of August, 2003.
IPG PHOTONICS CORPORATION
By: /s/ John H. Dalton ------------------------------------ John H. Dalton, President By: /s/ Paolo Sinni ------------------------------------ Paolo Sinni, Treasurer |
COMMONWEALTH OF MASSACHUSETTS
Worcester, ss. August 13, 2003
Then personally appeared the above-named John H. Dalton, President, and Paolo Sinni, Treasurer, and acknowledged the foregoing instrument to be their free act and deed and the free act and deed of IPG Photonics Corporation, before me
/s/ Angelo P. Lopresti ---------------------------------------- Angelo P. Lopresti, Notary Public My commission expires: 11/13/09 |
EXHIBIT A
Tract 1
the land in the southerly part of Oxford, Worcester County, Massachusetts, containing 22 acres, more or less, being the same premises described in deed of Buduo Diversified, Inc. to IPG Photonics, Inc. dated October 30, 2000, recorded in Worcester District Registry of Deeds Book 23152, Page 255.
Tract 2
the land in Oxford, Worcester County, Massachusetts, containing an area of 6.638 acres, more or less, in Plan Book 493, Plan 19, and being the same premises described in deed of Melvyn Glickman and Daniel M. Prouty, Trustees of Elmar Realty Trust, to IPG Photonics Corporation dated February 14, 2001, recorded in Worcester District Registry of Deeds Book 2
EXHIBIT D
Information marked below by a [***] has been omitted pursuant to a request for confidential treatment filed separately with the Commission.
IPG SUPPLY AGREEMENT
THIS MASTER IPG SUPPLY AGREEMENT is made effective as June 30, 2003 ("Effective Date") between IPG PHOTONICS CORPORATION, having offices at 50 Old Webster Road, Oxford, MA 01540, on behalf of itself and its subsidiaries, (collectively, "Supplier") and JDS Uniphase Corporation, having offices at 1768 Automation Parkway, San Jose, CA 95131, on behalf of itself and its subsidiaries ("Customer").
WHEREAS Supplier is a manufacturer and supplier of fiber laser modules;
AND WHEREAS Customer desires to from time to time order, purchase and take delivery of pulsed Ytterbium fiber laser modules from Supplier;
AND WHEREAS Supplier desires to sell and deliver to Customer fiber laser modules;
NOW THEREFORE, in consideration of the mutual covenants herein contained, and for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, Supplier and Customer agree as follows:
1.0 INTERPRETATION
1.1 Definitions. In this Agreement, the below terms shall have the following respective meanings:
(a) "Delivery Date" means the delivery date, as determined in accordance with this Agreement, for the Product to arrive at Customer's delivery location set forth the applicable Purchase Order (as later defined).
(b) "Effective Date" shall have the meaning set forth in the first paragraph of this Agreement.
(c) "Initial Term" shall have the meaning set forth in Section 2.0.
(d) "Products" shall have the meaning set forth in Section 5.1 and also means any pulsed Ytterbium fiber laser modules as set forth and described in Exhibit A, as may be amended from time to time by the agreement of Supplier and Customer, in writing.
(e) "Purchase Order" means a purchase order issued to Supplier by Customer, in written or electronic form, for the purchase of Products pursuant to this Agreement, which states inter alia the Product, agreed upon unit price, unit quantities per Product, requested delivery dates and Customer delivery location.
(f) "Renewal Term" shall have the meaning set forth in Section 2.0.
(g) "Rolling Forecast" means a rolling six (6) month non-binding written forecast of Customer's anticipated requirements for each Product.
(h) "Specifications" means the specifications for the Products described in Exhibit A, as may be amended from time to time by the agreement of Supplier and Customer, in writing.
(i) "Taxes" means any and all taxes and other charges (exclusive of taxes on the net income of Supplier), howsoever designated, levied or based on this Agreement or the Products delivered hereunder, including without limitation all federal (Canadian or U.S.), provincial, state and local sales, use and excise taxes, customs and duties, licenses, fees, tariffs and other similar expenses, whether now or subsequently in effect.
(j) "Term" means the Initial Term and Renewal Term.
1.2 Headings. The division of this Agreement into Sections, Subsections and Exhibits and the insertion of headings are for ease of reference only and shall not affect its construction or interpretation.
2.0 TERM
This Agreement shall commence as of the Effective Date and shall, unless otherwise terminated in accordance with the terms and conditions of this Agreement, remain in full force and effect for until the earlier of five (5) years or the date on which Customer has paid Supplier Eight Million Three Hundred Thousand United States Dollars (US$8,300,000.00) for Product (the "Initial Term"). Thereafter, this Agreement shall renew automatically for one period of three (3) years (the "Renewal Term"), subject to termination in accordance with the terms and conditions of this Agreement.
3.0 COMMITMENTS
3.1 Customer Commitment to Purchase/ Supplier Commitment to Sell. Except to the
extent Customer is required to compensate Supplier for the cancellation of
Purchase Orders pursuant to Section 5.6 (Cancellation and Cancellation Costs),
Section 5.7 (Rescheduling) and for termination costs pursuant to Section 12.2
(Termination Costs), there is no commitment by Customer to purchase Products
from Supplier. Except to the extent otherwise prohibited by exclusivity
agreements with its customers existing as of the Effective Date for current
pulsed Ytterbium lasers and to the extent with customers for exclusivity in the
future with respect to new/future custom developed pulsed Ytterbium lasers,
Supplier agrees to sell Products to Customer in accordance with this Agreement.
3.2 Supplier MFN Commitment. Supplier represents, warrants and agrees that
Customer shall at all times during the Term receive lead-time, manufacturing
capacity allocation, warranty support, shipment and ordering treatment which is
equal to, or better than, that provided to another customer. For the purposes of
this Section 3.2, "another customer" shall mean any and all other customers of
Products and products similar thereto from Supplier purchasing similar amounts.
For greater certainty and the avoidance of doubt: (i) Lead-Times offered to
Customer shall be equal to or less than those provided to another customers;
(ii) in the event of a manufacturing capacity shortage, Customer's orders shall
be satisfied with the same or better priority as another customer; (iii) in the
case of RMAs and warranty support, Customer's RMAs will be processed/satisfied
with the same or better priority as another customer; and (iv) with respect to
shipping Product (and products similar thereto), Customer's orders will with the
same or better priority as another customer.
4.0 FORECASTS
During the first seven (7) calendar days of each month during the Term, Customer shall provide Supplier a Rolling Forecast. A Rolling Forecast is an estimate of projected Product requirements based on the information then available to Customer and is not a commitment by Customer to purchase Product nor a commitment of Supplier to manufacture, deliver or sell Product. Supplier shall use Rolling Forecasts for internal material planning requirements.
5.0 PRODUCTS AND PURCHASE ORDERS
5.1 Products. Any pulsed Ytterbium fiber laser module offered for sale by Supplier on the merchant market, but subject to exclusivity obligations of Supplier described in Section 3.1, and ordered by, taken delivery of or paid for by Customer from Supplier shall be a "Product" hereunder. The parties shall seek to complete and update Exhibit A from time to time in respect of each such Product.
5.2 Issuance. Customer shall from time to time issue Purchase Orders. Customer shall only use the Products for incorporation into its systems/products and for warranty purposes related to same, and not for resale without incorporation in systems/products.
5.3 Acknowledgement. As soon as reasonably possible (and in no event later than three (3) business days) immediately following the receipt of each Purchase Order, Supplier shall acknowledge receipt of such Purchase Order.
5.4 Acceptance and Delivery Dates. As soon as reasonably possible (and in no event later than five (5) business days) immediately following the receipt of each Purchase Order, Supplier shall accept any Purchase Order having delivery dates consistent the applicable lead-time for such Product as set forth in Exhibit A or, in the case of Exhibit A not being complete, as from time to time provided by Supplier to Customer (collectively, "Lead-Time") and the delivery dates set forth in such Purchase Order acceptance shall be deemed the Delivery Dates for such Products.
To the extent that the delivery dates set forth in a Purchase Order are not consistent with the applicable Lead-Time, Supplier shall accept such Purchase Order and use commercially reasonable efforts to provide delivery dates for Products ordered thereunder. To the extent that Supplier does not provide delivery dates, Supplier shall use commercially reasonable efforts to provide Customer with delivery dates as soon thereafter as reasonably possible. In either case, the delivery dates provided by Supplier shall be deemed the Delivery Dates for such Products, unless Customer rejects same by written notice thereof on or before five (5) business days immediately following Supplier's provision of such Delivery Dates, in which case the parties shall acting reasonably and in good faith promptly negotiate mutually acceptable Delivery Dates. Thereafter, and to the extent that Supplier and Customer do not agree upon mutually acceptable Delivery Dates, either party may, by providing written notice to the other party, forthwith terminate the applicable Purchase Order with respect to Product for which there is no Delivery Date.
5.5 Changes. Except as otherwise provided for in this Agreement, Customer shall not cancel or terminate, reschedule or delay a Purchase Order, or applicable Delivery Dates thereunder, in whole or in part, without the prior written consent of Supplier.
5.6 Cancellation and Cancellation Costs. Subject to compensating Supplier in
accordance with this Section, Customer may cancel a Purchase Order, in whole or
part and without cost or penalty, by providing notice to Supplier prior to the
applicable Delivery Date. In the event that Customer provides Supplier with a
notice of cancellation four (4) weeks or less prior to the applicable Delivery
Date, Customer may not cancel and Customer must take and pay for all Product
delivered on or before the Delivery Date or within two (2) weeks thereafter. In
the event that Customer provides Supplier with a notice of cancellation more
than four (4) weeks (but less than the then current Lead-Time for the applicable
Product) prior to the applicable Delivery Date, Customer shall pay or reimburse
Supplier for the reasonable out of pocket or direct costs incurred by Supplier
relating to such canceled Product at the time of cancellation, including without
limitation with respect to work in process and raw materials, to the extent that
Supplier cannot (using reasonable efforts) mitigate such costs within forty-five
(45) calendar days of such cancellation, it being agreed that Customer shall not
be required to reimburse Supplier for laser diodes manufactured by Customer
which Supplier has in inventory on the Effective Date. This shall be Supplier's
sole and exclusive remedy and Customer's sole and exclusive liability/obligation
to Supplier for any cancellation hereunder by Customer.
5.7 Rescheduling. Provided Customer provides Supplier with at least fifteen (15) calendar days notice in advance of a Delivery Date for a Product, Customer may re-schedule such Delivery Date, at no cost or penalty and on a one time basis only, up to a maximum of sixty (60) calendar days. Thereafter, Customer shall take delivery of and pay for the Product in accordance with this Agreement.
6. PRICES FOR PRODUCTS
6.1 Prices for Products. Customer shall pay the applicable price for each Product as set forth in U.S. dollars in Exhibit A (or if not set forth in Exhibit A, as otherwise agreed by the parties) and as may be amended from time to time by Supplier and Customer in accordance with this Agreement. All prices are FCA (Incoterms 2000) Supplier's relevant facility, exclusive of Taxes, transportation, insurance and brokerage fees.
6.2 Product Pricing Structure.
(i) The parties agree and acknowledge that this Agreement is being executed by the parties as part of a settlement arrangement to resolve various outstanding issues between the parties, including the settlement of various contractual payments to be made by Supplier to Customer under a prior supply agreement between the parties. As partial consideration to Customer of its execution of a settlement and other related agreements, Supplier agrees to provide Customer with Product pricing, as follows:
During the Initial Term, the pricing shall be based upon Supplier's standard (market) non-distributor Product pricing for the given level of committed purchases (as mutually agreed upon by the parties). Supplier shall invoice to Customer such purchase price which shall be broken down into [***] and [***] (in each case as defined below). For the purposes of this Section and subject to Exhibit B, the [***] shall be [***] as mutually agreed upon by the parties [***] and the [***] shall be the difference between Supplier's invoiced
prices for Products and the [***] as mutually agreed upon by the parties [***]. Notwithstanding any other term or condition of this Agreement, Customer's sole and exclusive payment obligation in respect of the purchase price for a Product shall be to pay the [***] in accordance with the applicable terms and conditions of this Agreement and, notwithstanding any other term or condition of this Agreement, in no event shall Customer have any obligation to make any payments in respect of the [***]. The [***] shall represent additional consideration paid by Supplier to Customer under the above mentioned settlement arrangement, and shall be satisfied (and are hereby deemed to be satisfied) by Customer by its acceptance of such amounts as additional consideration paid by Supplier to Customer under the above mentioned settlement arrangement which acceptance is hereby provided. For greater certainty and the avoidance of doubt, [***], as noted above, shall be determined in accordance with GAAP.
(ii) Renewal Term: During the Renewal Term, the prices for Products shall be mutually agreed upon by the parties. Supplier represents, warrants and agrees that, in all cases, Supplier shall offer to, and charge, Customer prices for Products which are equal to, or less than, the lowest price offered or charged to any other purchaser or customer (excluding bone fide distributors in the normal course of Supplier's business) purchasing the Products or similar products (for marking systems or for other applications that Customer actually is currently in or in the future enters into and in respect of which Customer provides notice to Supplier) in the same or similar quantities (collectively, "Similar Purchaser"). If Supplier offers a lower price for the Product or similar product to any Similar Purchaser, then Supplier shall offer such pricing to Customer retroactively as of the date first offered to such Similar Purchaser.
6.3 Taxes. Except to the extent that applicable exemptions are available, obtained and documented for Supplier, Customer shall pay all Taxes and shall promptly reimburse Supplier for any Taxes which Supplier pays directly to any taxing authority. Supplier's invoices to Customer are payable in full without deduction for any Taxes, including without limitation withholding taxes.
7.0 INVOICING AND PAYMENT
During the Initial Term only, Supplier invoices shall set forth a Supplier
determined market price for each Product, the amount of the applicable Cash
Payment determined in accordance with Section 6.2(i) and the Contract Payment
determined in accordance with Section 6.2(i). For greater certainty and the
avoidance of doubt the cash amount to be paid for a Product during the Initial
Term shall always be the Cash Payment determined in accordance with Section
6.2(i). Supplier may issue an invoice as soon as the time of Product shipment
from Supplier's relevant facility, and Customer shall pay such invoice for the
Cash Payment within thirty (30) calendar days thereof. To the extent that
Customer that a proposed shipment to Customer exceeds the credit limits set by
Supplier for Customer in accordance with its ordinary practice, Supplier
reserves the right to require alternative payment terms including, without
limitation, letter of credit or payment in advance. If at any time Customer is
delinquent in the payment of any invoice or is otherwise in breach
of this Agreement, Supplier may, at its discretion, stop performance of services or withhold shipment (including partial shipments) of any order and may, at its option, require Customer to pre-pay for further performance or shipments. All payments not received when due shall be subject to an additional interest charge at an annual rate of 10% (.83% per month), or such lower interest rate as may be otherwise permitted at law, of the unpaid amount until the date of payment, without prejudice to any other rights, remedies or recourses which Supplier may have under this Agreement, at law or in equity. The right of Supplier to any payment provided for under this Agreement shall not be subject to any abatement, reduction, set off, defense, counterclaim or recoupment of any amount due or alleged to be due by reason of any past, present or future claims of Customer.
8.0 PRODUCT DELIVERY
8.1 Delivery Date. Except as provided for in this Agreement or otherwise mutually agreed upon by the parties, in writing, Supplier shall use commercially reasonable efforts to ship Products on the applicable Delivery Date.
8.2 Delay in Shipment. Supplier shall use commercially reasonable efforts to notify Customer in a timely manner of any delay in Delivery Dates, stating the reasons for the delay. Supplier shall use commercially reasonable efforts to minimize delays in Delivery Dates and, upon occurrence of any such delay, shall use commercially reasonable efforts to remedy same in a timely manner.
8.3 Shipping. All shipments are FCA (Incoterms 2000) Supplier's relevant facility. Supplier may ship partial orders provided Supplier notifies Customer prior to shipment. Customer shall specify the carrier or means of transportation or routing on the Purchase Order. In the event that Customer fails to specify shipping instructions on the Purchase Order, Supplier shall select the best available carrier on a commercially reasonable basis.
8.4 Packaging. Supplier shall package and label all Product in accordance with Supplier's then current packaging practices and suitable for shipment under normal circumstances without damage and in accordance with applicable law.
8.5 Title. Title to Product shall pass to Customer upon Supplier's tender of the relevant Product to the shipping carrier at Supplier's facility.
9.0 WARRANTIES
9.1 Product Warranty. Notwithstanding any provision to the contrary other than
Sections 10.2 and 10.3, Supplier's sole and exclusive obligation to the Customer
for any Product made by Supplier and sold hereunder is to repair returned
Product or provide a replacement Product, at Supplier's sole option, for any
Product which has been returned to Supplier under the RMA procedure set forth in
Section 9.2 and which is defective in workmanship, material or not in compliance
with the applicable Specifications and has in fact failed under normal use on or
before twenty-four (24) months from the date of original shipment of the
Product. All Product, which are experimental Products, prototypes or Products
used in field trials, are not warranted and are provided to Customer on an "as
is" basis. All Product or parts thereof supplied by third parties and sold by
Supplier carry only the original manufacturer's warranty to the extent
applicable to Customer. Supplier shall only accept for repair, replacement or
credit under warranty Products made by third parties, if expressly authorized to
do so by the
relevant third party. Any Product repaired or replaced under warranty is only warranted for the period of time remaining in the original warranty for the Product. The warranty excludes and does not cover any Product or parts thereof which has been accidentally damaged, disassembled, modified, misused, damaged in transit, used in applications which exceed the Product specifications or ratings, neglected, improperly installed or otherwise abused or is used in hazardous activities, or which fails as a result of Customer software or interfacing; improper installation, site preparation or maintenance; or Customer's failure to use the Product in accordance with the information and precautions contained in the applicable Product manual provided by Supplier. Customer must claim under the warranty in writing not later than thirty (30) calendar days after the claimed defect is discovered. The Customer must make all claims under this warranty and no claim shall be accepted from any third party.
9.2 Return Material Authorization. Except as otherwise provided in this Agreement, Supplier's then current RMA procedure shall apply to Supplier's repair or replacement of both in-warranty and out-of-warranty Products. Supplier shall only accept returns of Product for which an approved RMA number has been issued by Supplier and which are accompanied by an itemized statement of defects. Such Products shall be returned prepaid and insured to Supplier at the address stipulated by Supplier. All Products which have been returned to Supplier with an RMA number, but to which the warranty in Section 9.1 does not apply, shall be subject to Supplier's standard examination charge in effect at the time, which shall be invoiced by Supplier and paid by Customer in accordance with this Agreement. All Products returned to Supplier without an RMA number or which are not accompanied by an itemized statement of defects, may be returned to Customer, at Customer's expense, and Supplier shall have no obligation to evaluate such Products.
9.3 DISCLAIMER OF WARRANTIES. SUBJECT TO SECTIONS 10.2 AND 10.3, THE WARRANTY SET FORTH IN SECTION 9.1 AND THE OBLIGATIONS AND LIABILITIES OF SUPPLIER THEREUNDER ARE ACCEPTED BY CUSTOMER TO BE EXCLUSIVE AND IN LIEU OF, AND CUSTOMER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER REMEDIES, WARRANTIES, GUARANTEES, OBLIGATIONS, REPRESENTATIONS OR LIABILITIES, EXPRESS OR IMPLIED, OF SUPPLIER WITH RESPECT TO EACH PRODUCT OR PART THEREOF, PRODUCT DOCUMENTATION OR SERVICE DELIVERED OR PROVIDED UNDER THIS AGREEMENT, WHETHER ARISING IN FACT, IN LAW, IN CONTRACT (INCLUDING FUNDAMENTAL BREACH), IN TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY, CONDITION OR REPRESENTATION (A) OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, SATISFACTORY QUALITY, OR ARISING FROM COURSE OF PERFORMANCE, DEALING, USAGE OR TRADE PRACTICE; (B) THAT THE PRODUCTS WILL BE FREE FROM INFRINGEMENT OR VIOLATION OF ANY RIGHTS, INCLUDING INTELLECTUAL PROPERTY RIGHTS, OF THIRD PARTIES; OR (C) OR THAT THE OPERATION OF ANY SOFTWARE DELIVERED HEREUNDER WILL BE UNINTERRUPTED OR ERROR FREE. THIS SECTION AND THE LIMITATIONS SET FORTH HEREIN, SHALL APPLY IRRESPECTIVE OF THE NATURE OF THE CAUSE OF ACTION, DEMAND OR CLAIM, INCLUDING BUT NOT LIMITED TO, BREACH OF CONTRACT, NEGLIGENCE, TORT OR ANY OTHER LEGAL THEORY, AND SHALL SURVIVE A FUNDAMENTAL BREACH OR BREACHES AND/OR FAILURE OF THE ESSENTIAL PURPOSE OF THE AGREEMENT OR OF ANY REMEDY CONTAINED HEREIN.
9.4 LIMITATION OF LIABILITY. EXCEPT FOR DAMAGES OR LIABILITY ARISING PURSUANT TO
SECTION 10.3 (PRODUCT LIABILITY) OR FROM A BREACH OF SECTION 14.7 (CONFIDENTIAL
INFORMATION), SUPPLIER SHALL NOT BE LIABLE TO CUSTOMER, OR ANY THIRD PARTY, FOR
ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, EXEMPLARY OR INDIRECT COSTS OR DAMAGES,
INCLUDING WITHOUT LIMITATION, LITIGATION COSTS, INSTALLATION AND REMOVAL COSTS,
LOSS OF DATA, PRODUCTION, SAVINGS OR PROFIT OR ANY
OTHER COMMERCIAL OR ECONOMIC LOSS OF ANY KIND (INCLUDING WITHOUT LIMITATION BUSINESS INTERRUPTION OR LOSS OF BUSINESS) ARISING FROM ANY CAUSE WHATSOEVER, REGARDLESS OF THE FORM OF ACTION, INCLUDING WITHOUT LIMITATION IN CONTRACT (INCLUDING FUNDAMENTAL BREACH), TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH COSTS OR DAMAGES OR SAME WERE REASONABLY FORESEEABLE OR EVEN IF SUCH COSTS OR DAMAGES ARE ALLEGED TO ARISE FROM NEGLIGENT ACTS, OMISSIONS, OR CONDUCT OF SUPPLIER OR ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, REPRESENTATIVES OR SUBCONTRACTORS. EXCEPT FOR DAMAGES OR LIABILITY ARISING PURSUANT TO SECTION 10.3 (PRODUCT LIABILITY) OR FROM A BREACH OF SECTION 14.7 (CONFIDENTIAL INFORMATION), IN NO EVENT SHALL SUPPLIER'S TOTAL CUMULATIVE LIABILITY (WHICH FOR GREATER CERTAINTY IS NOT ON A PER INCIDENT BASIS) TO CUSTOMER IN CONTRACT (INCLUDING FUNDAMENTAL BREACH), TORT (INCLUDING NEGLIGENCE) OR OTHERWISE EXCEED THE AMOUNT PAID BY SELLER FOR PRODUCTS FROM WHICH SUCH LIABILTY AROSE DURING THE TWELVE (12) MONTH PERIOD IMMEDIATELY PRECEDING THE DATE OF THE MOST RECENT CLAIM. FOR THE PURPOSES OF THIS SECTION, CUSTOMER INCLUDES CUSTOMER'S DIRECTORS, OFFICERS, EMPLOYEEES, AGENTS, REPRESENTATIVES AND SUBCONTRACTORS. THIS SECTION AND THE LIMITATIONS SET FORTH HEREIN, SHALL APPLY IRRESPECTIVE OF THE NATURE OF THE CAUSE OF ACTION, DEMAND OR CLAIM, INCLUDING BUT NOT LIMITED TO, BREACH OF CONTRACT, NEGLIGENCE, TORT OR ANY OTHER LEGAL THEORY, AND SHALL SURVIVE A FUNDAMENTAL BREACH OR BREACHES AND/OR FAILURE OF THE ESSENTIAL PURPOSE OF THE AGREEMENT OR OF ANY REMEDY CONTAINED HEREIN.
10.0 INTELLECTUAL PROPERTY AND INDEMNITIES
10.1 Intellectual Property Rights. Unless otherwise provided for in this Agreement, nothing in this Agreement shall be construed as a sale, transfer or assignment of the intellectual property rights, including without limitation any patent, copyright, trade secrets, trademarks or tradenames, of Supplier whatsoever, including without limitation with respect to the Products, Specifications or related information and documentation. All right, title and interest in and to any inventions, discoveries, improvements, methods, ideas, computer and other apparatus programs and related documentation, other works of authorship fixed in any tangible medium of expression, mask works, or other forms of intellectual property, whether or not subject to statutory protection, which are made, created, developed, written, conceived or first reduced to practice by Supplier solely, jointly or on its behalf, in the course of, arising out of, or as a result of work performed hereunder, and any related tooling, set-up, fitting-up and preparation, shall belong to and be the sole and exclusive property of Supplier.
10.2 Intellectual Property Indemnity. Supplier agrees to defend or settle, at its sole option, and shall reimburse Customer for all costs and damages assessed by final judgement against Customer, and any reasonable expenses (including legal expenses), incurred at the written request of Supplier directly resulting from any claim alleging that any Products or the use, operation, sale or offer for sale thereof, infringe upon, misappropriate or violate any third party's intellectual property rights (including without limitation patents or copyrights) in member countries of the EU, countries in North America, Norway, Switzerland, Japan, New Zealand, China and Australia. Customer shall have no authority to settle any claim on behalf of Supplier.
In the event of such a claim of infringement of third party, Supplier shall have the right to discontinue further deliveries of the Product and shall use commercially reasonable efforts, at its expense, to: (a) obtain necessary rights required to permit the sale
or use of the Products by Customer and its customers; or (b) modify or replace such Products to make them non-infringing (and extend this indemnity thereto), provided that any such replacement or modified Products comply with the applicable Specifications. For the protection of Supplier and Customer, at the request and expense of Supplier, Customer agrees to exercise, and to the extent permitted sub-license Supplier, its have-made rights under any intellectual property license agreements it has with third parties, to the extent it has the right to do so. In the event Supplier is unable to achieve either of the options set forth above within a reasonable period of time or, in the reasonable opinion of Supplier, Supplier is unlikely to achieve such options within a reasonable period of time, Supplier shall have the right to immediately terminate Supplier's obligations to Customer under this Agreement with respect to the particular Product and promptly refund to Customer the invoiced purchase price.
Supplier's obligations specified in this Section shall be conditional on and subject to Customer notifying Supplier promptly in writing of the claim and giving Supplier full authority, information and assistance for the defense and settlement thereof. Supplier shall have no liability for, and Customer shall indemnify Supplier against, any claim based upon: (a) the combination, operation, or use of any Product supplied hereunder with equipment, devices, or software not supplied by Supplier; (b) alteration or modification of any Product supplied hereunder; or (c) Supplier's compliance with Customer's designs, specifications or instructions or (d) infringement of an application patent. Notwithstanding any other provisions hereof, Supplier shall not be liable for any claim based on Customer's use of the Products as shipped after Supplier has informed Customer of modifications or changes in the Products required to avoid such claims and offered to implement those modifications or changes, if such claim would have been avoided by implementation of Supplier's suggestions.
10.3 Personal Injury and Property Damage Indemnity. Supplier shall indemnify, defend and hold harmless Customer and its employees, officers, directors and agents, from and against any third party claims, demands, loss, damage or expense relating to bodily injury or death of any person or damage to real and/or tangible personal property to the extent directly caused by a Product and directly resulting from a breach of the warranty contained in Section 9.1 or the negligence or willful misconduct of Supplier. Supplier shall have no indemnity obligation hereunder for claims resulting from Product misuse, neglect, failure to follow normal Product safety procedures and recommended precautions in the Product manual or negligence of the operator.
11.0 PRODUCT CHANGES AND DISCONTINUATION
11.1 Customer Changes. In the event Customer desires an engineering or Specification change for any of the Products, Customer may submit such proposed engineering or Specification change to Supplier. Supplier and Customer acting reasonably and in good faith shall negotiate whether such change shall be made and if so, shall work with each other on the implementation of such change. Customer acknowledges that such changes may result in additional non-recurring engineering charges for Customer and may alter the price of the Products, in which case, this Agreement shall be amended, in writing, to reflect same.
11.2 Supplier Permitted Changes. Supplier may at any time make any changes, improvements, additions or enhancements to the Products
that do not materially affect the form, fit or function of a Product ("Permitted Change") without notice to, or the consent of, Customer. Permitted changes shall be made at no additional charge to Customer.
11.3 Supplier Material Changes. In the event that Supplier at any time makes any changes, improvements, additions or enhancements to the Products that materially affect the form, fit or function of a Product ("Material Change"), Supplier shall provide ninety (90) calendar days prior written notice to Customer of such Material Change, outlining the nature of the Material Change and any applicable non-recurring costs or impact on Delivery Dates or Product pricing. Customer shall approve or reject a Material Change within fifteen (15) calendar days from receipt of Supplier's notice, failing which the Material Change shall be deemed accepted by Customer. In the event of acceptance of any such Material Change, this Agreement shall be amended, in writing, to reflect any applicable non-recurring engineering costs or impact on Delivery Dates or Product pricing.
11.4 Rejection of Material Changes. In the event Customer rejects any Material
Change, Supplier shall continue to supply unchanged Product in accordance with
Section 11.7, in which case the date of Customer's rejection of such Material
Change shall be deemed the date on which (i) a Supplier notice of
discontinuation for the relevant Product shall be deemed to be provided to
Customer and (ii) the Discontinuance Period (as defined in Section 11.7 below)
shall be deemed to commence.
11.5 Required Changes. Notwithstanding any other term or condition in this
Section 11.0, in the event that any changes, improvements, additions or
enhancements of a Product, including Material Changes, are required by any law
or governmental regulation or requirement or interpretation thereof by any
governmental agency having jurisdiction or is required, in the discretion of
Supplier acting reasonably and in good faith, to address Product safety,
liability or performance ("Required Change"), Supplier shall provide sixty (60)
calendar days prior written notice (or such shorter period of notice as may be
reasonable in the circumstances) to Customer of such Required Change, outlining
the nature of the Required Change and any applicable non-recurring costs or
impact on Delivery Dates or Product pricing. Customer shall approve or reject a
Required Change within five (5) calendar days from receipt of Supplier's notice,
failing which the Required Change shall be deemed accepted by Customer. In the
event of acceptance of any such Required Change, this Agreement shall be
amended, in writing, to reflect any applicable non-recurring engineering costs
or impact on Delivery Dates or Product pricing. In no event shall Supplier be
required to manufacture, supply or sell a Product to which a Required Change is
applicable.
11.6 Rejection of Required Changes. In the event Customer rejects any Required Change referred to in Section 11.5, this Agreement shall be terminated with respect to the applicable Product and amended, in writing, to delete such Product from Exhibit A. Thereafter, Supplier shall have no further obligation to supply or sell such Product to Customer and Customer shall have no further obligation to take delivery of or purchase such Product.
11.7 Product Discontinuation. In the event Supplier intends to discontinue the manufacture and sale of any Product, Supplier shall give at least six (6) months prior written notice to Customer. At any time during such six (6) month period (the "Discontinuance Period"), Customer may place a last time Purchase Order for Product, provided the requested delivery dates are in compliance with the
applicable Product Lead-Time and the last requested delivery date for such Product is not more than six (6) months after the end of such Discontinuance Period.
12.0 TERMINATION
12.1 Rights of Termination. Upon the occurrence of any of the following events, a party may forthwith terminate this Agreement:
(a) the other party materially breaches or defaults any of its material obligations, duties or responsibilities hereunder (including, in the case of Customer, a failure to pay any amount owing when due), which breach or default has not been remedied within forty-five (45) calendar days (or fifteen (15) calendar days, in the case of Customer's failure to pay) after written notice is given by the party not in default, specifying the breach or default; or
(b) Other party shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property; (ii) admit in writing its inability, to pay its debts generally as they mature; (iii) make a general assignment for the benefit of its or any of its creditors; (iv) be dissolved or liquidated in full or in part; or (iv) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts pursuant to any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it; or
(c) Proceedings for the appointment of a receiver, trustee, liquidator or custodian of the other party or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the other party or the debts thereof pursuant to any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within ninety (90) days of commencement.
12.2 Termination Costs. In the event of termination of this Agreement by Supplier pursuant to Section 12.1, Customer shall compensate Supplier for any losses or damage resulting from such termination, including without limitation, the price of Products shipped, manufactured, or held separately for Customer and any incurred costs (including without limitation with respect of work in process and raw materials), and a reasonable allocation of general and administrative expenses relating to the Products. Notwithstanding any other term or condition of this Agreement, the foregoing amounts shall be due and payable by Customer immediately upon receipt of the applicable Supplier invoice.
13.0 DELAYS IN PERFORMANCE
13.1 Excusable Delay. In the event of a delay on the part of Supplier in the performance of any of its obligations or responsibilities under the terms and conditions of this Agreement due directly or indirectly to unforeseen circumstances or a cause which is beyond the reasonable control or without the fault or
negligence of Supplier (an "Excusable Delay"), Supplier shall not be liable for, nor be deemed to be in default under or breach of this Agreement on account of such delay and the time fixed or required for the performance of any such obligation or responsibility shall be extended for a period equal to the period during which any such delay persists. Excusable Delay shall be deemed to include, without limitation, delays occasioned by the following causes:
(a) force majeure or acts of God;
(b) war, warlike operations, act of the enemy, armed aggression, civil commotion, insurrection, riot or embargo;
(c) fire, explosion, earthquake, lightning, flood, draught, windstorm or other action of the elements or other catastrophic or serious accidents;
(d) epidemic or quarantine restrictions;
(e) any legislation, act, order, directive or regulation of any governmental or other duly constituted authority;
(f) strikes, lock-out, walk-out, and/or other labour troubles causing cessation, slow-down or interruption of work;
(g) a Required Change; or
(h) any default in or breach of this Agreement by Customer or any delay of Customer in the performance of its obligations or responsibilities under the terms and conditions of this Agreement.
13.2 Indefinite Delay and Termination. If Supplier reasonably concludes, based on its reasonable appraisal of the facts and normal scheduling procedures, that due to an Excusable Delay delivery of any Product will be delayed for more than six (6) months after the applicable Delivery Date or any revised date agreed to by the parties, in writing, Supplier shall promptly notify Customer, in writing, and either party may then terminate this Agreement, including any Purchase Orders, with respect to the affected Product by giving written notice to the other party within thirty (30) calendar days after receipt by Customer of Supplier's notice.
If, due to an Excusable Delay, delivery of any Product is delayed for more than six (6) months after the applicable Delivery Date, either party may terminate this Agreement, including any Purchase Orders, with respect to the affected Product by giving written notice to the other within thirty (30) calendar days after the expiration of such six (6) month period.
14.0 GENERAL
14.1 Product Specific Terms and Conditions. The Products governed by this Agreement may be supplied by various Supplier companies and divisions located in several different jurisdictions. From time to time the supply of an individual Product may require terms and conditions specific to such Product which terms and conditions shall be set forth in Exhibit A for the relevant Product.
14.2 Audits. To the extent Supplier's records may be relevant in determining whether Supplier is complying with its commitments under Section 3.1 and 3.2 (Commitments) and Section 6.2 (Price Structure), Customer shall have the right during the Term, through independent external certified professional accountants acceptable to both Supplier and Customer, to examine and inspect such records as may contain information bearing solely on whether Supplier is in compliance therewith, subject to the other terms of this Section 14.2. Such an audit shall take place under a reasonable confidentiality agreement, on reasonable notice to Supplier and during normal Supplier business hours. The auditor shall disclose to Customer only whether it found a discrepancy, and, if so, the amount/extent of that discrepancy. The auditor shall deliver a copy of any report to Supplier within ten (10) days of disclosure to Customer, and Supplier shall have an opportunity to rebut any discrepancy in any audit report. Customer may exercise its audit right not more than once per year. Solely with respect to compliance of Customer during the Renewal Term, the audit rights shall terminate following the date that Customer becomes a publicly traded company in the U.S.A. or is acquired by a publicly traded company in the U.S.A., provided that Customer, in lieu of the audit, shall deliver to Supplier a compliance statement, signed by a then current officer of Customer, certifying compliance by Customer with its obligations under Sections 3.1, Section 3.2 and 6.2(ii) hereof. All audits under this Section 14.2 shall be completed prior to the first anniversary of the expiration date of the Term.
14.3 Export Restrictions. Customer shall not transmit, export or re-export, directly or indirectly, separately or as part of any system, the Products or any technical data (including processes and services) received from Supplier, without first obtaining any license required by the applicable government, including without limitation, the United States Government and/or any other applicable competent authority. Customer also certifies that none of the products or technical data supplied by Supplier under this Agreement shall be sold or otherwise transferred to, or made available for use by or for, any entity that is engaged in the design, development, production or use of nuclear, biological or chemical weapons or missile technology. Customer shall indemnify and hold Supplier harmless for any violation or alleged violation by Customer of the foregoing.
14.4 Notices. Any notice, demand or other communication required or permitted to be given pursuant to this Agreement by either party shall be in writing and shall be either:
(a) Personally delivered to the other party; or
(b) Sent by prepaid overnight courier; or
(c) Sent by facsimile transmission or similar method of recorded communication, charges prepaid, confirmed by prepaid overnight courier.
Any notice, demand or other communication given in accordance with subparagraphs
(a), (b) and (c) above shall be delivered or sent to the intended recipient at
its address below:
If to JDS Uniphase Corporation:
To: Legal Department
JDS Uniphase Corporation
1768 Automation Parkway
San Jose, CA 95131
Fax: (408) 546-5856
And To: Associate General Counsel &
Director Business Development
JDS Uniphase Corporation
3000 Merivale Road
Nepean (Ottawa), Ontario
Canada K2G 6N7
Fax: (613) 823-2486
If to Customer:
To: Vice President - R&D
IPG Photonics Corporation
50 Old Webster Road
Oxford, MA 01540
Fax: 508-373-1101
And To: General Counsel
IPG Photonics Corporation
50 Old Webster Road
Oxford, MA 01540
Fax: 508-373-1101
Any party may from time to time change its address by written notice to the other party given in accordance with the provisions hereof.
Any notice, demand or other communication delivered in accordance with paragraph
(a) or (b) above shall be deemed to have been received on the day of its
delivery and if sent in accordance with paragraph (c) above, it shall be deemed
to have been received on the first business day following the date of its
transmission by facsimile or similar method of recorded communication
(confirmation copy by registered or certified mail).
14.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the provisions thereof relating to conflicts of laws or without regard to the United Nations Convention on Contracts for the International Sale of Goods. Supplier and Customer hereby irrevocably and unconditionally submit to the courts of the State of New York and all courts competent to hear appeal therefrom.
14.6 Dispute Resolution. In the event of any dispute, claim, question, or disagreement arising from or relating to this Agreement
or the breach thereof, the parties hereto shall use reasonable efforts to settle the dispute, claim, question, or disagreement. To this effect, the parties shall involve executives not involved with administration of this Agreement and internal counsel and shall consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both parties.
14.7 Severability. If any term or provision of this Agreement is found by a court of competent jurisdiction to be invalid, illegal or otherwise unenforceable, the same shall not affect the other terms or provisions hereof or the whole of this Agreement, but such term or provision shall be deemed modified to the extent necessary in the court's opinion to render such term or provision enforceable, and the rights and obligations of the parties shall be construed and enforced accordingly, preserving to the fullest permissible extent the intent and agreements of the parties herein set forth.
14.8 Confidential Information. The parties hereby agree that the terms and conditions of the Non-Disclosure Agreement between the parties, executed on June 17, 2003, continue to apply and extend to all Confidential Information (as that term is defined in the Non-Disclosure Agreement) exchanged between the parties in connection with this Agreement. This Section, and the terms and conditions of the Non-Disclosure Agreement, shall survive the expiration or earlier termination of this Agreement.
14.9 Independent Contractors. The relationship of the parties hereto is that of independent contractors. Under no circumstances shall any employees of one party be deemed to be the employees of the other for any purpose. Each party shall pay all wages, salaries, and other amounts due its respective employees relative to this Agreement and shall be responsible for all obligations respecting them relating to income tax withholdings, unemployment insurance premiums, workers' compensation, health care and pension plan contributions and other similar responsibilities. Neither party has the right nor authority to assume or to create any obligation or responsibility on behalf of the other party, except as may from time to time be provided by written instrument signed by both parties. Nothing contained herein shall be construed as creating an agency or joint venture, consortium or partnership between the parties.
14.10 Survival. The parties agree that the respective rights, obligations and duties under Section 1.0 (Interpretation), Section 6.1 and 6.2 (Prices for Products and Taxes), Section 7.0 (Invoicing and Payment), Section 9.0 (Warranties), Section 10.0 (Intellectual Property and Indemnities), Section 12.2 (Termination Costs) and Sections 14.2, 14.3, 14.4, 14.5, 14.6, 14.7, 14.8, 14.9, 14.10, 14.12 and 14.14 (General) and any outstanding payment obligations of Customer, shall survive expiration or earlier termination of this Agreement.
14.11 Assignment. This Agreement shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign this Agreement or any of their rights or obligations hereunder to a third party without the express prior written consent of the other party, which consent shall not be unreasonably withheld or delayed; provided however that Supplier may delegate performance to any Supplier selected independent contractor, provided that prior to any such assignment, such independent contractor shall become qualified by Customer using the same criteria as Customer used in qualifying Supplier for the same Product being assigned (it being understood that in either case Supplier shall not be relieved of any of its duties, obligations or
responsibilities hereunder by use of such affiliates or independent contractors); and provided further that, without notice to or consent of Customer, Supplier may at any time assign any payment to be made to Supplier hereunder. Any purported assignment contrary to this agreement shall be null and void.
14.12 Entire Agreement. This Agreement and its Exhibits express the entire understanding and agreement for both Supplier and Customer with respect to the subject matter covered by this Agreement and supersedes any and all previous agreements, except any existing non-disclosure agreement between both parties, with reference to the subject matter contained in this Agreement. All terms and conditions on any Purchase Orders and all provisions on Supplier's documents delivered in response to a Purchase Order shall be deemed deleted and superceded by the terms and conditions of this Agreement, except for information provided for administrative purposes only such as Purchase Order number, Product identifier, quantity, pricing, shipping dates, shipping instructions and delivery location.
14.13 Amendment and Waiver. No amendment or waiver of this Agreement shall be binding unless executed in writing by both parties. No waiver of any of the provisions of this Agreement shall constitute a waiver of any other provision (whether or not similar) nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.
14.14 Counterparts. This Agreement may be executed in any number of counterparts, including by facsimile, with the same effect as if Supplier and Customer had each signed the same document. All counterparts shall be construed together and shall constitute one and the same original Agreement.
IN WITNESS HEREOF, Supplier and Customer have executed this Agreement in duplicate originals by their duly authorized officials.
JDS UNIPHASE CORPORATION IPG PHOTONICS CORPORATION By: /s/ Christopher S. Dewees By: /s/ Valentin P. Gapontsev --------------------------------- ------------------------------------ Name: Christopher S. Dewees Name: Valentin P. Gapontsev Title: Vice President Title: CEO and Chairman of the Board Date: June 24, 2003 Date: June 24, 2003 |
EXHIBIT A
PRODUCT SCHEDULE
1. Product Name (Product Class)/ [***] Lasers Modules (OEM Units) average Description power to [***] 2. Customer Part No. [***] 3. Supplier Part No. [Insert Supplier Part No.] 4. Product Specification [Insert Specification Reference][to be agreed upon after Effective Date] 5. Lead-Time Six-weeks ARO (subject to agreed upon specification and a reasonable ramp up period) 6. Unit Price ($U.S.) [Insert Unit Price or Step Pricing, if applicable] 7. Unique Provisions Central wavelength emission [***] The Cash Payment in respect of this Product shall be Determined in accordance with Section 6(i), subject to Exhibit B. For illustration purposes only and without binding either party, IPG provides [***] for this Product in Exhibit A - Part B. For greater certainty the "Comments" section of the Exhibit do not apply - other than with respect to the applicability of the June 17, 2003 NDA between the parties. |
EXHIBIT A - PART 2
[***]
SEE ATTACHMENTS
EXHIBIT B
([***] Write-Downs and Permitted Cash Payment Changes)
- IPG represents that as of the Effective Date there is no present event that will result in a write-down of [***] and there is no pending write-down of the [***] under consideration by it or, to its knowledge, its auditors.
- The below only applies to the extent that [***] write downs result from GAAP for [***] accounting as applied consistently by IPG prior to the Effective Date, and not to the adoption of new or different [***] accounting practices.
- Note: Product Price = [***], as defined in the Agreement and [***] means
[***]
- In Months 1-6, all changes in inventory costs reduces [***].
Months 7-12 Year 2 Year 3 Year 4 Year 5 ----------- ------ ------ ------ ------ [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] [***] |
EXHIBIT E
JDSU SUPPLY AGREEMENT
THIS MASTER JDSU SUPPLY AGREEMENT is made effective as June 30, 2003 ("Effective Date") between JDS Uniphase Corporation, having offices at 1768 Automation Parkway, San Jose, CA 95131, on behalf of itself and its subsidiaries (collectively, "Supplier") and IPG Photonics Corporation, on behalf of itself and its subsidiaries, having offices at 50 Old Webster Road, Oxford, MA 01540 ("Customer").
WHEREAS Supplier is a manufacturer and supplier of laser diodes and packaged laser diodes;
AND WHEREAS Customer desires from time to time to order, purchase and take delivery of laser diodes and packaged laser diodes from Supplier;
AND WHEREAS Supplier desires to sell and deliver to Customer laser diodes and packaged laser diodes;
NOW THEREFORE, in consideration of the mutual covenants herein contained, and for good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, Supplier and Customer agree as follows:
1.0 INTERPRETATION
1.1 Definitions. In this Agreement, the below terms shall have the following respective meanings:
(a) "Delivery Date" means the delivery date, as determined in accordance with this Agreement, for the Product to arrive at Customer's delivery location set forth the applicable Purchase Order (as later defined).
(b) "Effective Date" shall have the meaning set forth in the first paragraph of this Agreement.
(c) "Products" shall have the meaning set forth in Section 5.1 and also means any laser diodes, packaged laser diodes as set forth and described in Exhibit A, as may be amended from time to time by the agreement of Supplier and Customer, in writing.
(d) "Purchase Order" means a purchase order issued to Supplier by Customer, in written or electronic form, for the purchase of Products pursuant to this Agreement, which states inter alia the Product, agreed upon unit price, unit quantities per Product, requested delivery dates and Customer delivery location.
(e) "Rolling Forecast" means a rolling six (6) month non-binding written forecast of Customer's anticipated requirements for each Product.
(f) "Specifications" means the specifications for the Products described in Exhibit A, as may be amended from time to time by the agreement of Supplier and Customer, in writing.
(g) "Taxes" means any and all taxes and other charges (exclusive of taxes on the net income of Supplier), howsoever designated,
levied or based on this Agreement or the Products delivered hereunder, including without limitation all federal (Canadian or U.S.), provincial, state and local sales, use and excise taxes, customs and duties, licenses, fees, tariffs and other similar expenses, whether now or subsequently in effect.
(h) "Term" has the meaning set forth in Section 2.0.
1.2 Headings. The division of this Agreement into Sections, Subsections and Exhibits and the insertion of headings are for ease of reference only and shall not affect its construction or interpretation.
2.0 TERM
This Agreement shall commence as of the Effective Date and shall, unless otherwise terminated in accordance with the terms and conditions of this Agreement or extended by the mutual agreement of the parties, remain in full force and effect for a period of five (5) years (the "Term").
3.0 CUSTOMER COMMITMENTS
3.1 Purchase Commitment. Except to the extent Customer is required to purchase laser diodes and packaged laser diodes under this Section 3.1, Section 5.6 (Cancellation and Cancellation Costs), Section 5.7 (Rescheduling) or for termination costs pursuant to Section 12.2 (Termination Costs), there is no commitment by Customer to purchase Products from Supplier. During each year of the first three (3) years of the Term, Customer agrees to issue Purchase Orders for, take delivery of, and pay for no less than seventy percent (70%) of its external requirements of any laser diodes and packaged laser diodes. During each year of the fourth and fifth years of the Term, Customer agrees to issue Purchase Orders for, take delivery of, and pay for no less than thirty-five percent (35%) of its external requirements of any laser diodes and packaged laser diodes. Compliance with this commitment shall be measured as a percentage of Customer's total external purchases of laser diodes plus packaged laser diodes on an annual basis as of each anniversary of the Effective Date and shall exclude laser diodes and packaged laser diodes of the type that Supplier does not sell on the merchant market. For greater certainty and the avoidance of doubt, the term "external requirements" shall not include laser diodes and packaged laser diodes manufactured or assembled by Customer. To the extent that:
(i) Supplier's prices for laser diodes and/or packaged laser diodes are ten percent (10%) or more greater than the prices of substantially the same products, which have been qualified by Customer and which meet the minimum specifications of Customer, offered by another supplier having the ability to supply such products in the quantities and timeframes required by Customer and Customer purchases such products from such other supplier; or
(ii) Supplier is not able to supply laser diodes and/or packaged laser diodes (a) that meet the minimum specifications of Customer; or (b) that are qualified by Customer; or (c) in the quantities and timeframes required by Customer (in each case as required by Customer of its other suppliers) and Customer purchases such products from such other supplier,
such products purchased from another supplier in accordance with the above shall be deemed to have been purchased from Supplier solely
for the purpose of determining Customer's compliance with the foregoing commitments.
3.2 Design In Commitment. On or before sixty (60) calendar days immediately following the Effective Date, Customer shall meet with Supplier to discuss Customer's external requirements of laser diodes and packaged laser diodes. For this meeting, Customer shall provide Supplier with specifications to the extent Customer has external requirements. Customer and Supplier shall enter into good faith discussions and cooperate to determine whether and how to implement Supplier laser diodes and packaged laser diodes into Customer's products. These discussions and cooperation are intended to result in Customer's satisfaction of its commitments in Section 3.1. Supplier shall respond to Customer's requests for proposals and quotation on Customer specifications in a reasonably prompt manner, but no longer than the response time for other customers purchasing similar quantities.
3.3 Business Reviews. In addition to the meetings provided for in Section 3.2, the parties (business and technical personnel, as appropriate) shall meet at least once per calendar year during the Term to conduct good faith discussions and cooperate to determine whether and how to continue or further implement Supplier laser diodes and packaged laser diodes into Customer's products, subject to Section 3.1. At least thirty (30) calendar days prior to each such annual business review, Customer shall provide Supplier with its specifications for its external requirements of laser diodes and packaged laser diodes to the extent previously provided specifications have changed or new specifications have been created or are being created. In addition to the annual meetings, technical personnel from the parties shall confer by telephone or video conference at least once per calendar quarter ("QBR") during the Term for the same purposes as the annual meetings. These discussions and cooperation are intended to result in Customer's satisfaction of its commitments in Section 3.1. Any other issues or opportunities relating to the parties' relationship shall also be discussed at QBRs.
Customer agrees to provide external requirement specifications to JDSU's Active Components Business Unit ("ACBU") under the NDA referenced in Section 14.8 and consult ACBU to determine whether and how to implement JDSU products in IPG systems. The goal shall be for both parties to be cooperative and work in good faith to implement JDSU solutions in IPG systems. If requested, IPG shall meet in person with JDSU to discuss implementing the JDSU solutions in IPG systems.
4.0 FORECASTS
During the first seven (7) calendar days of each month during the Term, Customer shall provide Supplier a Rolling Forecast. A Rolling Forecast is an estimate of projected Product requirements based on the information then available to Customer and is not a commitment by Customer to purchase Product nor a commitment of Supplier to manufacture, deliver or sell Product. Supplier shall use Rolling Forecasts for internal material planning requirements.
PRODUCTS AND PURCHASE ORDERS
5.1 Products. Any laser diode or packaged laser diode ordered by, taken delivery of or paid for by Customer from Supplier shall be a "Product" hereunder. The parties shall seek to complete and update Exhibit A from time to time in respect of each Products and Exhibit A shall contain or reference the Specifications for each Product.
5.2 Issuance. Customer shall from time to time issue Purchase Orders to Supplier to meet its commitments pursuant to Section 3.1.
5.3 Acknowledgement. As soon as reasonably possible (and in no event later than three (3) business days) immediately following the receipt of each Purchase Order, Supplier shall acknowledge receipt of such Purchase Order.
5.4 Acceptance and Delivery Dates. As soon as reasonably possible (and in no event later than five (5) business days) immediately following the receipt of each Purchase Order, Supplier shall accept any Purchase Order having delivery dates consistent the applicable lead-time for such Product as set forth in Exhibit A or, in the case of Exhibit A not being complete, as from time to time provided by Supplier to Customer (collectively, "Lead-Time") and the delivery dates set forth in such Purchase Order acceptance shall be deemed the Delivery Dates for such Products.
To the extent that the delivery dates set forth in a Purchase Order are not consistent with the applicable Lead-Time, Supplier shall accept such Purchase Order and use commercially reasonable efforts to provide delivery dates for Products ordered thereunder. To the extent that Supplier does not provide delivery dates, Supplier shall use commercially reasonable efforts to provide Customer with delivery dates as soon thereafter as reasonably possible. In either case, the delivery dates provided by Supplier shall be deemed the Delivery Dates for such Products, unless Customer rejects same by written notice thereof on or before five (5) business days immediately following Supplier's provision of such Delivery Dates, in which case the parties shall acting reasonably and in good faith promptly negotiate mutually acceptable Delivery Dates. Thereafter, and to the extent that Supplier and Customer do not agree upon mutually acceptable Delivery Dates, either party may, by providing written notice to the other party, forthwith terminate the applicable Purchase Order with respect to Product for which there is no Delivery Date.
5.5 Changes. Except as otherwise provided for in this Agreement, Customer shall not cancel or terminate, reschedule or delay a Purchase Order, or applicable Delivery Dates thereunder, in whole or in part, without the prior written consent of Supplier.
5.6 Cancellation and Cancellation Costs. Subject to compensating Supplier in
accordance with this Section, Customer may cancel a Purchase Order, in whole or
part and without cost or penalty, by providing notice to Supplier prior to the
applicable Delivery Date. In the event that Customer provides Supplier with a
notice of cancellation four (4) weeks or less prior to the applicable Delivery
Date, Customer may not cancel and Customer must take and pay for all Product
delivered on or before the Delivery Date or within two (2) weeks thereafter. In
the event that Customer provides Supplier with a notice of cancellation more
than four (4) weeks (but less than the then current Lead-Time for the applicable
Product) prior to the applicable Delivery Date, Customer shall pay or reimburse
Supplier for the reasonable out of pocket or direct costs incurred by Supplier
relating to such canceled Product at the time of cancellation, including without
limitation with respect to work in process and raw materials, to the extent that
Supplier cannot (using reasonable efforts) mitigate such costs within forty-five
(45) calendar days of such cancellation. This shall be Supplier's sole and
exclusive remedy and Customer's sole and exclusive
liability/obligation to Supplier for any cancellation hereunder by Customer.
5.7 Rescheduling. Provided Customer provides Supplier with at least fifteen (15) calendar days notice in advance of a Delivery Date for a Product, Customer may re-schedule such Delivery Date, at no cost or penalty and on a one time basis only, up to a maximum of sixty (60) calendar days. Thereafter, Customer shall take delivery of and pay for the Product in accordance with this Agreement.
6. PRICES FOR PRODUCTS
6.1 Prices for Products. Customer shall pay the applicable price for each Product as set forth in U.S. dollars in Exhibit A (or if not set forth in Exhibit A, as otherwise agreed by the parties) and as may be amended from time to time by Supplier and Customer in accordance with this Agreement. All prices are FCA (Incoterms 2000) Supplier's relevant facility, exclusive of Taxes, transportation, insurance and brokerage fees.
6.2 Taxes. Except to the extent that applicable exemptions are available, obtained and documented for Supplier, Customer shall pay all Taxes and shall promptly reimburse Supplier for any Taxes which Supplier pays directly to any taxing authority. Supplier's invoices to Customer are payable in full without deduction for any Taxes, including without limitation withholding taxes.
7.0 INVOICING AND PAYMENT
Supplier may issue an invoice as soon as the time of Product shipment from
Supplier's relevant facility, and Customer shall pay such invoice within thirty
(30) calendar days thereof. To the extent that a proposed shipment to Customer
exceeds the credit limits set by Supplier for Customer in accordance with its
ordinary business practice, Supplier reserves the right to require alternative
payment terms including, without limitation, letter of credit or payment in
advance. If at any time Customer is delinquent in the payment of any invoice or
is otherwise in breach of this Agreement, Supplier may, at its discretion, stop
performance of services or withhold shipment (including partial shipments) of
any order and may, at its option, require Customer to pre-pay for further
performance or shipments. If Customer cannot comply with the alternative payment
terms imposed by Supplier under the two immediately preceding sentences after
using commercially reasonable business efforts to comply with the alternative
payment terms requested, Customer's purchases of laser diodes or packaged laser
diodes from another supplier shall be deemed to have been purchased from
Supplier solely for purposes of determining Customer's requirements with Section
3.1. Customer shall, however, prior to purchasing from such other supplier
provide JDSU with an opportunity to promptly match the payment terms of such
other supplier in order to maintain the benefits of Section 3.1. All payments
not received when due shall be subject to an additional interest charge at an
annual rate of 10% (.83% per month), or such lower interest rate as may be
otherwise permitted at law, of the unpaid amount until the date of payment,
without prejudice to any other rights, remedies or recourses which Supplier may
have under this Agreement, at law or in equity. The right of Supplier to any
payment provided for under this Agreement shall not be subject to any abatement,
reduction, set off, defense, counterclaim or recoupment of any amount due or
alleged to be due by reason of any past, present or future claims of Customer.
8.0 PRODUCT DELIVERY
8.1 Delivery Date. Except as provided for in this Agreement or otherwise mutually agreed upon by the parties, in writing, Supplier shall use commercially reasonable efforts to ship Products on the applicable Delivery Date.
8.2 Delay in Shipment. Supplier shall use commercially reasonable efforts to notify Customer in a timely manner of any delay in Delivery Dates, stating the reasons for the delay. Supplier shall use commercially reasonable efforts to minimize delays in Delivery Dates and, upon occurrence of any such delay, shall use commercially reasonable efforts to remedy same in a timely manner.
8.3 Shipping. All shipments are FCA (Incoterms 2000) Supplier's relevant facility. Supplier may ship partial orders provided Supplier notifies Customer prior to shipment. Customer shall specify the carrier or means of transportation or routing on the Purchase Order. In the event that Customer fails to specify shipping instructions on the Purchase Order, Supplier shall select the best available carrier on a commercially reasonable basis.
8.4 Packaging. Supplier shall package and label all Product in accordance with Supplier's then current packaging practices and suitable for shipment under normal circumstances without damage, and in accordance with applicable law.
8.5 Title. Title to Product shall pass to Customer upon Supplier's tender of the relevant Product to the shipping carrier at Supplier's facility.
9.0 WARRANTIES
9.1 Product Warranty. Notwithstanding any provision to the contrary other than
Sections 10.2 and 10.3, Supplier's sole and exclusive obligation to the Customer
for any Product made by Supplier and sold hereunder is to repair returned
Product or provide a replacement Product, at Supplier's sole option, for any
Product which has been returned to Supplier under the RMA procedure set forth in
Section 9.2 and which is defective in workmanship, material or not in compliance
with the applicable Specifications and has in fact failed under normal use on or
before twelve (12) months from the date of original shipment of the Product. In
the event that during the Term Supplier's standard terms and conditions of sale
are amended to provide for a warranty period in excess of twelve (12) months,
such longer warranty period shall apply to Products ordered, taken delivery of
and paid for by Customer after the effective date of such change. All Product,
which are experimental Products, prototypes or Products used in field trials,
are not warranted and are provided to Customer on an "as is" basis. All Product
or parts thereof supplied by third parties and sold by Supplier carry only the
original manufacturer's warranty to the extent applicable to Customer. Supplier
shall only accept for repair, replacement or credit under warranty Products made
by third parties, if expressly authorized to do so by the relevant third party.
Any Product repaired or replaced under warranty is only warranted for the period
of time remaining in the original warranty for the Product. The warranty
excludes and does not cover any Product or parts thereof which has been
accidentally damaged, disassembled, modified, misused, damaged in transit, used
in applications which exceed the Product specifications or ratings, neglected,
improperly installed or otherwise abused or is used in hazardous activities or
which fails as a result of Customer software or interfacing, improper site
preparation or maintenance or Customer's failure to use the Product in
accordance with the information and precautions contained in the applicable
Product manual provided by Supplier. Customer must claim
under the warranty in writing not later than thirty (30) calendar days after the claimed defect is discovered. The Customer must make all claims under this warranty and no claim shall be accepted from any third party.
9.2 Return Material Authorization. Except as otherwise provided in this Agreement, Supplier's then current RMA procedure shall apply to Supplier's repair or replacement of both in-warranty and out-of-warranty Products. Supplier shall only accept returns of Product for which an approved RMA number has been issued by Supplier and which are accompanied by an itemized statement of defects. Such Products shall be returned prepaid and insured to Supplier at the address stipulated by Supplier. All Products which have been returned to Supplier with an RMA number, but to which the warranty in Section 9.1 does not apply, shall be subject to Supplier's standard examination charge in effect at the time, which shall be invoiced by Supplier and paid by Customer in accordance with this Agreement. All Products returned to Supplier without an RMA number or which are not accompanied by an itemized statement of defects, may be returned to Customer, at Customer's expense, and Supplier shall have no obligation to evaluate such Products.
9.3 DISCLAIMER OF WARRANTIES. SUBJECT TO SECTIONS 10.2 AND 10.3, THE WARRANTY SET FORTH IN SECTION 9.1 AND THE OBLIGATIONS AND LIABILITIES OF SUPPLIER THEREUNDER ARE ACCEPTED BY CUSTOMER TO BE EXCLUSIVE AND IN LIEU OF, AND CUSTOMER HEREBY WAIVES, RELEASES AND RENOUNCES ALL OTHER REMEDIES, WARRANTIES, GUARANTEES, OBLIGATIONS, REPRESENTATIONS OR LIABILITIES, EXPRESS OR IMPLIED, OF SUPPLIER WITH RESPECT TO EACH PRODUCT OR PART THEREOF, PRODUCT DOCUMENTATION OR SERVICE DELIVERED OR PROVIDED UNDER THIS AGREEMENT, WHETHER ARISING IN FACT, IN LAW, IN CONTRACT (INCLUDING FUNDAMENTAL BREACH), IN TORT (INCLUDING NEGLIGENCE), OR OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY, CONDITION OR REPRESENTATION (A) OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, SATISFACTORY QUALITY, OR ARISING FROM COURSE OF PERFORMANCE, DEALING, USAGE OR TRADE PRACTICE; (B) THAT THE PRODUCTS WILL BE FREE FROM INFRINGEMENT OR VIOLATION OF ANY RIGHTS, INCLUDING INTELLECTUAL PROPERTY RIGHTS, OF THIRD PARTIES; OR (C) OR THAT THE OPERATION OF ANY SOFTWARE DELIVERED HEREUNDER WILL BE UNINTERRUPTED OR ERROR FREE. THIS SECTION AND THE LIMITATIONS SET FORTH HEREIN, SHALL APPLY IRRESPECTIVE OF THE NATURE OF THE CAUSE OF ACTION, DEMAND OR CLAIM, INCLUDING BUT NOT LIMITED TO, BREACH OF CONTRACT, NEGLIGENCE, TORT OR ANY OTHER LEGAL THEORY, AND SHALL SURVIVE A FUNDAMENTAL BREACH OR BREACHES AND/OR FAILURE OF THE ESSENTIAL PURPOSE OF THE AGREEMENT OR OF ANY REMEDY CONTAINED HEREIN.
9.4 LIMITATION OF LIABILITY. EXCEPT FOR DAMAGES OR LIABILITY ARISING PURSUANT TO
SECTION 10.3 (PRODUCT LIABILITY) OR FROM A BREACH OF SECTION 14.7 (CONFIDENTIAL
INFORMATION), SUPPLIER SHALL NOT BE LIABLE TO CUSTOMER, OR ANY THIRD PARTY, FOR
ANY SPECIAL, CONSEQUENTIAL, INCIDENTAL, EXEMPLARY OR INDIRECT COSTS OR DAMAGES,
INCLUDING WITHOUT LIMITATION, LITIGATION COSTS, INSTALLATION AND REMOVAL COSTS,
LOSS OF DATA, PRODUCTION, SAVINGS OR PROFIT OR ANY OTHER COMMERCIAL OR ECONOMIC
LOSS OF ANY KIND (INCLUDING WITHOUT LIMITATION BUSINESS INTERRUPTION OR LOSS OF
BUSINESS) ARISING FROM ANY CAUSE WHATSOEVER, REGARDLESS OF THE FORM OF ACTION,
INCLUDING WITHOUT LIMITATION IN CONTRACT (INCLUDING FUNDAMENTAL BREACH), TORT
(INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE, EVEN IF ADVISED OF THE
POSSIBILITY OF SUCH COSTS OR DAMAGES OR SAME WERE REASONABLY FORESEEABLE OR EVEN
IF SUCH COSTS OR DAMAGES ARE ALLEGED TO ARISE FROM NEGLIGENT ACTS, OMISSIONS, OR
CONDUCT OF SUPPLIER OR ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS,
REPRESENTATIVES OR SUBCONTRACTORS. EXCEPT FOR DAMAGES OR LIABILITY ARISING
PURSUANT TO SECTION 10.3 (PRODUCT LIABILITY) OR FROM A BREACH OF SECTION 14.7
(CONFIDENTIAL INFORMATION), IN NO EVENT SHALL SUPPLIER'S TOTAL CUMULATIVE LIABILITY (WHICH FOR GREATER CERTAINTY IS NOT ON A PER INCIDENT BASIS) TO CUSTOMER IN CONTRACT (INCLUDING FUNDAMENTAL BREACH), TORT (INCLUDING NEGLIGENCE) OR OTHERWISE EXCEED THE AMOUNT PAID BY SELLER FOR PRODUCTS FROM WHICH SUCH LIABILTY AROSE DURING THE TWELVE (12) MONTH PERIOD IMMEDIATELY PRECEDING THE DATE OF THE MOST RECENT CLAIM. FOR THE PURPOSES OF THIS SECTION, CUSTOMER INCLUDES CUSTOMER'S DIRECTORS, OFFICERS, EMPLOYEEES, AGENTS, REPRESENTATIVES AND SUBCONTRACTORS. THIS SECTION AND THE LIMITATIONS SET FORTH HEREIN, SHALL APPLY IRRESPECTIVE OF THE NATURE OF THE CAUSE OF ACTION, DEMAND OR CLAIM, INCLUDING BUT NOT LIMITED TO, BREACH OF CONTRACT, NEGLIGENCE, TORT OR ANY OTHER LEGAL THEORY, AND SHALL SURVIVE A FUNDAMENTAL BREACH OR BREACHES AND/OR FAILURE OF THE ESSENTIAL PURPOSE OF THE AGREEMENT OR OF ANY REMEDY CONTAINED HEREIN.
10.0 INTELLECTUAL PROPERTY AND INDEMNITIES
10.1 Intellectual Property Rights. Unless otherwise provided for in this Agreement, nothing in this Agreement shall be construed as a sale, transfer or assignment of the intellectual property rights, including without limitation any patent, copyright, trade secrets, trademarks or tradenames, of Supplier whatsoever, including without limitation with respect to the Products, Specifications or related information and documentation. All right, title and interest in and to any inventions, discoveries, improvements, methods, ideas, computer and other apparatus programs and related documentation, other works of authorship fixed in any tangible medium of expression, mask works, or other forms of intellectual property, whether or not subject to statutory protection, which are made, created, developed, written, conceived or first reduced to practice by Supplier solely, jointly or on its behalf, in the course of, arising out of, or as a result of work performed hereunder, and any related tooling, set-up, fitting-up and preparation, shall belong to and be the sole and exclusive property of Supplier.
10.2 Intellectual Property Indemnity. Supplier agrees to defend or settle, at its sole option, and shall reimburse Customer for all costs and damages assessed by final judgment against Customer, and any reasonable expenses (including legal expenses), incurred at the written request of Supplier directly resulting from any claim alleging that any Products or the use, operation, sale or offer for sale thereof, infringe upon, misappropriate or violate any third party's intellectual property rights (including without limitation patents or copyrights) in member countries of the EU, countries in North America, Norway, Switzerland, Japan, New Zealand, China and Australia. Customer shall have no authority to settle any claim on behalf of Supplier.
In the event of such a claim of infringement of third party, Supplier shall have the right to discontinue further deliveries of the Product and shall use commercially reasonable efforts, at its expense, to: (a) obtain necessary rights required to permit the sale or use of the Products by Customer and its customers; or (b) modify or replace such Products to make them non-infringing (and extend this indemnity thereto), provided that any such replacement or modified Products comply with the applicable Specifications. For the protection of Supplier and Customer, at the request and expense of Supplier, Customer agrees to exercise, and to the extent permitted sub-license Supplier, its have-made rights under any intellectual property license agreements it has with third parties, to the extent it has the right to do so. In the event Supplier is unable to achieve either of the options set forth above within a reasonable period of time or, in the reasonable opinion of Supplier,
Supplier is unlikely to achieve such options within a reasonable period of time, Supplier shall have the right to immediately terminate Supplier's obligations to Customer under this Agreement with respect to the particular Product and promptly refund to Customer the invoiced purchase price.
Supplier's obligations specified in this Section shall be conditional on and subject to Customer notifying Supplier promptly in writing of the claim and giving Supplier full authority, information and assistance for the defense and settlement thereof. Supplier shall have no liability for, and Customer shall indemnify Supplier against, any claim based upon: (a) the combination, operation, or use of any Product supplied hereunder with equipment, devices, or software not supplied by Supplier; (b) alteration or modification of any Product supplied hereunder; or (c) Supplier's compliance with Customer's designs, specifications or instructions or (d) infringement of an application patent. Notwithstanding any other provisions hereof, Supplier shall not be liable for any claim based on Customer's use of the Products as shipped after Supplier has informed Customer of modifications or changes in the Products required to avoid such claims and offered to implement those modifications or changes, if such claim would have been avoided by implementation of Supplier's suggestions.
10.3 Personal Injury and Property Damage Indemnity. Supplier shall indemnify, defend and hold harmless Customer and its employees, officers, directors and agents, from and against any third party claims, demands, loss, damage or expense relating to bodily injury or death of any person or damage to real and/or tangible personal property to the extent directly caused by a Product and directly resulting from a breach of the warranty contained in Section 9.1 or the negligence or willful misconduct of Supplier. Supplier shall have no indemnity obligation hereunder for claims resulting from Product misuse, neglect, failure to follow normal Product safety procedures and recommended precautions in the Product manual or negligence of the operator.
11.0 PRODUCT CHANGES AND DISCONTINUATION
11.1 Customer Changes. In the event Customer desires an engineering or Specification change for any of the Products, Customer may submit such proposed engineering or Specification change to Supplier. Supplier and Customer acting reasonably and in good faith shall negotiate whether such change shall be made and if so, shall work with each other on the implementation of such change. Customer acknowledges that such changes may result in additional non-recurring engineering charges for Customer and may alter the price of the Products, in which case, this Agreement shall be amended, in writing, to reflect same.
11.2 Supplier Permitted Changes. Supplier may at any time make any changes, improvements, additions or enhancements to the Products that do not materially affect the form, fit or function of a Product ("Permitted Change") without notice to, or the consent of, Customer. Permitted changes shall be made at no additional charge to Customer.
11.3 Supplier Material Changes. In the event that Supplier at any time makes any changes, improvements, additions or enhancements to the Products that materially affect the form, fit or function of a Product ("Material Change"), Supplier shall provide ninety (90) calendar days prior written notice to Customer of such Material Change, outlining the nature of the Material Change and any applicable non-recurring costs or impact on Delivery Dates or
Product pricing. Customer shall approve or reject a Material Change within fifteen (15) calendar days from receipt of Supplier's notice, failing which the Material Change shall be deemed accepted by Customer. In the event of acceptance of any such Material Change, this Agreement shall be amended, in writing, to reflect any applicable non-recurring engineering costs or impact on Delivery Dates or Product pricing.
11.4 Rejection of Material Changes. In the event Customer rejects any Material
Change, Supplier shall continue to supply unchanged Product in accordance with
Section 11.7, in which case the date of Customer's rejection of such Material
Change shall be deemed the date on which (i) a Supplier notice of
discontinuation for the relevant Product shall be deemed to be provided to
Customer and (ii) the Discontinuance Period (as defined in Section 11.7 below)
shall be deemed to commence.
11.5 Required Changes. Notwithstanding any other term or condition in this
Section 11.0, in the event that any changes, improvements, additions or
enhancements of a Product, including Material Changes, are required by any law
or governmental regulation or requirement or interpretation thereof by any
governmental agency having jurisdiction or is required, in the discretion of
Supplier acting reasonably and in good faith, to address Product safety,
liability or performance ("Required Change"), Supplier shall provide sixty (60)
calendar days prior written notice (or such shorter period of notice as may be
reasonable in the circumstances) to Customer of such Required Change, outlining
the nature of the Required Change and any applicable non-recurring costs or
impact on Delivery Dates or Product pricing. Customer shall approve or reject a
Required Change within five (5) calendar days from receipt of Supplier's notice,
failing which the Required Change shall be deemed accepted by Customer. In the
event of acceptance of any such Required Change, this Agreement shall be
amended, in writing, to reflect any applicable non-recurring engineering costs
or impact on Delivery Dates or Product pricing. In no event shall Supplier be
required to manufacture, supply or sell a Product to which a Required Change is
applicable.
11.6 Rejection of Required Changes. In the event Customer rejects any Required Change referred to in Section 11.5, this Agreement shall be terminated with respect to the applicable Product and amended, in writing, to delete such Product from Exhibit A. Thereafter, Supplier shall have no further obligation to supply or sell such Product to Customer and Customer shall have no further obligation to take delivery of or purchase such Product.
11.7 Product Discontinuation. In the event Supplier intends to discontinue the manufacture and sale of any Product, Supplier shall give at least six (6) months prior written notice to Customer. At any time during such six (6) month period (the "Discontinuance Period"), Customer may place a last time Purchase Order for Product, provided the requested delivery dates are in compliance with the applicable Product Lead-Time and the last requested delivery date for such Product is not more than six (6) months after the end of such Discontinuance Period.
12.0 TERMINATION
12.1 Rights of Termination. Upon the occurrence of any of the following events, a party may forthwith terminate this Agreement:
(a) The other party materially breaches or defaults any of its material obligations, duties or responsibilities hereunder
(including, in the case of Customer, a failure to pay any amount owing when due), which breach or default has not been remedied within forty-five (45) calendar days (or fifteen (15) calendar days, in the case of Customer's failure to pay) after written notice is given by the party not in default, specifying the breach or default; or
(b) The other party shall (i) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property; (ii) admit in writing its inability, to pay its debts generally as they mature; (iii) make a general assignment for the benefit of its or any of its creditors; (iv) be dissolved or liquidated in full or in part; or (iv) commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts pursuant to any bankruptcy, insolvency or other similar law now or hereafter in effect or consent to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it; or
(c) Proceedings for the appointment of a receiver, trustee, liquidator or custodian of the other party or of all or a substantial part of the property thereof, or an involuntary case or other proceedings seeking liquidation, reorganization or other relief with respect to the other party or the debts thereof pursuant to any bankruptcy, insolvency or other similar law now or hereafter in effect shall be commenced and an order for relief entered or such proceeding shall not be dismissed or discharged within ninety days of commencement.
12.2 Termination Costs. In the event of termination of this Agreement by Supplier pursuant to Section 12.1, Customer shall compensate Supplier for any losses or damage resulting from such termination, including without limitation, the price of Products shipped, manufactured, or held separately for Customer and any incurred costs (including without limitation with respect of work in process and raw materials), and a reasonable allocation of general and administrative expenses relating to the Products. Notwithstanding any other term or condition of this Agreement, the foregoing amounts shall be due and payable by Customer immediately upon receipt of the applicable Supplier invoice.
13.0 DELAYS IN PERFORMANCE
13.1 Excusable Delay. In the event of a delay on the part of Supplier in the performance of any of its obligations or responsibilities under the terms and conditions of this Agreement due directly or indirectly to unforeseen circumstances or a cause which is beyond the reasonable control or without the fault or negligence of Supplier (an "Excusable Delay"), Supplier shall not be liable for, nor be deemed to be in default under or breach of this Agreement on account of such delay and the time fixed or required for the performance of any such obligation or responsibility shall be extended for a period equal to the period during which any such delay persists. Excusable Delay shall be deemed to include, without limitation, delays occasioned by the following causes:
(a) force majeure or acts of God;
(b) war, warlike operations, act of the enemy, armed aggression, civil commotion, insurrection, riot or embargo;
(c) fire, explosion, earthquake, lightning, flood, draught, windstorm or other action of the elements or other catastrophic or serious accidents;
(d) epidemic or quarantine restrictions;
(e) any legislation, act, order, directive or regulation of any governmental or other duly constituted authority;
(f) strikes, lock-out, walk-out, and/or other labour troubles causing cessation, slow-down or interruption of work;
(g) a Required Change; or
(h) any default in or breach of this Agreement by Customer or any delay of Customer in the performance of its obligations or responsibilities under the terms and conditions of this Agreement.
13.2 Indefinite Delay and Termination. If Supplier reasonably concludes, based on its reasonable appraisal of the facts and normal scheduling procedures, that due to an Excusable Delay delivery of any Product will be delayed for more than six (6) months after the applicable Delivery Date or any revised date agreed to by the parties, in writing, Supplier shall promptly notify Customer, in writing, and either party may then terminate this Agreement, including any Purchase Orders, with respect to the affected Product by giving written notice to the other party within thirty (30) calendar days after receipt by Customer of Supplier's notice.
If, due to an Excusable Delay, delivery of any Product is delayed for more than six (6) months after the applicable Delivery Date, either party may terminate this Agreement, including any Purchase Orders, with respect to the affected Product by giving written notice to the other within thirty (30) calendar days after the expiration of such six (6) month period.
14.0 GENERAL
14.1 Product Specific Terms and Conditions. The Products governed by this Agreement may be supplied by various Supplier companies and divisions located in several different jurisdictions. From time to time the supply of an individual Product may require terms and conditions specific to such Product which terms and conditions shall be set forth in Exhibit A for the relevant Product.
14.2 Audits. To the extent Customer's records may be relevant in determining
whether Customer is complying with its commitment under Sections 3.1, Supplier
shall have the right during the Term, through independent external certified
professional accountants acceptable to both Supplier and Customer, to examine
and inspect such records as may contain information bearing solely on whether
Customer is in compliance therewith, subject to the other terms of this Section
14.2. Such an audit shall take place under a reasonable confidentiality
agreement, on reasonable notice to Customer and during normal Customer business
hours. The auditor shall disclose to Supplier only whether it found a
discrepancy, and, if so, the amount/extent of that discrepancy. The auditor
shall deliver a copy of each report to Customer within ten (10) days of
disclosure to Supplier, and Customer shall have an opportunity to rebut any
discrepancy in any audit report. Supplier may exercise its audit right not more
than once per year. Solely with respect to compliance of Customer during the
fourth and fifth years of the Term, the audit rights shall terminate following
the date that Customer becomes a publicly traded company in the U.S.A. or is
acquired by a publicly traded company in the U.S.A., provided that Customer, in
lieu of the audit, shall deliver to Supplier a compliance statement, signed by a
then current officer of Customer, certifying compliance by Customer with its
obligations under Section 3.1 hereof. All audits under this Section 14.2 shall
be completed prior to the first anniversary of the expiration date of the Term.
14.3 Export Restrictions. Customer shall not transmit, export or re-export, directly or indirectly, separately or as part of any system, the Products or any technical data (including processes and services) received from Supplier, without first obtaining any license required by the applicable government, including without limitation, the United States Government and/or any other applicable competent authority. Customer also certifies that none of the products or technical data supplied by Supplier under this Agreement shall be sold or otherwise transferred to, or made available for use by or for, any entity that is engaged in the design, development, production or use of nuclear, biological or chemical weapons or missile technology. Customer shall indemnify and hold Supplier harmless for any violation or alleged violation by Customer of the foregoing.
14.4 Notices. Any notice, demand or other communication required or permitted to be given pursuant to this Agreement by either party shall be in writing and shall be either:
(a) Personally delivered to the other party; or
(b) Sent by prepaid overnight courier; or
(c) Sent by facsimile transmission or similar method of recorded communication, charges prepaid, confirmed by prepaid overnight courier.
Any notice, demand or other communication given in accordance with subparagraphs
(a), (b) and (c) above shall be delivered or sent to the intended recipient at
its address below:
If to JDS Uniphase Corporation:
To: Legal Department
JDS Uniphase Corporation
1786 Automation Parkway
San Jose, CA 95131
Fax: (408) 546-5856
And To: Associate General Counsel &
Director Business Development
JDS Uniphase Corporation
3000 Merivale Road
Nepean (Ottawa), Ontario
Canada K2G 6N7
Fax: (613) 823-2486
If to Customer:
To: Chief Executive Officer
IPG Photonics Corporation
50 Old Webster Road
Oxford, MA 01540
Fax: 508-373-1101
And To: General Counsel
IPG Photonics Corporation
50 Old Webster Road
Oxford, MA 01540
Fax: 508-373-1101
Any party may from time to time change its address by written notice to the other party given in accordance with the provisions hereof.
Any notice, demand or other communication delivered in accordance with paragraph
(a) or (b) above shall be deemed to have been received on the day of its
delivery and if sent in accordance with paragraph (c) above, it shall be deemed
to have been received on the first business day following the date of its
transmission by facsimile or similar method of recorded communication
(confirmation copy by registered or certified mail).
14.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to the provisions thereof relating to conflicts of laws or without regard to the United Nations Convention on Contracts for the International Sale of Goods. Supplier and Customer hereby irrevocably and unconditionally submit to the courts of the State of New York and all courts competent to hear appeal therefrom.
14.6 Dispute Resolution. In the event of any dispute, claim, question, or disagreement arising from or relating to this Agreement or the breach thereof, the parties hereto shall use reasonable efforts to settle the dispute, claim, question, or disagreement. To this effect, the parties shall involve executives not involved with administration of this Agreement and internal counsel and shall consult and negotiate with each other in good faith and, recognizing their mutual interests, attempt to reach a just and equitable solution satisfactory to both parties.
14.7 Severability. If any term or provision of this Agreement is found by a court of competent jurisdiction to be invalid, illegal or otherwise unenforceable, the same shall not affect the other terms or provisions hereof or the whole of this Agreement, but such term or provision shall be deemed modified to the extent necessary in the court's opinion to render such term or provision enforceable, and the rights and obligations of the parties shall be construed and enforced accordingly, preserving to the fullest permissible extent the intent and agreements of the parties herein set forth.
14.8 Confidential Information. The parties hereby agree that the terms and conditions of the Non-Disclosure Agreement between the parties, executed on June 17, 2003, continue to apply and extend to all Confidential Information (as that term is defined in the Non-Disclosure Agreement) exchanged between the parties in connection with this Agreement. This Section, and the terms and conditions of the Non-Disclosure Agreement, shall survive the expiration or earlier termination of this Agreement.
14.9 Independent Contractors. The relationship of the parties hereto is that of independent contractors. Under no circumstances shall any employees of one party be deemed to be the employees of the other for any purpose. Each party shall pay all wages, salaries, and other amounts due its respective employees relative to this Agreement and shall be responsible for all obligations respecting them relating to income tax withholdings, unemployment insurance premiums, workers' compensation, health care and pension plan contributions and other similar responsibilities. Neither party has the right nor authority to assume or to create any obligation or responsibility on behalf of the other party, except as may from time to time be provided by written instrument signed by both parties. Nothing contained herein shall be construed as creating an agency or joint venture, consortium or partnership between the parties.
14.10 Survival. The parties agree that the respective rights, obligations and duties under Section 1.0 (Interpretation), Section 6.1 and 6.2 (Prices for Products and Taxes), Section 7.0 (Invoicing and Payment), Section 9.0 (Warranties), Section 10.0 (Intellectual Property and Indemnities), Section 12.2 (Termination Costs) and Sections 14.2, 14.3, 14.4, 14.5, 14.6, 14.7, 14.8, 14.9, 14.10, 14.12 and 14.14 (General) and any outstanding payment obligations of Customer, shall survive expiration or earlier termination of this Agreement.
14.11 Assignment. This Agreement shall be binding on and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Neither party may assign this Agreement or any of their rights or obligations hereunder to a third party without the express prior written consent of the other party, which consent shall not be unreasonably withheld or delayed provided however that Supplier may delegate performance to any Supplier selected independent contractor provided that prior to any such assignment, such independent contractor shall become qualified by Customer using the same criteria as Customer used in qualifying Supplier for the same Product being assigned (it being understood that in either case Supplier shall not be relieved of any of its duties, obligations or responsibilities hereunder by use of such affiliates or independent contractors); and provided further that, without notice to or consent of Customer, Supplier may at any time assign any payment to be made to Supplier hereunder. Any purported assignment contrary to this agreement shall be null and void.
14.12 Entire Agreement. This Agreement and its Exhibits express the entire understanding and agreement for both Supplier and Customer with respect to the subject matter covered by this Agreement and supersedes any and all previous agreements, except any existing non-disclosure agreement between both parties, with reference to the subject matter contained in this Agreement. All terms and conditions on any Purchase Orders and all provisions on Supplier's documents delivered in response to a Purchase Order shall be deemed deleted and superceded by the terms and conditions of this Agreement, except for information provided for administrative purposes only such as Purchase Order number, Product identifier, quantity, pricing, shipping dates, shipping instructions and delivery location.
14.13 Amendment and Waiver. No amendment or waiver of this Agreement shall be binding unless executed in writing by both parties. No waiver of any of the provisions of this Agreement shall constitute a waiver of any other provision (whether or not similar) nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.
14.14 Counterparts. This Agreement may be executed in any number of counterparts, including by facsimile, with the same effect as if Supplier and Customer had each signed the same document. All counterparts shall be construed together and shall constitute one and the same original Agreement.
IN WITNESS HEREOF, Supplier and Customer have executed this Agreement in duplicate originals by their duly authorized officials.
JDS UNIPHASE CORPORATION IPG PHOTONICS CORPORATION By: /s/ Christopher S. Dewees By: /s/ Valentin P. Gapontsev --------------------------------- ------------------------------------ Name: Christopher S. Dewees Name: Valentin P. Gapontsev Title: Vice President Title: CEO and Chairman of the Board Date: June 24, 2003 Date: June 24, 2003 |
EXHIBIT A
PRODUCT SCHEDULE
2. Product Name (Product Class)/ Laser Diodes and Packaged Laser Diodes Description 2. Customer Part No. [Insert Customer Part No.] 3. Supplier Part No. [Insert Supplier Part No.] 5. Product Specification [Insert Specification Reference] 5. Lead-Time [Insert Lead-Time] 6. Unit Price ($U.S.) [Insert Unit Price or Step Pricing, if applicable] 7. Unique Provisions [Insert Unique Provisions] |
EXHIBIT 10.45
SUBLEASE AGREEMENT
This sublease agreement was entered into on October 30, 2006 between IP Fibre Devices (UK) Limited, of 22 Buckingham Gate, London SW1, referred to as "Lessee" and IPG Photonics (UK) Limited, referred to as "Sublessee."
RECITALS
The parties recite and declare:
A. Lessee has leased space in an office building.
B. Sublessee desires to obtain office space in the geographical area in which the building is located.
C. The parties desire to enter a sublease agreement defining all rights, duties, and liabilities of the parties.
In consideration of the mutual covenants contained in this sublease agreement, the parties agree as follows:
SECTION ONE
DESCRIPTION OF PREMISES
D. Lessee has leased a building consisting of one (1) floor of office space of approximately 1,200 square feet from Standard Life Investment Funds Limited ("Lessor"), located at 22 Buckingham Gate, London SW1 (the "demised premises").
E. Lessee shall demise to Sublessee the demised premises, as more fully described in Lease between Lessee and Lessor dated August 3, 2000. which is attached to and made a part of this sublease agreement.
SECTION TWO
PURPOSE OF SUBLEASE
A. The premises demised under this sublease agreement are to be used by Sublessee in the conduct of the business of sales of fiber lasers and amplifiers, and all tasks related to that business.
B. Sublessee shall not use the demised premises for any illegal, immoral, or ultra-hazardous activity, whether within or outside the scope of the business of Sublessee.
SECTION THREE
TERM OF SUBLEASE
The term of this sublease agreement shall be for a period, commencing on the date hereof and terminating on June 23, 2010, unless earlier terminated by breach of the terms and conditions of this sublease agreement or as provided in Sections Seven or Sixteen.
SECTION FOUR
RENT
Sublessee shall pay to Lessee as basic rent [Pound Sterling]37,000 per annum, and [Pound Sterling]3,000 for service charges and [Pound Sterling]2,000 for taxes payable quarterly, subject to increases as provided for in the Lease, plus the other rent and charges as set forth in Section 3.1 of the Lease, but not greater than the amount paid by Lessee under the Lease and continuing each quarter thereafter during the term of this sublease agreement. Sublessee shall pay all other sums due as additional rental under the provisions of this sublease agreement on the basic rental payment due date first occurring after the additional rental payment arises.
SECTION FIVE
SERVICES AND UTILITIES
Lessee shall furnish all water and sewer services to Sublessee at the expense of Lessee. All other utilities required by Sublessee on the demised premises, including gas, electricity, and telephone services shall be obtained by and at the expense of Sublessee. Sublessee shall also obtain and pay the expense of all janitorial services required on the demised premises.
SECTION SIX
ACCIDENTAL DAMAGE OR INJURY
Lessor and Lessee shall not be liable for any damage to property or any injury to persons, sustained by Sublessee or others, caused by conditions or activities on the demised premises. Sublessee shall indemnify Lessor and Lessee against all claims arising from such damages or injuries and shall carry liability insurance insuring Lessee, Sublessee, and Lessor against any claims in amounts to he approved by Lessor.
SECTION SEVEN
CASUALTY DAMAGE OR INJURY
If the demised premises shall be destroyed or damaged by any acts of war, the elements, including earthquake, or fire, to such an extent as to render the demised premises untenantable in whole or in substantial part, Lessor has the option of rebuilding or repairing the demised premises as set forth in the Lease. If Lessor elects to rebuild or repair the demised premises and does so without unnecessary delay, Sublessee shall be bound by this sublease agreement, except that during the period of repair the rent of the demised premises shall he abated in the same proportion that the part of the demised premises rendered unfit for occupancy by Sublessee shall bear to the whole of the subleased premises. If Lessor fails to give notice of the intent to repair, Sublessee shall have the right to declare this sublease agreement terminated.
SECTION EIGHT
COMPLIANCE WITH ORIGINAL LEASE AND LAWS
A. Sublessee shall not cause or allow any undue waste on the demised premises and shall comply with all applicable laws and ordinances respecting the use and occupancy of the demised premises relating to matters not covered elsewhere in this sublease agreement, provided that Sublessee shall not be required to make any alterations, additions, or improvements to the demised premises in order to conform with this sublease agreement.
B. Sublessee shall perform and observe the terms and conditions to be performed on the part of Lessee under the provisions of the Lease between Lessee and Lessor, excepting the covenant for the payment of rent reserved thereby, and to indemnify Lessee against any and all claims, damages, costs, and expenses in respect to the nonperformance or nonobservance of any such terms or conditions.
SECTION NINE
REPAIRS
Subject to the obligations of Lessor under Section 4 of the Lease, Lessee, unless specified to the contrary in this sublease agreement, shall maintain the demised premises in good repair and tenantable condition during the continuance of this sublease agreement, except in case of damage arising from acts or negligence of Sublessee or the agents of Sublessee.
SECTION TEN
ALTERATIONS, ADDITIONS, OR IMPROVEMENTS
A. Sublessee shall not make any alterations, additions, or improvements on or to the demised premises without first obtaining the written consent of Lessee. All alterations, additions, and improvements that shall be made shall be at the sole expense of Sublessee and shall become the property of Lessee and shall remain on and be surrendered with the demised premises as a part of them at the termination of this sublease agreement without disturbance, molestation, or injury.
B. Nothing contained in this section shall prevent Sublessee from removing all office machines, equipment, and trade fixtures customarily used in the business of Sublessee.
SECTION ELEVEN
LIENS
Sublessee shall keep the demised premises free and clear of all liens arising out of any work performed. materials furnished, or obligations incurred by Sublessee.
SECTION TWELVE
ACCESS TO PREMISES
Sublessee shall allow Lessor or Lessee or the agents or employees of either the free access to the demised premises at all reasonable times for the purpose of inspecting or of making repairs, additions, or alterations to the demised premises or any property owned by or under the control of either party.
SECTION THIRTEEN
ADVERTISEMENTS
All signs or symbols placed in the windows or doors of the demised premises, or on any exterior part of the building by Sublessee, shall be subject to the approval of Lessee. If Sublessee shall place signs or symbols on the exterior of the building or in the windows or doors where they are visible from the street that are not satisfactory to Lessee, Lessee may immediately demand the removal of the signs or symbols.
SECTION FOURTEEN
SALES, ASSIGNMENTS, AND SUBLEASES
Sublessee shall not assign this sublease agreement, or sell or sublet the premises subleased, or any part of or interest in them, without the prior, express, and written consent of Lessee. This sublease agreement shall not he assigned by operation of law.
SECTION FIFTEEN
QUIET ENJOYMENT
If Sublessee performs the terms of this sublease agreement, Lessee will warrant and defend Sublessee in the enjoyment and peaceful possession of the demised premises during the term of this sublease agreement without any interruption by Lessee or Lessor or either of them or any person rightfully claiming under either of them.
SECTION SIXTEEN
CONDEMNATION
A. If the demised premises or any part of the demised premises are appropriated or taken for any public use by virtue of eminent domain or condemnation proceedings, or if by reason of law, ordinance, or court decree, whether by consent or otherwise, the use of the demised premises by Sublessee for any of the specific purposes referred to in this sublease agreement shall be prohibited, Sublessee shall have the right to terminate this sublease on written notice to Lessee, and rental shall he paid only to the time when Sublessee surrenders possession of the demised premises.
B. In the event of partial appropriation, Sublessee may elect to continue in possession of that part of the demised premises not so appropriated under the same terms and conditions of this sublease agreement, except that in those cases Sublessee shall be entitled to an equitable reduction of the rental payment under this sublease agreement.
C. Any rental paid in advance beyond the time that the property has been taken from Sublessee shall be returned by Lessee to Sublessee on demand.
D. Sublessee does not waive any right to recover from the condemnation authority for any damage that may be suffered by Sublessee by reason of any condemnation.
SECTION SEVENTEEN
DEFAULT BY LESSOR OR LESSEE
If Lessor or Lessee fails or neglects to perform under the provisions of this sublease agreement or of the original lease between them, then Sublessee may, after reasonable notice in writing of not less than thirty (30) days, terminate this sublease agreement.
SECTION EIGHTEEN
DEFAULT OF SUBLESSEE
A. If any rents reserved, or any part of them, shall be and remain unpaid when they shall become due, or if Sublessee violates or defaults in any of the provisions of this sublease agreement, then Lessee may cancel this sublease agreement by giving the required notice, and reenter the demised premises.
B. In spite of any reentry, the liability of Sublessee for the rent shall not be extinguished for the balance of the term of this sublease agreement, and Sublessee shall make good to Lessee any deficiency arising from a reentry and reletting of the demised premises at a reduced rental.
C. Sublessee shall pay any deficiency on the first day of each month immediately following the month in which the amount of deficiency is ascertained by Lessee.
SECTION NINETEEN
INSOLVENCY OR BANKRUPTCY
If Sublessee becomes insolvent, voluntarily or involuntarily bankrupt, or if a receiver, assignee, or other liquidating officer is appointed for the business of Sublessee, then Lessee may terminate this sublease agreement at the option of Lessee.
SECTION TWENTY
TERMINATION AND SURRENDER
A. Sublessee shall surrender the demised premises within thirty (30) days from receipt of notice of termination of this sublease agreement, or on the last day of the term of this sublease agreement.
B. Lessee shall have the right to place and maintain on the demised premises "For Rent" or "For Sale" signs during the last ninety (90) days of the term of this sublease agreement.
C. Sublessee shall, at the expiration of this sublease agreement, surrender the keys to the demised premises to Lessee.
D. If Sublessee shall surrender the demised premises at the election of Sublessee, the liability for all duties and obligations required of Sublessee shall continue until the surrender has been accepted by Lessee in writing.
SECTION TWENTY-ONE
REMOVAL OF PERSONAL PROPERTY
Sublessee shall have the right to remove all personal property, trade fixtures, and office equipment, whether attached to the demised premises or not, provided that these items can be removed without serious damage to the building or the demised premises.
SECTION TWENTY-TWO
INTEREST OF SUCCESSORS
The covenants and agreements of this sublease agreement shall be binding on the successors and assigns of Lessee and on the successors and assigns of Sublessee but only to the extent specified in this sublease agreement.
SECTION TWENTY-THREE
NOTICES
Except where otherwise required by statute, all notices given pursuant to the provisions of this sublease agreement may be sent by certified mail, postage prepaid, to the last known mailing address of the party for whom the notice is intended.
SECTION TWENTY-FOUR
VENUE
At the option of either party, venue of any action may be established in London, England. Personal service either within or without London shall be sufficient to give that court jurisdiction.
SECTION TWENTY-FIVE
GOVERNING LAW
It is agreed that this sublease agreement shall he governed by, construed, and enforced in accordance with the laws of Great Britain.
In witness, each party to this sublease agreement has caused it to he executed on the date indicated below.
IP FIBRE DEVICES (UK) LIMITED
By: /s/ Valentin P. Gapontsev ----------------------------- Name: Valentin P. Gapontsev Date: October 31, 2006 |
IPG PHOTONICS (UK) LIMITED
By: /s/ Timothy P.V. Mammen ----------------------------- Name: Timothy P.V. Mammen Date: October 31, 2006 |
EXHIBIT 10.46
RIGHT OF FIRST OFFER AGREEMENT
THIS RIGHT OF FIRST OFFER AGREEMENT (this "Agreement") is made and entered into as of November 1, 2006 by and among IPG Laser GmbH, a limited liability company organized under the laws of Germany ("IPG Laser"), Scientific and Technical Association IRE Polus, a limited liability company organized under the laws of the Russian Federation (the "Company") and Valentin P. Gapontsev, Ph.D. (the "Participant") who holds a voting equity interest in the Company.
RECITALS
A. WHEREAS, the Participant owns 26.7% of the voting equity interest in the Company (said voting equity interest, together with any voting equity interest now owned or subsequently acquired by Participant, his permitted transferees or assigns, is hereinafter referred to as the "Interest");
B. WHEREAS, IPG Laser owns 51% of the voting equity interest in the Company;
C. WHEREAS, IPG Photonics Corporation, a Delaware corporation ("IPG"), intends to enter into an Underwriting Agreement (the "Underwriting Agreement") by and between it, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc. and each of the other Underwriters named in Schedule A thereto (collectively, the "Underwriters"), pursuant to which IPG intends to consummate an initial public offering of shares of its common stock;
D. WHEREAS, IPG Laser is a wholly-owned subsidiary of IPG;
E. WHEREAS, simultaneous with the execution hereof, the Participant is granting IPG Laser the power to exercise the Participant's voting interest with respect to the Interest pursuant to an Irrevocable Proxy Coupled with Interest substantially in the form attached hereto as Exhibit A (the "Proxy");
F. WHEREAS, the Participant is also a substantial stockholder of IPG and will draw a substantial benefit from the initial public offering of IPG; and
G. WHEREAS, as a material inducement to the Underwriters to enter into the Underwriting Agreement, the Participant has agreed to grant (i) to IPG Laser the power to exercise the Participant's voting interest with respect to the Interest pursuant to the Proxy and (ii) to IPG Laser a right of first offer with respect to any proposed transfer of the Interest, or any portion thereof, pursuant to this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Right of First Offer.
(a) The Participant hereby agrees that he shall not assign, sell, offer to
sell, pledge, mortgage, hypothecate, encumber, dispose of or enter into any
other like transaction involving the transfer or encumbrance of the Interest, in
whole or in part (each a "Transfer"), to any participant of the Company other
than IPG Laser without first offering such interest to IPG Laser at a price
equal to the lesser of (x) the proportionate interest in the net asset value of
the Company as of June 30, 2006 represented by the interest to be transferred,
(y) the fair value of the interest to be transferred as determined in good faith
and approved by the Audit Committee of the Board of Directors of IPG as of a
date within three months of the proposed transfer or (z) the bona fide purchase
price proposed to be paid by any participant of the Company, if any, for the
interest to be transferred. Prior to any Transfer of the Interest, in whole or
in part, to any participant of the Company, the Participant must deliver a
written notice (the "Notice") to IPG Laser, which Notice must include (i) a
statement of the intent to Transfer the Interest (or some portion thereof) , the
material terms and conditions of the proposed Transfer and the identity of the
proposed transferee, (ii) a copy of any written offer, term sheet or purchase
agreement from any participant of the Company setting forth all material terms,
including the bona fide consideration to be paid, and (iii) an offer to sell the
Interest (or such portion thereof in question) to IPG Laser on the terms set
forth in this Agreement. IPG Laser may elect to purchase all or part of the
Interest (or such portion thereof being offered) by sending written notice to
the Participant accepting the offer to purchase the Interest (or such portion
thereof being offered) at a price equal to the lesser of clauses (x), (y) or (z)
above within thirty (30) days following receipt of the Notice. The closing will
take place on a mutually agreeable date to be not more than thirty (30) days
following the exercise of the right of first offer hereunder by IPG Laser.
(b) If IPG Laser does not exercise the right of first offer by the end of
the thirty (30) day period referred to above, the Participant, subject to
Section 1(a) hereof, will be free to sell the membership interest described in
the Notice to such participant of the Company on terms not worse to the
Participant than those set forth in the Notice, at any time within ninety (90)
days thereafter. Regardless of whether such sale is completed, the right of
first offer set forth in this Section 1 will remain in full force and effect.
(c) Any Transfer of the Interest (or any portion thereof) by the Participant not made in compliance with the requirements of this Agreement shall be void ab initio and shall not be recognized by the Company.
(d) If the Participant becomes obligated to Transfer the Interest (or any portion thereof) to IPG Laser pursuant to this Agreement and fails to deliver the Notice in accordance with the terms of this Agreement, IPG Laser may, at its option, in addition to all other remedies it may have, send to the Participant the purchase price for the Interest (or portion thereof) as is herein specified and the Company shall take such steps as are required under the laws of the Russian Federation to effect the transfer of the Participant's shares to IPG Laser.
2. Representations, Warranties and Covenants of the Participant. The Participant represents, warrants and covenants to IPG Laser as follows:
(a) The Participant is the sole beneficial and record owner, and has good and marketable title to, the Interest, and, except as provided for in the Proxy, has sole and full power to vote or direct the voting of the Interest with no limitations, qualifications or restrictions on such rights, and no other person has any interest in the Interest (or any portion thereof).
(b) As of the date hereof the Interest is, and at all times up until a Transfer of all of the Interest in compliance with the terms hereof, the Interest will be, free and clear of any rights of first offer, co-sale rights or other similar rights, other than those rights described herein and in the charter documents of the Company.
(c) The Participant has the legal capacity and full power and authority to make, enter into and carry out the terms of this Agreement and to perform his obligations hereunder. This Agreement has been duly and validly executed and delivered by the Participant and constitutes a valid and binding agreement of the Participant, enforceable against the Participant in accordance with the terms of this Agreement.
(d) Except for the Proxy, none of the Interest is subject to any voting trust, proxy, or other agreement, arrangement or restriction with respect to voting.
(e) The Participant agrees that, except for the Proxy, he shall not enter into any voting arrangement, whether by proxy, power-of-attorney, voting agreement, voting trust or otherwise, directly or indirectly, with respect to the Interest.
(f) The execution and delivery of this Agreement by the Participant does not, and the performance of this Agreement by the Participant will not, (i) conflict with or violate any law applicable to the Participant or by which the Participant or any of the Participant's assets is bound or affected, or (ii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, acceleration, or cancellation of, or result in the creation of a lien or encumbrance on any assets of the Participant, including, without limitation, the Interest, pursuant to, any notice, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise, or other instrument or obligations to which the Participant is a party or by which the Participant or any of the Participant's assets is bound or affected.
3. Additional Documents. Upon request of the other party, the Participant and IPG Laser hereby covenant and agree to execute and deliver all such other and additional instruments and documents and do all such other acts and things as may be necessary to more fully effectuate this Agreement or the Proxy.
4. No Impairment. The Participant shall not take, or fail to take, any action or avoid or seek to avoid the observance or performance of any of the terms of this Agreement to be observed or performed hereunder or the Proxy, but will at all times in good faith assist in the carrying out of all
the provisions of this Agreement and the Proxy and in the taking of all action as may be necessary or appropriate in order to protect the rights of IPG Laser hereunder and thereunder.
5. Term. This Agreement shall terminate and shall have no further force or effect at such time as the Interest shall have been transferred in its entirety in compliance with the terms of this Agreement.
6. Miscellaneous.
(a) Severability. If any term, provision, covenant, representation, warranty or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the terms, provisions, covenants, representations, warranties and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties agree to negotiate, in good faith, a legal and enforceable substitute provision which most nearly effects the parties' intent in entering into this Agreement.
(b) Binding Effect and Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but, except as otherwise specifically provided herein, neither this Agreement nor any of the rights, interests or obligations of any party hereunder may be assigned without the prior written consent of the other parties hereto.
(c) Amendments and Modification. This Agreement may not be modified, amended, altered or supplemented except by the execution and delivery of a written agreement executed by each of the parties hereto.
(d) Waiver. No waiver by any party hereto of any condition or of any breach of any provision of this Agreement shall be effective unless in writing, executed on behalf of the party or parties against whom enforcement is sought. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
(e) Specific Performance; Injunctive Relief. The Participant acknowledges that IPG Laser will be irreparably harmed and that there will be no adequate remedy at law for a violation of any of the covenants, representations, warranties or agreements of the Participant set forth herein. Therefore, the Participant hereby unconditionally and irrevocably agrees that IPG Laser shall be entitled to seek protective orders, injunctive relief and other remedies available at law or in equity (including, without limitation, seeking specific performance or the rescission of any Transfer of the Interest (or any portion thereof) not made in strict compliance with this Agreement).
(f) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial messenger or courier service, or mailed by registered or certified mail (return receipt requested) or sent via facsimile (with acknowledgement of complete transmission) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice), provided, however, that notices sent by mail will not be deemed given until received:
If to IPG Laser, to:
IPG Laser GmbH
Siemensstrasse 7
D-57299 Burbach, Germany
Attn: Valentin P. Gapontsev
Fax: 49-27-3644-342
With a copy to:
IPG Photonics Corporation
50 Old Webster Road
Oxford, Massachusetts 01540
Attn: Angelo P. Lopresti
Fax: 508-373-1134
If to the Participant:
IPG Photonics Corporation
50 Old Webster Road
Oxford, Massachusetts 01540
Fax: (508) 373-1101
(g) Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the Russian Federation, without giving effect to any choice or conflict of law provision or rule (whether of the laws of the Russian Federation or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the Russian Federation.
(h) Entire Agreement. This Agreement contains the entire understanding of the parties in respect of the subject matter hereof, and supersedes all prior negotiations and understandings between the parties with respect to such subject matter.
(i) Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument.
(j) Effect of Headings. The section headings herein are for convenience only and shall not affect the construction or interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Right of First Offer Agreement on the date first above written.
IPG LASER GMBH
By: /s/ Eugene Shcherbakov -------------------------------- Name: Eugene Shcherbakov Title: Managing Director |
Valentin P. Gapontsev
/s/ Valentin P. Gapontsev ----------------------------------- |
Scientific and Technical Association IRE Polus
By: /s/ Igor Samartsev -------------------------------- Name: Igor Samartsev Title: Acting General Manager |
EXHIBIT A
Irrevocable Proxy Coupled with Interest
IRREVOCABLE PROXY COUPLED WITH INTEREST
Valentin P. Gapontsev (the "Participant") hereby irrevocably appoints IPG Laser GmbH, a limited liability company organized under the laws of Germany ("IPG Laser"), as his sole and exclusive attorney-in-fact and proxy, with full power of substitution and resubstitution, to vote and exercise all voting and related rights (to the fullest extent that the Participant is entitled to do so under applicable law) with respect to all of the Participant's voting or equity interests in Scientific and Technical Association IRE Polus, a limited liability company organized under the laws of the Russian Federation (the "Company"), that now are or hereafter may be beneficially owned by the Participant, and any and all other voting or equity interests in the Company issued or issuable in respect thereof on or after the date hereof (collectively, the "Interest"), in accordance with the terms of this Irrevocable Proxy Coupled With Interest (the "Proxy"). The Interest beneficially owned by the Participant as of the date of this Proxy is listed on the final page of this Proxy. Upon the Participant's execution of this Proxy, any and all prior proxies given by the Participant with respect to any portion of the Interest are hereby revoked and the Participant agrees not to grant any subsequent proxies with respect to the Interest, or any portion thereof.
IPG Laser is hereby authorized and empowered by the Participant, at any time, to act as the Participant's true and lawful attorney-in-fact and proxy to vote the Interest, and to exercise all voting, consent and similar rights of the Participant with respect to the Interest, including, without limitation, the power to execute and deliver in the Participant's name any consent, certificate or other document that may be required by law.
For a period of three years from the date hereof, the Participant agrees not to transfer, sell, exchange, pledge or otherwise dispose of or encumber the Interest, or any portion thereof, or to make any offer or agreement relating thereto except pursuant to and in compliance with the terms of that certain Right of First Offer Agreement, dated as of November __, 2006, by and among IPG Laser, the Company and the Participant. All authority herein conferred shall survive the death or incapacity of the Participant and any obligation of the Participant shall be binding upon the heirs, personal representatives, executors, administrators successors and assigns of the Participant.
IPG Photonics Corporation, a Delaware corporation ("IPG"), intends to enter into an Underwriting Agreement (the "Underwriting Agreement") by and between it, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc. and each of the other Underwriters named in Schedule A thereto (collectively, the "Underwriters"), pursuant to which IPG intends to consummate an initial public offering of shares of its common stock from which the Participant will recognize a substantial benefit. This Proxy is being granted as a material inducement to the Underwriters to enter into the Underwriting Agreement and to consummate the transactions described therein, and is therefore coupled with an interest and is irrevocable.
This Proxy shall be governed by, construed and enforced in accordance with the laws of the Russian Federation, without giving effect to any choice or conflict of law provision or rule (whether of the laws of the
Russian Federation or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the Russian Federation.
If any term, provision, covenant, representation, warranty or restriction of this Proxy is held by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the terms, provisions, covenants, representations, warranties and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the Participant and IPG Laser agree to negotiate, in good faith, a legal and enforceable substitute provision which most nearly effects the parties' intent in entering into this Agreement.
Dated: November 1, 2006
Valentin P. Gapontsev
/s/ Valentin P. Gapontsev -------------------------------- Interest beneficially owned: 26.7% of the total voting equity interest in the Company Place of residence: Home address: Passport number and country of issuance: |
Registered Address of IPG Laser:
Siemensstrasse 7
D-57299 Burbach, Germany
EXHIBIT 10.47
RIGHT OF FIRST OFFER AGREEMENT
THIS RIGHT OF FIRST OFFER AGREEMENT (this "Agreement") is made and entered into as of November 1, 2006 by and among IPG Laser GmbH, a limited liability company organized under the laws of Germany ("IPG Laser"), Scientific and Technical Association IRE Polus, a limited liability company organized under the laws of the Russian Federation (the "Company") and Igor Samartsev, Ph.D. (the "Participant") who holds a voting equity interest in the Company.
RECITALS
A. WHEREAS, the Participant owns 4.9% of the voting equity interest in the Company (said voting equity interest, together with any voting equity interest now owned or subsequently acquired by Participant, his permitted transferees or assigns, is hereinafter referred to as the "Interest");
B. WHEREAS, IPG Laser owns 51% of the voting equity interest in the Company;
C. WHEREAS, IPG Photonics Corporation, a Delaware corporation ("IPG"), intends to enter into an Underwriting Agreement (the "Underwriting Agreement") by and between it, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc. and each of the other Underwriters named in Schedule A thereto (collectively, the "Underwriters"), pursuant to which IPG intends to consummate an initial public offering of shares of its common stock;
D. WHEREAS, IPG Laser is a wholly-owned subsidiary of IPG;
E. WHEREAS, simultaneous with the execution hereof, the Participant is granting IPG Laser the power to exercise the Participant's voting interest with respect to the Interest pursuant to an Irrevocable Proxy Coupled with Interest substantially in the form attached hereto as Exhibit A (the "Proxy");
F. WHEREAS, the Participant is also a substantial stockholder of IPG and will draw a substantial benefit from the initial public offering of IPG; and
G. WHEREAS, as a material inducement to the Underwriters to enter into the Underwriting Agreement, the Participant has agreed to grant (i) to IPG Laser the power to exercise the Participant's voting interest with respect to the Interest pursuant to the Proxy and (ii) to IPG Laser a right of first offer with respect to any proposed transfer of the Interest, or any portion thereof, pursuant to this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:
1. Right of First Offer.
(a) The Participant hereby agrees that he shall not assign, sell, offer to
sell, pledge, mortgage, hypothecate, encumber, dispose of or enter into any
other like transaction involving the transfer or encumbrance of the Interest, in
whole or in part (each a "Transfer"), to any participant of the Company other
than IPG Laser without first offering such interest to IPG Laser at a price
equal to the lesser of (x) the proportionate interest in the net asset value of
the Company as of June 30, 2006 represented by the interest to be transferred,
(y) the fair value of the interest to be transferred as determined in good faith
and approved by the Audit Committee of the Board of Directors of IPG as of a
date within three months of the proposed transfer or (z) the bona fide purchase
price proposed to be paid by any participant of the Company, if any, for the
interest to be transferred. Prior to any Transfer of the Interest, in whole or
in part, to any participant of the Company, the Participant must deliver a
written notice (the "Notice") to IPG Laser, which Notice must include (i) a
statement of the intent to Transfer the Interest (or some portion thereof) , the
material terms and conditions of the proposed Transfer and the identity of the
proposed transferee, (ii) a copy of any written offer, term sheet or purchase
agreement from any participant of the Company setting forth all material terms,
including the bona fide consideration to be paid, and (iii) an offer to sell the
Interest (or such portion thereof in question) to IPG Laser on the terms set
forth in this Agreement. IPG Laser may elect to purchase all or part of the
Interest (or such portion thereof being offered) by sending written notice to
the Participant accepting the offer to purchase the Interest (or such portion
thereof being offered) at a price equal to the lesser of clauses (x), (y) or (z)
above within thirty (30) days following receipt of the Notice. The closing will
take place on a mutually agreeable date to be not more than thirty (30) days
following the exercise of the right of first offer hereunder by IPG Laser.
(b) If IPG Laser does not exercise the right of first offer by the end of
the thirty (30) day period referred to above, the Participant, subject to
Section 1(a) hereof, will be free to sell the membership interest described in
the Notice to such participant of the Company on terms not worse to the
Participant than those set forth in the Notice, at any time within ninety (90)
days thereafter. Regardless of whether such sale is completed, the right of
first offer set forth in this Section 1 will remain in full force and effect.
(c) Any Transfer of the Interest (or any portion thereof) by the Participant not made in compliance with the requirements of this Agreement shall be void ab initio and shall not be recognized by the Company.
(d) If the Participant becomes obligated to Transfer the Interest (or any portion thereof) to IPG Laser pursuant to this Agreement and fails to deliver the Notice in accordance with the terms of this Agreement, IPG Laser may, at its option, in addition to all other remedies it may have, send to the Participant the purchase price for the Interest (or portion thereof) as is herein specified and the Company shall take such steps as are required under the laws of the Russian Federation to effect the transfer of the Participant's shares to IPG Laser.
2. Representations, Warranties and Covenants of the Participant. The Participant represents, warrants and covenants to IPG Laser as follows:
(a) The Participant is the sole beneficial and record owner, and has good and marketable title to, the Interest, and, except as provided for in the Proxy, has sole and full power to vote or direct the voting of the Interest with no limitations, qualifications or restrictions on such rights, and no other person has any interest in the Interest (or any portion thereof).
(b) As of the date hereof the Interest is, and at all times up until a Transfer of all of the Interest in compliance with the terms hereof, the Interest will be, free and clear of any rights of first offer, co-sale rights or other similar rights, other than those rights described herein and in the charter documents of the Company.
(c) The Participant has the legal capacity and full power and authority to make, enter into and carry out the terms of this Agreement and to perform his obligations hereunder. This Agreement has been duly and validly executed and delivered by the Participant and constitutes a valid and binding agreement of the Participant, enforceable against the Participant in accordance with the terms of this Agreement.
(d) Except for the Proxy, none of the Interest is subject to any voting trust, proxy, or other agreement, arrangement or restriction with respect to voting.
(e) The Participant agrees that, except for the Proxy, he shall not enter into any voting arrangement, whether by proxy, power-of-attorney, voting agreement, voting trust or otherwise, directly or indirectly, with respect to the Interest.
(f) The execution and delivery of this Agreement by the Participant does not, and the performance of this Agreement by the Participant will not, (i) conflict with or violate any law applicable to the Participant or by which the Participant or any of the Participant's assets is bound or affected, or (ii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, acceleration, or cancellation of, or result in the creation of a lien or encumbrance on any assets of the Participant, including, without limitation, the Interest, pursuant to, any notice, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise, or other instrument or obligations to which the Participant is a party or by which the Participant or any of the Participant's assets is bound or affected.
3. Additional Documents. Upon request of the other party, the Participant and IPG Laser hereby covenant and agree to execute and deliver all such other and additional instruments and documents and do all such other acts and things as may be necessary to more fully effectuate this Agreement or the Proxy.
4. No Impairment. The Participant shall not take, or fail to take, any action or avoid or seek to avoid the observance or performance of any of the terms of this Agreement to be observed or performed hereunder or the Proxy, but will at all times in good faith assist in the carrying out of all
the provisions of this Agreement and the Proxy and in the taking of all action as may be necessary or appropriate in order to protect the rights of IPG Laser hereunder and thereunder.
5. Term. This Agreement shall terminate and shall have no further force or effect at such time as the Interest shall have been transferred in its entirety in compliance with the terms of this Agreement.
6. Miscellaneous.
(a) Severability. If any term, provision, covenant, representation, warranty or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the terms, provisions, covenants, representations, warranties and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties agree to negotiate, in good faith, a legal and enforceable substitute provision which most nearly effects the parties' intent in entering into this Agreement.
(b) Binding Effect and Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but, except as otherwise specifically provided herein, neither this Agreement nor any of the rights, interests or obligations of any party hereunder may be assigned without the prior written consent of the other parties hereto.
(c) Amendments and Modification. This Agreement may not be modified, amended, altered or supplemented except by the execution and delivery of a written agreement executed by each of the parties hereto.
(d) Waiver. No waiver by any party hereto of any condition or of any breach of any provision of this Agreement shall be effective unless in writing, executed on behalf of the party or parties against whom enforcement is sought. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
(e) Specific Performance; Injunctive Relief. The Participant acknowledges that IPG Laser will be irreparably harmed and that there will be no adequate remedy at law for a violation of any of the covenants, representations, warranties or agreements of the Participant set forth herein. Therefore, the Participant hereby unconditionally and irrevocably agrees that IPG Laser shall be entitled to seek protective orders, injunctive relief and other remedies available at law or in equity (including, without limitation, seeking specific performance or the rescission of any Transfer of the Interest (or any portion thereof) not made in strict compliance with this Agreement).
(f) Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial messenger or courier service, or mailed by registered or certified mail (return receipt requested) or sent via facsimile (with acknowledgement of complete transmission) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice), provided, however, that notices sent by mail will not be deemed given until received:
If to IPG Laser, to:
IPG Laser GmbH
Siemensstrasse 7
D-57299 Burbach, Germany
Attn: Igor Samartsev
Fax: 49-27-3644-342
With a copy to:
IPG Photonics Corporation
50 Old Webster Road
Oxford, Massachusetts 01540
Attn: Angelo P. Lopresti
Fax: 508-373-1134
If to the Participant:
IPG Photonics Corporation
50 Old Webster Road
Oxford, Massachusetts 01540
Fax: (508) 373-1101
(g) Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the Russian Federation, without giving effect to any choice or conflict of law provision or rule (whether of the laws of the Russian Federation or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the Russian Federation.
(h) Entire Agreement. This Agreement contains the entire understanding of the parties in respect of the subject matter hereof, and supersedes all prior negotiations and understandings between the parties with respect to such subject matter.
(i) Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument.
(j) Effect of Headings. The section headings herein are for convenience only and shall not affect the construction or interpretation of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Right of First Offer Agreement on the date first above written.
IPG LASER GMBH
By: /s/ Eugene Shcherbakov ----------------------------- Name: Eugene Shcherbakov Title: Managing Director |
IGOR SAMARTSEV
/s/ Igor Samartsev -------------------------------- |
Scientific and Technical Association IRE Polus
By: /s/ Valentin P. Gapontsev ----------------------------- Name: Valentin P. Gapontsev Title: General Manager |
EXHIBIT A
Irrevocable Proxy Coupled with Interest
IRREVOCABLE PROXY COUPLED WITH INTEREST
Igor Samartsev (the "Participant") hereby irrevocably appoints IPG Laser GmbH, a limited liability company organized under the laws of Germany ("IPG Laser"), as his sole and exclusive attorney-in-fact and proxy, with full power of substitution and resubstitution, to vote and exercise all voting and related rights (to the fullest extent that the Participant is entitled to do so under applicable law) with respect to all of the Participant's voting or equity interests in Scientific and Technical Association IRE Polus, a limited liability company organized under the laws of the Russian Federation (the "Company"), that now are or hereafter may be beneficially owned by the Participant, and any and all other voting or equity interests in the Company issued or issuable in respect thereof on or after the date hereof (collectively, the "Interest"), in accordance with the terms of this Irrevocable Proxy Coupled With Interest (the "Proxy"). The Interest beneficially owned by the Participant as of the date of this Proxy is listed on the final page of this Proxy. Upon the Participant's execution of this Proxy, any and all prior proxies given by the Participant with respect to any portion of the Interest are hereby revoked and the Participant agrees not to grant any subsequent proxies with respect to the Interest, or any portion thereof.
IPG Laser is hereby authorized and empowered by the Participant, at any time, to act as the Participant's true and lawful attorney-in-fact and proxy to vote the Interest, and to exercise all voting, consent and similar rights of the Participant with respect to the Interest, including, without limitation, the power to execute and deliver in the Participant's name any consent, certificate or other document that may be required by law.
For a period of three years from the date hereof, the Participant agrees not to transfer, sell, exchange, pledge or otherwise dispose of or encumber the Interest, or any portion thereof, or to make any offer or agreement relating thereto except pursuant to and in compliance with the terms of that certain Right of First Offer Agreement, dated as of November __, 2006, by and among IPG Laser, the Company and the Participant. All authority herein conferred shall survive the death or incapacity of the Participant and any obligation of the Participant shall be binding upon the heirs, personal representatives, executors, administrators successors and assigns of the Participant.
IPG Photonics Corporation, a Delaware corporation ("IPG"), intends to enter into an Underwriting Agreement (the "Underwriting Agreement") by and between it, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman Brothers Inc. and each of the other Underwriters named in Schedule A thereto (collectively, the "Underwriters"), pursuant to which IPG intends to consummate an initial public offering of shares of its common stock from which the Participant will recognize a substantial benefit. This Proxy is being granted as a material inducement to the Underwriters to enter into the Underwriting Agreement and to consummate the transactions described therein, and is therefore coupled with an interest and is irrevocable.
This Proxy shall be governed by, construed and enforced in accordance with the laws of the Russian Federation, without giving effect to any choice or conflict of law provision or rule (whether of the laws of the Russian Federation or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the Russian Federation.
If any term, provision, covenant, representation, warranty or restriction of this Proxy is held by a court of competent jurisdiction to be invalid, void or unenforceable, then the remainder of the terms, provisions, covenants, representations, warranties and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the Participant and IPG Laser agree to negotiate, in good faith, a legal and enforceable substitute provision which most nearly effects the parties' intent in entering into this Agreement.
Dated: November 1, 2006
IGOR SAMARTSEV
/s/ Igor Samartsev -------------------------------- Interest beneficially owned: 4.9% of the total voting equity interest in the Company Place of residence: Home address: Passport number and country of issuance: |
Registered Address of IPG Laser:
Siemensstrasse 7
D-57299 Burbach, Germany
EXHIBIT 23.1
The consolidated financial statements give effect to a 2-for-3 reverse stock split of the outstanding common stock of IPG Photonics Corporation which will take place prior to the effective date of the registration statement. The following consent is in the form which will be provided by Deloitte & Touche LLP, an independent registered public accounting firm, upon the completion of the 2-for-3 reverse stock split of the Company's outstanding common stock as described in Note 1 to the consolidated financial statements and assuming that from November 13, 2006 to the date of such completion no other material events have occurred that would affect the consolidated financial statements or disclosure therein.
/s/ DELOITTE & TOUCHE LLP -------------------------- Boston, Massachusetts November 13, 2006 |
"CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Amendment No. 3 to Registration Statement No. 333-136521 of our report dated November 13, 2006 ( as to the 3rd paragraph of Note 1) (which report expresses an unqualified opinion and includes an explanatory paragraph as to the adoption of Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment," effective January 1, 2006), relating to the financial statements of IPG Photonics Corporation and subsidiaries appearing in the Prospectus, which is part of such Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus.
Boston, Massachusetts
, 2006"