-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QszimuVmQiSzClGvkFSzrnKysAptaP2ahvMoQX8x1rLkjes+PLX+9isgZ/bVzLgW +GyOqX4qekzZ8XFeKtu63Q== 0000950135-00-002803.txt : 20000516 0000950135-00-002803.hdr.sgml : 20000516 ACCESSION NUMBER: 0000950135-00-002803 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BROOKS AUTOMATION INC CENTRAL INDEX KEY: 0000933974 STANDARD INDUSTRIAL CLASSIFICATION: SPECIAL INDUSTRY MACHINERY, NEC [3559] IRS NUMBER: 043040660 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-25434 FILM NUMBER: 630886 BUSINESS ADDRESS: STREET 1: 15 ELIZABETH DRIVE CITY: CHELMSFORD STATE: MA ZIP: 01824 BUSINESS PHONE: 9782622566 MAIL ADDRESS: STREET 1: 15 ELIZABETH DRIVE CITY: CHELMSBORO STATE: MA ZIP: 01824 10-Q 1 FORM 10-Q 03/31/00 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: March 31, 2000 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from _______ to _______ Commission File Number 0-25434 BROOKS AUTOMATION, INC. (Exact name of registrant as specified in its charter) DELAWARE 04-3040660 - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 15 Elizabeth Drive Chelmsford, Massachusetts (Address of principal executive offices) 01824 (Zip Code) Registrant's telephone number, including area code: (978) 262-2400 --------------------------------------------- Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practical date (March 31, 2000): Common stock, $0.01 par value 16,640,442 shares 2 BROOKS AUTOMATION, INC. INDEX
PAGE NUMBER ----------- PART I. FINANCIAL INFORMATION - ------- --------------------- Item 1. Consolidated Financial Statements Consolidated Balance Sheets as of March 31, 2000 (unaudited) and September 30, 1999 3 Consolidated Statements of Operations for the three and six months ended March 31, 2000 and 1999 (unaudited) 4 Consolidated Statements of Cash Flows for the six months ended March 31, 2000 and 1999 (unaudited) 5 Notes to Consolidated Financial Statements (unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 13 Item 3. Quantitative and Qualitative Disclosures about Market Risk 27 PART II. OTHER INFORMATION - -------- ----------------- Item 2. Changes in Securities and Use of Proceeds 28 Item 4. Submission of Matters to a Vote of the Security Holders 28 Item 6. Exhibits and Reports on Form 8-K 29 Signatures 31
3 BROOKS AUTOMATION, INC. CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data) (UNAUDITED) MARCH 31, SEPTEMBER 30, 2000 1999 --------- ------------- ASSETS Current assets Cash and cash equivalents $ 256,790 $ 66,366 Accounts receivable, net, including related party receivables of $5,557 and $3,384, respectively 67,287 32,904 Inventories 36,456 28,917 Prepaid expenses and other current assets 8,447 2,999 Deferred income taxes 5,539 6,542 --------- --------- Total current assets 374,519 137,728 Fixed assets, net of accumulated depreciation of $36,233 and $24,119, respectively 22,786 17,434 Intangible assets, net of accumulated amortization of $7,110 and $1,361, respectively 56,881 13,719 Deferred income taxes 6,250 4,192 Other assets 4,531 4,072 --------- --------- Total assets $ 464,967 $ 177,145 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Notes payable $ 16,000 $ - Current portion of long-term debt and capital lease obligations 516 537 Accounts payable 14,372 6,993 Deferred revenue 10,808 6,127 Accrued compensation and benefits 9,228 4,909 Accrued acquisition-related and restructuring costs 3,463 3,868 Accrued income taxes payable 6,481 2,093 Accrued expenses and other current liabilities 15,947 7,405 --------- --------- Total current liabilities 76,815 31,932 Long-term debt and capital lease obligations 562 801 Deferred income taxes 395 174 Other long-term liabilities 739 632 --------- --------- Total liabilities 78,511 33,539 --------- --------- Commitments and contingencies Minority interests 1,352 1,460 --------- --------- Stockholders' equity Preferred stock, $0.01 par value, 1,000,000 shares authorized, none issued and outstanding - - Common stock, $0.01 par value, 21,500,000 shares authorized, 16,640,442 and 12,760,084 shares issued and outstanding, respectively 166 128 Additional paid-in capital 408,085 168,827 Deferred compensation (50) (65) Accumulated other comprehensive loss (1,763) (1,093) Accumulated deficit (21,334) (25,651) --------- --------- Total stockholders' equity 385,104 142,146 --------- --------- Total liabilities and stockholders' equity $ 464,967 $ 177,145 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 4 BROOKS AUTOMATION, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands, except share data)
THREE MONTHS ENDED SIX MONTHS ENDED MARCH 31, MARCH 31, 2000 1999 (1) 2000 1999 (1) ---------- ----------- ----------- ----------- Revenues Product, including related party revenues of $8,554 and $3,401 for the three month periods and $15,527 and $4,139 for the six month periods, respectively $ 59,204 $ 18,710 $ 102,273 $ 34,108 Services 13,806 4,796 21,017 9,450 -------- -------- --------- -------- Total revenues 73,010 23,506 123,290 43,558 -------- -------- --------- -------- Cost of revenues Product 30,202 9,853 52,377 18,840 Services 8,786 3,453 12,439 5,953 -------- -------- --------- -------- Total cost of revenues 38,988 13,306 64,816 24,793 -------- -------- --------- -------- Gross profit 34,022 10,200 58,474 18,765 -------- -------- --------- -------- Operating expenses Research and development 9,770 5,179 16,910 10,109 Selling, general and administrative 15,208 6,386 27,709 12,427 Amortization of acquired intangible assets 4,804 - 5,599 - -------- -------- --------- -------- Total operating expenses 29,782 11,565 50,218 22,536 -------- -------- --------- -------- Income (loss) from operations 4,240 (1,365) 8,256 (3,771) Interest income 1,039 767 1,682 1,538 Interest expense 196 92 234 167 Other income (expense) 31 4 (10) (14) -------- -------- --------- -------- Income (loss) before income taxes and minority interests 5,114 (686) 9,694 (2,414) Income tax provision (benefit) 3,677 (78) 5,485 (275) -------- -------- --------- -------- Income (loss) before minority interests 1,437 (608) 4,209 (2,139) Minority interests in loss of consolidated subsidiary (15) - (108) - -------- -------- --------- -------- Net income (loss) 1,452 (608) 4,317 (2,139) Accretion and dividends on preferred stock - (162) - (387) -------- -------- --------- -------- Net income (loss) attributable to common stockholders $ 1,452 $ (770) $ 4,317 $ (2,526) ======== ======== ========= ======== Earnings (loss) per share attributable to common stockholders Basic $ 0.10 $ (0.07) $ 0.32 $ (0.23) Diluted $ 0.09 $ (0.07) $ 0.30 $ (0.23) Shares used in computing earnings (loss) per share Basic 14,002 11,113 13,386 11,096 Diluted 15,362 11,113 14,387 11,096
(1) Amounts have been restated to reflect the acquisition of Smart Machines Inc. in a pooling of interests transaction effective August 31, 1999. The accompanying notes are an integral part of these consolidated financial statements. 5 BROOKS AUTOMATION, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
SIX MONTHS ENDED MARCH 31, 2000 1999 (1) ---- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 4,317 $(2,139) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 10,092 3,524 Compensation expense related to common stock options 15 59 Deferred income taxes 651 (857) Minority interests (108) - (Gain)loss on fixed asset disposal 28 - Changes in operating assets and liabilities: Accounts receivable (24,219) (2,455) Inventories (7,972) 3,225 Prepaid expenses and other current assets (4,176) 604 Accounts payable 6,767 21 Deferred revenue 2,083 387 Accrued acquisition-related and restructuring costs (405) (1,241) Accrued expenses and other current liabilities 9,108 456 -------- ------- Net cash provided by (used in) operating activities (3,819) 1,584 -------- ------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of fixed assets (5,215) (2,137) Purchase of businesses, net of cash acquired (24,004) - Proceeds from sale of depreciable assets 313 - Increase in other assets (791) (194) -------- ------- Net cash used in investing activities (29,697) (2,331) -------- ------- CASH FLOWS FROM FINANCING ACTIVITIES Net increase (decrease) in short-term borrowings - (95) Proceeds from issuance of convertible notes - 1,500 Payments of long-term debt (260) (337) Issuance of long-term debt - - Proceeds from issuance of common stock, net of issuance costs 223,912 401 -------- ------- Net cash provided by financing activities 223,652 1,469 -------- ------- Elimination of net cash activities of Smart Machines for the three months ended December 31, 1998 - (63) -------- ------- Effects of exchange rate changes on cash and cash equivalents 288 116 -------- ------- Net increase (decrease) in cash and cash equivalents 190,424 775 Cash and cash equivalents, beginning of period 66,366 69,479 -------- ------- Cash and cash equivalents, end of period $256,790 $70,254 ======== =======
(1) Amounts have been restated to reflect the acquisition of Smart Machines Inc. in a pooling of interests transaction effective August 31, 1999. The accompanying notes are an integral part of these consolidated financial statements. 6 BROOKS AUTOMATION, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION The unaudited consolidated financial statements of Brooks Automation, Inc. and its subsidiaries (the "Company") included herein have been prepared in accordance with generally accepted accounting principles. In the opinion of management, all material adjustments necessary for a fair presentation of the results for the periods presented have been reflected. The accompanying financial information should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K, filed with the United States Securities and Exchange Commission for the year ended September 30, 1999. On January 6, 2000, the Company acquired Auto-Soft Corporation ("ASC") and AutoSimulations, Inc. ("ASI") from Daifuku America Corporation ("Daifuku America"), a U.S. subsidiary of Daifuku Co., Ltd. of Japan. The acquisition was accounted for using the purchase method of accounting. Accordingly, the Company's Consolidated Statements of Operations and of Cash Flows for the three and six months ended March 31, 2000 include the results of these acquired entities for the period subsequent to their acquisition. The Company made several acquisitions during fiscal year 1999 which were accounted for using the purchase method of accounting: the Infab Division ("Infab") of Jenoptik AG on September 30, 1999; Domain Manufacturing Corporation ("Domain") on June 30, 1999 and Hanyon Technology, Inc. ("Hanyon") on April 2, 1999. Accordingly, the Company's Consolidated Statements of Operations and of Cash Flows for the three and six months ended March 31, 2000 include the results of these acquired entities. In June 1999, the Company formed a joint venture in Korea with Samsung Electronics ("Samsung"). This joint venture is 70% owned by the Company and 30% owned by Samsung. The Company consolidates fully the financial position and results of operations of the joint venture and accounts for the minority interest in the consolidated financial statements. The consolidated financial statements for the three and six months ended March 31, 1999 have been restated to reflect the acquisition of Smart Machines Inc. ("Smart Machines") in a pooling of interests transaction effective August 31, 1999. In March 2000, the Financial Accounting Standards Board issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation -- an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44 clarifies the application of APB Opinion No. 25 and among other issues clarifies the following: the definition of an employee for purposes of applying APB Opinion No. 25; the criteria for determining whether a plan qualifies as a non-compensatory plan; the accounting consequence of various modifications to the terms of previously fixed stock options or awards; and the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44 cover specific events that occurred after either December 15, 1998 or January 12, 2000. The Company does not expect the application of FIN 44 to have a material impact on the Company's financial position or results of operations. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes the SEC's views in applying generally accepted accounting principles to selected revenue recognition issues in financial statements. The application of the guidance in SAB 101 will be required in the Company's first quarter of fiscal 2001. The Company is currently determining the impact that SAB 101 will have on its financial position and results of operations. 2. BUSINESS ACQUISITIONS On January 6, 2000, the Company completed the acquisition of the businesses of ASC and ASI from Daifuku America. ASC is a leading material handling software and systems integration company focusing on manufacturing and distribution of logistic systems for the semiconductor industry. ASI is a world leader in robotic and material handling simulation, scheduling and real time dispatching software for the semiconductor industry. At closing, the Company paid $27.0 million in cash, 535,404 shares of Brooks common stock with a value of $14.7 million, and issued a $16.0 million promissory note payable in one year, bearing interest at a rate of 4.0% per annum. The acquisition was accounted for using the purchase method of accounting in accordance with Accounting Principles Board Opinion No. 16, "Business Combinations" ("APB 16"). 7 BROOKS AUTOMATION, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued) A summary of the acquisition follows (in thousands): Consideration: Cash $27,000 Common stock 14,727 Promissory note 16,000 Transaction costs 3,500 ------- Total consideration 61,227 Net tangible assets acquired 12,603 ------- Excess of purchase price over net tangible assets acquired $48,624 ======= The excess of the purchase price over the fair value of the net tangible assets acquired has been recorded based on a preliminary purchase price allocation. Finalization of the allocation of the purchase price to tangible and identifiable intangible assets acquired will be made after the completion of analyses of their fair values. The Company anticipates that the weighted average useful life of the acquired intangible assets will be three years. The assets are being amortized using the straight-line method. The following pro forma results of operations have been prepared as though the acquisition had occurred as of the beginning of the fiscal year prior to the acquisition. This pro forma financial information does not purport to be indicative of the results of operations that would have been attained had the acquisition been made as of those dates or of results of operations that may occur in the future (in thousands except per share data):
Three months ended Six months ended March 31, March 31, 2000 1999 2000 1999 -------------------------------------------------------- Revenues $73,010 $32,049 $129,182 $ 62,940 Net income (loss) $ 1,214 $(5,000) $ (1,946) $(10,450) Net income (loss) attributable to common stockholders $ 1,214 $(5,162) $ (1,946) $(10,837) Net income (loss) per share applicable to common stockholders $ 0.08 $ (0.44) $ (0.14) $ (0.93)
3. REVOLVING CREDIT FACILITY On January 7, 2000, the Company entered into an agreement for an unsecured revolving credit facility with ABN AMRO Bank N.V. and other lending institutions. The two-year facility provides for borrowings and letters of credit of up to $30.0 million. The interest rates for borrowings and letters of credit under the facility are expressed in relation to LIBOR and a margin of 1.75% to 2.25%, or from 0.25% to 0.75% above a base rate. At March 31, 2000, $1.0 million of the facility was in use, all of it for letters of credit. This facility was subsequently replaced by a $10.0 million uncommitted demand promissory note credit facility with ABN AMRO Bank N.V. ("ABN AMRO"). ABN AMRO is not obligated to extend loans or issue letters of credit under this facility. 8 BROOKS AUTOMATION, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued) 4. COMMON STOCK OFFERING On March 7, 2000, the Company completed a public offering of 3,250,000 shares of its common stock, of which 2,750,000 shares were offered by the Company and 500,000 were offered by selling stockholders. The Company realized proceeds, net of issuance costs, of approximately $220 million on the sale of the initial 2,750,000 shares and the additional 320,500 shares purchased by the underwriters from the Company on March 23, 2000 to cover over-allotments of shares. The Company did not receive any proceeds from the sale of shares by the selling stockholders. The Company intends to use the net proceeds from the offering for working capital and general corporate purposes. 5. EARNINGS PER SHARE The following table is a summary of net income (loss) attributable to common stockholders used in the calculation of basic and diluted loss per share (in thousands):
Three months ended Six months ended March 31, March 31, 2000 1999 2000 1999 -------------------------------------------------------- Net income (loss) $ 1,452 $ (608) $ 4,317 $ (2,139) Accretion and dividends on preferred stock -- (162) -- (387) ------- ------ ------- -------- Net income (loss) applicable to common stockholders for basic and diluted earnings per share $ 1,452 $ (770) $ 4,317 $ (2,526) ======= ====== ======= ========
The following table is a summary of shares used in calculating basic and diluted earnings per share (in thousands):
Three months ended Six months ended March 31, March 31, 2000 1999 2000 1999 -------------------------------------------------------- Weighted average number of shares used in computing basic earnings per share 14,002 11,113 13,386 11,096 Dilutive securities: Common stock options and warrants 1,360 -- 1,001 -- ------ ------ ------ ------ Shares used in computing diluted earnings per share 15,362 11,113 14,387 11,096 ====== ====== ====== ======
Options and warrants to purchase approximately 780,000 and 637,000 shares of common stock were excluded from the computation of diluted loss per share for the three and six months ended March 31, 1999, respectively, as their effect would be antidilutive. 6. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) for the Company is computed as the sum of net income (loss) and the change in the cumulative translation adjustment. Comprehensive income was $899,000 and $3,647,000 for the three and six month periods ended March 31, 2000, respectively. Comprehensive loss was $578,000 and $2,034,000 for the three and six month periods ended March 31, 1999, respectively. 9 BROOKS AUTOMATION, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued) 7. SEGMENT AND GEOGRAPHIC INFORMATION The Company has two reportable segments: tool automation and factory automation. The tool automation segment provides a full complement of semiconductor wafer and flat panel display substrate handling systems. Tool automation product revenue is comprised of factory hardware and tool control software products. Tool automation service revenue is comprised of spare parts sales and tool control application consulting services. The factory automation segment provides software products for the semiconductor manufacturing execution system ("MES") market. Factory automation product revenues include factory software and factory interface hardware products. Factory automation service revenue primarily consists of revenues related to consulting and software customization. The Company evaluates performance and allocates resources based on revenues and operating income. Operating income for each segment includes selling, general and administrative expenses directly attributable to the segment. Amortization of acquired intangible assets is excluded from the segments' operating income. The Company's non-allocable overhead costs, which include corporate general and administrative expenses, are allocated between the segments based upon segment revenues. Financial information for the Company's business segments is as follows (in thousands):
Tool Factory Automation Automation Total ---------- ---------- ----- THREE MONTHS ENDED MARCH 31, 2000 Revenue: Product $ 37,111 $ 22,093 $ 59,204 Services 3,097 10,709 13,806 -------- -------- -------- Total $ 40,208 $ 32,802 $ 73,010 ======== ======== ======== Gross margin $ 17,393 $ 16,629 $ 34,022 Operating income (loss) $ 6,694 $ 2,350 $ 9,044 THREE MONTHS ENDED MARCH 31, 1999 Revenue: Product $ 16,791 $ 1,919 $ 18,710 Services 2,265 2,531 4,796 -------- -------- -------- Total $ 19,056 $ 4,450 $ 23,506 ======== ======== ======== Gross margin $ 6,911 $ 3,289 $ 10,200 Operating income (loss) $ (976) $ (389) $ (1,365)
10 BROOKS AUTOMATION, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (Continued)
Tool Factory Automation Automation Total ---------- ---------- ----- SIX MONTHS ENDED MARCH 31, 2000 Revenue: Product $ 65,308 $ 36,965 $ 102,273 Services 5,887 15,130 21,017 -------- -------- --------- Total $ 71,195 $ 52,095 $ 123,290 ======== ======== ========= Gross margin $ 29,636 $ 28,838 $ 58,474 Operating income (loss) $ 10,155 $ 3,700 $ 13,855 SIX MONTHS ENDED MARCH 31, 1999 Revenue: Product $ 29,468 $ 4,640 $ 34,108 Services 4,890 4,560 9,450 -------- --------- --------- Total $ 34,358 $ 9,200 $ 43,558 ======== ========= ========= Gross margin $ 11,803 $ 6,962 $ 18,765 Operating income (loss) $ (3,293) $ (478) $ (3,771)
A reconciliation of the Company's reportable segment operating income (loss) to the corresponding consolidated amounts for the three and six month periods ended March 31, 2000 and 1999 is as follows (in thousands):
Three months ended Six months ended March 31, March 31, 2000 1999 2000 1999 -------------------------------------------------------- Segment operating income (loss) $9,044 $ (1,365) $ 13,855 $ (3,771) Amortization of acquired intangibles 4,804 -- 5,599 -- ------ -------- -------- -------- Total operating income (loss) $4,240 $ (1,365) $ 8,256 $ (3,771) ====== ======== ======== ========
Net revenues by geographic area are as follows (in thousands):
Three months ended Six months ended March 31, March 31, 2000 1999 2000 1999 -------------------------------------------------------- North America $ 35,835 $ 15,501 $ 59,941 $ 23,546 Asia 22,997 6,325 37,283 13,975 Europe 14,178 1,680 26,066 6,037 -------- -------- --------- -------- $ 73,010 $ 23,506 $ 123,290 $ 43,558 ======== ======== ========= ========
8. SIGNIFICANT CUSTOMERS AND RELATED PARTY INFORMATION One of the Company's directors is also a director of one of the Company's customers. Net revenue recognized from this customer was $8,554,000 and $3,401,000, or 11.7% and 14.5% of revenues, in the three months ended March 31, 2000 and 1999, respectively. Net revenue recognized from this customer in the six months ended March 31, 2000 and 1999, was $15,527,000 and $4,139,000, or 12.6% and 9.5% of revenues, respectively. Amounts due from this customer included in accounts receivable at March 31, 2000 and September 30, 1999 were $5,557,000 and $3,384,000, respectively. Related party amounts included in accounts receivable are on standard terms and manner of settlement. 11 BROOKS AUTOMATION, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued In the three months ended March 31, 2000, the Company had no other customers that accounted for more than 10% of revenues. In the comparable prior year period, one other customer accounted for more than 10% of revenues; sales to this customer were 10.6% of revenues. In the six months ended March 31, 2000, the Company had no other customers that accounted for more than 10% of revenues. The Company had one other customer who accounted for more than 10% of revenues in the six months ended March 31, 1999; sales to this customer were 13.1% of revenues in the period. 9. ACCOUNTS RECEIVABLE Accounts receivable consist of the following (in thousands): March 31, September 30, 2000 1999 --------- ------------- Accounts receivable $ 69,527 $ 34,591 Less allowances 2,240 1,687 -------- -------- $ 67,287 $ 32,904 ======== ======== 10. INVENTORIES Inventories consist of the following (in thousands): March 31, September 30, 2000 1999 --------- ------------- Raw materials and purchased parts $ 19,580 $ 14,655 Work-in-process 11,142 10,154 Finished goods 5,734 4,108 -------- -------- $ 36,456 $ 28,917 ======== ======== 11. INTANGIBLE ASSETS Intangible assets consist of the following (in thousands): March 31, September 30, 2000 1999 --------- ------------- Patents $ 6,826 $ 7,127 Goodwill 57,165 7,953 -------- -------- 63,991 15,080 Less accumulated amortization 7,110 1,361 -------- -------- $ 56,881 $ 13,719 ======== ======== 12 BROOKS AUTOMATION, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - Continued 12. ACQUISITION-RELATED AND RESTRUCTURING LIABILITIES The activity related to the Company's acquisition-related and restructuring liabilities during the six months ended March 31, 2000 is below (in thousands): Balance Balance September 30, March 31, 1999 Utilization 2000 --------------------------------------- Facilities $ 1,145 $ (90) $ 1,055 Depreciable assets -- -- -- Workforce-related 2,512 (265) 2,247 Other 211 (50) 161 ------- ----- ------- $ 3,868 $(405) $ 3,463 ======= ===== ======= 13. CONTINGENCIES There has been substantial litigation regarding patent and other intellectual property rights in the semiconductor and related industries. The Company has received notice from a third party alleging infringements of such party's patent rights by certain of the Company's products. The Company's patent counsel is investigating the claim and the Company believes the patents claimed may be invalid. In the event of litigation with respect to this claim, the Company is prepared to vigorously defend its position. However, because patent litigation can be extremely expensive and time consuming, the Company may seek to obtain a license to one or more of the disputed patents. Based upon currently available information, the Company would only do so if such license fees would not be material to the Company's consolidated financial statements. Currently, the Company does not believe it is probable that the future events related to this threatened matter would have an adverse effect on the Company's business. 14. SUBSEQUENT EVENTS On May 5, 2000, the Company acquired Irvine Optical Company, L.L.C. ("Irvine Optical") in exchange for 307,493 shares of Common Stock. Subsequently, the Company repaid a long-term debt obligation of Irvine Optical in the amount of $7,089,000. The acquisition will be accounted for as a pooling of interests. Irvine Optical, a California limited liability company located in Burbank, California, is engaged principally in the design, engineering and manufacturing of wafer handling and inspection equipment for sale primarily to the semiconductor industry. Irvine Optical had revenues of approximately $11 million in the year ended December 31, 1999. On May 2, 2000 the Company terminated its $30.0 million unsecured revolving credit facility for a $10.0 million uncommitted demand promissory note credit facility with ABN AMRO. The new facility is payable on demand or on December 31, 2001, whichever occurs first. ABN AMRO is not obligated to extend loans or issue letters of credit under this facility. The interest rates for borrowings and letters of credit under the facility are expressed in relation to LIBOR and a margin of 1.75%, or at 0.75% above ABN AMRO's base rate. Approximately $1.1 million in face amount of letters of credit outstanding under the revolving credit facility were transferred to the replacement facility. 13 BROOKS AUTOMATION, INC. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS Certain statements in this quarterly report constitute "forward-looking statements" which involve known risks, uncertainties and other factors which may cause the actual results, performance or achievements of Brooks Automation, Inc. ("Brooks" or the "Company") to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. For a further discussion of the various risks affecting the business, refer to "Factors That May Affect Future Results" appearing at the end of this Management's Discussion and Analysis of Financial Condition and Results of Operations. Precautionary statements made herein should be read as being applicable to all related forward-looking statements wherever they appear in this report. OVERVIEW The Company is a leading supplier of integrated tool and factory automation solutions for the global semiconductor and related industries such as the data storage and flat panel display manufacturing industries. The Company's product revenues include sales of hardware and software products. The Company's service revenues are primarily comprised of tool control application consulting services, consulting, software customization and spare parts sales. Many of the Company's customers purchase the Company's vacuum transfer robots and other modules before purchasing the Company's vacuum central wafer handling systems. The Company believes that once a customer has selected the Company's products for a process tool, the customer is likely to rely on those products for the life of that process tool model, which can be in excess of five years. Conversely, losing a bid for a manufacturing execution system ("MES") does not preclude the Company from securing optimization products to fit with a competitor's MES. A significant portion of the Company's revenues have been generated by sales to customers in the United States, although the Company believes that a significant portion of these customers incorporate the Company's products into equipment sold to their foreign customers. The Company's foreign sales have occurred principally in Asia and Europe. Sales in Asia have occurred primarily in Japan and South Korea, and, to a lesser extent, in Taiwan and Singapore. The Company's foreign revenues are generally denominated in United States dollars. Accordingly, foreign currency fluctuations have not had a significant impact on the comparison of the results of operations for the periods presented. The costs and expenses of the Company's international subsidiaries are generally denominated in currencies other than the United States dollar. However, since the functional currency of the Company's international subsidiaries is the local currency, foreign currency translation adjustments are reflected as a component of stockholders' equity under the caption "Accumulated other comprehensive income (loss)". To the extent that the Company expands its international operations or changes its pricing practices to denominate prices in foreign currencies, the Company will be exposed to increased risk of currency fluctuation. The Company's business is highly dependent upon the capital expenditures of semiconductor and flat panel display manufacturers which historically have been cyclical, and the Company's ability to develop, manufacture and sell new products and product enhancements. The Company's results will also be affected, especially when measured on a quarterly basis, by the volume, composition and timing of orders, conditions in industries served by the Company, competition and general economic conditions. 14 BROOKS AUTOMATION, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued BASIS OF PRESENTATION On January 6, 2000, the Company completed the acquisition of the businesses of Auto-Soft Corporation ("ASC") and AutoSimulations, Inc. ("ASI") from Daifuku America Corporation ("Daifuku America"), a U.S. subsidiary of Daifuku Co., Ltd. of Japan. The acquisition was accounted for using the purchase method of accounting. Accordingly, the Company's Consolidated Statements of Operations and of Cash Flows for the three and six months ended March 31, 2000 include the results of ASC and ASI for the period subsequent to their acquisition. The Company made several acquisitions during fiscal year 1999 which were accounted for using the purchase method of accounting: the Infab Division ("Infab") of Jenoptik AG on September 30, 1999; Domain Manufacturing Corporation ("Domain") on June 30, 1999 and Hanyon Technology, Inc. ("Hanyon") on April 2, 1999. Accordingly, the Company's Consolidated Statements of Operations and of Cash Flows for the three and six months ended March 31, 2000 include the results of these acquired entities. In June 1999, the Company formed a joint venture in Korea with Samsung Electronics ("Samsung"). This joint venture is 70% owned by the Company and 30% owned by Samsung. The Company consolidates fully the financial position and results of operations of the joint venture and accounts for the minority interest in the financial statements. The financial statements for the three months and six months ended March 31, 1999 have been restated to reflect the acquisition of Smart Machines Inc. ("Smart Machines") in a pooling of interests transaction effective August 31, 1999. RESULTS OF OPERATIONS THREE AND SIX MONTHS ENDED MARCH 31, 2000, COMPARED TO THREE AND SIX MONTHS ENDED MARCH 31, 1999 The Company reported net income of $1.5 million for the three months ended March 31, 2000, compared to a net loss of $0.6 million in the same prior year period. Net income before amortization of acquired intangible assets, net of taxes, was $6.0 million for the three months ended March 31, 2000. There was no amortization of acquired intangible assets in the three months ended March 31, 1999. The Company reported net income of $4.3 million for the six months ended March 31, 2000. This compares to a net loss of $2.1 million in the same period of the prior year. Net income before amortization of acquired intangible assets, net of taxes, was $9.3 million for the six months ended March 31, 2000. There was no amortization of acquired intangible assets in the six months ended March 31, 1999. REVENUES The Company reported revenues of $73.0 million in the three months ended March 31, 2000, compared to $23.5 million in the same prior year period. For the six months ended March 31, 2000, the Company reported revenues of $123.3 million. This compares to revenues of $43.6 million in the six months ended March 31, 1999. Product revenues increased $40.5 million, or 216.4%, to $59.2 million, in the three months ended March 31, 2000, compared to the three months ended March 31, 1999. Product revenues for the six months ended March 31, 2000, were $102.3 million, nearly three times greater than product revenues of $34.1 million in the same prior year period. This growth is primarily attributable to acquisitions, the overall strength in the original equipment manufacturer ("OEM") markets and software business growth. Service revenues for the three months ended March 31, 2000 were $13.8 million, an increase of $9.0 million, or 187.9%, from the three months ended March 31, 1999. Service revenues for the six months ended March 31, 2000 increased $11.6 million, or 122.4%, for the six months ended March 31, 2000, from $9.4 million in the six months ended March 31, 1999. These increases are primarily the result of the Company's acquisitions and the impact of those acquisitions on consulting services associated with factory automation. 15 BROOKS AUTOMATION, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Foreign revenues were $37.2 million, or 50.9% of revenues, and $8.0 million, or 34.1% of revenues, in the three month periods ended March 31, 2000 and 1999, respectively. For the six month periods ended March 31, 2000 and 1999, foreign revenues were $63.3 million, or 51.4% of revenues, and $20.0 million, or 45.9% of revenues, respectively. The Company expects that foreign revenues will continue to account for a significant portion of total revenues. GROSS PROFIT Gross profit increased to 46.6% for the three months ended March 31, 2000, compared to 43.4% for the same prior year period. Gross profit for the six months ended March 31, 2000 was 47.4%, an increase from 43.1% for the comparable prior year period. Gross profit on product revenues increased to 49.0% for the three months ended March 31, 2000, from 47.3% in the comparable prior year period. Gross profit on product revenues increased to 48.8% for the six months ended March 31, 2000, from 44.8% in the same prior year period. The increase in both the three and six month periods is primarily attributable to improvements in manufacturing capacity utilization and the acquisition of higher margin software product businesses, partially offset by the Infab operations' lower margins. In future periods, gross profit may be adversely affected by changes in product mix or price competition. Gross profit on service revenues was 36.4% for the three months ended March 31, 2000, an increase from 28.0% for the three months ended March 31, 1999. Gross profit on service revenues increased to 40.8% for the six months ended March 31, 2000, from 37.0% in the same prior year period. The increase in both the three and six month periods is primarily attributable to improved market conditions and change in service mix. Included in the cost of services revenues are global support customer costs, consisting primarily of personnel costs and travel expenses. RESEARCH AND DEVELOPMENT Research and development expenses for the three months ended March 31, 2000 were $9.8 million, an increase of $4.6 million, compared to $5.2 million in the three months ended March 31, 1999. Research and development expenses for the six months ended March 31, 2000 were $16.9 million, an increase of $6.8 million, or 67.3%, compared to the same prior year period. However, research and development expenses decreased as a percentage of revenues in both the three and six month periods ended March 31, 2000, to 13.4% and 13.7%, respectively. This compares to 22.0% and 23.2% of revenues in the three and six months ended March 31, 1999, respectively. The increase in absolute spending is the result of the research and development efforts related to the Company's recent acquisitions as well as incremental spending associated with the launch of new atmospheric products and the transition to next generation vacuum wafer handling products. These increases were partially offset by the elimination of redundant research and development programs. The Company expects to continue to invest in research and development to enhance existing and develop new tool and factory hardware and software automation solutions for the semiconductor, data storage and flat panel display manufacturing industries. 16 BROOKS AUTOMATION, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses were $15.2 million for the three months ended March 31, 2000, an increase of $8.8 million, compared to $6.4 million in the same prior year period. Selling, general and administrative expenses increased by $15.3 million, to $27.7 million for the six months ended March 31, 2000, compared to $12.4 million in the six months ended March 31, 1999. However, selling, general and administrative expenses decreased as a percentage of revenues in both the three and six month periods ended March 31, 2000, to 20.8% and 22.5%, respectively. This compares to 27.2% and 28.5% of revenues in the three and six months ended March 31, 1999, respectively. The increase in absolute spending is the result of expanded sales and marketing activities as well as general and administration support costs associated with the Company's recently completed acquisitions and infrastructure improvements, while the improvement of these costs as a percentage of revenues reflects the Company's efforts at expanding its product offerings and customer base. AMORTIZATION OF ACQUIRED INTANGIBLE ASSETS Amortization expense for acquired intangible assets totaled $4.8 million and $5.6 million in the three and six months ended March 31, 2000, and is related to acquired intangible assets of the ASC and ASI acquisition, which was consummated January 6, 2000, and the Infab, Domain and Hanyon acquisitions, all of which occurred during the second half of fiscal 1999. Accordingly, there was no amortization of acquired intangible assets recorded in the three or six months ended March 31, 1999. INTEREST INCOME AND EXPENSE Interest income increased by 35.5%, to $1.0 million, in the three months ended March 31, 2000, and by 9.4%, to $1.7 million, in the six months ended March 31, 2000, due primarily to higher cash and investment asset balances which resulted from the Company's public offering of shares of common stock in March 2000. Interest income was $0.8 million and $1.5 million in the three and six months ended March 31, 1999. Interest expense was $0.2 million and $0.1 million in the three months ended March 31, 2000 and 1999, respectively. Interest expense in the three months ended March 31, 2000 relates primarily to the note payable issued to Daifuku America in partial consideration for ASC and ASI. Interest expense was $0.2 million in each of the six month periods ended March 31, 2000 and 1999. INCOME TAX PROVISION (BENEFIT) The Company recorded net income tax expense of $5.5 million and net tax benefits of $0.3 million for the six months ended March 31, 2000 and 1999, respectively. The tax provision is attributable to federal, state, foreign and withholding taxes. Federal and state taxes have been reduced for net operating losses, research and development tax credits and a foreign sales corporation benefit. LIQUIDITY AND CAPITAL RESOURCES Cash and cash equivalents were $256.8 million at March 31, 2000, an increase of $190.4 million from September 30, 1999. The Company realized proceeds, net of issuance costs, of approximately $220 million from a public offering of shares of its common stock in March 2000. In connection with its acquisition of ASC and ASI on January 6, 2000, the Company paid Daifuku America $27.0 million in cash and issued Daifuku America a note in the amount of $16.0 million, which is due on January 6, 2001. 17 BROOKS AUTOMATION, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Cash used in operations was $3.8 million, and is primarily attributable to increases in accounts receivable, inventories and prepaid expenses and other current assets of $24.2 million, $8.0 million and $4.2 million, respectively, partially offset by depreciation and amortization of $10.1 million, and increases of $6.8 million and $9.1 million in accounts payable and accrued expenses and other current liabilities, respectively. Cash used in investing activities was $29.7 million, and was principally comprised of $24.0 million used for the purchase of businesses, net of cash acquired (primarily the acquisition of ASC and ASI) and $5.2 million used for capital additions, primarily in telecommunications, systems infrastructure and for computer requirements. Cash provided by financing activities was $223.6 million, comprised of $223.9 million of proceeds from the issuance of common stock, net of issuance costs and $0.3 million for payments of long-term debt. While the Company has no significant capital commitments, as the Company expands its product offerings and prepares for expected growth, the Company anticipates that it will continue to make capital expenditures to support its business. The Company is also planning to expand its capacity in its new Chelmsford facility and acquire capital equipment and management information systems. The Company may also use its resources to acquire companies, technologies or products that complement the business of the Company. Because of its strong cash position, the Company terminated its $30.0 million unsecured revolving credit facility and replaced it with a $10.0 million uncommitted demand promissory note facility with ABN AMRO Bank N.V. ("ABN AMRO") on May 2, 2000. At March 31, 2000, $1.0 million of the original facility was in use, all for letters of credit. The Company transferred all of its obligations under the terminated facility, which consisted of outstanding letters of credit, totaling approximately $1.1 million, to the new facility. ABN AMRO is not obligated to extend loans or issue letters of credit under this new facility. The Company believes that its existing resources, including the proceeds received from its recent sale of common stock will be adequate to fund the Company's currently planned working capital and capital expenditure requirements for at least the next twelve months. The sufficiency of the Company's resources to fund its needs for capital is subject to known and unknown risks, uncertainties and other factors which may have a material adverse effect on the Company's business, including, without limitation, the factors discussed under "Factors That May Affect Future Results." YEAR 2000 READINESS DISCLOSURE The year 2000 issue is the potential for system and processing failure of date-related data as the result of computer-controlled systems using two digits rather than four digits to define the applicable year. For example, computer programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. Problems associated with the year 2000 may not become apparent until some time after January 2000. Internal infrastructure compliance. Brooks may be affected by year 2000 issues related to non-compliant information technology systems and other systems operated or sold by Brooks or by third parties. Brooks has completed assessment of its internal information technology systems and applications and believes that all critical applications are year 2000 compliant. Brooks also has evaluated its information technology hardware and its non-information technology systems, including facilities and other operations, such as financial, security and utility systems. As of the end of calendar year 1999, Brooks had completed the remediation of all items identified as non-compliant. 18 BROOKS AUTOMATION, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Product compliance. Brooks has completed a year 2000 readiness evaluation of its current generation of released products and believes that products distributed after December 31, 1998 are year 2000 compliant. Brooks cannot guarantee that product testing has identified all year 2000 related issues that could have an adverse affect on Brooks' financial condition and results of operations. Acquisitions. Brooks has acquired eight businesses since September 1998: Irvine Optical, ASC, ASI, Infab, Smart Machines, FASTech, Hanyon and Domain. Brooks is in various stages of negotiation with respect to the acquisition of additional businesses. As part of Brooks' due diligence examination of these businesses, Brooks conducted a limited evaluation of their year 2000 readiness. Brooks believes there are no significant year 2000 related issues arising from the companies that Brooks has acquired. Brooks cannot guarantee that it has identified and properly evaluated year 2000 issues relating to the acquired companies. Brooks also can give no assurance that it will properly identify year 2000 issues relating to any companies acquired in the future. Third Party Compliance. Although Brooks believes that its systems are year 2000 compliant, Brooks utilizes third party equipment and software that may not be year 2000 compliant. In addition, Brooks' products and software are often sold integrated into or interfaced with third party equipment or software. Failure of third party equipment or software to operate properly with regard to the year 2000 and thereafter could require Brooks to incur unanticipated expenses to remedy any problems, which could have a material adverse effect on Brooks' business, results of operations and financial condition. Brooks may also be vulnerable to any failures by its major suppliers, service providers and customers to remedy their own internal information technology and non-information technology system year 2000 issues which could, among other things, have a material adverse effect on Brooks supplies and orders. At this time, Brooks is unable to estimate the nature or extent of any potential adverse impact resulting from the failure of third parties, such as its suppliers, service providers and customers, to achieve year 2000 compliance. Moreover, such third parties, even if year 2000 compliant, could experience difficulties resulting from year 2000 issues that may affect their suppliers, service providers and customers. As a result, although Brooks does not currently anticipate, based upon surveys, discussions and actual experience to date in 2000, that it will experience any material shipment delays from its major product suppliers or any material sales delays from its major customers due to year 2000 issues, there can be no assurance that these third parties will not experience year 2000 problems or that any problems would not have an adverse material effect on Brooks' business, results of operations and financial condition. Because the cost and timing of year 2000 compliance by third parties such as suppliers, service providers and customers is not within Brooks' control, Brooks cannot give any assurance with respect to the cost or timing of such efforts or any potential adverse effects on Brooks of any failure by these third parties to achieve year 2000 compliance. Brooks relies on commercial or government suppliers for services related to Brooks' infrastructure, including utilities, transportation, financial, governmental, communications and other services. These suppliers pose an undetermined risk to Brooks' facilities and operations worldwide. In some cases, alternate suppliers of these services, such as electrical utilities, are unavailable, and failure by a supplier could adversely impact Brooks. Costs. Based on its investigation to date, Brooks does not expect the total cost of its year 2000 assessment and planning to have a material adverse effect on Brooks' business or financial results. On a cumulative basis, Brooks has incurred approximately $800,000 in year 2000 compliance costs. Brooks has not incurred material year 2000 compliance costs in fiscal 2000 and does not anticipate the need for additional significant expenditures. Contingency Plan. Brooks has developed contingency plans, as appropriate, and believes its year 2000 compliance efforts to be materially complete in the event year 2000 problems relating to its operations arise. 19 BROOKS AUTOMATION, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Worst Case Scenario. To the extent that Brooks does not identify any material non-compliant information technology systems or non-information technology systems operated by Brooks or by third parties, such as Brooks' suppliers, service providers and customers, the most reasonably likely worst case year 2000 scenario is a systemic failure beyond the control of Brooks, such as a prolonged telecommunications or electrical failure, or a general disruption in United States or global business activities that could result in a significant economic downturn. Brooks believes that the primary business risks, in the event of such failure or other disruption, would include but not be limited to, loss of customers or orders, increased operating costs, inability to obtain inventory on a timely basis, disruptions in product shipments, or other business interruptions of a material nature, as well as claims of mismanagement, misrepresentation, or breach of contract, any of which could have a material adverse effect on Brooks' business, results of operations and financial condition. RECENTLY ENACTED ACCOUNTING PRONOUNCEMENTS In March 2000, the Financial Accounting Standards Board issued FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock Compensation -- an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44 clarifies the application of APB Opinion No. 25 and among other issues clarifies the following: the definition of an employee for purposes of applying APB Opinion No. 25; the criteria for determining whether a plan qualifies as a non-compensatory plan; the accounting consequence of various modifications to the terms of previously fixed stock options or awards; and the accounting for an exchange of stock compensation awards in a business combination. FIN 44 is effective July 1, 2000, but certain conclusions in FIN 44 cover specific events that occurred after either December 15, 1998 or January 12, 2000. The Company does not expect the application of FIN 44 to have a material impact on the Company's financial position or results of operations. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes the SEC's views in applying generally accepted accounting principles to selected revenue recognition issues in financial statements. The application of the guidance in SAB 101 will be required in the Company's first quarter of fiscal 2001. The Company is currently determining the impact that SAB 101 will have on its financial position and results of operations. FACTORS THAT MAY AFFECT FUTURE RESULTS You should carefully consider the risks described below and the other information in this report before deciding to invest in shares of our common stock. While these are the risks and uncertainties we believe are most important for you to consider, you should know that they are not the only risks or uncertainties facing us or which may adversely affect our business. If any of the following risks or uncertainties actually occur, our business, financial condition and operating results would likely suffer. In that event, the market price of our common stock could decline and you could lose all or part of the money you paid to buy our common stock. RISKS RELATING TO OUR OPERATIONS The Cyclical Demand of Semiconductor Manufacturers Affects our Operating Results. Our business is significantly dependent on capital expenditures by semiconductor manufacturers. The level of semiconductor manufacturers' capital expenditures is dependent on the current and anticipated market demand for semiconductors. Demand for semiconductors is cyclical and has historically experienced periodic downturns. During these downturns, our revenues have dropped, and we have incurred losses. We believe that downturns in the semiconductor manufacturing industry will occur in the future and will result in decreased demand for our products. Despite the addition of our factory automation business in fiscal 1999, our financial results will continue to be dependent on capital expenditures by semiconductor manufacturers. Downturns in the semiconductor business, when fewer new facilities are being built, could harm our financial results as have downturns in the past. Our Sales Volume Depends on the Sales Volume of our Original Equipment Manufacturer Customers. We sell a majority of our tool automation products to original equipment manufacturers who incorporate our products into their equipment. Therefore, our revenues are directly dependent on the ability of these customers to develop and market their equipment in a timely, cost-effective manner. 20 BROOKS AUTOMATION, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued We Rely on a Small Number of Customers for a Large Portion of our Revenues. We receive a significant portion of our revenues in each fiscal period from a limited number of customers. The loss of one or more of these major customers, or a decrease in orders by one or more customers, would adversely affect our business. Sales to our ten largest customers accounted for approximately 53% of total revenues in the six months ended March 31, 2000 and 63% of total revenues in fiscal 1999. Delays in Shipment of a Few of our Large Orders Could Substantially Decrease our Revenues. Historically, a substantial portion of our quarterly and annual revenues came from sales of a small number of large orders. These orders consist of products with high selling prices compared to our other products. As a result, the timing of the recognition of revenue from one of these large orders can have a significant impact on our total revenues and operating results for a particular period. Our operating results could be harmed if orders for even a small number of large orders are canceled or rescheduled by customers or cannot be filled due to delays in manufacturing, testing, shipping or product acceptance. We Have Significant Fixed Costs Which Are Not Easily Reduced if Revenues Fall Below Expectations. Our expense levels are based in part on our future revenue expectations. Many of our expenses, particularly those relating to capital equipment and manufacturing overhead, are relatively fixed. If we do not meet our sales goals we may be unable to rapidly reduce these fixed costs. Our ability to reduce expenses is further constrained because we must continue to invest in research and development to maintain our competitive position to maintain service and support for our existing global customer base. Accordingly, if we suffer an unexpected downturn in revenue, our inability to reduce fixed costs rapidly could increase the adverse impact on our results of operations. Our Lengthy Sales Cycle Requires Us to Incur Significant Expenses With No Assurance That We Will Generate Revenue. Our tool automation products are generally incorporated into original equipment manufacturer equipment at the design stage. To obtain new business from our original equipment manufacturer customers, we must develop products for selection by a potential customer at the design stage. This often requires us to make significant expenditures, without any assurance of success. The original equipment manufacturer's design decisions often precede the generation of volume sales, if any, by a year or more. We also must complete successfully a lengthy evaluation period before we can achieve volume sales of our manufacturing execution system software and process optimization software to our factory automation customers. We cannot guarantee that we will continue to achieve design wins or satisfy evaluations by our factory automation customers of our software. We cannot guarantee that the equipment manufactured by our original equipment manufacturing customers will be commercially successful. If we or our original equipment manufacturing customers fail to develop and introduce new products successfully and in a timely manner, our business and financial results will suffer. Our International Business Operations Expose Us to a Number of Difficulties in Coordinating Our Activities Abroad and in Dealing with Multiple Regulatory Environments. Approximately 51% of our total revenues in the six months ended March 31, 2000, and 41% of our total revenues in fiscal 1999, were derived from customers located outside North America. We anticipate that international sales will continue to account for a significant portion of our revenues. Our vendors are located in several different foreign countries. As a result of our international business operations, we are subject to various risks, including: - difficulties in staffing and managing operations in multiple locations in many countries; - challenges presented by collecting trade accounts receivable in foreign jurisdictions; - possible adverse tax consequences; - governmental currency controls; - changes in various regulatory requirements; - political and economic changes and disruptions; and - export/import controls and tariff regulations. 21 BROOKS AUTOMATION, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued To support our international customers, we maintain locations in several countries, including Japan, South Korea, Germany, United Kingdom, Malaysia, Taiwan, Singapore and Canada. We cannot guarantee that we will be able to manage these operations effectively. We cannot assure you that our investment in these international operations will enable us to compete successfully in international markets or to meet the service and support needs of our customers, some of whom are located in countries where we have no infrastructure. Although our international sales are primarily denominated in U.S. dollars, changes in currency exchange rates can make it more difficult for us to compete with foreign manufacturers on price. If our international sales increase relative to our total revenues, these factors could have a more pronounced effect on our operating results. We Must Continually Improve Our Technology to Remain Competitive. Technology changes rapidly in the semiconductor, data storage and flat panel display manufacturing industries. We believe our success will depend upon our ability to enhance our existing products and to develop and market new products to meet customer needs. We cannot guarantee that we will identify and adjust to changing market conditions or succeed in introducing commercially rewarding products or product enhancements. The success of our product development and introduction depends on a number of factors, including: - accurately identifying and defining new products; - completing and introducing new product designs in a timely manner; - market acceptance of our products and our customers' products; and - determining a comprehensive, integrated product strategy. We Face Significant Competition Which Could Result in Decreased Demand For Our Products or Services. The markets for our products are intensely competitive and we may not be able to compete successfully. We believe that our primary competition in the tool automation market is from integrated original equipment manufacturers that satisfy their semiconductor and flat panel display handling needs themselves rather than by purchasing systems or modules from an independent supplier like us. Many of these original equipment manufacturers have substantially greater resources than we do. Applied Materials, Inc., the leading process equipment original equipment manufacturer, develops and manufactures its own central wafer handling systems and modules. We may not be successful in selling our products to original equipment manufacturers that currently satisfy their wafer or substrate handling needs themselves, regardless of the performance or the price of our products. Moreover, integrated original equipment manufacturers may begin to commercialize their handling capabilities and become our competitors. We believe that the primary competitive factors in the end-user semiconductor manufacturer market for factory automation software and process control software are product functionality, price/performance, ease of use, hardware and software platform compatibility, vendor reputation and financial stability. The relative importance of these competitive factors may change over time. We directly compete in this market with various competitors, including Applied Materials-Consilium, PRI-Promis, IBM-Poseidon and numerous small, independent software companies. We also compete with the in-house software staffs of semiconductor manufacturers like NEC. Most of those manufacturers have substantially greater resources than us. We believe that the primary competitive factors in the factory interface market are technical and technological capabilities, reliability, price/performance, ease of integration and global sales and support capability. In this market, we compete directly with Asyst, Fortrend, Kensington and Rorze. Some of these competitors have substantial financial resources and extensive engineering, manufacturing and marketing capabilities. We believe our sale of products for the flat panel display process equipment market is heavily dependent upon our penetration of the Japanese market. In addressing the Japanese markets, we may be at a competitive disadvantage to Japanese suppliers that, historically, have been the supplier of choice to these markets. 22 BROOKS AUTOMATION, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Much of Our Success and Value Lies in Our Ownership and Use of Intellectual Property and Our Failure to Protect That Property Could Adversely Affect Our Future Growth. Our ability to compete is heavily affected by our ability to protect our intellectual property. We rely primarily on trade secret laws, confidentiality procedures, patents, copyrights, trademarks and licensing arrangements to protect our intellectual property. The steps we have taken to protect our technology may be inadequate. Existing trade secret, trademark and copyright laws offer only limited protection. Our patents could be invalidated or circumvented. The laws of certain foreign countries in which our products are or may be developed, manufactured or sold may not fully protect our products or intellectual property rights. This may make the possibility of piracy of our technology and products more likely. We cannot guarantee that the steps we have taken to protect our intellectual property will be adequate to prevent misappropriation of our technology. There has been substantial litigation regarding patent and other intellectual property rights in semiconductor-related industries. We may engage in litigation to: - enforce our patents; - protect our trade secrets or know-how; - defend ourselves against claims we infringe on the rights of others; or - determine the scope and validity of the patents or intellectual property rights of others. Any litigation could result in substantial cost to us and divert the attention of our management, which could harm our operating results. Our Operations Could Infringe on the Intellectual Property Rights of Others. Particular aspects of our technology could be found to infringe on the intellectual property rights or patents of others. Other companies may hold or obtain patents on inventions or may otherwise claim proprietary rights to technology necessary to our business. We cannot predict the extent to which we may be required to seek licenses or alter our products so that they no longer infringe on the rights of others. We cannot guarantee that the terms of any licenses we may be required to seek will be reasonable. Similarly, changing our products or processes to avoid infringing on the rights of others may be costly or impractical or could detract from the value of our products. Our Business May Be Harmed by Infringement Claims of General Signal or Applied Materials. We received notice from General Signal Corporation alleging infringements of its patent rights by certain of our products. The notification advised us that General Signal was attempting to enforce its rights to those patents in litigation against Applied Materials, and that, at the conclusion of that litigation, General Signal intended to enforce its rights against us and others. According to a press release issued by Applied Materials in November 1997, Applied Materials settled its litigation with General Signal by acquiring ownership of five General Signal patents. Although not verified by us, these five patents would appear to be the patents referred to by General Signal in its prior notice to us. Applied Materials has not contacted us regarding these patents. We Do Not Have Long-term Contracts With Our Customers and Our Customers May Cease Purchasing Our Products at Any Time. We generally do not have long-term contracts with our customers. As a result, our agreements with our customers do not provide any assurance of future sales. Accordingly: - our customers can cease purchasing our products at any time without penalty; - our customers are free to purchase products from our competitors; - we are exposed to competitive price pressure on each order; and - our customers are not required to make minimum purchases. 23 BROOKS AUTOMATION, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Year 2000 Readiness; Year 2000 Problems Could Disrupt Our Business. The year 2000 problem is the potential for system and processing failure of date-related data as the result of computer-controlled systems using two digits rather than four digits to define the applicable year. This could result in system failure or miscalculations causing disruptions of operations, including, among other things, temporary inability to process transactions, send invoices, or engage in similar normal business activities. Problems associated with the year 2000 may not become apparent until some time after January 2000. We have evaluated our internal software and products for year 2000 problems. We believe that our products and business will not be substantially affected by the year 2000 problem and that we have no significant exposure to liabilities related to the year 2000 problems for the products that we have sold. We have also communicated with others, including suppliers and customers whose computer systems' functionality could directly impact our operations. Although we believe our planning efforts are adequate to address our year 2000 concerns, undetected year 2000 problems may cause use to experience negative consequences or significant costs. We cannot be sure that our suppliers, customers or businesses that we may acquire will not experience similar consequences or costs. Such consequences or costs could adversely affect our business. RISKS RELATING TO OUR GROWTH Rapid Growth is Straining Our Operations and Requiring Us to Incur Costs to Upgrade Our Infrastructure. During the last three quarters, we have experienced extremely rapid growth in our operations, the number of our employees, our product offerings and the geographic area of our operations. Our growth places a significant strain on our management, operations and financial systems. Our future operating results will be dependent in part on our ability to continue to implement and improve our operating and financial controls and management information systems. If we fail to manage our growth effectively, our financial condition, results of operations and business could be materially adversely affected. Our Operating Results Would Be Harmed If One of Our Key Suppliers Fails to Deliver Components for Our Products. We currently procure many of our components on an as needed, purchase order basis. We do not carry significant inventories or have any long-term supply contracts with our vendors. With the recent increased demand for semiconductor manufacturing equipment, our suppliers are facing significant challenges in providing components on a timely basis. Our inability to obtain components in required quantities or of acceptable quality could result in significant delays or reductions in product shipments. This would materially and adversely affect our operating results. Our Business Could Be Harmed If We Fail to Adequately Integrate the Operations of Our Acquisitions. Our management must devote substantial time and resources to the integration of the operations of our acquired businesses with our business and with each other. If we fail to accomplish this integration efficiently, we may not realize the anticipated benefits of our acquisitions. The process of integrating supply and distribution channels, research and development initiatives, computer and accounting systems and other aspects of the operation of our acquired businesses, presents a significant challenge to our management. This is compounded by the challenge of simultaneously managing a larger entity. We have completed a number of acquisitions in a short period of time. 24 BROOKS AUTOMATION, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued These businesses have operations and personnel located in Asia, Europe and the United States and present a number of additional difficulties of integration, including: - difficulties in the assimilation of products and designs into integrated solutions; - difficulties in informing customers, suppliers and distributors of the effects of the acquisitions and integrating them into our overall operations; - difficulties integrating personnel with disparate business backgrounds and cultures; - difficulties in defining and executing a comprehensive product strategy; - difficulties in managing geographically remote units; - difficulties associated with managing the risks of entering markets or types of businesses in which we have limited or no direct experience; and - difficulties in minimizing the loss of key employees of the acquired businesses. If we delay integrating or fail to integrate an acquired business or experience other unforeseen difficulties, the integration process may require a disproportionate amount of our management's attention and financial and other resources. Our failure to adequately address these difficulties could harm our business and financial results. Our Business May Be Harmed by Acquisitions We Complete in the Future. We plan to continue to pursue additional acquisitions of related businesses. Our identification of suitable acquisition candidates involves risks inherent in assessing the values, strengths, weaknesses, risks and profitability of acquisition candidates, including the effects of the possible acquisition on our business, diversion of our management's attention and risks associated with future acquisitions, we will be required to expend significant funds, incur additional debt or issue additional securities, which may negatively affect our results of operations and be dilutive to our stockholders. If we spend significant funds or incur additional debt, our ability to obtain financing for working capital or other purposes could decline and we may be more vulnerable to economic downturns and competitive pressures. We cannot guarantee that we will be able to finance additional acquisitions or that we will realize any anticipated benefits from acquisitions that we complete. Should we successfully acquire another business, the process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of our existing business. We May Not Be Able to Recruit and Retain Necessary Personnel Because of Intense Competition for Highly Skilled Personnel. We need to hire and retain substantial numbers of employees with technical backgrounds for both our hardware and software engineering and support staffs. The market for these employees is intensely competitive, and we have occasionally experienced delays in hiring these personnel. Due to the cyclical nature of the demand for our products, we have had to reduce our workforce and then rebuild our workforce as our business has gone through downturns followed by upturns. We currently need to hire a number of highly skilled employees, especially in manufacturing, to meet customer demand. Due to the competitive nature of the labor markets in which we operate, this type of employment cycle increases our risk of not being able to retain and recruit key personnel. Our inability to recruit, retain and train adequate numbers of qualified personnel on a timely basis could adversely affect our ability to develop, manufacture, install and support our products. 25 BROOKS AUTOMATION, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued RISKS RELATING TO OUR COMMON STOCK Our Operating Results Fluctuate Significantly, Which Could Negatively Impact Our Business and Our Stock Price. Our margins, revenues and other operating results can fluctuate significantly from quarter to quarter depending upon a variety of factors, including: - the level of demand for semiconductors in general; - cycles in the market for semiconductor manufacturing equipment and automation software; - the timing and size of orders from our customer base; - our ability to manufacture, test and deliver products in a timely and cost-effective manner; - our success in winning competitions for orders; - the timing of our new product announcements and releases and those of our competitors; - the mix of products sold by us; - competitive pricing pressures; and - the level of automation required in fab extensions, upgrades and new facilities. We entered into the factory automation software business in fiscal 1999. We believe a substantial portion of our revenues from this business will be dependent on achieving project milestones. As a result, our revenue from this business will be subject to fluctuations depending upon a number of factors, including whether we can achieve project milestones on a timely basis, if at all, as well as the timing and size of projects. The Volatility of Our Stock Price Could Adversely Affect an Investment in Our Stock. The market price of our common stock has fluctuated widely. For example, between February 11, 2000 and February 22, 2000, the price of our common stock dropped from approximately $67.75 to $56.38 per share. Between March 30, 2000 and April 19, 2000, the price of our common stock rose from approximately $58.25 to $85.56 per share. Consequently, the current market price of our common stock may not be indicative of future market prices, and we may not be able to sustain or increase the value of an investment in our common stock. Factors affecting our stock price may include: - variations in operating results from quarter to quarter; - changes in earnings estimates by analysts or our failure to meet analysts' expectations; - changes in the market price per share of our public company customers; - market conditions in the industry; - general economic conditions; - low trading volume of our common stock; and - the number of firms making a market in our common stock. In addition, the stock market has recently experienced extreme price and volume fluctuations. These fluctuations have particularly affected the market prices of the securities of high technology companies like us. These market fluctuations could adversely affect the market price of our common stock. Provisions of Our Certificate of Incorporation, Bylaws and Contracts May Discourage Takeover Offers and May Limit the Price Investors Would Be Willing to Pay for Our Common Stock. Our certificate of incorporation and bylaws contain provisions that may make an acquisition of us more difficult and discourage changes in our management. These provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock. In addition, we have adopted a rights plan. In many potential takeover situations, rights issued under the plan become exercisable to purchase our common stock at a price substantially discounted from the then applicable market price of our common stock. Because of its possible dilutive effect to a potential acquirer, the rights plan would generally discourage third parties from proposing a merger with or initiating a tender 26 BROOKS AUTOMATION, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued offer for us that is not approved by our board of directors. Accordingly, the rights plan could have an adverse impact on our stockholders who might want to vote in favor of the merger or participate in the tender offer. In addition, shares of our preferred stock may be issued upon terms the board of directors deems appropriate without stockholder approval. Our ability to issue preferred stock in such a manner could enable our board of directors to prevent changes in our management or control. 27 BROOKS AUTOMATION, INC. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK INTEREST RATE EXPOSURE Based on Brooks' overall interest exposure at March 31, 2000, including all interest rate-sensitive instruments, a near-term change in interest rates within a 95% confidence level based on historical interest rate movements would not materially affect the consolidated results of operations or financial position. CURRENCY RATE EXPOSURE Brooks' foreign revenues are generally denominated in United States dollars. Accordingly, foreign currency fluctuations have not had a significant impact on the comparison of the results of operations for the periods presented. The costs and expenses of Brooks' international subsidiaries are generally denominated in currencies other than the United States dollar. However, since the functional currency of Brooks' international subsidiaries is the local currency, foreign currency translation adjustments do not impact operating results, but instead are reflected as a component of stockholders' equity under the caption "Accumulated other comprehensive income (loss)". To the extent Brooks expands its international operations or changes its pricing practices to denominate prices in foreign currencies, Brooks will be exposed to increased risk of currency fluctuation. STOCK PRICE The stock prices of semiconductor equipment companies are subject to significant fluctuations. Brooks' stock price may be affected by a variety of factors that could cause the price of Brooks' common stock to fluctuate, perhaps substantially, including: announcements of developments related to Brooks' business; quarterly fluctuations of Brooks' actual or anticipated operating results and order levels; general conditions in the semiconductor and flat panel display industries or the worldwide economy; announcements of technological innovations; new products or product enhancements by Brooks or its competitors; developments in patents or other intellectual property rights and litigation; and developments in Brooks' relationships with its customers and suppliers. In addition, in recent years, both the stock market in general and the market for shares of small capitalization and semiconductor industry-related companies in particular have experienced extreme price fluctuations which have often been unrelated to the operating performance of affected companies. Any such fluctuations in the future could adversely affect the market price of Brooks' common stock. There can be no assurance that the market price of the common stock of Brooks will not decline. 28 BROOKS AUTOMATION, INC. PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. Amendment to Certificate of Incorporation -- Following receipt of stockholder approval at the special meeting of stockholders of the Company on February 24, 2000, the Company amended its certificate of incorporation to increase the authorized shares of its Common Stock from 21,500,000 shares to 43,000,000 shares. This amendment to the Company's certificate of incorporation did not otherwise affect the rights of the holders of the Company's Common Stock. All of the additional shares resulting from the increase in the Company's authorized Common Stock are of the same class, with the same dividend, voting and liquidation rights, as the shares of Common Stock previously outstanding. Recent sales of unregistered securities--Pursuant to the terms of an Agreement and Plan of Merger dated as of December 16, 1999 among the Company, ASC Merger Corp., ASI Merger Corp., Daifuku America and Daifuku Co., Ltd., the Company acquired the businesses of Auto-Soft Corporation ("ASC") and AutoSimulations, Inc. ("ASI"). The Company issued an aggregate of 535,404 shares of its Common Stock on January 6, 2000 as part of the purchase price to acquire the businesses of ASC and ASI. The Company reported this transaction on Form 8-K filed on January 19, 2000. The issuance of the Common Stock pursuant to the acquisition of ASI and ASC was exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF THE SECURITY HOLDERS The Annual Meeting of Stockholders of the Company was held on February 24, 2000, at which the stockholders voted to (i) elect directors to the Company's board of directors for terms of office expiring at the 2001 Annual Meeting of Stockholders; (ii) approve the Company's 2000 Combination Stock Option Plan; (iii) approve an amendment to the Company's 1995 Employee Stock Option Plan to increase the number of shares of Common Stock available under the 1995 Plan by an additional 500,000 shares of Common Stock; and (iv) approve an amendment to the Company's Certificate of Incorporation to increase the number of authorized shares of the Company's Common Stock from 21,500,000 shares to 43,000,000 shares. The Company's stockholders voted on these matters as follows: (i) Election of Directors Robert J. Therrien, with 10,998,373 shares voting for and 492,166 shares withheld; Roger D. Emerick with 10,903,111 shares voting for and 587,428 shares withheld; Amin J. Khoury with 10,885,391 shares voting for and 605,148 shares withheld; Juergen Giessmann with 10,899,365 shares voting for and 591,174 voting withheld; (ii) to amend the Company's 2000 Combination Stock Option Plan with 6,218,984 shares voting for, 3,305,956 shares voting against, 16,111 shares abstaining and 1,949,488 broker non-votes; (iii) to amend the Company's 1995 Employee Stock Option Plan with 9,061,449 shares voting for, 467,097 shares voting against, 12,505 shares abstaining and 1,949,488 broker non-votes; (iv) to amend the Company's Certificate of Incorporation with 10,425,868 shares voting for, 1,058,086 broker non-votes and 6,585 shares abstaining. 29 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are included herein: Exhibit No. Description ----------- ----------- 3.01 Certificate of Incorporation as Amended 10.1 Demand Promissory Note Agreement dated as of May 2, 2000, between Brooks Automation, Inc. and ABN AMRO Bank N.V. 27.1 Financial Data Schedule for the quarterly period ended March 31, 2000 27.2 Financial Data Schedule for the quarterly period ended March 31, 1999, restated to reflect the acquisition of Smart Machines Inc. in a pooling of interests transaction effective August 31, 1999 99.3 1995 Employee Stock Purchase Plan as amended January 6, 2000 99.4 1998 Employee Equity Incentive Plan 99.7 2000 Combination Stock Option Plan (b) The following reports on Form 8-K were filed during the quarterly period ended March 31, 2000: (1) Current report on Form 8-K filed on January 19, 2000, relating to the acquisition of Auto-Soft Corporation and AutoSimulations, Inc. from Daifuku America Corporation, a U.S. subsidiary of Daifuku Co., Ltd. (2) Amended current report on Form 8-K/A filed on February 14, 2000, relating to the acquisition of Auto-Soft Corporation and AutoSimulations, Inc. from Daifuku America Corporation, a U.S. subsidiary of Daifuku Co., Ltd. The following audited (except where noted) financial statements of AutoSimulations, Inc. and Subsidiaries together with the report thereon by PricewaterhouseCoopers LLP were filed with the Form 8-K/A: AUTOSIMULATIONS, INC. AND SUBSIDIARIES Report of Independent Accountants Consolidated Balance Sheets as of December 31, 1999 (unaudited) and March 31, 1999 and 1998 Consolidated Statements of Operations for the nine months ended December 31, 1999 and 1998 (unaudited) and the years ended March 31, 1999 and 1998, the period from November 27, 1996 to March 31, 1997 and the period from April 1, 1996 to November 26, 1996 Consolidated Statement of Changes in Stockholder's Equity for the nine months ended December 31, 1999 (unaudited), the years ended March 31, 1999 and 1998, the period from November 27, 1996 to March 31, 1997 and the period from April 1, 1996 to November 26, 1996 Notes to Consolidated Financial Statements 30 The following audited (except where noted) financial statements of Auto-Soft Corporation and Subsidiary together with the report thereon by PricewaterhouseCoopers LLP were filed with the Form 8-K/A: AUTO-SOFT CORPORATION AND SUBSIDIARY Report of Independent Accountants Consolidated Balance Sheets as of December 31, 1999 (unaudited) and March 31, 1999 and 1998 Consolidated Statements of Operations for the nine months ended December 31, 1999 and 1998 (unaudited), the years ended March 31, 1999 and 1998, the period from September 6, 1996 to March 31, 1997 and the period from April 1, 1996 to September 5, 1996 Consolidated Statements of Changes in Stockholder's Equity for the nine months ended December 31, 1999 (unaudited), the years ended March 31, 1999 and 1998, the period from September 5, 1996 to March 31, 1997 and the period from April 1, 1996 to September 5, 1996 Consolidated Statements of Cash Flows for the nine months ended December 31, 1999 and 1998 (unaudited), the years ended March 31, 1999 and 1998, the period from September 6, 1996 to March 31, 1997 and the period from April 1, 1996 to September 5, 1996 Notes to Consolidated Financial Statements The following unaudited pro forma combined condensed financial statements of the Company, AutoSimulations, Inc. and Subsidiaries and Auto-Soft Corporation and Subsidiary were filed with the Form 8-K/A: Unaudited Pro Forma Combined Condensed Balance Sheet as of December 31, 1999 Unaudited Pro Forma Combined Condensed Statement of Operations for the three months ended December 31, 1999 Unaudited Pro Forma Combined Condensed Statement of Operations for the year ended September 30, 1999 Notes to Unaudited Pro Forma Combined Condensed Financial Statements 31 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BROOKS AUTOMATION, INC. DATE: May 12, 2000 /s/ Robert J. Therrien ---------------------- Robert J. Therrien Director and President (Principal Executive Officer) DATE: May 12, 2000 /s/ Ellen B. Richstone ---------------------- Ellen B. Richstone Senior Vice President of Finance and Administration and Chief Financial Officer (Principal Financial Officer) 32 EXHIBIT INDEX Exhibit No. Description ----------- ----------- 3.01 Certificate of Incorporation as Amended 10.1 Demand Promissory Note Agreement dated as of May 2, 2000, between Brooks Automation, Inc. and ABN AMRO Bank N.V. 27.1 Financial Data Schedule for the quarterly period ended March 31, 2000 27.2 Financial Data Schedule for the quarterly period ended March 31, 1999, restated to reflect the acquisition of Smart Machines Inc. in a pooling of interests transaction effective August 31, 1999 99.3 1995 Employee Stock Purchase Plan as amended January 6, 2000 99.4 1998 Employee Equity Incentive Plan 99.7 2000 Combination Stock Option Plan EX-3.01 2 CERTIFICATE OF INCORPORATION AS AMENDED 1 EXHIBIT 3.01 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF BROOKS AUTOMATION, INC. Brooks Automation, Inc., a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), pursuant to Section 242 of the Delaware General Corporation Law, DOES HEREBY CERTIFY: FIRST: That, the Board of Directors of the Corporation, by unanimous written consent dated January 6, 2000, in accordance with the provisions of Section 141(f) of the General Corporation Law of the State of Delaware, duly adopted a resolution setting forth a proposed amendment to the Corporation's Certificate of Incorporation. The resolution setting forth the proposed amendment is as follows: RESOLVED: To amend, subject to the approval by the stockholders of the Corporation, the Corporation's Certificate of Incorporation to increase the number of shares of the Corporation's common stock authorized thereunder from 21,500,000 to 43,000,000 and to submit the amendment to the Corporation's Certificate of Incorporation to the stockholders of the Corporation for their consideration, with a recommendation for approval of the amendment. SECOND: The foregoing amendment to the Certificate of Incorporation was duly adopted by the stockholders at a meeting duly held, at which a quorum was present and acting throughout and in accordance with the provisions of Section 242 of the General Corporation Law of Delaware, on February 24, 2000. THIRD: That the Certificate of Incorporation be amended by deleting the first paragraph of Article Fourth in its entirety and replacing it as follows: "The total number of shares of all classes of stock which the Corporation shall have authority to issue is (i) 43,000,000 shares of Common Stock, $.01 par value per share (the "Common Stock"), and (ii) 1,000,000 shares of Preferred Stock, $.01 par value per share (the "Preferred Stock")." [REST OF PAGE INTENTIONALLY LEFT BLANK] -1- 2 CERTIFICATE OF INCORPORATION OF BROOKS AUTOMATION, INC. The undersigned, a natural person, for the purposes of organizing a corporation for conducting the business and promoting the purposes hereinafter stated, under the provisions and subject to the requirements of the laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts amendatory thereof and supplemental thereto, and generally known as the "General Corporation Law of the State of Delaware"), hereby certifies that: FIRST: The name of the corporation (hereinafter called the "Corporation") is Brooks Automation, Inc. SECOND: The address, including street, number, city, and county, of the registered office of the Corporation in the State of Delaware is 32 Loockerman Square, Suite L-100, Dover, County of Kent, Delaware 19901; and the name of the registered agent of the Corporation in the State of Delaware at such address is The Prentice-Hall Corporation System, Inc. THIRD: The nature of the business and the purposes to be conducted and promoted by the Corporation, shall be (a) to create, design, develop, manufacture, buy, sell, hold, act as agent for the sale of, process, store, repair, modify, service, and otherwise deal in and with atmospheric and vacuum valves and robots, other goods and systems related to atmospheric and vacuum applications and electrical, mechanical and other goods, wares, merchandise, and personal property of every kind and description, including without limitation patent rights for inventions and designs of any description; (b) to provide technical and scientific consultation services; (c) to deal in matters concerned with conversion of energies and research and development in all fields of science; and (d) any lawful business, to promote any lawful purpose, and to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: A statement of the designations and powers, preferences and rights, and the qualifications, limitations or restrictions of the classes of capital stock of the Corporation shall be as follows: (i) 20,000,000 shares of Common Stock, $.01 par value per share (the "Common Stock"); (ii) 1,500,000 shares of Class A Common Stock, $.01 par value per share (the "Class A Common Stock"); and -1- 3 (iii) 1,000,000 shares of Preferred Stock, $.01 par value per share (the "Preferred Stock"). The classes of stock of the Corporation authorized by this Article Fourth hereof shall have the preferences, voting rights, qualifications and special or relative rights or privileges as to each class thereof and any series now established as set forth in this Article Fourth. Stock of any class or series authorized pursuant hereto may be issued from time to time by authority of the Board of Directors for such consideration as from time to time may be fixed by vote of the Board of Directors. COMMON STOCK SECTION 1. DESIGNATION OF CLASSES. The authorized classes of common stock of the Corporation shall be designated as Common Stock and Class A Common Stock, respectively. Except as otherwise hereafter provided, the preferences, voting rights, qualifications and special or relative rights or privileges as to each class shall be identical. SECTION 2. VOTING RIGHTS. The holders of Common Stock shall have one vote per share upon all matters. The holders of Class A Common Stock shall have no vote. Notwithstanding the foregoing, the approval of the holders of two-thirds of the outstanding shares of any class, voting separately as a class, shall be required for any amendment of these Articles which would adversely affect the rights of such class. SECTION 3. DIVIDENDS, ETC. The holders of each class of stock shall share equally, share for share, in all dividends and distributions, without regard to class. In all recapitalizations, the holders of each class shall receive identical treatment, share for share, without regard to class, except that in connection with any stock dividend or stock split the holders of shares of any class shall receive additional shares of the same class held by them. SECTION 4. LIQUIDATION. Upon any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of each class of stock shall receive identical treatment, share for share, without regard to class. SECTION 5. CONVERSION. (a) On the vote of the directors of the Corporation, all of the authorized shares of all classes of common stock of the Corporation shall be convertible, on any one occasion, into a like number of shares of a single class of voting Common Stock. -2- 4 (b) Upon the sale by the Corporation of shares of its Common Stock pursuant to a registration statement filed with the Securities and Exchange Commission resulting in gross proceeds of not less than $10,000,000, each share of the Corporation's Class A Common Stock shall automatically, and without further action, be converted into one share of the Corporation's Common Stock. PREFERRED STOCK The Preferred Stock may be issued and designated by the Board of Directors, in one or more classes or series and with such rights, powers, preferences and terms and at such times and for such consideration as the Board of Directors shall determine, without further stockholder action. With respect to each class or series of Preferred Stock, prior to issuance, the Board of Directors by resolution shall designate that class or series to distinguish it from other classes and series of stock of the Corporation, shall specify the number of shares to be included in the class or series, and shall fix the rights, powers, preferences and terms of the shares of the class or series, including, but without limitation: (i) the dividend rate, which may be fixed or variable, its preference as to any other class or series of capital stock, and whether dividends will be cumulative or noncumulative; (ii) whether the shares are to be redeemable and, if so, at what times and prices (which price or prices may, but need not, vary according to the time or circumstances of such redemption) and on what other terms and conditions; (iii) the terms and amount of any sinking fund provided for the purchase or redemption of the shares; (iv) whether the shares shall be convertible or exchangeable and, if so, the times, prices, rates, adjustments and other terms of such conversion or exchange; (v) the voting rights, if any, applicable to the shares in addition to those prescribed by law; (vi) the restrictions and conditions, if any, on the issue or reissue of any additional shares of such class or series or of any other class or series of Preferred Stock ranking on a parity with or prior to the shares of such class or series; (vii) whether, and the extent to which, any of the rights, powers, preferences and terms of any such class or series may be made dependent upon facts ascertainable outside of the Certificate of Incorporation or outside the resolution or resolutions providing for the issuance of such class or series by the Board of Directors, provided that the manner in which such facts shall operate is clearly set forth in the resolution or resolutions providing for the issuance of such class or series adopted by the Board of Directors; and (viii) the rights of the holders of such shares upon voluntary or involuntary liquidation, dissolution or winding up of the Corporation. FIFTH: The name and the mailing address of the incorporator is as follows: -3- 5 NAME ADDRESS ---- ------- Samuel P. Williams c/o Brown, Rudnick, Freed & Gesmer One Financial Center Boston, MA 02111 SIXTH: The Corporation shall have perpetual existence. SEVENTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 29l of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agrees to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation. EIGHTH: For the management of the business and for the conduct of the affairs of the Corporation, and in further definition, limitation and regulation of the powers of the Corporation and of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that: (a) The business of the Corporation shall be conducted by the officers of the Corporation under the supervision of the Board of Directors. (b) The number of directors which shall constitute the whole Board of Directors shall be fixed by, or in the manner provided in, the Bylaws. No election of Directors need be by written ballot. (c) The Board of Directors of the Corporation may adopt, amend or repeal the Bylaws of the Corporation at any time after the original adoption of the Bylaws according to Section -4- 6 109 of the General Corporation Law of the State of Delaware; provided, however, that any amendment to provide for the classification of directors of the Corporation for staggered terms pursuant to the provisions of subsection (d) of Section 141 of the General Corporation Law of the State of Delaware shall be set forth in an amendment to this Certificate of Incorporation, in an initial By-Law, or in a By-Law adopted by the stockholders of the Corporation entitled to vote. (d) Notwithstanding any other provision of law, all action required to be taken by the stockholders of the Corporation shall be taken at a meeting duly called and held in accordance with law and with the Certificate of Incorporation and the Bylaws, and not by written consent. NINTH: (a) The Corporation may, to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware, as the same may be amended and supplemented, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section, and the indemnification provided for herein shall not be deemed exclusive of any other rights to which a person indemnified may be entitled under any By-Law, agreement, vote of stockholders or disinterested Directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a Director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (b) No director shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty by such director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law (i) for breach of the Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the General Corporation Law of the State of Delaware or (iv) for any transaction from which the director derived an improper personal benefit. No amendment to or repeal of this paragraph (b) of this Article Ninth shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such Director occurring prior to such amendment. TENTH: From time to time, subject to the provisions of this Certificate of Incorporation (including without limitation the provisions of paragraph (d) of Article Eleventh and of -5- 7 Article Twelfth), any of the provisions of this Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Corporation by this Certificate of Incorporation are granted subject to the provisions of this Article Tenth. ELEVENTH: (a) Any direct or indirect purchase or other acquisition in one or more transactions by the Corporation or any Subsidiary of any of the outstanding Voting Stock of any class from any one or more individuals or entities known by the Corporation to be a Related Person, who has beneficially owned such security or right for less than two years prior to the date of such purchase, at a price in excess of the Fair Market Value shall, except as hereinafter provided, require the affirmative vote of the holders of at least two-thirds of the shares of Voting Stock, voting as a single class, excluding any votes cast with respect to shares of Voting Stock beneficially owned by such Related Person. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified by law or any agreement with any national securities exchange, or otherwise, but no such affirmative vote shall be required with respect to any purchase or other acquisition of securities made as part of (i) a tender or exchange offer by the Corporation to purchase securities of the same class made on the same terms to all holders of such securities and complying with the applicable requirements of the Exchange Act and the rules and regulations thereunder, or any successor rule or regulation or (ii) pursuant to an open-market purchase program conducted in accordance with the requirements of Rule 10b-18 promulgated by the Securities and Exchange Commission pursuant to the Exchange Act or any successor rule or regulation. (b) A majority of the Continuing Directors shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article Eleventh including, without limitation, (i) whether a person is a Related Person, (ii) the number of shares of Voting Stock beneficially owned by any person and (iii) whether a price is in excess of Fair Market Value. (c) Nothing contained in this Article Eleventh shall be construed to relieve any Related Person from any fiduciary obligation imposed by law. (d) Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least two-thirds of the outstanding -6- 8 shares of Voting Stock, voting together as a single class, shall be required to alter, change, amend, repeal or adopt any provision inconsistent with this Article Eleventh. TWELFTH: Except as otherwise provided in this Certificate of Incorporation, the Bylaws and any designation of terms pursuant to Section 151 of the General Corporation Law of the State of Delaware, any vote required by stockholders pursuant to said General Corporation Law, other than the election of directors (which shall not be affected by this provision), shall be effective if recommended by a majority of the Continuing Directors and the vote of a majority of each class of stock outstanding and entitled to vote thereon; and if not recommended by a majority of the Continuing Directors, then by the vote of 80% of each class of stock outstanding and entitled to vote thereon. THIRTEENTH: DEFINITIONS The following definitions shall apply for the purposes of this Article and of Articles Eleventh and Twelfth only: (a) "Affiliate" shall have the meaning given such term in Rule 12b-2 under the Exchange Act. (b) "Associate" shall have the meaning given such term in Rule 12b-2 under the Exchange Act. (c) "Continuing Director" shall mean any member of the Board of Directors who is not an Affiliate of any Related Person or who was a member of the Board of Directors prior to the time that any such Related Person became a Related Person, and any successor of a Continuing Director who is unaffiliated with any Related Person and is recommended to succeed a Continuing Director by a majority of the Continuing Directors then on the Board of Directors. Notwithstanding the above, a majority of the then existing Continuing Directors can deem a new director to be a Continuing Director, even though such person is Affiliated with a Related Person. (d) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, from time to time. (e) "Fair Market Value" shall mean: (i) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the principal United States securities exchange registered under the Exchange Act on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the -7- 9 National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use or, if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board of Directors in good faith; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board of Directors in good faith. (f) "Massachusetts Predecessor" shall mean Brooks Automation, Inc., a Massachusetts Corporation. (g) "Merger Date" shall mean the date upon which the Massachusetts Predecessor merges with and into the Corporation. (h) "Person" shall mean any individual, firm, Corporation or other entity. (i) "Related Person" shall mean any Person (other than the Corporation, any Subsidiary or any individual who is a stockholder of the Corporation on the Merger Date) which, together with its Affiliates and Associates and with any other Person (other than the Corporation, any Subsidiary or any individual who is a stockholder of the Corporation on the Merger Date) with which it or they have entered into, after the Merger Date, any agreement, arrangement or understanding with respect to acquiring, holding or disposing of Voting Stock, acquires beneficial ownership (as defined in Rule 13d-3 of the Exchange Act, except that such term shall include any Voting Stock which such person has the right to acquire, whether or not such right may be exercised within 60 days), directly or indirectly of more than 5% of the voting power of the outstanding Voting Stock after the Merger Date. (j) "Subsidiary" shall mean any Corporation in which a majority of the capital stock entitled to vote generally in the election of directors is owned, directly or indirectly, by the Corporation. (k) "Voting Stock" shall mean all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors. Signed on the 14th day of November, 1994. /s/ Samuel P. Williams --------------------------------- Samuel P. Williams, Incorporator -8- EX-10.1 3 DEMAND PROMISSORY NOTE 1 DEMAND PROMISSORY NOTE $10,000,000 dated as of May 2, 2000 FOR VALUE RECEIVED, the undersigned, BROOKS AUTOMATION, INC. (the "Borrower"), a Delaware corporation having its principal place of business at 15 Elizabeth Drive, Chelmsford, Massachusetts 01824, by this promissory note (hereinafter called "this Note"), absolutely and unconditionally promises to pay to the order of ABN AMRO BANK N.V. (hereinafter, together with its successors in title and assigns, called the "Lender"), at its office at 135 South LaSalle Street, Chicago, Illinois, ON DEMAND AT ANY TIME, or, if no demand is made prior thereto, on December 31, 2001, the principal sum of TEN MILLION DOLLARS, or so much thereof as shall have been advanced by the Lender to the Borrower by way of loans under this Note and shall remain outstanding together with all amounts which are owed or which may become due upon the Lender's honoring of any letter of credit issued by the Lender for the Borrower's account (the "Letter of Credit Exposure"), and to pay interest on the principal sum outstanding hereunder from time to time from the date hereof until the said principal sum or the unpaid portion thereof shall have become due and payable as hereinafter provided. This Note evidences, among other things, the obligation of the Borrower to repay loans made hereunder by the Lender to the Borrower together with the Letter of Credit Exposure. From time to time prior to the maturity of this Note (whether upon demand or, if no demand is made prior thereto, on December 31, 2001) the Lender may, in its sole and absolute discretion, make loans or otherwise extend credit to the Borrower subsequent to the date hereof, and the Borrower may borrow, repay and reborrow the funds available hereunder, PROVIDED that the aggregate principal amount of all loans outstanding together with the Letter of Credit Exposure hereunder shall in no event exceed ten million dollars ($10,000,000). All loans made by the Lender to the Borrower pursuant to this Note and all repayments of principal made hereunder shall be recorded by the Lender on the schedule annexed hereto. The entire unpaid principal (not at the time overdue) of this Note outstanding shall bear interest at an annual rate which shall at all times be equal to the Base Rate (as hereinafter defined) in effect from time to time plus three quarters of one percent (3/4%) during the period beginning on the date hereof and ending on the date on which the entire unpaid principal amount of this Note shall be paid in full; provided, however, that if a LIBOR Rate option is in effect with respect to any principal amount outstanding hereunder, such principal amount shall bear interest in accordance with the LIBOR Rate provisions set forth in the next paragraph. 2 -2- At the option of the Borrower, all or any portion of the unpaid principal (not at the time overdue) of this Note outstanding shall bear interest at the rates quoted by the Lender as the Lender's 1, 2 or 3 month reserve-adjusted LIBOR Rate plus one and three quarters percent (1 3/4%), the LIBOR Rate being determined by the Lender at 11:00 a.m. three Business Days (as hereinafter defined) prior to the requested borrowing date or conversion date. Requests for the initial borrowings at or conversions to this pricing option must be received at least one hour before the time for determining the relevant rate. LIBOR Rate loans may be requested for interest periods of one, two or three months and interest on all such loans shall be payable on the last day of such interest period. All LIBOR Rates will be adjusted for reserves. A borrowing under the LIBOR Rate pricing options must be in minimum increments of $100,000 or greater multiples of $100,000 and the Borrower's ability to prepay such loans is subject to the requirement that the Borrower compensate the Lender for any losses resulting from the liquidation or reemployment of deposits or other funds acquired by the Lender to maintain the obligation at the LIBOR Rate option. In addition, the Borrower agrees to indemnify the Lender and to hold the Lender harmless from and against any losses resulting from the liquidation or reemployment of deposits or other funds acquired by the Lender to maintain the obligation at the LIBOR Rate option that the Lender may sustain or incur as a consequence of (a) the failure by the Borrower to pay the principal amount of or any interest on any LIBOR Rate borrowing as and when due and payable, including any such loss or expense arising from interest or fees payable by the Lender to lenders of funds obtained by it in order to maintain the LIBOR Rate borrowings or (b) the failure of the Borrower to make the initial borrowing (if the initial borrowing is to bear interest at the LIBOR Rate) or conversion after the Borrower has given (or is deemed to have given) a loan or conversion request relating thereto in accordance with this paragraph. The Lender's willingness to offer the LIBOR Rate option hereunder is subject to the availability of funding sources and the continued legality of the Lender offering such pricing options. The Borrower agrees to reimburse the Lender for any increased costs (taxes, regulatory reserves or assessments) incurred by the Lender in connection with borrowings at such pricing option. In addition, the Borrower hereby agrees that to the extent the Lender issues any letter of credit for the account of the Borrower, the Borrower agrees to pay a fee (in each case, a "Letter of Credit Fee") to the Lender in respect of each such letter of credit in an amount equal to one and three quarters percent (1 3/4%) per annum of the face amount of such letter of credit. Such Letter of Credit Fee shall be due and payable quarterly in arrears. In respect of each such letter of credit, the Borrower shall also pay to the Lender at such other time or times as such charges are customarily made by the Lender, the Lender's customary issuance, amendment, negotiation or document examination and other administrative fees as in effect from time to time. Beginning May 31, 2000, and on the last Business Day (as hereinafter defined) of each successive calendar month, there shall become absolutely due and payable hereunder, and the Borrower promises to pay to the holder hereof, all of the unpaid interest accrued to the date of payment on the unpaid principal hereof not at the time overdue and not at the time bearing interest at the LIBOR Rate option set forth in the preceding paragraph which is payable at the end of each interest period. 3 -3- On the earlier to occur of DEMAND, or, if no demand has been made prior thereto, on December 31, 2001, there shall become absolutely due and payable by the Borrower hereunder (without regard to the length of any interest period in effect), and the Borrower hereby promises to pay to the holder hereof, the balance (if any) of the principal hereof then remaining unpaid, all of the unpaid interest accrued hereon and all (if any) other amounts payable on or in respect of this Note or the indebtedness evidenced hereby. Each overdue amount (whether of principal, interest or otherwise) payable on or in respect of this Note or the indebtedness evidenced hereby shall (to the extent permitted by applicable law) bear interest, from the date on which such amount shall have first become due and payable in accordance with the terms hereof to the date on which such amount shall be paid to the holder of this Note (whether before or after judgment), at the annual rate of interest which shall (to the extent permitted by applicable law) at all times be two percent (2%) above the Base Rate (as hereinafter defined) in effect from time to time. The unpaid interest accrued on each overdue amount in accordance with the foregoing terms of this paragraph shall become absolutely due and payable by the Borrower to the holder hereof on demand by the holder of this Note at any time. Interest on each overdue amount will continue to accrue, as provided by the foregoing terms of this paragraph until the obligations of the Borrowers in respect of the payment of such overdue amount shall be discharged (whether before or after judgment). The Borrower absolutely and unconditionally agrees to reimburse the Lender, on demand, whether or not all or any of the transactions contemplated by the Note are ultimately consummated, for all its reasonable out-of-pocket expenses, including but not limited to (a) the reasonable attorney's fees and disbursements of the Lender's Special Counsel (as hereinafter defined) and disbursements, incurred or expended in connection with the preparation, negotiation and interpretation of this Note or any ancillary documentation contemplated thereby, or any amendment thereof, or the making of loans, (b) all reasonable attorneys' fees and disbursements incurred and expended in connection with the making of loans, and (c) all reasonable attorneys' fees relating to the enforcement of any obligations under this Note or the satisfaction of any indebtedness of the Borrower hereunder, or in connection with any litigation proceeding or dispute hereunder in any way related to the credit hereunder. Each payment of principal, interest or other sums payable on or in respect of this Note or the indebtedness evidenced hereby shall be made by the Borrower directly to the Lender in U.S. Dollars, for the account of the holder of this Note, at the Lender's Office, not later than 1:00 p.m., Chicago time, on the due date of such payment, and in immediately available and freely transferable funds. All payments on or in respect of this Note or any other document, instrument or agreement executed in connection therewith (including without limitation any documentation pertaining to any letter of credit issued by the Lender for the Borrower's account) (a "Loan Document") or the indebtedness evidenced hereby shall be made to the holder of this Note without recoupment, setoff or counterclaim and free and clear of and without deduction for any taxes, levies, imposts, duties, charges, fees, deductions, withholdings, compulsory loans, restrictions or conditions of any nature now or hereafter imposed or levied by any jurisdiction or any political subdivision thereof or taxing or other 4 -4- authority therein unless the Borrower is compelled by law to make such deduction or withholding. If any such obligation is imposed upon the Borrower with respect to any amount payable by it hereunder or under any of the other Loan Documents, the Borrower will pay to the Lender, on the date on which such amount is due and payable hereunder or under such other Loan Document, such additional amount in Dollars as shall be necessary to enable the Lender or any holder hereof to receive the same net amount which the Lender or such holder would have received on such due date had no such obligation been imposed upon the Borrower. The Borrower will deliver promptly to the Lender certificates or other valid vouchers for all taxes or other charges deducted from or paid with respect to payments made by the Borrower hereunder or under such other Loan Document. This Note evidences the obligations of the Borrower (a) to repay the principal amount of all loans made by the Lender to the Borrower hereunder, (b) to pay interest, as herein provided, on the principal amount hereof remaining unpaid from time to time, or other amounts which may become due and payable hereunder as herein provided and (c) to repay all amounts owing to the Lender in respect of any letter of credit issued by the Lender for the Borrower's account (the "Obligations"). No reference herein to any collateral for this Note shall impair the obligations of the Borrower, which are absolute, unconditional and irrevocable, to pay the principal of and the interest on this Note and to pay all (if any) other amounts which may become due and payable on or in respect of this Note or the indebtedness evidenced hereby, strictly in accordance with the terms and the tenor of this Note. For all purposes of this Note, the following terms shall have the respective meanings set forth below: (a) "Base Rate" means the greater of (i) annual rate of interest from time to time announced by ABN AMRO Bank N.V. at its head office as its base rate or its prime rate or (ii) the rate equal to the weighted average of the published rates on overnight Federal Funds transactions with members of the Federal Reserve System plus 1/2%. The Base Rate is a reference rate and does not necessarily represent the lowest or best rate being charged to any customer. Changes in the rate of interest resulting from changes in the Base Rate shall take place immediately without notice or demand of any kind. (b) "Business Day" means a day, other than a Saturday or Sunday, on which banks are open for business in Chicago, Illinois and, in the case of a LIBOR Rate borrowing, also a day on which commercial banks are open for international business (including dealing in Dollar deposits) in London or such other eurodollar interbank market as may be selected by the Lender in its sole discretion acting in good faith. (c) "holder" means the Lender in possession of this Note or any other person who is at the time the lawful holder in possession of this Note. (d) "Lender's Office" means the office of the Lender located at 135 South LaSalle Street, Chicago, Illinois. (e) "Lender's Special Counsel" means Bingham Dana LLP. 5 -5- The Borrower will have the right to prepay at any time the unpaid principal of this Note in full or in part, subject to the requirement that the Borrower compensate the Lender for any funding losses resulting from the liquidation or reemployment of deposits or other funds acquired by the Lender to maintain the obligation at the LIBOR Rate option incurred as a result of such prepayment of a LIBOR Rat borrowing prior to the end of the interest period applicable to such borrowing. There shall become and be absolutely due and payable by the Borrower on the date of each prepayment of principal of this Note, and the Borrower hereby promises to pay on the date of each such prepayment of this Note, all of the unpaid interest accrued to such date on the amount of principal of this Note being prepaid on such date and, with respect to any principal which bears interest based upon the LIBOR Rate, any amounts required to be paid pursuant to the fourth paragraph of this Note. Any partial payment of the indebtedness evidenced by this Note shall be applied by the holder hereof (a) first, to the payment of all of the interest due and payable on the unpaid principal of this Note at the time of such partial payment, (b) then, to the payment of all (if any) other amounts (except principal) due and payable at the time of such partial payment on or in respect of this Note or the indebtedness evidenced by this Note, and (c) finally, to the repayment or (as the case may be) the prepayment of the unpaid principal of this Note due and payable at the time of such partial payment. Upon demand by the holder of this Note of the entire unpaid principal of this Note, or, if no demand is made prior thereto, on December 31, 2001, all of the interest accrued on the unpaid principal of this Note and all (if any) other amounts payable on or in respect of this Note or the indebtedness evidenced hereby (without regard to the length of any interest period in effect), the entire unpaid principal of this Note, all of the interest accrued on the unpaid principal of this Note and all (if any) other amounts payable on or in respect of this Note or the indebtedness evidenced hereby (without regard to the length of any interest period in effect), shall forthwith become and be due and payable to the holder of this Note without presentment, further demand, protest, notice of protest or any other formalities of any kind, all of which are hereby expressly and irrevocably waived by the Borrower. All computations of interest payable as provided in this Note shall be made by the holder hereof on the basis of the actual number of days elapsed divided by 360. The holder of this Note shall determine the Base Rate in effect from time to time. Any change in the Base Rate shall, for all purposes of this Note, become effective on, and from the beginning of, the day on which such change shall first be made public by the Lender in accordance with the Lender's usual practice. If any sum would, but for the provisions of this paragraph, become due and payable on or in respect of this Note or the indebtedness evidenced hereby on a day which is not a Business Day, then such sum shall become due and payable on the Business Day next succeeding the day on which such sum would otherwise have become due and payable hereunder, and interest payable hereunder to the holder hereof shall be adjusted by the holder hereof accordingly. 6 -6- The failure of the holder of this Note to exercise all or any of its rights, remedies, powers or privileges hereunder in any instance shall not constitute a waiver thereof in that or in any other instance. The Borrower hereby irrevocably waives notice of acceptance, presentment, notice of nonpayment, protest, notice of protest, suit and all other conditions precedent in connection with the delivery, acceptance, collection and/or enforcement of this Note or any collateral or security therefor. The Borrower hereby absolutely and irrevocably consents and submits to the jurisdiction of the Courts of the Commonwealth of Massachusetts and of any Federal Court located in the said Commonwealth in connection with any actions or proceedings brought against the Borrower by the holder hereof arising out of or relating to this Note. The Borrowers represents and warrants to the Lender that: (a) the Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware; (b) the Borrower has adequate power and authority and full legal right to carry on the business in which it is presently engaged and will be engaged upon consummation of the transactions contemplated hereby; and (c) all necessary corporate action has been taken to execute and deliver this Note and to make the borrowings hereunder. The Borrower hereby agrees, at the Borrower's own expense, to execute and deliver, from time to time, any and all further, or other, instruments, and to perform such acts, as the Lender may reasonably request to effect the transactions contemplated by this Note and to provide to the Lender the benefits of all rights, authorities and remedies conferred upon the Lender by the terms of this Note. The Borrower shall use the proceeds of the loans made by the Lender to the Borrower pursuant to this Note for general corporate purposes. No portion of this loan is to be used for the purpose of purchasing or carrying any "margin stock" or "margin security" as such terms are used in Regulations U and X of the Board of Governors of the Federal Reserve System (2 C.F.R. Parts 221 and 224). This Note may be assigned by the Lender upon the prior written consent of the Borrower, which consent shall not be unreasonably withheld. Anything contained in this Note to the contrary notwithstanding, the Lender may at any time pledge all or any portion of its interest and rights under any of the Loan Documents (including all or any portion of this Note) to any of the twelve Federal Reserve Banks organized under ss.4 of the Federal Reserve Act, 12 U.S.C. ss.341. No such pledge or the enforcement thereof shall release the pledgor Lender from its obligations hereunder or under any of the other Loan Document. THIS NOTE IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT. THIS NOTE AND THE OBLIGATIONS OF THE BORROWER HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED AND DETERMINED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. 7 -7- IN WITNESS WHEREOF, this DEMAND PROMISSORY NOTE has been duly executed by the undersigned, BROOKS AUTOMATION, INC., as of the day and in the year first above written. The Borrower: ------------- BROOKS AUTOMATION, INC. Witness: By: ----------------------- ------------------------------ May _,2000 Title: --------------------------- 8 -8- REPAYMENTS OF PRINCIPAL ----------------------- Advances and payments of principal of this Note were made on the dates and in the amounts specified below: Amount Amount of Balance of and Type Principal Principal Notation Date of Loan Repaid Unpaid Made by: - ---- -------- --------- ---------- -------- EX-27.1 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF OPERATIONS AND NOTE 9-ACCOUNTS RECEIVABLE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000. 1,000 U.S. DOLLARS 6-MOS SEP-30-2000 OCT-01-1999 MAR-31-2000 1 256,790 0 69,527 2,240 36,456 374,519 59,019 36,233 464,967 76,815 17,078 0 0 166 384,938 464,967 102,273 123,290 52,377 64,816 22,509 0 234 9,694 5,485 4,317 0 0 0 4,317 0.32 0.30
EX-27.2 5 RESTATED FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000. 1,000 US 6-MOS SEP-30-1999 OCT-01-1998 MAR-31-1999 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 34,108 43,558 18,840 24,793 10,109 0 1,538 (2,414) (275) (2,139) 0 0 0 (2,139) (0.23) (0.23)
EX-99.3 6 1995 EMPLOYEE STOCK PURCHASE PLAN 1 EXHIBIT 99.3 BROOKS AUTOMATION, INC. 1995 EMPLOYEE STOCK PURCHASE PLAN (AS AMENDED JANUARY 6, 2000) 1. PURPOSE. The Brooks Automation, Inc. 1995 Employee Stock Purchase Plan (the "Plan") is intended to provide a method whereby employees of Brooks Automation, Inc. (the "Company") will have an opportunity to acquire a proprietary interest in the Company through the purchase of shares of the Company's $.01 par value common stock (the "Common Stock"). It is the intention of the Company to have the Plan qualify as an "employee stock purchase plan" under Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). The provisions of the Plan shall, accordingly, be construed so as to extend and limit participation in a manner consistent with the requirements of that Section of the Code. 2. ELIGIBLE EMPLOYEES. (a) All employees of the Company or any of its participating subsidiaries shall be eligible to receive options under this Plan to purchase the Company's Common Stock. In no event may an employee be granted an option if such employee, immediately after the option is granted, owns stock possessing five (5%) percent or more of the total combined voting power or value of all classes of stock of the Company or of its parent corporation or subsidiary corporation as the terms "parent corporation" and "subsidiary corporation" are defined in Section 424(e) and (f) of the Code. For purposes of determining stock ownership under this paragraph, the rules of Section 424(d) of the Code shall apply and stock which the employee may purchase under outstanding options shall be treated as stock owned by the employee. (b) For the purpose of this Plan, the term employee shall not include an employee whose customary employment is for not more than twenty (20) hours per week or is for not more than five (5) months in any calendar year. 3. STOCK SUBJECT TO THE PLAN. The stock subject to the options granted hereunder shall be shares of the Company's authorized but unissued Common Stock or shares of Common Stock reacquired by the Company, including shares purchased in the open market. The aggregate number of shares which may be issued pursuant to the Plan is 750,000, subject to increase or decrease by reason of stock split-ups, reclassifications, stock dividends, changes in par value and the like. If the number of shares of Common Stock reserved and available for any Offering Period (as defined hereafter) is insufficient to satisfy all purchase requirements for that Offering Period, the reserved and available shares for that Offering Period shall be apportioned among participating employees in proportion to their options. 4. OFFERING PERIODS AND STOCK OPTIONS. (a) Six month periods during which payroll deductions will be accumulated under the Plan ("Offering Periods") will commence on January 1 and July 1 of each year and end on the June 30 or December 31 next following the commencement date. The first Offering Period shall commence on January 2, 1996 and end on June 30, 1996. Each Offering Period includes only regular pay days falling within it. The Offering 1 2 Commencement Date is the first day of each Offering Period. The Offering Termination Date is the applicable date on which an Offering Period ends under this Section. (b) On each Offering Commencement Date, the Company will grant to each eligible employee who is then a participant in the Plan an option to purchase on the Offering Termination Date at the Option Exercise Price, as provided in this paragraph (b), that number of full shares of Common Stock reserved for the purpose under the Plan as his or her accumulated payroll deductions on the Offering Termination Date (including any amount carried forward pursuant to Article 8 hereof) will pay for at the Option Exercise Price; provided that such employee remains eligible to participate in the Plan throughout such Offering Period. The Option Exercise Price for each Offering Period shall be the lesser of (i) eighty-five percent (85%) of the fair market value of the Common Stock on the Offering Commencement Date, or (ii) eighty-five percent (85%) of the fair market value of the Common Stock on the Offering Termination Date, in either case rounded up to avoid fractions other than multiples of 1/8. In the event of an increase or decrease in the number of outstanding shares of Common Stock through stock split-ups, reclassifications, stock dividends, changes in par value and the like, an appropriate adjustment shall be made in the number of shares and Option Exercise Price per share provided for under the Plan, either by a proportionate increase in the number of shares and proportionate decrease in the Option Exercise Price per share, or by a proportionate decrease in the number of shares and a proportionate increase in the Option Exercise Price per share, as may be required to enable an eligible employee who is then a participant in the Plan to acquire on the Offering Termination Date that number of full shares of Common Stock as his accumulated payroll deductions on such date will pay for at the Option Exercise Price, as so adjusted. (c) For purposes of this Plan, the term "fair market value" on any date means, if the Common Stock is listed on a national securities exchange or on the Nasdaq National Market, the average of the high and low sales prices of the Common Stock on such date on such exchange or as reported on Nasdaq National Market or, if the Common Stock is traded in the over-the-counter securities market, but not on the Nasdaq National Market, the average of the high and low bid quotations for the Common Stock on such date, each as published in the Wall Street Journal. If no shares of Common Stock are traded on the Offering Commencement Date or Offering Termination Date, the fair market value will be determined by taking the average of the fair market values on the immediately preceding and the next following business days on which shares of Common Stock are traded. (d) For purposes of this Plan the term "business day" as used herein means a day on which there is trading on a national securities exchange or the Nasdaq National Market on which the Common Stock is listed. (e) No employee shall be granted an option which permits his rights to purchase Common Stock under the Plan and any similar plans of the Company or any parent or participating subsidiary corporations to accrue at a rate which exceeds $25,000 of fair market value of such stock (determined at the time such option is granted) for each calendar year in which such option is outstanding at any time. The purpose of the limitation in the preceding sentence is to comply with and shall be construed in accordance with Section 423(b)(8) of the Code. 5. EXERCISE OF OPTION. Each eligible employee who continues to be a participant in the Plan on the Offering Termination Date shall be deemed to have exercised his or her option on such date and shall be deemed to have purchased from the Company such number of full shares of Common Stock reserved for the purpose of the Plan as his or her accumulated payroll deductions on such date, plus any amount carried forward pursuant to Article 8 hereof, will pay for at the Option Exercise Price, but in no event may an employee purchase shares of Common Stock 2 3 in excess of 1,500 shares of Common Stock on any Offering Termination Date. If a participant is not an employee on the Offering Termination Date and throughout an Offering Period, he or she shall not be entitled to exercise his or her option. All options issued under the Plan shall, unless exercised as set forth herein, expire at the end of the Offering Termination Date with respect to the Offering Period during which such options were issued. 6. AUTHORIZATION FOR ENTERING PLAN. (a) An eligible employee may enter the Plan by filling out, signing and delivering to the Chief Financial Officer of the Company or his or her designee an authorization ("Authorization"): (i) stating the amount to be deducted regularly from his or her pay; (ii) authorizing the purchase of stock for him or her in each Offering Period in accordance with the terms of the Plan; (iii) specifying the exact name in which Common Stock purchased for him or her is to be issued in accordance with Article 11 hereof; and (iv) at the discretion of the employee in accordance with Article 14, designating a beneficiary who is to receive any Common Stock and/or cash in the event of his or her death. Such Authorization must be received by the Chief Financial Officer of the Company or his or her designee at least ten (10) business days before an Offering Commencement Date. (b) The Company will accumulate and hold for the employee's account the amounts deducted from his or her pay. No interest will be paid thereon. Participating employees may not make any separate cash payments into their account. (c) Unless an employee files a new Authorization or withdraws from the Plan, his or her deductions and purchases under the Authorization he or she has on file under the Plan will continue as long as the Plan remains in effect. An employee may increase or decrease the amount of his or her payroll deductions as of the next Offering Commencement Date by filling out, signing and delivering to the Chief Financial Officer of the Company or his or her designee a new Authorization. Such new Authorization must be received by the Chief Financial Officer of the Company or his designee at least ten (10) business days before the date of such next Offering Commencement Date. 7. ALLOWABLE PAYROLL DEDUCTIONS. An employee may authorize payroll deductions in any even dollar amount up to but not more than ten percent (10%) of his or her base pay; provided, however, that the minimum deduction in respect of any payroll period shall be one percent (1%) of his or her base pay but in no event less than five dollars ($5); and provided further that the maximum percentage shall be reduced to meet the requirements of Section 4(e) hereof. Base pay means regular straight-time earnings and, if applicable, commissions, but excluding payments for overtime, bonuses, and other special payments. 8. UNUSED PAYROLL DEDUCTIONS. Only full shares of Common Stock may be purchased. Any balance remaining in an employee's account after a purchase will be reported to the employee and will be carried forward to the next Offering Period. However, in no event will the amount of the unused payroll deductions carried forward from a payroll period exceed the Option Exercise Price per share for the immediately preceding Offering Period. If for any Offering 3 4 Period the amount of unused payroll deductions should exceed the Option Exercise Price per share, the amount of the excess for any participant shall be refunded to such participant, without interest. 9. CHANGE IN PAYROLL DEDUCTIONS. Deductions may not be increased or decreased during an Offering Period. 10. WITHDRAWAL FROM THE PLAN. (a) An employee may withdraw from the Plan and withdraw all but not less than all of the payroll deductions credited to his or her account under the Plan at any time prior to the Offering Termination Date by delivering a notice to the Chief Financial Officer of the Company or his or her designee (a "Withdrawal Notice") in which event the Company will promptly refund without interest the entire balance of such employee's deductions not theretofore used to purchase Common Stock under the Plan. (b) If employee withdraws from the Plan, the employee's rights under the Plan will be terminated and no further payroll deductions will be made. To reenter, such an employee must file a new Authorization at least ten (10) business days before the next Offering Commencement Date. Such Authorization will become effective for the Offering Period that commences on such Offering Commencement Date. Notwithstanding the foregoing, employees who are subject to Section 16 of the Securities Exchange Act of 1934, as amended, who withdraw from the Plan may not reenter the Plan until the next Offering Commencement Date which is at least six months following the date of such withdrawal. 11. ISSUANCE OF STOCK. Upon written request, certificates for Common Stock will be issued and delivered to participants as soon as practicable after each Offering Period. Common Stock purchased under the Plan will be issued only in the name of the employee, or in the case of employees who are not subject to Section 16 of the Securities Exchange Act of 1934, as amended, if the employee's Authorization so specifies, in the name of the employee and another person of legal age as joint tenants with rights of survivorship. 12. NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS. An employee's rights under the Plan are his or hers alone and may not be transferred or assigned to, or availed of by, any other person. Any option granted to an employee may be exercised only by him or her, except as provided in Article 13 in the event of an employee's death. 13. TERMINATION OF EMPLOYEE'S RIGHTS. (a) Except as set forth in the last paragraph of this Article 13, an employee's rights under the Plan will terminate when he or she ceases to be an employee because of retirement, resignation, lay-off, discharge, death, change of status, failure to remain in the customary employ of the Company for greater than twenty (20) hours per week, or for any other reason. A Withdrawal Notice will be considered as having been received from the employee on the day his or her employment ceases, and all payroll deductions not used to purchase Common Stock will be refunded. (b) If an employee's payroll deductions are interrupted by any legal process, a Withdrawal Notice will be considered as having been received from him or her on the day the interruption occurs. (c) Upon termination of the participating employee's employment because of death, the employee's beneficiary (as defined in Article 14) shall have the right to elect, by written notice given to the Chief Financial Officer of the Company or his or her designee prior to the expiration of the thirty (30) day period 4 5 commencing with the date of the death of the employee, either (i) to withdraw, without interest, all of the payroll deductions credited to the employee's account under the Plan, or (ii) to exercise the employee's option for the purchase of shares of Common Stock on the next Offering Termination Date following the date of the employee's death for the purchase of that number of full shares of Common Stock reserved for the purpose of the Plan which the accumulated payroll deductions in the employee's account at the date of the employee's death will purchase at the applicable Option Exercise Price (subject to the maximum number set forth in Article 5), and any excess in such account will be returned to said beneficiary. In the event that no such written notice of election shall be duly received by the Chief Financial Officer of the Company or his or her designee, the beneficiary shall automatically be deemed to have elected to withdraw the payroll deductions credited to the employee's account at the date of the employee's death and the same will be paid promptly to said beneficiary, without interest. 14. DESIGNATION OF BENEFICIARY. A participating employee may file a written designation of a beneficiary who is to receive any Common Stock and/or cash in case of his or her death. Such designation of beneficiary may be changed by the employee at any time by written notice. Upon the death of a participating employee and upon receipt by the Company of proof of the identity and existence at the employee's death of a beneficiary validly designated by him under the Plan, the Company shall deliver such Common Stock and/or cash to such beneficiary. In the event of the death of a participating employee and in the absence of a beneficiary validly designated under the Plan who is living at the time of such employee's death, the Company shall deliver such Common Stock and/or cash to the executor or administrator of the estate of the employee, or if, to the knowledge of the Company, no such executor or administrator has been appointed, the Company, in the discretion of the Committee, may deliver such Common Stock and/or cash to the spouse or to any one or more dependents of the employee as the Committee may designate. No beneficiary shall, prior to the death of the employee by whom he or she has been designated, acquire any interest in the Common Stock or cash credited to the employee under the Plan. 15. TERMINATION AND AMENDMENTS TO PLAN. (a) The Plan may be terminated at any time by the Company's Board of Directors, effective on the next following Offering Termination Date. Notwithstanding the foregoing, it will terminate when all of the shares of Common Stock reserved for the purposes of the Plan have been purchased. Upon such termination or any other termination of the Plan, all payroll deductions not used to purchase Common Stock will be refunded without interest. (b) The Board of Directors reserves the right to amend the Plan from time to time in any respect; provided, however, that no amendment shall be effective without stockholder approval if the amendment would (a) except as provided in Articles 3, 4, 24 and 25, increase the aggregate number of shares of Common Stock to be offered under the Plan, or (b) change the class of employees eligible to receive options under the Plan; provided, further, that so long as there is a requirement under Rule 16b-3 under the Securities Exchange Act of 1934, as amended, for stockholder approval of the Plan and certain amendments thereto, any such amendment which (a) materially increases the number of shares of Common Stock which may be issued under the Plan, (b) materially increases the benefits accruing to participants in the Plan or (c) materially modifies the requirements as to eligibility for participation in the Plan, shall be subject to stockholder approval. 16. LIMITATIONS OF SALE OF STOCK PURCHASED UNDER THE PLAN. Common Stock purchased under the Plan by employees who are subject to Section 16 of the Securities Exchange Act of 1934, as amended, may not be sold for six (6) months after the Offering Termination Date 5 6 on which such shares were purchased, unless such transaction shall be exempt from Rule 16b-3 under the Securities Exchange Act of 1934, as amended. Thereafter, such employees may sell Common Stock purchased under the Plan at any time. Notwithstanding the foregoing, because of certain Federal tax requirements, all employees will agree by entering the Plan, promptly to give the Company notice of any such Common Stock disposed of within two years after the Offering Commencement Date on which the related option was granted showing the number of such shares disposed of. The employee assumes the risk of any market fluctuations in the price of such Common Stock. Certificates representing shares of Common Stock purchased under the Plan will bear a legend reflecting the restrictions on transfer set forth herein. 17. COMPANY'S PAYMENT OF EXPENSES RELATED TO PLAN. The Company will bear all costs of administering and carrying out the Plan. 18. PARTICIPATING SUBSIDIARIES. The term "participating subsidiaries" shall mean any subsidiary of the Company which is designated by the Committee (as defined in Article 19) to participate in the Plan. The Committee shall have the power to make such designation before or after the Plan is approved by the stockholders. 19. ADMINISTRATION OF THE PLAN. (a) The Plan shall be administered by a committee of "disinterested" directors as that term is defined in Rule 16b-3 under the Securities Exchange Act of 1934, as amended, appointed by the Board of Directors of the Company, which shall be the Company's Compensation Committee (the "Committee"). The Committee shall consist of not less than two members of the Company's Board of Directors. The Board of Directors may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, howsoever caused, shall be filled by the Board of Directors. No member of the Committee shall be eligible to participate in the Plan while serving as a member of the Committee. (b) The Committee shall select one of its members as chairman, and shall hold meetings at such times and places as it may determine. Acts by a majority of the Committee, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee. (c) The interpretation and construction by the Committee of any provisions of the Plan or of any option granted under it shall be final. The Committee may from time to time adopt such rules and regulations for carrying out the Plan as it may deem best. With respect to persons subject to Section 16 of the Securities and Exchange Act of 1934, as amended, transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors under said Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by that Committee. (d) Promptly after the end of each Offering Period, the Committee shall prepare and distribute to each participating employee in the Plan a report containing the amount of the participating employee's accumulated payroll deductions as of the Offering Termination Date, the Option Exercise Price for such Offering Period, the number of shares of Common Stock purchased by the participating employee with the participating employee's accumulated payroll deductions, and the amount of any unused payroll deductions either to be carried forward to the next Offering Period, or returned to the participating employee without interest. (e) No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under it. The Company shall indemnify each member of the Board of Directors and the Committee to the fullest extent permitted by law 6 7 with respect to any claim, loss, damage or expense (including counsel fees) arising in connection with their responsibilities under this Plan. 20. OPTIONEES NOT STOCKHOLDERS. Neither the granting of an option to an employee nor the deductions from his or her pay shall constitute such employee a stockholder of the Company with respect to the shares covered by such option until such shares have been purchased by and issued to him or her. 21. APPLICATION OF FUNDS. The proceeds received by the Company from the sale of Common Stock pursuant to options granted under the Plan may be used for any corporate purposes, and the Company shall not be obligated to segregate participating employees' payroll deductions. 22. GOVERNMENTAL REGULATION. (a) The Company's obligation to sell and deliver shares of the Company's Common Stock under this Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance or sale of such stock. (b) In this regard, the Board of Directors may, in its discretion, require as a condition to the exercise of any option that a Registration Statement under the Securities Act of 1933, as amended, with respect to the shares of Common Stock reserved for issuance upon exercise of the option shall be effective. 23. TRANSFERABILITY. Neither payroll deductions credited to an employee's account nor any rights with regard to the exercise of an option or to receive stock under the Plan may be assigned, transferred, pledged, or otherwise disposed of in any way by the employee. Any such attempted assignment, transfer, pledge, or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds in accordance with Article 10. 24. EFFECT OF CHANGES OF COMMON STOCK. If the Company should subdivide or reclassify the Common Stock which has been or may be optioned under the Plan, or should declare thereon any dividend payable in shares of such Common Stock, or should take any other action of a similar nature affecting such Common Stock, then the number and class of shares of Common Stock which may thereafter be optioned (in the aggregate and to any individual participating employee) shall be adjusted accordingly. 25. MERGER OR CONSOLIDATION. If the Company should at any time merge into or consolidate with another corporation, the Board of Directors may, at its election, either (i) terminate the Plan and refund without interest the entire balance of each participating employee's payroll deductions, or (ii) entitle each participating employee to receive on the Offering Termination Date upon the exercise of such option for each share of Common Stock as to which such option shall be exercised the securities or property to which a holder of one share of the Common Stock was entitled upon and at the time of such merger or consolidation, and the Board of Directors shall take such steps in connection with such merger or consolidation as the Board of Directors shall deem necessary to assure that the provisions of this Article 25 shall thereafter be applicable, as nearly as reasonably possible. A sale of all or 7 8 substantially all of the assets of the Company shall be deemed a merger or consolidation for the foregoing purposes. 26. WITHHOLDING OF ADDITIONAL FEDERAL INCOME TAX. The Company will undertake such withholding in connection with the Plan as it determines is appropriate, in its sole discretion. 27. APPROVAL OF STOCKHOLDERS. The Plan shall not take effect until approved by the holders of a majority of the outstanding shares of Common Stock of the Company, which approval must occur no later than the end of the first Offering Period after the date the Plan is adopted by the Board of Directors. Options may be granted under the Plan prior and subject to such stockholder approval. If the Plan is not so approved by the stockholders, all payroll deductions from participating employees shall be returned without interest and all options so granted shall terminate. Dates of Approval by the Board of Directors: November 1, 1995, December 10, 1997, and January 6, 2000. Dates of Approval by the Stockholders: February 22, 1996, February 26, 1998, and . 8 EX-99.4 7 1998 EMPLOYEE EQUITY INCENTIVE PLAN 1 EXHIBIT 99.4 BROOKS AUTOMATION, INC. 1998 EMPLOYEE EQUITY INCENTIVE PLAN (a) NAME AND PURPOSE This plan shall be known as the Brooks Automation, Inc. 1998 Employee Equity Incentive Plan (the "Plan"). The purpose of the Plan is to attract and retain employees and provide an incentive for them to assist Brooks Automation, Inc. (the "Company") to achieve long-range performance goals, and to enable them to participate in the long-term growth of the Company. (b) DEFINITIONS (a) "Award" means any Option awarded under the Plan. (b) "Board" means the Board of Directors of the Company. (c) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (d) "Committee" means the Stock Option Committee of the Board, or such other committee of not less than three members of the Board appointed by the Board to administer the Plan. (e) "Common Stock" or "Stock" means the Common Stock, par value $.01 per share, of the Company. (f) "Company" means Brooks Automation, Inc. and any business entity in which Brooks Automation, Inc. owns directly or indirectly 50% or more of the total combined voting power or has a significant financial interest as determined by the Committee. (g) "Designated Beneficiary" means the beneficiary designated by a Participant, in a manner determined by the Board, to receive amounts due or exercise rights of the Participant in the event of the Participant's death. In the absence of an effective designation by a Participant, Designated Beneficiary shall mean the Participant's estate. (h) "Fair Market Value" means, with respect to Common Stock or any other property, the fair market value of such property as determined by the Board in good faith or in the manner established by the Board from time to time. (i) "Nonqualified Stock Option" means an option to purchase shares of Common Stock, awarded to a Participant under Section 6, which is not intended to comply as an incentive stock option under Section 422 of the Code or any successor provision. (j) "Option" means a Nonqualified Stock Option. (k) "Participant" means a person eligible pursuant to Section 4 hereof and selected by the Board to receive an Award under the Plan. (c) ADMINISTRATION The Plan shall be administered by the Committee. The Board shall have authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the Plan as it shall from time to time consider advisable, and to interpret the provisions of the Plan. The Board's decisions shall be final and binding. To -1- 2 the extent permitted by applicable law, the Board may delegate to the Committee the power to make Awards to Participants and all determinations under the Plan with respect thereto. (d) ELIGIBILITY All employees of the Company, other than officers and directors of the Company, are eligible to be Participants in the Plan. (e) STOCK AVAILABLE FOR AWARDS (a) Subject to adjustment under subsection (b), Awards may be made under the Plan of Options to acquire not in excess of 1,800,000 shares of Common Stock. If any Award in respect of shares of Common Stock expires or is terminated unexercised or is forfeited for any reason or settled in a manner that results in fewer shares outstanding than were initially awarded, including without limitation the surrender of shares in payment for the Award or any tax obligation thereon, the shares subject to such Award or so surrendered, as the case may be, to the extent of such expiration, termination, forfeiture or decrease, shall again be available for award under the Plan. Common Stock issued through the assumption or substitution of outstanding grants from an acquired Company shall not reduce the shares available for Awards under the Plan. Shares of Common Stock issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares. (b) In the event that the Board determines that any stock dividend, extraordinary cash dividend, creation of a class of equity securities, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase Common Stock at a price substantially below fair market value, or other similar transaction affects the Common Stock such that an adjustment is required in order to preserve the benefits or potential benefits intended to be made available under the Plan, then the Board, shall equitably adjust any or all of (i) the number and kind of shares in respect of which Awards may be made under the Plan, (ii) the number and kind of shares subject to outstanding Awards, and (iii) the award, exercise or conversion price with respect to any of the foregoing, and if considered appropriate, the Board may make provision for a cash payment with respect to an outstanding Award, provided that the number of shares subject to any Award shall always be a whole number. (f) STOCK OPTIONS (a) Subject to the provisions of the Plan, the Board may award Nonqualified Stock Options and determine the number of shares to be covered by each Option, the Option Price therefor and the conditions and limitations applicable to the exercise of the Option. (b) The Board shall establish the Option Price at the time each Option is awarded, provided, however, that the Option Price shall not be less than the Fair Market Value of the Stock on the date of the grant of the Option. (c) Each Option shall be exercisable at such times and subject to such terms and conditions as the Board may specify in the applicable Award or thereafter. The Board may impose such conditions with respect to the exercise of Options, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable. (d) No shares shall be delivered pursuant to any exercise of an Option until payment in full of the Option Price therefor is received by the Company. Such payment may be made in whole or in part in cash or, to the extent permitted by the Board at or after the award of the Option, by delivery of a note or shares of Common Stock owned by the optionholder, including Restricted Stock, valued at their Fair Market Value on the date of delivery, by the reduction of the shares of Common Stock that the optionholder would be entitled to receive upon exercise of the Option, such shares to be valued at their Fair Market Value on the date of exercise, less their Option Price (a so-called "cashless exercise"), or such other lawful consideration as the Board may determine. In addition, an optionholder may engage in a successive exchange (or series of exchanges) in which -2- 3 the shares of Common Stock that such optionholder is entitled to receive upon the exercise of an Option may be simultaneously utilized as payment for the exercise of an additional Option or Options. (e) The Board may provide for the automatic award of an Option upon the delivery of shares to the Company in payment of an Option for up to the number of shares so delivered. (g) GENERAL PROVISIONS APPLICABLE TO AWARDS (a) DOCUMENTATION. Each Award under the Plan shall be evidenced by a writing delivered to the Participant specifying the terms and conditions thereof and containing such other terms and conditions not inconsistent with the provisions of the Plan as the Board considers necessary or advisable to achieve the purposes of the Plan or comply with applicable tax and regulatory laws and accounting principles. (b) BOARD DISCRETION. The terms of each Award need not be identical, and the Board need not treat Participants uniformly. Except as otherwise provided by the Plan or a particular Award, any determination with respect to an Award may be made by the Board at the time of award or at any time thereafter. Without limiting the foregoing, an Award may be made by the Board, in its discretion, to any 401(k), savings, pension, profit sharing or other similar plan of the Company in lieu of or in addition to any cash or other property contributed or to be contributed to such plan. (c) SETTLEMENT. The Board shall determine whether Awards are settled in whole or in part in cash, Common Stock, other securities of the Company, Awards or other property. The Board may permit a Participant to defer all or any portion of a payment under the Plan, including the crediting of interest on deferred amounts denominated in cash and dividend equivalents on amounts denominated in Common Stock. (d) TERMINATION OF EMPLOYMENT. The Board shall determine the effect on an Award of the disability, death, retirement or other termination of employment of a Participant and the extent to which, and the period during which, the Participant's legal representative, guardian or Designated Beneficiary may receive payment of an Award or exercise rights thereunder. (e) CHANGE IN CONTROL. In order to preserve a Participant's rights under an Award in the event of a change in control of the Company, the Board in its discretion may, at the time an Award is made or at any time thereafter, take one or more of the following actions: (i) provide for the acceleration of any time period relating to the exercise of the Award, (ii) provide for the purchase of the Award upon the Participant's request for an amount of cash or other property that could have been received upon the exercise of the Award had the Award been currently exercisable, (iii) adjust the terms of the Award in a manner determined by the Board to reflect the change in control, (iv) cause the Award to be assumed, or new rights substituted therefor, by another entity, or (v) make such other provision as the Board may consider equitable and in the best interests of the Company. (f) WITHHOLDING. The Participant shall pay to the Company, or make provision satisfactory to the Board for payment of, any taxes required by law to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability. In the Board's discretion, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the Award creating the tax obligation, valued at their Fair Market Value on the date of delivery. The Company and its affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Participant. (g) AMENDMENT OF AWARD. The Board may amend, modify or terminate any outstanding Award, including substituting therefor another Award of the same or a different type, changing the date of exercise, provided that the Participant's consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant. (h) MISCELLANEOUS -3- 4 (a) NO RIGHT TO EMPLOYMENT. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment. The Company expressly reserves the right at any time to dismiss a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award. (b) NO RIGHTS AS SHAREHOLDER. Subject to the provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a shareholder with respect to any shares of Common Stock to be distributed under the Plan until he or she becomes the holder thereof. (c) GOVERNING LAW. The provisions of the Plan shall be governed by and interpreted in accordance with the laws of the State of Delaware. (d) INDEMNITY. Neither the Board nor the Committee, nor any members of either, nor any employees of the Company or any parent, subsidiary, or other affiliate, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with their responsibilities with respect to this Plan, and the Company hereby agrees to indemnify the members of the Board, the members of the Committee, and the employees of the Company and its parent or subsidiaries in respect of any claim, loss, damage, or expense (including reasonable counsel fees) arising from any such act, omission, interpretation, construction or determination to the full extent permitted by law. -4- EX-99.7 8 2000 COMBINATION STOCK OPTION PLAN 1 EXHIBIT 99.7 BROOKS AUTOMATION, INC. 2000 COMBINATION STOCK OPTION PLAN SECTION 1. PURPOSE The purpose of this Brooks Automation, Inc. Combination Stock Option Plan (the "Plan") is to attract and retain employees and to provide an incentive for them to assist Brooks Automation, Inc. (the "Company") to achieve long-range performance goals, and to enable them to participate in the long-term growth of the Company. SECTION 2. DEFINITIONS As used herein, the following terms have the indicated meanings: "Affiliate" means any business entity in which the Company owns directly or indirectly 50% or more of the total combined voting power or has a significant financial interest as determined by the Committee. "Award" means any Option awarded under the Plan. "Board" means the Board of Directors of the Company. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Committee" means a committee of not less than two nonemployee directors appointed by the Board to administer the Plan or, alternatively, if the Board so determines, the whole Board of Directors. "Common Stock" or "Stock" means the Common Stock, $.01 par value, of the Company. "Company" means Brooks Automation, Inc., a Delaware corporation. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor statute. "Fair Market Value" means the fair market value of Common Stock as determined in accordance with Section 10 of this Plan. "Incentive Stock Option" means an option to purchase shares of Common Stock awarded to a Participant under Section 6 which is intended to meet the requirements of Section 422 of the Code or any successor provision. "Nonqualified Stock Option" means an option to purchase shares of Common Stock awarded to a Participant under Section 6 which is not intended to be an Incentive Stock Option. "Option" means an Incentive Stock Option or a Nonqualified Stock Option. "Parent Corporation" has the meaning specified in Section 425(e) of the Code. "Participant" means a person selected by the Committee to receive an Award under the Plan. "Permanent Disability" has the meaning in Section 22(e)(3) of the Code. "Plan" means this Brooks Automation, Inc. 2000 Combination Stock Option Plan. 1 2 "Subsidiary Corporation" has the meaning specified in Section 425(f) of the Code. "Ten Percent Stockholder" means an individual who owns (within the meaning of Section 425(d) of the Code) capital stock possessing more than 10% of the total combined voting power of all classes of capital stock of the Company or any Parent Corporation or Subsidiary Corporation at the time an Incentive Stock Option is granted under this Plan. SECTION 3. ELIGIBILITY All employees of the Company or any Affiliate capable of contributing significantly to the successful performance of the Company, other than a person who has irrevocably elected not to be eligible, are eligible to be Participants in the Plan. SECTION 4. STOCK SUBJECT TO PLAN (a) Subject to adjustment under Section 9, the maximum aggregate number of shares of the Company's Common Stock that may be issued under this Plan shall be 1,000,000 shares. (b) The shares to be issued under this Plan may be made available, at the discretion of the Board of Directors, from: (i) authorized but unissued shares; (ii) shares previously reserved for issuance upon exercise of Options which have expired or been terminated; or (iii) treasury shares and shares reacquired by the Company for the purpose, including shares purchased in the open market. (c) If any Award in respect of shares of Common Stock expires or is terminated unexercised or is forfeited for any reason or settled in a manner that results in fewer shares outstanding than were initially awarded, including without limitation the surrender of shares in payment for the Award or any tax obligation thereon, the shares subject to such Award or so surrendered, as the case may be, to the extent of such expiration, termination, forfeiture or decrease, shall again be available for award under the Plan, subject, in the case of Incentive Stock Options, to any limitation required under the Code. (d) Common Stock issued through the assumption or substitution of outstanding grants from an acquired company shall not reduce the shares available for Awards under the Plan. SECTION 5. ADMINISTRATION OF THE PLAN (a) The Plan shall be administered by the Committee. Except where the full Board of Directors serves as the Committee, the Committee shall serve at the pleasure of the Board, which may from time to time appoint additional members of the Committee, remove members and appoint new members in substitution for those previously appointed, and fill vacancies however caused. A majority of the Committee shall constitute a quorum and the acts of a majority of the members present at any meeting at which a quorum is present shall be deemed the action of the Committee. The Committee may act by unanimous written consent in lieu of a meeting. (b) Subject to the express provisions of this Plan and provided that all actions taken shall be consistent with the purposes of the Plan, the Committee shall have full and complete authority and the sole discretion to: (i) determine those persons eligible under Section 3; (ii) select those persons to whom Awards shall be granted under the Plan; (iii) determine the number of shares covered by and the form of the Awards to be granted; (iv) determine the time or times when Awards shall be granted; (v) establish the terms and conditions upon which Options may be exercised; (vi) alter any restrictions or conditions upon any Awards; and (vii) adopt rules and regulations, establish, define and/or interpret any other terms and conditions, and make all other determinations (which may be on a case-by-case basis) deemed necessary or desirable for the administration of the Plan. 2 3 (c) The terms of each type of Award need not be identical, and the Committee need not treat Participants uniformly. Except as otherwise provided by the Plan or a particular Award, any determination with respect to an Award may be made by the Committee at the time of award or at any time thereafter. (d) In making its determinations hereunder, the Committee shall take into account the nature of the services rendered or to be rendered by the recipient, their present and potential contributions to the success of the Company, and such other factors as the Committee, in its discretion, shall deem relevant in order to accomplish the purposes of the Plan. SECTION 6. STOCK OPTIONS (a) General. Subject to the provisions of the Plan, the Board may award Incentive Stock Options and Non-Qualified Stock Options and determine the number of shares to be covered by each Option, the option price therefor and the conditions and limitations applicable to the exercise of the Option. Any Option granted under this Plan shall be upon such terms and conditions not inconsistent with this Plan as the Committee may determine. At the time of grant of any Option, the Committee shall specify whether the Option is intended to be an Incentive Stock Option or a Non-Qualified Stock Option. If the Option is not intended to be an Incentive Stock Option but otherwise qualifies to be such, the agreement will include a specific statement that it is not intended to qualify as an Incentive Stock Option. (b) Price. The price at which any shares of Stock may be purchased pursuant to the exercise of an Option shall be determined by the Committee but may not be less than the greater of (i) the minimum legal consideration required under the laws of the jurisdiction in which the Company is then organized or (ii) the Fair Market Value of the Stock on the date of grant of the Option (or, in the case of Incentive Stock Options granted to Ten Percent Stockholders, 110% of the Fair Market Value on such date). (c) Period of Option. Each Option granted under this Plan shall continue in effect for such period not exceeding seven years as the Committee shall determine; provided, that any Incentive Stock Option must be granted within ten years from the date of establishment of this Plan or the date the Plan is approved by stockholders, whichever is earlier, and must have a term of not more than five years from the date of grant in the case of Incentive Stock Options granted to Ten Percent Stockholders. (d) Additional Provisions For ISOs. In the case of Incentive Stock Options, the following additional conditions shall apply: (i) Incentive Stock Options shall be granted only to employees of the Company; (ii) No Incentive Stock Option shall be exercisable beyond three months after the date upon which the Option holder ceases to be an employee of the Company or a Parent Corporation or Subsidiary Corporation, except that the Committee may provide in the Incentive Stock Option that in the event of termination of employment by reason of death or Permanent Disability of the holder, the Option may be exercised by the holder or his estate for a period of up to one year after termination of employment; (iii) Each Incentive Stock Option shall, by its terms, be transferable by the optionee only by will or the laws of descent and distribution, and shall be exercisable only by such employee during his lifetime; and (iv) The terms and conditions of Incentive Stock Options shall be subject to and comply with Section 422 of the Code, or any successor provision, and any regulations thereunder. 3 4 SECTION 7. EXERCISE OF OPTIONS; PAYMENT (a) Options may be exercised in whole or in part at such time and in such manner as the Committee may determine and as shall be prescribed in the written agreement with each holder. (b) The purchase price of shares of Stock upon exercise of an Option shall be paid by the Option holder in full upon exercise and may be paid as the Committee may determine in its sole discretion in any combination of: (i) cash or check payable to the order of the Company; (ii) delivery of a promissory note; (iii) delivery of shares of Common Stock (valued at Fair Market Value at the date of purchase of the Common Stock subject to the Option); or (iv) such other means as the Committee may permit; provided, however, that payment of the exercise price by delivery of shares of Common Stock of the Company owned by the Option holder may be made only if such payment does not result in a charge to earnings for financial accounting purposes, as determined by the Committee. (c) With the consent of the Committee, payment of the exercise price may also be made by delivery of a properly executed exercise notice to the Company, together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the exercise price. To facilitate such arrangements, the Company may enter into agreements for coordinating procedures with one or more securities brokerage firms. The date of delivery of such exercise notices shall be deemed the date of exercise. (d) The Committee may impose such conditions with respect to the exercise of Options, including conditions relating to applicable federal or state securities laws, as it considers necessary or advisable, including making the Common Stock issued upon exercise subject to restrictions on vesting or transferability, or to risk of forfeiture upon the happening of such events as the Committee may determine, any of which may be accelerated or waived in the Committee's sole discretion. (e) No shares of Common Stock shall be issued upon exercise of any Option under this Plan until full payment in the form approved by the Committee has been made and all other legal requirements applicable to the issuance or transfer of such shares and such other requirements as are consistent with the Plan have been complied with to the satisfaction of the Committee. SECTION 8. GENERAL PROVISIONS APPLICABLE TO AWARDS (a) Documentation. Each Award under the Plan shall be evidenced by a writing delivered to the Participant specifying the terms and conditions thereof and containing such other terms and conditions not inconsistent with the provisions of the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or comply with applicable laws and accounting principles. (b) Date of Award. The date of any Award hereunder shall be the date upon which such Award is voted by the Committee (or approved by the full Board if such approval is legally required), unless the vote expressly provides otherwise. (c) Termination of Employment. The Committee shall determine the effect on an Award of the disability, death, retirement or other termination of employment of a Participant and the extent to which, and the period during which, the Participant's legal representative, guardian or Designated Beneficiary may receive payment of an Award or exercise rights thereunder. (d) Withholding. The Participant shall pay to the Company, or make provision satisfactory to the Committee for payment of, any taxes required by law to be withheld in respect of Awards under the Plan no later than the date of the event creating the tax liability. In the Committee's discretion, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the Award 4 5 creating the tax obligation, valued at their Fair Market Value on the date of delivery. The Company and its Affiliates may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Participant. (e) Foreign Nationals. Awards may be made to Participants who are foreign nationals or employed outside the United States on such terms and conditions different from those specified in the Plan as the Committee considers necessary or advisable to achieve the purposes of the Plan or comply with applicable laws. (f) Amendment of Award. The Committee may amend, modify or terminate any outstanding Award, including substituting therefor another Award of the same or a different type, changing the date of exercise, or conversion of an Incentive Stock Option to a Non-Qualified Stock Option; provided, that the Participant's consent to such action shall be required unless the Committee determines that the action, taking into account any related action, would not materially and adversely affect the Participant. (g) Loans. The Company may make loans to Participants to permit them to exercise Options. If any such loans are made, the requirements of applicable Federal and State law regarding such loans shall be met. SECTION 9. ADJUSTMENTS Upon the occurrence of any of the following events, a Participant's rights with respect to Awards granted to him or her hereunder shall be adjusted as hereinafter provided, unless otherwise specifically provided in the written agreement between the Participant and the Company. (a) Stock Dividends and Stock Splits. If the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of Common Stock deliverable upon the exercise of Options shall be appropriately increased or decreased proportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or stock dividend. (b) Consolidation or Mergers. If the Company is to be consolidated with or acquired by another entity in a merger, sale of all or substantially all of the Company's assets or otherwise (an "Acquisition"), the Committee or the Board of Directors of any entity assuming the obligations of the Company hereunder shall, as to outstanding Awards, make appropriate provision for the continuation of such Awards by substituting on an equitable basis for the shares then subject to such Awards the consideration payable with respect to the outstanding shares of Common Stock in connection with the Acquisition and by adjusting on an equitable basis the exercise price of such Awards to reflect such Acquisition. (c) Recapitalization or Reorganization. In the event of a recapitalization or reorganization of the Company (other than an Acquisition) pursuant to which securities of the Company or of another corporation are issued with respect to the outstanding shares of Common Stock, a Participant upon exercising rights under an Award shall be entitled to receive what he would have received if he had exercised prior to such recapitalization or reorganization. (d) Modification of ISOs. Notwithstanding the foregoing, any adjustments made pursuant to subparagraphs (a), (b) or (c) with respect to Incentive Stock Options shall be made only after the Committee, after consulting with counsel for the Company, determines whether such adjustments would constitute a "modification" of such Incentive Stock Options (as that term is defined in Section 424 of the Code) or would cause any adverse tax consequences for the holders of such Incentive Stock Options. If the Committee determines that any such adjustments made with respect to Incentive Stock Options would constitute a modification of such Incentive Stock Options, it may refrain from making such adjustments. 5 6 (e) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, each Option will terminate immediately prior to the consummation of such proposed action or at such other time and subject to such other conditions as shall be determined by the Committee. (f) Issuances of Securities. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to Options. No adjustments shall be made for dividends paid in cash or in property other than securities of the Company. (g) Fractional Shares. No fractional shares shall be issued under the Plan and the optionee shall receive from the Company cash in lieu of such fractional shares. (h) Adjustments. Upon the happening of any of the events described in subparagraphs (a), (b) or (c) above, the class and aggregate number of shares set forth in Section 4 hereof that are subject to Awards which previously have been or subsequently may be granted under the Plan shall also be appropriately adjusted to reflect the events described in such subparagraphs. The Committee shall determine the specific adjustments to be made under this Section 9 and, subject to Section 5, its determination shall be conclusive. SECTION 10. FAIR MARKET VALUE (a) If the Common Stock is then traded on any national securities exchange or automated quotation system which has sale price reporting, the Fair Market Value of the Common Stock shall be the closing sales price, if any, on such exchange or system on the date as of which Fair Market Value is being determined or, if none, shall be determined by taking the closing sales price on the nearest date before that date in accordance with applicable regulations under the Code. (b) If the Common Stock is then traded on an exchange or system which does not have sale price reporting, the Fair Market Value of the Common Stock shall be the mean between the average of the "Bid" and the average of the "Ask" prices, if any, as reported for such the date as of which Fair Market Value is being determined, or, if none, shall be determined by taking a weighted average of the means between the highest and lowest sales prices on the nearest date before and the nearest date after such date in accordance with applicable regulations under the Code. (c) With respect to Common Stock if it is not publicly traded and with respect to any other property, the Fair Market Value of such property shall be determined in good faith by the Committee or in the manner otherwise provided by the Committee from time to time. SECTION 11. MISCELLANEOUS (a) No Right To Employment. No person shall have any claim or right to be granted an Award, and the grant of an Award shall not be construed as giving a Participant the right to continued employment. The Company expressly reserves the right at any time to dismiss a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Award. (b) No Rights Other Than Those Expressly Created. No person eligible to receive Awards under this Plan shall have any claim or right to be granted an Award hereunder. Neither this Plan nor any action taken hereunder shall be construed as (i) giving any Award holder any right to continue to be affiliated with the Company, (ii) giving any Award holder any equity or interest of any kind in any assets of the Company, or (iii) creating a trust of any kind or a fiduciary relationship of any kind between the Company and any such person. As to any claim for any unpaid amounts under this Plan, any person having a claim for payments shall be an unsecured creditor. No Award holder shall have any of the rights of a stockholder with respect to shares of Stock covered by an Award until such time as the stock has been issued. 6 7 (c) Governing Law. The provisions of the Plan shall be governed by and interpreted in accordance with the laws of The Commonwealth of Massachusetts. (d) Effective Date of Plan. The effective date of this Plan shall be the date of adoption by the Board of Directors. If the Plan is subject to the approval of the stockholders under paragraph (e) below, upon such approval it shall be effective as of the date of adoption by the Board of Directors. The Committee may grant Awards under the Plan prior to any such required shareholder approval, and any such Awards which are of a type that require shareholder approval shall become effective as of the date of grant upon receipt of such approval. (e) Stockholder Approval. The adoption of this Plan, or any amendment hereto, shall be subject to approval by stockholders only to the extent required by (i) the Code, (ii) the rules under Section 16 of the Exchange Act, (iii) rules of any stock exchange or over-the-counter stock market, or (iv) as otherwise required by law. Any such approval shall be obtained within the time required by such law or rule. Any stockholder approval of this Plan or any amendment so required shall mean the affirmative vote of at least a majority of the shares of capital stock present and entitled to vote at a duly held meeting of stockholders, unless a greater vote is required by state corporation law or the law or rule requiring stockholder approval, in which case such greater requirement shall apply. (f) Amendment of Plan. The Board of Directors of the Company may at any time, and from time to time, amend, suspend or terminate this Plan in whole or in part; provided, however, that the Board of Directors may not modify the Plan in a manner requiring the approval of stockholders under paragraph (e) above unless such approval is obtained to the extent required. (g) Term of Plan. This Plan shall terminate ten years from the date of adoption by the Board of Directors, and no Award shall be granted under this Plan thereafter, but such termination shall not affect the validity of Awards granted prior to the date of termination. 7 -----END PRIVACY-ENHANCED MESSAGE-----