SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Quarter Ended September 30, 1996
------------------
Commission File Number 0-11370
CERPROBE CORPORATION
--------------------
(Name of Issuer Specified in Its Charter)
Delaware 86-0312814
------------------------------- ----------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
600 South Rockford Drive, Tempe, Arizona 85281
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(602) 967-7885
--------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 issuer's classes of
common stock, at the latest practical date.
CLASS OUTSTANDING AS OF NOVEMBER 1, 1996
- ----- ----------------------------------
Common 5,037,821
Par value $.05 per share
Traditional Small Business Disclosure Format (check one):
Yes No X
----- -----
1
<PAGE>
CERPROBE CORPORATION
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1.
Condensed Consolidated Balance Sheets -
September 30, 1996 and December 31, 1995 ......................... 3
Condensed Consolidated Statements of Income -
Three and Nine Months Ended September 30, 1996 and 1995 .......... 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1996 and 1995 .................... 5
Notes to Condensed Consolidated Financial Statements ............. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS .................... 11
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS ................ 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................. 17
SIGNATURES ................................................................ 18
2
<PAGE>
CERPROBE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1996 1995
------ ------------ ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,232,995 $ 263,681
Marketable securities (Note B) 2,260,063 0
Accounts receivable, net (Note C) 5,169,219 4,377,041
Inventories (Note D) 3,811,354 2,802,081
Prepaid expenses 138,245 111,673
Income taxes receivable 364,116 163,464
Deferred income taxes 336,598 270,599
------------ ------------
TOTAL CURRENT ASSETS 19,312,590 7,988,539
------------ ------------
PROPERTY AND EQUIPMENT, net (Notes E & I) 6,681,928 4,667,786
GOODWILL & INTANGIBLES, net 1,734,424 1,923,396
PATENTS AND TECHNOLOGY, net 59,854 74,013
OTHER ASSETS (Note F) 1,348,924 313,716
------------ ------------
TOTAL ASSETS $ 29,137,720 $ 14,967,450
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 1,849,836 $ 1,499,853
Accrued expenses (Note G) 1,307,981 788,599
Convertible subordinated debentures 485,000 595,000
Current portion of notes payable (Note H) 124,770 123,743
Current portion of capital leases (Note I) 225,165 209,885
------------ ------------
TOTAL CURRENT LIABILITIES 3,992,752 3,217,080
------------ ------------
Notes payable, less current portion 312,584 408,376
Capital leases, less current portion 644,693 572,830
Deferred income taxes 66,123 66,123
Other liabilities 339,159 46,801
------------ ------------
TOTAL LIABILITIES 5,355,311 4,311,210
------------ ------------
MINORITY INTEREST 29,211 0
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.05 per share:
Authorized, 10,000,000 shares;
Issued and outstanding 523 shares at September 30, 1996 26 0
Common stock, par value $.05 per share:
Authorized, 10,000,000 shares;
Issued and outstanding 4,909,279 and 4,095,851
shares at September 30, 1996 and December 31, 1995 245,464 204,792
Additional paid-in-capital 17,488,202 7,239,410
Retained earnings 5,997,348 3,466,464
Unearned compensation 0 (241,872)
Foreign currency translation adjustment 22,158 (12,554)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 23,753,198 10,656,240
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,137,720 $ 14,967,450
============ ============
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CERPROBE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES $ 8,799,247 $ 6,834,260 $ 28,159,069 $ 17,968,454
COST OF GOODS SOLD 4,937,571 3,551,627 15,285,366 9,390,742
------------ ------------ ------------ ------------
GROSS MARGIN 3,861,676 3,282,633 12,873,703 8,577,712
------------ ------------ ------------ ------------
EXPENSES:
Engineering and product development 345,963 199,745 724,230 529,068
Selling, general and administrative 2,595,559 2,197,764 7,870,390 5,110,197
------------ ------------ ------------ ------------
2,941,522 2,397,509 8,594,620 5,639,265
------------ ------------ ------------ ------------
OPERATING INCOME 920,154 885,124 4,279,083 2,938,447
OTHER INCOME AND (EXPENSE):
Interest expense (50,737) (50,273) (167,194) (134,207)
Interest income 177,113 8,950 345,356 34,576
Other income 64,348 30,357 151,830 119,726
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 1,110,878 874,158 4,609,075 2,958,542
MINORITY INTEREST 21,521 0 83,809 0
PROVISION FOR INCOME TAXES 469,000 362,000 2,162,000 1,267,000
------------ ------------ ------------ ------------
NET INCOME $ 663,399 $ 512,158 $ 2,530,884 $ 1,691,542
============ ============ ============ ============
INCOME PER COMMON AND COMMON EQUIVALENT SHARE:
PRIMARY NET INCOME PER SHARE $ 0.14 $ 0.12 $ 0.56 $ 0.42
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 4,778,398 4,405,372 4,503,963 4,022,993
============ ============ ============ ============
FULLY DILUTED NET INCOME PER SHARE $ 0.11 $ 0.10 $ 0.45 $ 0.36
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 5,782,576 4,992,874 5,647,789 4,708,352
============ ============ ============ ============
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
CERPROBE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30,
------------------------------
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,530,884 $ 1,691,542
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,339,227 485,502
Gain on sale of fixed assets 0 6,444
Tax benefit from stock options exercised 407,000 0
Deferred income taxes (65,999) (8,901)
Provision for losses on accounts receivable 5,000 51,000
Provision for obsolete inventory 46,000 95,000
Compensation expense 49,383 0
Loss applicable to minority interest (83,809) 0
Changes in operating assets and liabilities:
Accounts receivable (797,178) (859,701)
Inventories (1,055,273) (935,603)
Prepaid expenses and other assets (461,780) (322,438)
Accounts payable and accrued expenses 869,365 168,549
Income taxes receivable (200,652) 0
Other liabilities 292,358 424,133
----------- -----------
Net cash provided by operating activities 2,874,526 795,527
----------- -----------
INVESTING ACTIVITIES:
Capital expenditures (2,896,861) (1,187,269)
Purchase of marketable securities (2,260,063) 0
Investment in CRPB Investors, L.L.C (600,000) 0
Cost incurred in Fresh Test Technology acquisition 0 (402,865)
Cash acquired in purchase of Fresh Test Technology 0 321,167
Proceeds from sale of fixed assets 0 43,613
----------- -----------
Net cash used in investing activities (5,756,924) (1,225,354)
----------- -----------
FINANCING ACTIVITIES:
Principal payments on notes payable and capital leases (261,000) (253,692)
Net proceeds from issuance of convertible preferred stock 9,400,000 0
Net proceeds from issuance of common stock 564,980 207,464
Capital contribution by minority interest partner 113,020 0
----------- -----------
Net cash provided by (used in) financing activities 9,817,000 (46,228)
----------- -----------
EFFECT OF EXCHANGE RATES ON CASH 34,712 (18,479)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,969,314 (494,534)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 263,681 738,319
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,232,995 $ 243,785
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Conversion of subordinated debentures to common stock $ 110,000 0
----------- -----------
Property acquired under capital leases and notes payable $ 253,378 $ 547,613
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION :
Interest paid $ 118,685 $ 110,263
----------- -----------
Income taxes paid $ 1,812,000 $ 1,679,876
----------- -----------
Issuance of stock for purchase of Fresh Test Technology $ 0 $ 2,662,969
----------- -----------
</TABLE>
5
<PAGE>
CERPROBE CORPORATION
--------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
SEPTEMBER 30, 1996
------------------
A. INTERIM FINANCIAL REPORTING
---------------------------
The balance sheet as of September 30, 1996, the statements of
operations for the three and nine months ended September 30, 1996 and
September 30, 1995, and the statements of cash flows for the nine
months ended September 30, 1996 and September 30, 1995 have been
prepared by Cerprobe Corporation (the "Company") without audit. In the
opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows for all periods
presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's 1995
Form 10-KSB. The results of operations of the interim periods are not
necessarily indicative of the results to be obtained for the entire
year.
In late 1995, Cerprobe Corporation formed a wholly owned Singapore
subsidiary called Cerprobe Asia Holdings PTE. LTD. Cerprobe Asia
Holdings PTE. LTD., together with Asian investors, formed a joint
venture named Cerprobe Asia PTE. LTD. Cerprobe Asia Holdings PTE. LTD.
is a 70% owner of Cerprobe Asia PTE. LTD. Subsequently, Cerprobe Asia
PTE. LTD created wholly owned subsidiaries, Cerprobe Singapore PTE. LTD
and Cerprobe Taiwan Co. LTD, to operate full service sales and
manufacturing plants. At present, Cerprobe Taiwan Co. LTD is not fully
operational. All activities that are related to the above Asian
Companies will, henceforth, be referred to as "Asian Operations."
B. MARKETABLE SECURITIES
---------------------
Marketable securities consist of a U.S. Treasury Note for $2,225,000 at
6 3/8%, maturing on July 15, 1999. This balance is stated at cost plus
accrued interest, which approximates fair market value.
C. ALLOWANCE FOR DOUBTFUL ACCOUNTS
-------------------------------
The allowance for doubtful accounts at September 30, 1996 and December
31, 1995 were $178,000 and $173,000, respectively.
6
<PAGE>
D. INVENTORIES
-----------
Inventories are stated at the lower of cost (determined on the
first-in, first-out method) or market and consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------- ------------
<S> <C> <C>
Raw materials $ 2,250,649 $ 1,655,974
Work-in-process 1,689,705 1,229,107
Reserve for obsolete inventory (129,000) (83,000)
-------------- ------------
Total $ 3,811,354 $ 2,802,081
============== ============
</TABLE>
E. PROPERTY AND EQUIPMENT
----------------------
Property and equipment consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------- ------------
<S> <C> <C>
Manufacturing tools and equipment $ 6,671,614 $ 4,825,724
Office furniture and equipment 2,783,528 1,722,312
Leasehold improvements 881,554 759,843
Construction in progress 507,185 398,838
Computer software 39,775 39,775
Accumulated depreciation and amortization (4,201,728) (3,078,706)
-------------- ------------
$ 6,681,928 $ 4,667,786
============== ============
</TABLE>
F. OTHER ASSETS
------------
In September 1996, the Company acquired a 36% interest in CRPB
Investors, L.L.C., for $600,000. CRPB Investors, L.L.C., an Arizona
limited liability company, was formed for the purpose of owning and
operating the 83,000 square foot facility being built to serve as
Cerprobe's worldwide headquarters. The investment will be accounted for
by the equity method of accounting. A holder of $460,000 of Cerprobe's
convertible subordinated debentures is a 24% owner of CRPB Investors,
L.L.C..
G. ACCRUED EXPENSES
----------------
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
--------------- -------------
<S> <C> <C>
Accrued payroll and related taxes $ 910,957 $ 482,866
Other accrued expenses 397,024 305,733
--------------- -------------
$ 1,307,981 $ 788,599
=============== =============
</TABLE>
7
<PAGE>
H. NOTES PAYABLE
-------------
On April 30, 1996, the Company entered into an unsecured $3,000,000
revolving line of credit with First Interstate Bank (now Wells Fargo
Bank), which expires on April 28, 1997. The non-use fee under the line
of credit is .125% of the unused portion, calculated per annum. The
interest rate on any amounts borrowed under the revolving credit
agreement is the lower of Prime Rate, which was 8.25% at September 30,
1996, or LIBOR (London Interbank Rate), plus 2.25%, which was 7.684% at
September 30, 1996. There was no amount outstanding under this
agreement at September 30, 1996.
On April 3, 1995, due to the acquisition of Fresh Test Technology
Corporation ("Fresh Test"), the Company acquired a note related to an
exclusive license for probe card technology, which provided for monthly
payments of $2,500. This note was paid in full on March 14, 1996.
I. LONG-TERM DEBT AND COMMITMENTS
------------------------------
On August 21, 1996, Cerprobe entered into a long term commercial
operating lease to consolidate its Arizona operations into a single
facility on a 12 acre parcel in Gilbert, Arizona. The lease will
commence upon completion of the 83,000 square foot facility in May
1997. The facility will serve as Cerprobe's worldwide headquarters and
is being built for Cerprobe's use by CRPB Investors, L.L.C., a limited
liability company formed for the purpose of owning and operating the
property. Cerprobe is a minority shareholder in CRPB Investors, L.L.C.
The initial term of the lease is 15 years with 7 options to extend the
lease for successive 5 year terms. The initial lease rate is dependent
on final construction costs, but is currently expected to be about
$875,000 per year.
On September 9, 1996, the Company leased various equipment with an
aggregate cost of $253,378 from Wells Fargo Leasing Corporation. The
interest rate on this lease is 8.48%. On September 30, 1996, the long
term portion of this lease was $209,227.
On October 10, 1996, the Company leased various equipment with an
aggregate cost of $270,590 from Wells Fargo Leasing Corporation. The
interest rate on this lease is 8.08%.
Convertible Subordinated Debentures
In March and April 1991, the Company issued $1,000,000 in aggregate
principal amount of Convertible Subordinated Debentures (the
"Debentures"). The Debentures are convertible into shares of the
Company's Common Stock at a conversion price equal to $1.00 per share.
As of September 30, 1996, $515,000 in principal amount of the
Debentures had been converted into 515,000 shares of Common Stock.
Accordingly, $485,000 in principal amount of the Debentures was
outstanding at September 30, 1996, all of which is due on December 15,
1996 ($480,000 of which bears interest at 12 1/2% and $5,000 of which
bears interest at 25%, payable semi-annually in June and December of
each year).
8
<PAGE>
Convertible Preferred Stock
On January 18, 1996, the Company issued 1,000 shares of Convertible
Preferred Stock for $10,000,000. Net proceeds, after deducting
expenses, were $9,400,000. If a holder does not convert within the
first two years, then automatic conversion occurs at the end of the
second year. The Convertible Preferred Stock converts at the lesser of
110% of the fixed strike price of $16.55 or 90% of the average five day
closing price prior to the conversion date. The Company may call the
Convertible Preferred Stock at any time in minimum amounts of
$2,000,000 at a price of 125% of par, or upon a merger, buyout or
acquisition.
Additionally, the Company issued 39,275 common stock warrants on
January 18, 1996. These give the holder the right to purchase from
Cerprobe Corporation not more than 39,275 fully paid and non-assessable
shares of the Company's Common Stock, $.05 par value, at a price of
$16.55 per share on or after January 16, 1997, with expiration in four
years.
During the first quarter ended March 31, 1996, 22 shares of Convertible
Preferred Stock were converted into 17,655 shares of Common Stock.
During the second quarter ended June 30, 1996, 106 shares of
Convertible Preferred Stock were converted into 83,300 shares of Common
Stock. During the third quarter ended September 30, 1996, 349 shares of
Convertible Preferred Stock were converted into 437,771 shares of
Common Stock. Accordingly, 523 shares of Convertible Preferred Stock
were outstanding at September 30, 1996.
Acquisition
On October 25, 1996, the Company signed an Agreement of Merger and Plan
of Reorganization with CRoute, Inc., a Texas corporation, pursuant to
which Cerprobe will acquire CompuRoute, Incorporated, a manufacturer of
printed circuit boards, 89% of which is owned by CRoute, Inc., in
exchange for 400,000 shares of Cerprobe common stock and $4.6 million
in cash, subject to reduction. The transaction will be accounted for by
Cerprobe under the purchase method of accounting in accordance with
generally accepted accounting principles. In connection with this
transaction, Cerprobe will purchase the existing building leased by
CompuRoute for $1.2 million and the assumption of the remaining
principal balance against the building, which at September 30, 1996,
was approximately $1,040,000. This transaction is subject to a number
of conditions, as well as approval by the shareholders of CRoute and
CompuRoute.
9
<PAGE>
J. PRO FORMA DATA - FRESH TEST TECHNOLOGY ACQUISITION
--------------------------------------------------
The following summary, prepared on a pro forma basis, presents the
results of operations as if the acquisition had occurred January 1,
1995.
Nine Months Ended
-----------------
September 30, 1995
------------------
Net sales $19,446,606
Net income 1,871,418
Primary earnings per share .46
Fully diluted earnings per share .40
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
General
Cerprobe designs, manufactures, and markets high-performance probing and
interface products for use in the testing of integrated circuits and hybrid
electronic circuits for the semiconductor industry. Its probe cards generally
range from $500 to $24,000, but may cost more depending upon the complexity and
performance specifications of the probe cards. Cerprobe's interface assemblies
range in price from $1,000 to $65,000. The Company has experienced significant
growth over the past few years with sales of $14 million in 1994, $26 million in
1995, and $28 million for the first nine months of 1996. Approximately $4
million of 1995 sales and $5.4 million of the first nine months of 1996 sales
were sales of interface products from the Company's 1995 acquisition of Fresh
Test Technology Corporation ("Fresh Test").
The Company operates domestic full service manufacturing and sales facilities in
Tempe and Chandler, Arizona; San Jose, California; Austin, Texas; and Westboro,
Massachusetts, and maintains sales offices in Beaverton, Oregon; Colorado
Springs, Colorado; and Boca Raton, Florida.
In Europe and Asia, Cerprobe markets its products and services its customers
through its full service manufacturing and sales facilities in Scotland and
Singapore. Cerprobe recently leased space for a Taiwan facility under the name
of Cerprobe Taiwan Co., LTD. This subsidiary is in the initial startup phase.
The Company intends to continue to expand in Southeast Asia as it believes that
area is the fastest growing region for the semiconductor industry.
Results of Operations
Three Months Ended September 30, 1996 Compared to Three Months Ended September
30, 1995
Net sales for the three months ended September 30, 1996 were $8,799,247 compared
to $6,834,260 for the three months ended September 30, 1995, an increase of 29%.
The increase in net sales reflects a continuation of higher order rates for the
Company's probe card products and the contribution of interface products from
the Company's 1995 acquisition of Fresh Test.
Gross margin for the three months ended September 30, 1996 was 44% of sales
compared to 48% of sales for the comparable period in 1995. The decrease in
gross margin was a result of the change in product mix, which includes a higher
ratio of interface product sales in the three months ended September 30, 1996,
as well as manufacturing variances due to decreased volume in relation to
capacity during the three months ended September 30, 1996.
Engineering and product development expenses for the three months ended
September 30, 1996 were $345,963 compared to $199,745 for the three months ended
September 30, 1995, an increase of 73%. This increase represents a controlled
expansion of research and development efforts to pursue the development of new
integrated circuit testing systems for the future.
11
<PAGE>
Selling, general and administrative expenses for the three months ended
September 30, 1996 were $2,595,559 compared to $2,197,764 for the three months
ended September 30, 1995, an increase of 18%. The increase in selling, general
and administrative expenses resulted primarily from increased sales and
marketing efforts, and increased fixed general and administrative costs due to
the Company's domestic facility expansion and the start-up of Asian operations.
Operating income for the three months ended September 30, 1996 was $920,154
compared to $885,124 for the three months ended September 30, 1995, an increase
of 4%. The increase in operating income resulted primarily from the increase in
net sales as a result of higher order rates.
Interest income for the three months ended September 30, 1996 was $177,113
compared with $8,950 for the three months ended September 30, 1995, an increase
of 1,879%. This increase was primarily due to the interest income earned on the
net proceeds from the issuance of Convertible Preferred Stock.
Income before income taxes and minority interest for the three months ended
September 30, 1996 was $1,110,878 as compared to $874,158 for the three months
ended September 30, 1995, an increase of 27%. The majority of the increase was
due to increased sales reflecting a continuation of higher order rates for the
Company's probe card and interface products.
The minority interest from Asian operations for the three months ended September
30, 1996 of $21,521 represents the Company's joint venture partner's share (30%)
of the loss from Asian operations. The initial start up phase for the Asian
operations, which includes training and build up of inventory, has been
occurring during 1996.
For the three months ended September 30, 1996, the Company's income tax rate
remained comparable to that of the same period in 1995.
Net income for the three months ended September 30, 1996 was $663,399 compared
to $512,158 for the three months ended September 30, 1995, an increase of 30%.
The increase was primarily due to the increase in net sales due to higher order
rates.
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30,
1995
Revenues for the nine months ended September 30, 1996 were $28,159,069 compared
to $17,968,454 for the nine months ended September 30, 1995, an increase of 57%.
The increase in net sales reflects a continuation of higher order rates for the
Company's probe card products and the contribution of interface products from
the Company's 1995 acquisition of Fresh Test.
Gross margin for the nine months ended September 30, 1996 was 46% of sales
compared to 48% of sales for the comparable period in 1995. The decrease in
gross margin is a result of a change in product mix, which includes a higher
ratio of interface product sales, as well as manufacturing variances due to
decreased volume in relation to capacity during the three months ended September
30, 1996.
Engineering and product development expenses for the nine months ended September
30, 1996 were $724,230 compared to $529,068 for the nine months ended September
30, 1995, an
12
<PAGE>
increase of 37%. This increase represents a controlled expansion of research and
development efforts to pursue the development of new integrated circuit testing
systems for the future.
Selling, general and administrative expenses for the nine months ended September
30, 1996 were $7,870,390 compared to $5,110,197 for the nine months ended
September 30, 1995, an increase of 54%. The increase in selling, general and
administrative expenses resulted primarily from increased sales and marketing
efforts, increased fixed general and administrative costs due to the Company's
domestic facility expansion and the start-up of Asian operations.
Operating income for the nine months ended September 30, 1996 was $4,279,083
compared to $2,938,447 for the nine months ended September 30, 1995, an increase
of 46%. The increase in operating income resulted primarily from the increase in
net sales as a result of higher order rates.
Interest expense for the nine months ended September 30, 1996 was $167,194
compared to $134,207 for the nine months ended September 30, 1995, an increase
of 25%. The increase in interest expense is primarily attributable to the
increase in lease equipment financing.
Interest income for the nine months ended September 30, 1996 was $345,356
compared to $34,576 for the nine months ended September 30, 1995, an increase of
899%. This increase was primarily due to the interest income earned on the net
proceeds from the issuance of Convertible Preferred Stock.
Income before income taxes and minority interest for the nine months ended
September 30, 1996 was $4,609,075 compared to $2,958,542 for the comparable
period in 1995, an increase of 56%. The majority of the increase was due to an
increase in sales which reflects a continuation of higher order rates for the
Company's probe card and interface products.
The minority interest from Asian operations for the nine months ended September
30, 1996 of $83,809 represents the Company's joint venture partner's share (30%)
of the loss from Asian operations. During the nine months ended September 30,
1996, the Asian operations were in the initial start up phase which includes
training and build up of inventory.
For the nine months ended September 30, 1996, the Company's income tax rate was
47% compared to 43% for the same period in 1995. The increase in income tax rate
was due to the non-deductibility of losses from the Company's European and Asian
subsidiaries.
Net income for the nine months ended September 30, 1996 was $2,530,884 compared
to $1,691,542 for the comparable period in 1995, an increase of 50%. The
increase was primarily due to the increase in net sales.
Liquidity and Capital Resources
The Company has financed its operations and capital requirements primarily
through cash flow from operations, equipment lease financing arrangements, and
sales of equity securities. In January 1996, the Company completed a private
placement of Convertible Preferred Stock which raised net proceeds of $9,400,000
to fund its domestic and international expansion as well as acquisitions of
other companies and/or technologies. At September 30, 1996, cash and marketable
securities were $9,493,058, compared to $263,681 as of December 31, 1995.
13
<PAGE>
During the nine months ended September 30, 1996, the Company generated
$2,874,526 in cash flow from operations. Accounts receivable increased $797,178,
or 18%, to $5,169,219, primarily due to the 8% increase in net revenues for the
three months ended September 30, 1996 compared to the three months ended
December 31, 1995, as well as the timing of the shipments during the respective
quarters. Inventories increased $1,055,273, or 36%, to $3,811,354 at September
30, 1996, to support the higher production levels related to the continuing
year-over-year increase in net sales. Both accounts receivable days sales
outstanding and inventory turns improved during the nine months ended September
30, 1996 compared to the fiscal year ended December 31, 1995.
Accounts payable and accrued expenses increased $869,365 from December 31, 1995,
or 38%, to $3,157,817 primarily due to increased activities with vendors.
Working capital increased $10,548,379, or 221%, to $15,319,838 from December 31,
1995 to September 30, 1996. The current ratio increased from 2.5 to 1 at
December 31, 1995 to 4.8 to 1 at September 30, 1996. These increases were
primarily as a result of the net proceeds from the private placement of the
Convertible Preferred Stock..
The Company increased its investment in property, plant, and equipment during
the nine months ended September 30, 1996 by $3,150,239 or 40%, to $10,883,656,
in order to expand capacity to meet customer demand for its products. These
capital expenditures were funded from cash flow from operations, proceeds from
the private placement of the Convertible Preferred Stock, and a capital lease of
$253,378 with Wells Fargo Leasing Corporation. Long term debt, comprised of
notes payable and capital leases, decreased $23,929, or 2%, to $957,277.
On October 25, 1996, the Company signed an Agreement of Merger and Plan of
Reorganization with CRoute, Inc., a Texas corporation, pursuant to which
Cerprobe will acquire CompuRoute, Incorporated, a manufacturer of printed
circuit boards, 89% of which is owned by CRoute, Inc., in exchange for 400,000
shares of Cerprobe common stock and $4.6 million in cash, subject to reduction.
The transaction will be accounted for by Cerprobe under the purchase method of
accounting in accordance with generally accepted accounting principles. In
connection with this transaction, Cerprobe will purchase the existing building
leased by CompuRoute for $1.2 million and the assumption of the remaining
principal balance against the building, which at September 30, 1996, was
approximately $1,040,000. This transaction is subject to a number of conditions,
as well as approval by the shareholders of CRoute and CompuRoute.
The Company has signed a long-term lease for a corporate headquarters and
manufacturing facility in Arizona. Construction began in September 1996 and is
anticipated to continue over an eight month period. The Company would be the
sole tenant of the approximately 83,000 square foot facility, which will permit
the Company to consolidate all of its Arizona activities.
In April 1996, the Company entered into a $3,000,000 unsecured revolving line of
credit, which matures April 28, 1997, with its primary lender, First Interstate
Bank of Arizona (now Wells Fargo Bank). Advances under the revolving line may be
made as Prime Rate Advances, which accrue interest payable monthly, at the
Bank's prime lending rate, or as LIBOR Rate Advances which bear interest at 225
basis points in excess of the LIBOR Base Rate. At September 30, 1996, no
borrowings were outstanding under this credit facility.
14
<PAGE>
If the remaining holders of the Convertible Preferred Stock elect to convert
their shares into shares of Common Stock based on the current market price of
the Company's Common Stock, the Company would be required to issue more than
800,000 shares of Common Stock. To insure compliance with Nasdaq National Market
rules requiring shareholder approval of issuances of Common Stock representing
greater than 20% of all shares outstanding, the Company has the right to redeem
any shares of Convertible Preferred Stock that, if converted, would result in
the issuance of more than 800,000 shares of Common Stock. In such event, the
Company may redeem those shares of Convertible Preferred Stock for cash in an
amount determined by a formula based on the current market price of the
Company's Common Stock. If the holders of all outstanding shares of Convertible
Preferred Stock had elected to convert their shares on October 24, 1996, the
Company estimates that it would have been required to pay approximately
$3,300,000 to have redeemed all shares of Convertible Preferred Stock that, if
converted, would have resulted in the issuance of more than 800,000 shares of
Common Stock. Based on the formula referred to above, the amount of cash
required to redeem any shares of Convertible Preferred Stock will increase if
the price of the Company's Common Stock decreases, and will decrease if the
price of the Company's Common Stock increases.
The Company believes that its capital, together with loan commitments described
above and anticipated cash flow from operations, will provide adequate sources
to fund operations in the near term. The Company anticipates that any additional
cash requirements as the result of operations or capital expenditures will be
financed through cash flow from operations, by borrowing from the Company's
primary lender, or by lease financing arrangements.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995
Statements in this report regarding the expansion of the Company's operations in
Southeast Asia and adequacy of sources of capital are forward looking
statements. Words such as "expects", "intends", "believes", "anticipates" and
"will likely" also identify forward looking statements. Actual results, however,
could differ materially from those anticipated for a number of reasons,
including increased competition in Southeast Asia, a downturn in the market for
semiconductors, increases in interest rates, foreign currency fluctuations, and
other unanticipated factors. Risk factors, cautionary statements, and other
conditions that could cause actual results to differ are contained in the
Company's SEC filings, its press releases dated July 22, 1996 and October 17,
1996, and the Company's Annual Report on Form 10-KSB.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
<TABLE>
<S> <C> <C>
a. The annual meeting of stockholders of the Company was held on
July 23, 1996 in Tempe, Arizona. The table below
briefly describes the proposals and results from the
annual meeting of stockholders.
1. Election of Directors For Withheld
--- --------
Ross J. Mangano 3,718,932 14,256
C. Zane Close 3,718,932 14,256
Kenneth W. Miller 3,718,932 14,256
Donald F. Walter 3,622,734 110,454
William A. Fresh 3,718,932 14,256
2. Proposal to ratify the appointment of KPMG Peat Marwick LLP as
the independent auditors of the Company.
For Against Abstain
--- ------- -------
3,722,454 1,500 9,234
b. A special meeting of stockholders of the Company, which was a
continuation of the annual meeting of stockholders, was held on August
20, 1996 in Phoenix, Arizona.
1. Proposal to amend the Company's Certificate of Incorporation to
add a provision allowing the Board of Directors to consider certain
factors when evaluating certain matters such as tender offers.
For Against Withheld Abstain
--- ------- -------- -------
2,409,732 104,540 1,266,860 74,741
2. Proposal to amend the Company's Certificate of Incorporation so
that the Company will be subject to the provisions of Section 203
of the Delaware General Corporation Law.
For Against Withheld Abstain
--- ------- -------- -------
2,409,857 100,390 1,266,860 75,766
3. Proposal to amend the Company's Certificate of Incorporation to
eliminate actions by written consent of stockholders.
For Against Withheld Abstain
--- ------- -------- -------
2,416,769 119,228 1,296,860 20,016
4. Proposal to amend the Company's Certificate of Incorporation to
add certain minimum price and procedural requirements in
connection with certain transactions such as business
combinations.
For Against Withheld Abstain
--- ------- -------- -------
2,463,557 104,140 1,226,860 18,316
</TABLE>
16
<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a. Exhibits required by Item 601 of Regulation S-K
1. Capital Lease Agreement between the Company
and Wells Fargo Leasing Corporation dated
October 10, 1996.
2. Capital Lease Agreement between the Company
and Wells Fargo Leasing Corporation dated
September 9, 1996.
3. Lease Agreement between the Company and CRPB
Investors L.L.C. dated August 21, 1996.
4. Employment Agreement between the Company and
Randal L. Buness dated June 26, 1996.
5. Operating Agreement between the Company and
CRPB Investors, L.L.C. dated September 18,
1996.
b. Exhibit 11. Statement regarding computation of per
share earnings.
17
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CERPROBE CORPORATION
/s/ Randal L. Buness
-------------------------
Randal L. Buness
Vice President - Chief Financial Officer
November 1, 1996
18
EQUIPMENT SCHEDULE
DATED October 10, 1996
to
MASTER LEASE AGREEMENT
DATED June 6, 1994
LESSEE: LESSOR:
CERPROBE CORPORATION Wells Fargo Leasing Corporation
"(as assignee of all right,
title and interest of First
Interstate Bank of Arizona)"
Name
600 S. Rockford Drive P.O. Box 53456, MAC 4101-250
- ---------------------------------------------
Address
Tempe, Arizona 85281 Phoenix, Arizona 85072-3456
1. Master Lease: The terms and conditions of that Master Lease
Agreement dated as of the date set forth above by and between the Lessor, Wells
Fargo Leasing Corporation "(as assignee of all right, title and interest of
First Interstate Bank of Arizona)" and Lessee (the "Master Agreement") are by
this reference incorporated herein as if fully set forth herein and together
with the terms and conditions hereof, and of all schedules, riders, addenda
and/or exhibits that are attached or refer to this Equipment Schedule,
constitute a single and severable agreement of lease (this "Lease"). Subject to
all of the terms and conditions of this Lease, Lessor hereby leases to Lessee,
and Lessee hereby hires from Lessor, the personal property described below and
on any supplemental Schedule "A" hereto (hereinafter, together with all
replacement parts, additions, modifications, repairs and accessories
incorporated therein and/or attached thereto, said personal property is referred
to as the "Equipment"):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Qty. Description of Equipment - Make, kind, model no., serial no., and Original
any other pertinent identification Cost
- ----------- ----------------------------------------------------------------------------------- --------------------
<S> <C> <C>
Applied Precision Invoice #2541
1 PRVX System, 960 Channels, LP $250,125.50
1 PRVX Table Short 1280
1 Assy, PRVX W/S PF Compat
1 Assy, VX CPLT W/BEVEL Postgrind
1 PRVX Controller Pkg.
1 Monitor 17" Samsung
1 PRV/PRVX Test Software
1 Assy, PRVX Channel Config. Pkg.
1 Assy, PRVX Accessory kit
2 PRVX Training AT API
1 Checkpoint System Install.
1 Assy, PRVX Shipping Pkg.
1 Assy, Probe Force, PRVX, factory
1 PWA, Edge Card 48 Pin VX $697.50
1 PWA, PRVX Cal Card Conn $697.50
1 PWA, Edge Card 88 Pin VX $813.75
1 PWA, Edge Card 128 Pin VX $1,046.25
2 Manual PRVX 7.1
1 Manual PRVX 7.1 Cleanroom
Shipping Charges $935.00
location: 600 S. Rockford Drive,
Tempe, Arizona 85281
- ----------------------------------------------------------------------------------------------------------------------
Applied Precision Invoice #2699
1 Probe Force $16,275.00
location: 600 S. Rockford Drive,
Tempe, Arizona 85281
- ----------------------------------------------------------------------------------------------------------------------
Sales or Use Tax
- ----------------------------------------------------------------------------------------------------------------------
*If additional space is required, attach Schedule A. Total Original Cost $270,590.50
- ----------------------------------------------------------------------------------------------------------------------
Location of Equipment (if additional space is required, attach Schedule A)
A. 600 S. Rockford Drive Tempe Maricopa Arizona 85281
-----------------------------------------------------------------------------------
Address City County State Zip
B.
-----------------------------------------------------------------------------------
Address City County State Zip
</TABLE>
2. Acceptance Deadline: October 25, 1996
3. Term: The term of this Lease shall be a period of 60 months
and shall commence on the date that the Equipment is accepted by Lessee on
behalf of Lessor (the "Acceptance Date").
4. Rent Commencement Date: The first day of the month immediately
following the Acceptance Date.
1
<PAGE>
5. Basic Rent Payment Date: The first day of each month beginning
with the Rent Commencement Date.
6. Rent:
(a) Interim Rent: An amount equal to 1/30th of the Basic
Rent multiplied by the number of days elapsed from and including the Acceptance
Date but excluding the Rent Commencement Date and due and payable concurrently
with the delivery of the Certificate of Acceptance by Lessee to Lessor.
(b) Basic Rent: for the term of this Lease, Lessee shall
pay Lessor Basic Rent of $5,460.20 monthly payable on each Basic Rent Payment
Date.
If the first day of each month during the term of this Lease is not a
business day, Basic Rent shall be due on the next subsequent business day.
Unless otherwise expressly agreed to in writing by Lessor, sales tax on each
rental payment received by Lessor under this lease shall be due and payable by
Lessee to Lessor on each Basic Rent Payment Date.
(c) Overdue Rent: Lessee shall pay to Lessor an Overdue
Rent Charge of 5% of all Basic Rent payments not received by Lessor on or before
the Basic Rent Payment Date.
7. Purchase Option: Provided that (i) an Event of Default (or an event
or condition which, with the lapse of time or the giving of notice or both,
would constitute an Event of Default) does not exist; (ii) this Lease has not
previously been terminated, and (iii) Lessee has given Lessor not less than
sixty (60) days notice prior to the expiration of the initial term of the Lease,
Lessor shall have the option to purchase all (but not less than all) of the
Equipment on the original expiration date of this Lease under the following
terms and conditions:
[Lessee shall have the right to purchase the Equipment, on an "as-is,
where-is" basis, without representation or warranty of any kind, for $1.00,
provided that such right is further subject to payment in full of the purchase
price on or before the expiration of the initial term of this Lease.]
Lessee shall pay or reimburse Lessor all of Lessor's costs and expenses incurred
in connection with such purchase and shall pay all taxes imposed in connection
with such sale (other than taxes imposed on or measured by lessor's net income).
8. Modification to Master Agreement: All terms and conditions of
this Lease shall be as set forth above and in the Master Agreement, except (if
additional space is required, attach an Addendum to this Lease): N/A
9. Conditions Precedent: Lessor shall have no obligation to
purchase the Equipment and to lease the same to Lessee hereunder. (i) if the
actual cost of the Equipment exceeds the original cost thereof set forth
hereinabove; (ii) if there exists any Event of Default or event or condition
which, with the lapse of time or the giving of notice or both, would constitute
an Event of Default; or (iii) unless prior to the Acceptance Deadline Lessee, at
its expense, shall have delivered or caused to be delivered to Lessor all of the
Documents required under Section 3 of the Master Agreement and, in addition,
Lessee, at its expense, shall have fully satisfied all of the following
additional conditions precedent (if additional space is required, attach an
Addendum to this Lease): N/A
10. Schedule: The "Schedule of Stipulated Loss Percentages" that
is attached or refers to this Equipment Schedule is by this reference expressly
incorporated herein as if fully set forth herein.
11. Reaffirmation: By their execution and delivery of this
Equipment Schedule, the parties hereby reaffirm all of the terms and conditions
of the Master Agreement, except to the extent, if any, modified hereby.
12. Counterparts: The Equipment Schedule evidencing this Lease may
be executed in more than one original counterpart. However, only the counterpart
designated below as "Counterpart No. 1" shall evidence the monetary obligation
of Lessee with respect to this Lease. To the extent, if any, that this Lease
constitutes "chattel paper," as that term is defined in the Arizona Uniform
Commercial Code, no security interest in this Lease may be created or perfected
by the transfer or possession of any counterpart hereof other than said
"Counterpart No. 1."
THIS IS COUNTERPART NO. 1 OF 1 COUNTERPART ORIGINALS.
IN WITNESS WHEREOF, this Equipment Schedule has been executed,
delivered and accepted this 10th day of October 1996.
LESSOR: LESSEE:
CERPROBE CORPORATION Wells Fargo Leasing Corporation
- ---------------------------------- -------------------------------
"(as assignee of all right,
title and interest of First
Interstate Bank of Arizona)"
By SIGNATURE NOT LEGIBLE By SIGNATURE NOT LEGIBLE
------------------------------- ----------------------------
Its President/CEO Its Vice President
------------------------------- ---------------------------
2
<PAGE>
SCHEDULE OF STIPULATED LOSS PERCENTAGES
to
EQUIPMENT SCHEDULE
DATED October 10, 1996
to
MASTER LEASE AGREEMENT
DATED June 6, 1994
Rental Payment Date Stipulated Loss
in the month of: Percentage
- ---------------- ----------
1 98.64
2 97.27
3 95.90
4 94.51
5 93.12
6 91.71
7 90.30
8 88.88
9 87.44
10 86.00
11 84.55
12 83.09
13 81.61
14 80.13
15 78.64
16 77.14
17 75.63
18 74.10
19 72.57
20 71.03
21 69.47
22 67.91
23 66.34
24 64.75
25 63.16
26 61.55
27 59.93
28 58.30
29 56.67
30 55.02
31 53.36
32 51.68
33 50.00
34 48.30
35 46.60
36 44.88
37 43.15
38 41.41
39 39.66
40 37.89
41 36.12
42 34.33
43 32.53
44 30.72
45 28.89
46 27.05
47 25.21
48 23.34
49 21.47
50 19.58
51 17.68
52 15.77
53 13.84
54 11.91
55 9.96
56 7.99
57 6.01
58 4.02
59 2.02
For purposes of the "Master Agreement" (defined below) and the "Lease
" (defined below), the term "Stipulated Loss Percentage" means, with respect to
any item of "Equipment" (defined in the Lease) for which "Stipulated Loss Value"
(defined in the Master Agreement) is determined, the percentage set forth
hereinabove that corresponds to the "Rental Payment Date" (defined in the Lease)
through which rental payments on such Equipment have actually been paid
(exclusive of prepayments of rent otherwise due and payable at the end of the
Lease term, if any are required under the Lease) as of the date that the
Stipulated Loss Value of such item of Equipment is determined.
-1-
<PAGE>
IN WITNESS WHEREOF, the undersigned "Lessor" and "Lessee" have this
10th day of October, 1996 executed and delivered this "Schedule of Stipulated
Loss Percentages" to that Equipment Schedule dated as set forth above (the
"Lease") to that Master Lease Agreement dated as set forth above (the "Master
Agreement") between the undersigned "Lessor" and "Lessee."
LESSOR: LESSEE:
WELLS FARGO LEASING CORPORATION CERPROBE CORPORATION
By By /s/ Signature Illegible
----------------------------------- -------------------------------
Its Authorized Representative Title President/CEO
-----------------------------
-2-
<PAGE>
CERTIFICATE OF ACCEPTANCE
Wells Fargo Leasing Corporation
"(as assignee of all right, title and interest of
First Interstate Bank of Arizona)"
P.O. Box 53456, MAC 4101-250
Phoenix, Arizona 85072-3456
RE: Acceptance of Equipment Leased Under Equipment Schedule dated October
10, 1996 (the "Lease") to Master Lease Agreement dated June 6, 1994
(the "Master Agreement") between the undersigned and Wells Fargo
Leasing Corporation.
Gentlemen:
This Certificate of Acceptance is delivered pursuant to Section 2 of the Master
Agreement, and constitutes a "Certificate of Acceptance," as defined therein.
We, as Lessee, have received all of the "Equipment" (as defined in the Lease),
and all necessary installation thereof has been completed. We have inspected,
tested and approved all of the Equipment, and find that each piece is in good
working order and is of the size, design, type, quality, condition, capacity and
manufacture specified by us, and conforms to any applicable purchase orders
therefor. We approve the contract by which you acquired the Equipment or the
right to possession and use of the goods. Our inspection and test has disclosed
no defects or deficiencies in any of the Equipment. You are hereby notified that
we accepted delivery of all of the Equipment on your behalf on 10/24/96 , 199 .
We hereby certify that as of the date hereof (i) no Event of Default has
occurred under the Lease of the Master Agreement; (ii) the presentations and
warranties made by Lessee pursuant to the Lease and Master Agreement are true
and correct, (iii) Lessee has obtained insurance policies with respect to the
Equipment as are required to be obtained under the Lease and Master Agreement;
and (iv) the Equipment will be located at 600 S. Rockford Rd., Tempe, Arizona
85281.
Sincerely,
Cerprobe Corporation
- --------------------------------------
("Lessee")
By: SIGNATURE NOT LEGIBLE
-----------------------------------
Its: President/CEO
----------------------------------
Dated: October 10, 1996
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- --------------------------------------------------------------------------------------------------------------
Approved by the Secretary of State of Arizona Rev. 10/90 FORM UCC-1 Space below used by filing office
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Return copy or recorded original to: ARIZONA UNIFORM COMMERCIAL CODE
FINANCING STATEMENT--FORM UCC-1
This FINANCING STATEMENT is presented for filing
(recording) pursuant to the Arizona Uniform
Commercial Code.
- --------------------------------------------------------------------------------------------------------------
1. (Last name first and address): Lessee 2. Address: Lessor
Cerprobe Corporation Wells Fargo Leasing Corporation
600 S. Rockford Drive 100 West Washington MAC 4101-250
Tempe, Arizona 85281 Phoenix, Arizona 85003
- --------------------------------------------------------------------------------------------------------------
3. Name and Address of Assignee of Secured 4. [ ] if checked, products of collateral are
Party(ies): also covered.
---------------------------------------------------
5. This Financing Statement covers the
following types (or items) of property:
- ------------------------------------------------------ See Exhibit "A" attached hereto and by this
6. If the collateral is crops, the crops are reference incorporated herein as if fully set
growing or to be grown on the following forth.
described real estate:
The transaction related to this financing
statement is a true lease; this precautionary
notice file is made pursuant to U.C.C. 9-408
(A.R.S. 47-9408).
- --------------------------------------------------------------------------------------------------------------
7. If the collateral is (a) goods which are or are to become fixtures; (b)
timber to be cut; or (c) minerals or the like (including oil and gas), or
accounts resulting from the sale thereof at the wellhead or minehead to which
the security interest attaches upon extraction, the legal description of the
real estate concerned is:
And, this Financing statement is to be recorded in the office where a mortgage
on such real estate would be recorded. If the Debtor does not have an interest
of record, the name of a record owner is:
- --------------------------------------------------------------------------------------------------------------
8. This Financing Statement is signed by the Secured Party instead of the debtor to perfect or continue
perfection of a security interest in:
[ ] collateral already subject to a security interest in jurisdiction when it was brought into this state.
[ ] proceeds of collateral because of a change in type or use.
[ ] collateral as to which the filing has lapsed or will lapse.
[ ] collateral acquired after a change of name, identity, or corporate structure of the Debtor.
- --------------------------------------------------------------------------------------------------------------
Cerprobe Corporation (Use Dated: 10/10/96
- ------------------------------------- whichever --------------------------------------
By: SIGNATURE NOT LEGIBLE is Wells Fargo Leasing Corporation
- ------------------------------------- applicable) ---------------------------------------------
Its: President/CEO By: SIGNATURE NOT LEGIBLE Its:Vice President
- ------------------------------------- ---------------------------------------------
</TABLE>
EQUIPMENT SCHEDULE
DATED September 9, 1996
to
MASTER LEASE AGREEMENT
DATED September 9, 1996
LESSEE: LESSOR:
CERPROBE CORPORATION Wells Fargo Leasing
- ----------------------------------------------- Corporation "(as assignee of
all right, title and
interest of First Interstate
Bank of Arizona)"
Name
600 S. Rockford Drive P.O. Box 53456, MAC 4101-250
- ----------------------------------------------
Address
Tempe, Arizona 85281 Phoenix, Arizona 85072-3456
- ----------------------------------------------
1. Master Lease: The terms and conditions of that Master Lease
Agreement dated as of the date set forth above by and between the Lessor, Wells
Fargo Leasing Corporation "(as assignee of all right, title and interest of
First Interstate Bank of Arizona)" and Lessee (the "Master Agreement") are by
this reference incorporated herein as if fully set forth herein and together
with the terms and conditions hereof, and of all schedules, riders, addenda
and/or exhibits that are attached or refer to this Equipment Schedule,
constitute a single and severable agreement of lease (this "Lease"). Subject to
all of the terms and conditions of this Lease, Lessor hereby leases to Lessee,
and Lessee hereby hires from Lessor, the personal property described below and
on any supplemental Schedule "A" hereto (hereinafter, together with all
replacement parts, additions, modifications, repairs and accessories
incorporated therein and/or attached thereto, said personal property is referred
to as the "Equipment"):
<TABLE>
<CAPTION>
Qty. Description of Equipment - Make, kind, model no., serial no., and Original
any other pertinent identification Cost
- ----------- ----------------------------------------------------------------------------------- --------------------
<S> <C> <C>
1 Applied Precision Invoice #2372 $251,518.50
po req date 6/14/96
1 52-502755-1280
ASSY, PRVX ACCESSORY KIT
1 52-502757-000
Assy, PRVX ACCESSORY KIT
2 53-201061-000
PRVX TRAINING AT API
1 53-201031-000
CHECKPOINT SYSTEM INSTALL
1 52-502904-000
ASSY, PRVX SHIPPING PKG
1 21-503328-000
PWA, EDGE CARD 48 PIN VX
21-502885-000
PWA, PRVX CAL CARD CONN
1 53-262030-000
PRVX SYSTEM, 1280 CHANNELS, LP
1 52-502758-003
PRVX TABLE SHORT 1280
1 52-502763-002
ASSY, PRVX W/S PF COMPAT
1 52-503357-001
ASSY, VX CPLT W/BEVEL POSTGRIND
1 52-502756-000
PRVX CONTROLLER PKG.
1 62-805304-700
PRV/PRVX TEST SOFTWARE
1
- ----------------------------------------------------------------------------------------------------------------------
Applied Precision Invoice #2444 $ 1,860.00
1 21-503329-000
PWA, Edge Card 88 Pin VX
1 21-503331-000
PWA, Edge Card 128 Pin VX
- ----------------------------------------------------------------------------------------------------------------------
Sales or Use Tax
- ----------------------------------------------------------------------------------------------------------------------
*If additional space is required, attach Schedule A Total Original Cost $253,378.50
- ----------------------------------------------------------------------------------------------------------------------
Location of Equipment (if additional space is required, attach Schedule A)
A. 30 Montague Expressway San Jose Santa Clara California 95134
---------------------------------------------------------------------------------------------
Address City County State Zip
B.
---------------------------------------------------------------------------------------------
Address City County State Zip
</TABLE>
<PAGE>
2. Acceptance Deadline: September 30, 1996
3. Term: The term of this Lease shall be a period of 60 months
and shall commence on the date that the Equipment is accepted by Lessee on
behalf of Lessor (the "Acceptance Date").
4. Rent Commencement Date: The first day of the month immediately
following the Acceptance Date.
5. Basic Rent Payment Date: The first day of each month beginning
with the Rent Commencement Date.
6. Rent:
(a) Interim Rent: An amount equal to 1/30th of the Basic
Rent multiplied by the number of days elapsed from and including the Acceptance
Date but excluding the Rent Commencement Date and due and payable concurrently
with the delivery of the Certificate of Acceptance by Lessee to Lessor.
(b) Basic Rent: for the term of this Lease, Lessee shall
pay Lessor Basic Rent of $5,121.00 monthly payable on each Basic Rent Payment
Date.
If the first day of each month during the term of this Lease is not a
business day, Basic Rent shall be due on the next subsequent business day.
Unless otherwise expressly agreed to in writing by Lessor, sales tax on each
rental payment received by Lessor under this lease shall be due and payable by
Lessee to Lessor on each Basic Rent Payment Date.
(c) Overdue Rent: Lessee shall pay to Lessor an Overdue
Rent Charge of 5% of all Basic Rent payments not received by Lessor on or before
the Basic Rent Payment Date.
7. Purchase Option: Provided that (i) an Event of Default (or an event
or condition which, with the lapse of time or the giving of notice or both,
would constitute an Event of Default) does not exist; (ii) this Lease has not
previously been terminated, and (iii) Lessee has given Lessor not less than
sixty (60) days notice prior to the expiration of the initial term of the Lease,
Lessor shall have the option to purchase all (but not less than all) of the
Equipment on the original expiration date of this Lease under the following
terms and conditions:
[Lessee shall have the right to purchase the Equipment, on an "as-is,
where-is" basis, without representation or warranty of any kind, for $1.00,
provided that such right is further subject to payment in full of the purchase
price on or before the expiration of the initial term of this Lease.]
Lessee shall pay or reimburse Lessor all of Lessor's costs and expenses incurred
in connection with such purchase and shall pay all taxes imposed in connection
with such sale (other than taxes imposed on or measured by lessor's net income).
8. Modification to Master Agreement: All terms and conditions of
this Lease shall be as set forth above and in the Master Agreement, except (if
additional space is required, attach an Addendum to this Lease): N/A
9. Conditions Precedent: Lessor shall have no obligation to
purchase the Equipment and to lease the same to Lessee hereunder: (i) if the
actual cost of the Equipment exceeds the original cost thereof set forth
hereinabove; (ii) if there exists any Event of Default or event or condition
which, with the lapse of time or the giving of notice or both, would constitute
an Event of Default; or (iii) unless prior to the Acceptance Deadline Lessee, at
its expense, shall have delivered or caused to be delivered to Lessor all of the
Documents required under Section 3 of the Master Agreement and, in addition,
Lessee, at its expense, shall have fully satisfied all of the following
additional conditions precedent (if additional space is required, attach an
Addendum to this Lease): N/A
10. Schedule: The "Schedule of Stipulated Loss Percentages" that
is attached or refers to this Equipment Schedule is by this reference expressly
incorporated herein as if fully set forth herein.
11. Reaffirmation: By their execution and delivery of this
Equipment Schedule, the parties hereby reaffirm all of the terms and conditions
of the Master Agreement, except to the extent, if any, modified hereby.
12. Counterparts: The Equipment Schedule evidencing this Lease may
be executed in more than one original counterpart. However, only the counterpart
designated below as "Counterpart No. 1" shall evidence the monetary obligation
of Lessee with respect to this Lease. To the extent, if any, that this Lease
constitutes "chattel paper," as that term is defined in the Arizona Uniform
Commercial Code, no security interest in this Lease may be created or perfected
by the transfer or possession of any counterpart hereof other than said
"Counterpart No. 1."
THIS IS COUNTERPART NO. 1 OF 1 COUNTERPART ORIGINALS.
IN WITNESS WHEREOF, this Equipment Schedule has been executed,
delivered and accepted this 9th day of September, 1996.
LESSOR: LESSEE:
CERPROBE CORPORATION Wells Fargo Leasing Corporation
- ---------------------------------------- ---------------------------------
"(as assignee of all right, title
and interest of First Interstate
Bank of Arizona)"
By SIGNATURE NOT LEGIBLE By SIGNATURE NOT LEGIBLE
------------------------------------- -----------------------------
Its President/CEO Its Vice President
------------------------------------ -----------------------------
2
<PAGE>
SCHEDULE OF STIPULATED LOSS PERCENTAGES
to
EQUIPMENT SCHEDULE
DATED September 9, 1996
to
MASTER LEASE AGREEMENT
DATED June 6, 1994
Rental Payment Date Stipulated Loss
in the month of: Percentage
- ---------------- ----------
1 100.00
2 98.70
3 97.39
4 96.07
5 94.74
6 93.39
7 92.04
8 90.67
9 89.30
10 87.91
11 86.51
12 85.10
13 83.68
14 82.25
15 80.80
16 79.35
17 77.88
18 76.40
19 74.91
20 73.40
21 71.89
22 70.36
23 68.82
24 67.27
25 65.70
26 64.12
27 62.53
28 60.93
29 59.31
30 57.68
31 56.03
32 54.38
33 52.71
34 51.02
35 49.32
36 47.61
37 45.89
38 44.15
39 42.39
40 40.63
41 38.84
42 37.05
43 35.24
44 33.41
45 31.57
46 29.71
47 27.84
48 25.96
49 24.06
50 22.14
51 20.21
52 18.26
53 16.29
54 14.32
55 12.32
56 10.31
57 8.28
58 6.23
59 4.17
60 2.09
For purposes of the "Master Agreement" (defined below) and the "Lease
" (defined below), the term "Stipulated Loss Percentage" means, with respect to
any item of "Equipment" (defined in the Lease) for which "Stipulated Loss Value"
(defined in the Master Agreement) is determined, the percentage set forth
hereinabove that corresponds to the "Rental Payment Date" (defined in the Lease)
through which rental payments on such Equipment have actually been paid
(exclusive of prepayments of rent otherwise due and payable at the end of the
Lease term, if any are required under the Lease) as of the date that the
Stipulated Loss Value of such item of Equipment is determined.
-1-
<PAGE>
IN WITNESS WHEREOF, the undersigned "Lessor" and "Lessee" have this
9th day of September, 1996 executed and delivered this "Schedule of Stipulated
Loss Percentages" to that Equipment Schedule dated as set forth above (the
"Lease") to that Master Lease Agreement dated as set forth above (the "Master
Agreement") between the undersigned "Lessor" and "Lessee."
LESSOR: LESSEE:
WELLS FARGO LEASING CORPORATION CERPROBE CORPORATION
By /s/ Signature Illegible By /s/ Signature Illegible
---------------------------- -----------------------------
Its Authorized Representative Title President/CEO
-2-
<PAGE>
CERTIFICATE OF ACCEPTANCE
Wells Fargo Leasing Corporation
"(as assignee of all right, title and interest of
First Interstate Bank of Arizona)"
Leasing and Equipment MAC 4101-250
100 West Washington
Phoenix, Arizona 85003
RE: Acceptance of Equipment Leased Under Equipment Schedule dated
September 9, 1996 (the "Lease") to Master Lease Agreement dated May 1,
1995 (the "Master Agreement") between the undersigned and Wells Fargo
Leasing Corporation "(as assignee of all right title and interest of
First Interstate Bank of Arizona).
Gentlemen:
This Certificate of Acceptance is delivered pursuant to Section 2 of the Master
Agreement, and constitutes a "Certificate of Acceptance," as defined therein.
We, as Lessee, have received all of the "Equipment" (as defined in the Lease),
and all necessary installation thereof has been completed. We have inspected,
tested and approved all of the Equipment, and find that each piece is in good
working order and is of the size, design, type, quality, condition, capacity and
manufacture specified by us, and conforms to any applicable purchase orders
therefor. We approve the contract by which you acquired the Equipment or the
right to possession and use of the goods. Our inspection and test has disclosed
no defects or deficiencies in any of the Equipment. You are hereby notified that
we accepted delivery of all of the Equipment on your behalf on 9/17, 1999.
We hereby certify that as of the date hereof (i) no Event of Default has
occurred under the Lease of the Master Agreement; (ii) the presentations and
warranties made by Lessee pursuant to the Lease and Master Agreement are true
and correct, (iii) Lessee has obtained insurance policies with respect to the
Equipment as are required to be obtained under the Lease and Master Agreement;
and (iv) the Equipment will be located at 30 West Montague Expressway, San Jose,
California 95134.
Sincerely,
Cerprobe Corporation
- -------------------------------
("Lessee")
By: SIGNATURE NOT LEGIBLE
----------------------------
Its: President/CEO
---------------------------
Dated: September 9, 1996
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
This FINANCING STATEMENT is presented for filing and will remain effective with
certain exceptions for a period of five years from the date of filing pursuant
to section 9403 of the California Uniform Commercial Code.
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1. Lessee 1A. Social Security or Federal Tax No.
Cerprobe Corporation
- --------------------------------------------------------------------------------------------------------------------
1B. Mailing Address 1C City, State, 1D Zip Code
600 S. Rockford Drive Tempe, Arizona 85281
- --------------------------------------------------------------------------------------------------------------------
2. Additional Debtor (If Any) 2A. Social Security or Federal Tax No.
- --------------------------------------------------------------------------------------------------------------------
2B Mailing Address: 2C City, State, 2D Zip Code
- --------------------------------------------------------------------------------------------------------------------
3. Debtor's Trade Names or Styles: 3A. Federal Tax Number:
- --------------------------------------------------------------------------------------------------------------------
4: Lessor: 4A: Social Security or Federal Tax No.
Name Wells Fargo Leasing Corporation or Bank Transit and A.B.A. No.
Mailing Address: 100 W. Washington MAC 4101-250
City Phoenix AZ 85003 State AZ Zip Code 85003
- --------------------------------------------------------------------------------------------------------------------
5. Assignee of Secured Party: (If Any) 5A: Social Security or Federal Tax No.
Name or Bank Transit and A.B.A. No.
Mailing Address:
City State Zip Code
- --------------------------------------------------------------------------------------------------------------------
6. This FINANCING STATEMENT covers the following types or items of property (include description of real property on
which located and owner of record when required by instruction 4).
See Schedule "A"
attached hereto and by this reference incorporated herein as if fully set forth.
The transaction related to this financing statement is a true lease; this precautionary notice file is made pursuant
to U.C.C. 9-408 (A.R.S. 47-9408)
- --------------------------------------------------------------------------------------------------------------------
7. Check [X] 7A Products of collateral 7B Debtor(s) signature not required in accordance with
if applicable: are also covered instruction 5(a) item
[ ] [ ] (1) [ ] (2) [ ] (3) [ ] (4)
- --------------------------------------------------------------------------------------------------------------------
8. Check [X]
if applicable: [ ] Debtor is a "transmitting utility" in accordance with UCC statute 9105 (1)(n)
- --------------------------------------------------------------------------------------------------------------------
9. Cerprobe Corporation Date: 9/9/96 C 10. This Space For Use of Filing Officer
X /s/ Signature Illegible O (Date, Time, File Number
Signature(s) of Lessee D And Filing Officer)
E
- --------------------------------------------------------------------------------------------------------------------
1
2
Type or Print Name(s) of Debtor(s)
- --------------------------------------------------------------------------------------------------------------------
Wells Fargo Leasing Corporation 3
X /s/ Signature Illegible 4
Signature of Lessor:
- --------------------------------------------------------------------------------------------------------------------
5
6
Type or Print Name(s) of Secured Party(ies)
- --------------------------------------------------------------------------------------------------------------------
11. Return copy to: 7
Name 8
Address 9
City 0
State
Zip Code
- --------------------------------------------------------------------------------------------------------------------
Filing Officer is requested to note file number, date and FORM UCC1-
hour of filing on PINK copy and return to the above party Approved by the Secretary of State
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
FIRST ADDENDUM TO LEASE
-----------------------
This First Addendum to Lease ("Addendum") is attached to and made a
part of that certain Lease, dated August 21, 1996, by and between CRPB
INVESTORS, L.L.C., an Arizona limited liability company, as Lessor, and CERPROBE
CORPORATION, a Delaware corporation, as Lessee, including the Work Agreement
attached as Exhibit "B". Should the provisions of the Lease and this Addendum
conflict, then the terms and conditions contained in this Addendum shall
control. Any reference to "Lease" shall include this Addendum, including all
exhibits, unless a different intent is clearly indicated.
49. Definitions. All capitalized terms not otherwise defined in
this First Addendum shall have the meanings given to them in the Lease or the
Work Agreement attached hereto.
50. Term; Completion. The Original Term of this Lease is fifteen
(15) years from the Commencement Date. The Commencement Date shall be the date
on which Substantial Completion occurs. If the Commencement Date occurs on a day
other than the first day of a calendar month, the Original Term of this Lease
shall be fifteen (15) years plus the number of days remaining in the month in
which the Commencement Date occurs. In the event that Substantial Completion of
the Work does not occur before the Scheduled Completion Date set forth in the
Work Agreement, then Lessee shall be credited with two (2) days of free Base
Rent for each day of delay until Substantial Completion of the Work occurs. In
the event that Substantial Completion does not occur within sixty (60) days
following the Scheduled Completion Date set forth in the Work Agreement, then
Lessee, upon written notice to Lessor, shall be entitled to terminate the Lease
in which case Lessee shall be released from all liability and obligation
thereunder. Upon any such termination by Lessee, Lessor shall pay to and
reimburse Lessee on demand for all reasonable costs and expenses incurred in
connection with the Project and this Lease including, but not limited to,
architect's fees, consultant fees, legal fees, and any additional rental, costs
or expenses incurred for the lease or occupancy of substitute premises,
including any increased rent or penalties for the premises now occupied by
Lessee, to the extent that such rental costs for comparable space exceed the
Base Rent that Lessee otherwise would have been obligated to pay to Lessee if
the Lease had not been terminated, plus such other damages and costs as Lessee
may incur as a result of Lessor's default.
51. Base Rent. The Base Rent for the Original Term shall be
calculated according to the schedule set forth below. The Base Rent shall be
payable in equal monthly installments, each due on the first day of each month.
In the event the Commencement Date occurs on a day other than the first day of a
month, then the Base Rent for the partial month shall be calculated by prorating
the monthly Base Rent according to the number of days in the partial month
occurring after the Commencement Date.
<PAGE>
(a) Commencing on the Commencement Date and ending upon
expiration of the fifth Lease Year of the Original Term, the monthly Base Rent
shall be calculated by multiplying the Project Costs (as defined herein) times
11.5% and dividing the result by twelve (12) ("Initial Base Rent"). Lessor and
Lessee acknowledge and agree that the estimated Project Costs is $7,600,000.00.
Lessor and Lessee also agree that in no event shall: (i) the monthly Initial
Base Rent be less than $71,875.00 per month or (ii) the total Project Costs be
greater than $7,600,000.00 without Lessee's prior written consent; or (iii) line
item expenditures exceed the line item amounts set forth in the budget approved
by Lessee as provided in subparagraph (e) below, without Lessee's prior written
consent.
(b) For Lease Years six (6) through ten (10) of the
Original Term, the monthly Base Rent shall be calculated by multiplying the
monthly Initial Base Rent for Lease Years one (1) through five (5) times 115%.
(c) For Lease Years eleven (11) through fifteen (15) of
the Original Term, the monthly Base Rent shall be calculated by multiplying the
monthly Base Rent for Lease Years six (6) through ten (10) times 115%.
(d) With each monthly payment of Base Rent, Lessee shall
also pay to Lessor any sales or transactional privilege taxes imposed by the
City of Gilbert, County of Maricopa, or State of Arizona.
(e) No later than twenty (20) days following the delivery
to Lessor of the Building Permit issued by the City of Gilbert, Lessor shall
prepare and deliver to Lessee for Lessee's approval an itemized budget for the
Project, reflecting the costs of all labor, materials, supplies, equipment, fees
and services necessary for the Work. Upon Lessee's approval thereof, Lessor
agrees that the cost of any line item shall not be exceeded by more than ten
percent (10%) of such line item or $25,000, whichever is greater, without
Lessee's approval, so long as the total costs do not exceed the total Project
Costs set forth in the budget approved by Lessee. Lessor agrees that upon
forty-eight (48) hours notice, Lessee, its employees or accountants shall have
the right to audit all Project Costs at reasonable intervals, and Lessor shall
deliver or make available to Lessee all invoices and statements of account
supporting the amounts so expended and claimed by Lessor as part of the Project
Costs. In the event of any dispute between Lessor and Lessee as to any of the
costs, the good faith and reasonable determination by the architect as to
whether such costs are appropriate and are to be included as a part of the
Project Costs shall be conclusive and binding on the parties.
52. Option to Renew Lease. Lessor hereby grants to Lessee the
option to extend the term of this Lease (the "Option") for seven (7) additional
periods of five (5) Lease Years each, subject to the following conditions. If
the Option is exercised, each successive term shall commence when the prior term
expires.
2
<PAGE>
(a) To exercise its Option to extend the Original Term or
any extended term, Lessee shall deliver to Lessor written notice of Lessee's
election to extend no less than one hundred eighty (180) days nor more than two
hundred seventy (270) days prior to the expiration of the then current lease
term. If said notification of the exercise of the Option is not so delivered,
the Option shall continue and shall expire seven (7) days after Lessor has
delivered written notice to Lessee that the Option will expire within seven (7)
days following Lessee's receipt thereof. Each Option may (if more than one) only
be exercised consecutively.
(b) The provisions of Paragraph 39, including the
provision relating to the default of Lessee set forth in Paragraph 39.4 of this
Lease, are conditions of this Option.
(c) All of the other terms and conditions of this Lease
except where specifically modified by this Option shall apply during each
extended term.
(d) The annual Base Rent for each five-year period (each
"Option Period") of the Option(s) shall be determined as follows:
(i) For the first three (3) five-year Option
Periods (Lease Years 16- 30), the monthly Base Rent for each Option Period shall
be equal to the greater of (A) the monthly Base Rent for the previous five (5)
Lease Year period multiplied by 115%, or (B) the Market Rental Value (determined
as set forth in paragraphs 52(d)(ii) and (iii) below) for comparable space in
comparable real estate located within the same market area.
(ii) Four (4) months prior to the expiration of
the Original Term, or four (4) months prior to the expiration of the current
Option Period, as the case may be, Lessor and Lessee shall meet to establish an
agreed upon new monthly Base Rent for the Option Period or Periods as to which
Lessee has elected to extend. If agreement cannot be reached within sixty (60)
days after the first meeting, Lessor shall obtain, at its expense, and deliver
to Lessee, an appraisal as to the Market Value Rental of the Premises.
(iii) If, within thirty (30) days after Lessee's
receipt of the appraisal, Lessor and Lessee cannot mutually agree as to the
Market Value Rental of the Premises, then Lessee shall have the right within
thirty (30) days to obtain, at its expense, and deliver to Lessor, an appraisal
reflecting the Market Value Rental of the Premises. If the two appraisers are
unable to agree on the Market Value Rental within fifteen (15) days after
delivery of Lessee's appraisal to Lessor, such two appraisers shall, within
fifteen (15) days thereafter, join to appoint a third appraiser and if they fail
so to appoint such third appraiser within such period, the third appraiser shall
be appointed by the Presiding Judge of the Federal District Court for the
District of Arizona, or if said Presiding Judge should refuse to make such
appointment, by the Presiding Judge of the Maricopa County Superior Court. Such
third appraiser shall individually determine such fair market value of the
Premises within forty-five (45) days thereafter. The Market Value Rental and
purchase
3
<PAGE>
price of the Premises shall then become the average of the Market Value Rental
determinations of the two (2) appraisals closest in value. All appraisers
appointed hereunder shall be competent, qualified by training and experienced in
Maricopa County, Arizona, to appraise real estate of the type to be appraised
hereunder, disinterested and independent and shall be members in good standing
of the American Institute of Real Estate Appraisers (or any successor
association, or a body of comparable standing if such Institute is not then in
existence) and all appraisal reports shall be rendered in writing and signed by
the appraiser or appraisers making the report. Lessor and Lessee shall bear the
costs of their respective appraisers and shall share the cost of the third
appraiser, if any.
(iv) For the fourth, fifth, sixth and seventh
five-year Option Periods (i.e., Lease Years 31-70), the annual Base Rent for
each Option Period shall be equal to the lesser of: (A) the monthly Base Rent
for the immediately prior Option Period multiplied by 115%, or the Market Rental
Value for comparable space in comparable real estate located within the same
market area. The procedure used to establish Market Rental Value set forth in
paragraphs 52(d)(ii) and (iii) above shall be utilized to establish Market
Rental Value for the fourth, fifth, sixty and seventh Option Periods.
53. Security Deposit.
(a) On or before the Commencement Date, Lessee shall
remit to Lessor a security deposit in the amount of one month's Base Rent, which
will be held by Lessor as security for the payment and performance by Lessee of
the amounts and obligations to be paid and performed by Lessee under this Lease.
If Lessee shall faithfully pay and perform the obligations to be paid and
performed by it, then Lessor shall disburse to Lessee the security deposit
together with all accrued interest thereon within thirty (30) days following the
expiration of the third Lease Year.
(b) The Security Deposit shall be held by Lessor in an
interest bearing money market account subject to immediate withdrawal without
penalty, or, at Lessee's option a certificate of deposit with a maturity of no
more than one (1) year, with the accrued interest to be added to the Security
Deposit. If these funds are not available because of a bankruptcy or similar
proceeding involving Lessor, Lessee shall have the right to offset the loss of
the funds against the amounts next due from Lessee under the Lease.
54. Assignment of Lessor's Interest. Lessor shall not have the
right to assign its interest under this Lease prior to Substantial Completion
without Lessee's prior written consent. Following Substantial Completion, Lessor
shall have the right to assign its interest under this Lease, without the
consent of the Lessee, during the Original Term of this Lease and any Option
Period, provided that the assignee executes and delivers to Lessee an instrument
pursuant to which the assignee has agreed to assume and perform all of the
obligations of Lessor that are to be performed by Lessor following the date of
such assignment. Any assignment by Lessor shall release and discharge Lessor
from any
4
<PAGE>
obligations that are to be performed by Lessor subsequent to such assignment,
but shall in no event release or discharge Lessor from any obligations that are
to be or were to have been performed by Lessor prior to such assignment.
55. Liability of Lessor. The liability of Lessor under this Lease
shall be limited to Lessor's interest in the Premises and the Security Deposit.
In no event shall there be any recourse against any partner, member or agent of
Lessor or Lessee, or any member, person or entity comprising Lessor or Lessee,
or against any property or assets of any such partner or member or agent for or
on account of any obligation or liability arising under this Lease or otherwise
in connection with the Premises.
56. Construction. In consideration of the covenants and
obligations to be performed by Lessor under this Lease, Lessor, at Lessor's sole
expense, shall provide all labor, materials, supplies and equipment necessary to
construct the building and other improvements, all as described in Paragraph 1.2
and Exhibit "A", Exhibit "B" and Exhibit "C" to this Lease.
57. Expansion of Premises/Option To Purchase.
57.1 Grant of Option. Lessor and Lessee acknowledge that
Lessee may require, from time to time, additional space to be constructed and
added to the Premises during the Original Term of this Lease or any Option
Period so as to accommodate the business and operations of Lessee. Each time
that Lessee determines that it will require such additional space and there is
no existing Breach under this Lease; Lessee shall give written notice thereof to
Lessor, and Lessor and Lessee shall thereafter negotiate in good faith to agree
upon terms for the construction of such additional space, including, if
necessary, additional buildings and improvements to accommodate Lessee's
requirements, and associated revisions to this Lease, including the amount of
the Base Rent. If Lessee gives notice, within the last ten (10) years of the
term of the Lease, that Lessee will require additional space, and Lessor and
Lessee thereafter agree upon terms for the construction of such additional
space, the term of the Lease shall be extended so that the remaining term of the
Lease shall be no less than ten (10) years from the date of Lessee's notice. If
Lessor and Lessee are unable to agree upon terms within sixty (60) days after
delivery of Lessee's written notice to Lessor of Lessee's requirements for
additional space Lessor hereby grants to Lessee an option (the "Option"), for a
period of twelve (12) months commencing upon the expiration of the sixty (60)
day period, to purchase the Premises upon and subject to the terms and
conditions described below. If Lessee does not elect to exercise the Option
within such twelve (12) month period, or exercises the Option, but cancels and
terminates the purchase transaction prior to the closing pursuant to Paragraph
57.13, Lessee shall not have the right to exercise any Option to purchase in
connection with a requested expansion for a period of twelve (12) months after
the expiration of the prior Option or the termination of the purchase
transaction.
5
<PAGE>
57.2 Notice of Exercise. The Option may be exercised by
Lessee delivering written notice of such exercise to Lessor at the address
specified below.
57.3 Price.
(a) Determination of Purchase Price. After the
exercise of the Option, Lessor and Lessee
shall negotiate in good faith to agree upon
the price at which the Premises will be
purchased by Lessee. Such purchase price to
be paid for the Premises shall be the then
fair market value of the Premises, subject
to the terms and conditions of this Lease;
provided, however, that the purchase price
shall not be less than the amount of the
unpaid balance of principal, interest, and
other charges on the Construction Loan and
the Permanent Loan.
(b) Negotiation of Purchase Price and use of
Appraisals. Not later than forty-five (45)
days after Lessee exercises the Option,
Lessor shall obtain, at its expense, and
deliver to Lessee, an appraisal as to the
fair market value of the Premises. If,
within sixty (60) days after Lessee's
receipt of the appraisal, Lessor and Lessee
cannot mutually agree as to the fair market
value of the Premises, then Lessee shall
have the right within forty- five (45) days
after the expiration of the sixty (60) day
negotiation period to obtain, at its
expense, and deliver to Lessor, an appraisal
reflecting the fair market value of the
Premises. If the two appraisers are unable
to agree on the fair market value within
fifteen (15) days after delivery of Lessee's
appraisal to Lessor, such two appraisers
shall, within fifteen (15) days thereafter,
join to appoint a third appraiser and if
they fail so to appoint such third appraiser
within such period, the third appraiser
shall be appointed by the Presiding Judge of
the Federal District Court for the District
of Arizona, or if said Presiding Judge
should refuse to make such appointment, by
the Presiding Judge of the Maricopa County
Superior Court. Such third appraiser shall
individually determine such fair market
value of the Premises within forty-five (45)
days thereafter. The fair market value and
purchase price of the Premises shall then
become the average of the fair market value
determinations of the two (2) appraisals
closest in value. All appraisers appointed
hereunder shall be competent, qualified by
training and experienced in Maricopa County,
Arizona, to appraise real estate of the type
to be appraised hereunder, disinterested and
independent and shall be members
6
<PAGE>
in good standing of the American Institute
of Real Estate Appraisers (or any successor
association, or a body of comparable
standing if such Institute is not then in
existence) and all appraisal reports shall
be rendered in writing and signed by the
appraiser or appraisers making the report.
Lessor and Lessee shall bear the costs of
their respective appraisers and shall share
the cost of the third appraiser, if any.
(c) Payment of the Purchase Price. The purchase
price to be paid for the Premises shall be
paid at close of escrow. The purchase price
to be paid for the Premises may, at Lessee's
option, be paid through Lessee's assumption
at the close of escrow of existing
indebtedness on the Premises and the
remainder thereof in cash. However, Lessee's
ability to assume the existing indebtedness
on the Premises shall be conditioned upon
the discharge of the liability of Lessor and
any guarantors for such indebtedness.
57.4 Title Report. Not later than thirty (30) days after
Lessee exercises the Option, Lessor shall cause to be delivered to Lessee by a
title company selected by the parties: (i) an "extended coverage" title report
with respect to the Premises showing that title to the Premises is subject to
only those matters set forth in Paragraph 57.9; (ii) legible copies of all
documents, whether recorded or unrecorded, referred to as special exceptions in
such title report or any supplemental title report issued by the title insurance
company; and (iii) an ALTA survey of the Premises from a surveyor selected by
the parties in form reasonably acceptable to Lessor and Lessee. Lessor agrees
that during the term of this Lease Lessor will not do anything that could
reasonably be expected to prevent the parties from obtaining an extended
coverage title policy with respect to the Premises.
57.5 Conveyance Document. The conveyance of the Premises
to Lessee or its designee shall be by a good and sufficient special warranty
deed in form acceptable to Lessee conveying to Lessee or its designee good and
marketable title to the Premises, subject only to the exceptions permitted under
Paragraph 57.9.
57.6 Title Insurance. As of the closing date, Lessor shall
cause to be delivered to Lessee, a standard coverage title insurance policy and,
if available, an extended coverage title policy issued by the title insurance
company in the amount of the purchase price insuring that Lessee has acquired
good and marketable title to the Premises subject only to those matters set
forth in Paragraph 57.9 hereof. Lessee shall reimburse Lessor for the difference
between the premiums for an extended coverage title insurance policy and the
premiums for a standard coverage title insurance policy.
7
<PAGE>
57.7 Closing Date. The purchase transaction shall be
closed within one hundred twenty (120) days after the purchase price is
determined pursuant to Paragraph 57.3.
57.8 Condition of Title.
(a) Exceptions to Title. The Premises shall be
conveyed by Lessor to Lessee subject only
to:
(i) current real estate taxes for the
year during which the closing
occurs;
(ii) current assessments;
(iii) current property owner's
association dues;
(iv) matters to which the Premises are
subject on the Commencement Date of
this Lease;
(v) matters affecting title caused or
created by Lessee or that have been
approved in writing by Lessee;
(vi) utility easements and other
easements incidental to the
development and use of the Premises
that do not impair the value, or
interfere with Lessee's use and
occupancy, of the Premises; and
(vii) the effect of all other applicable
documents executed hereafter by
both Lessor and Lessee, or by one
of them with the written consent of
the other, or which Lessor is
permitted to execute alone and
without Lessee pursuant to the
provisions of this Lease, including
any mortgage or deed of trust that
is assumed by Lessee in connection
with the purchase of the Premises.
(b) Removal of Title Exceptions. Prior to
closing, Lessor shall satisfy, remove or
cause to be removed, prior to the close of
escrow for the purchase and sale of the
Premises, all matters affecting title to the
Premises other than those matters permitted
in this Paragraph 57.9. Lessor shall
indemnify, defend, and hold Lessee harmless
for, from and against and any and all
losses, debts, liabilities or claims,
absolute or contingent,
8
<PAGE>
and all actions, suits proceedings, demands,
judgments, costs and expenses incident
thereto, incurred in connection with or
resulting from any failure of Lessor to
comply fully with the provisions of this
Paragraph.
57.9 Fees and Charges. The escrow fees and charges, and
all other expenses in connection with the transaction for which the Option may
be exercised, will be shared equally by Lessee and Lessor. Real estate taxes,
assessments, property owner's association dues and those costs and expenses
relating to the Premises which constitute Lessee's obligations pursuant to this
Lease shall not be prorated between Lessor and Lessee, it being the
understanding of the parties hereto that Lessee solely shall be obligated to pay
the same.
57.10 Lessee's Remedies. By reason of, among other things,
the uniqueness of the Premises, Lessee shall be entitled to exercise and enforce
the equitable remedies of specific performance and/or injunction for each and
every obligation of Lessor under Paragraph 57, which remedies may be exercised
and enforced separately or cumulatively with any other rights or remedies
available to Lessee in the event of a breach by Lessor of any of Lessor's
obligations under Paragraph 57 or any other provision of this Lease.
57.11 No Real Estate Commission. No real estate commission
shall be payable by Lessee in connection with Lessee's exercise of the Option or
Lessee's purchase of the Premises.
57.12 Lessee's Right To Terminate Purchase. Notwithstanding
Lessee's exercise of the Option pursuant to Paragraph 57.2, Lessee shall have
the right to cancel and terminate the purchase transaction in Lessee's sole
discretion at any time prior to the closing of the sale. Lessee shall pay
Lessor's reasonable out-of-pocket expenses for surveys, title examination,
appraisals, and similar services provided by third parties and reasonable
attorney's fees incurred in connection with the terminated sale.
57.13 Further Documents. Lessor and Lessee shall execute,
acknowledge and deliver such instruments, and shall do such acts, as may be
necessary or appropriate to close the purchase and sale of the Premises,
including without limitation such instruments as may be necessary or appropriate
to cancel or amend existing documents which no longer will be applicable to the
Premises after and by reason of Lessee's purchase.
57.14 Lessee's Continuing Duty to Perform Under Lease. From
and after Lessee's exercise of the Option until the closing of the purchase
transaction or the earlier termination of the purchase transaction, Lessee shall
continue to perform all of its obligations under this Lease. If Lessee fails to
perform its obligations under this Lease during that period, Lessor may exercise
any remedies available to it under this Lease.
9
<PAGE>
58. Right of First Offer/Option to Purchase. If at any time during
term of this Lease, Lessor shall elect to sell the Premises, Lessor grants
Lessee the first offer to purchase the Premises and an option to purchase the
Premises in accordance with the provisions of this paragraph:
(a) Prior to offering the Premises for sale to third
parties, Lessor shall deliver to Lessee written notice of Lessor's election to
do so ("Notice to Sell") and a current appraisal of the fair market value of the
Premises. The Notice to Sell shall contain the price and terms upon which Lessor
intends to sell the Premises. Lessee shall have thirty (30) days from the
receipt of the Notice to Sell to (i) deliver written notice to Lessor that
Lessee has elected to purchase the Premises upon the terms and conditions
established by Lessor in the Notice to Sell ("Notice to Purchase"), or (ii) to
deliver written notice to Lessor that Lessee is exercising the option to
purchase the Premises granted in this Paragraph 58 upon and subject to the
terms, conditions and procedures set forth in Paragraph 57. If Lessee has not
delivered the Notice to Purchase to Lessor within such thirty (30) day period,
or if Lessee has not delivered written notice of Lessee's exercise of the option
granted in this Paragraph 58 within such thirty (30) day period, Lessee's right
to purchase the Premises shall be deemed waived by Lessee, and Lessor shall have
the right to sell the Premises to any third party upon customary and reasonable
terms and with the price not to be less than eighty percent (80%) of the price
specified in Lessor's Notice to Sell to Lessee. If the Premises are not
transferred to a third party in connection with a sale within 270 days after the
date of Lessee's receipt of the Notice to Sell, or if Lessor thereafter decides
to offer the Premises for sale on customary and reasonable terms at a price less
than eighty (80%) of the price specified in the Notice to Sell, then Lessor
shall first re-offer the Premises for sale to Lessee upon such new terms, in
accordance with the procedures and time limits set forth in this Paragraph 58
and Lessee's rights under this Paragraph 58, including the option to purchase,
shall be restored.
(b) In the event that Lessee delivers to Lessor written
notice that Lessee has elected to purchase the Premises upon the terms and
conditions established by Lessor in the Notice to Sell, then Lessor shall sell,
and Lessee shall purchase, the Premises upon and subject to such terms. In the
event that Lessee delivers to Lessor written notice that Lessee has elected to
exercise the option to purchase the Premises, then Lessor shall sell, and Lessee
shall purchase, the Premises upon and subject to the terms, conditions, and
procedures set forth in Paragraph 57. However, Lessee shall have the option to
rescind its election to purchase the Premises by delivering written notice of
such rescission to Lessor at any time prior to the closing of the sale. In such
case, Lessee shall pay Lessor's reasonable, out-of-pocket expenses incurred in
connection with the purchase, including attorney's fees, but not for other
expenses for services such as surveys, appraisals and similar services that can
reasonably be expected to be used in connection with a subsequent sale of the
Premises to a third party.
10
<PAGE>
59. Liens. Lessor shall not record or suffer to be recorded any
deed of trust or other security instrument, other than the deed of trust
securing the Construction Loan or the Permanent Loan, which creates, may create
or appear to create a lien or encumbrance upon the Premises, or any part
thereof, without Lessee's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed.
60. Exhibits and Addenda. Exhibits as referenced in Paragraph 1.12
are incorporated by reference in this Lease and listed below:
Exhibit "A" - Description of Working Drawings
prepared by Deutsch & Associates, as the
architect of the Lessee, describing the
construction of the Premises, which Working
Drawings shall be initialed by Lessor and
Lessee;
Exhibit "B" - Work Agreement;
Exhibit "C" - Contractor's building and premises construction
specifications;
Exhibit "D" - Hazardous Substances Addendum.
Exhibit "E" - Itemization of Project Costs
61. Definitions. The following capitalized terms as used in the
Lease shall have the definitions set forth below:
(a) "Commencement Date". The date on which Substantial
Completion of the Work occurs.
(b) "Construction Loan". That loan by Guaranty Federal
Bank, F.S.B. to Lessor the proceeds of which shall be used to finance the
initial construction of an office/manufacturing building and other improvements
on the land generally located at the southwest corner of West San Angelo Road
and North Fiesta Boulevard, Gilbert, Arizona as described in the Plans.
(c) "Lease Year". The year commencing on the Commencement
Date and ending on the day immediately preceding the next anniversary of the
Commencement Date, except that if the Commencement Date does not occur on the
first day of a calendar month, then the year commencing on the first day of the
calendar month next succeeding the Commencement Date and ending on the last day
of the twelfth calendar month thereafter.
(d) "Permanent Loan". The long term financing secured by
a deed of trust on the Premises that replaces the Construction Loan.
11
<PAGE>
(e) "Plans". The plans and specifications referred to in
Exhibits "A" and "C", as hereafter modified from time to time, and, where
applicable, as approved by the City of Gilbert, Arizona.
(f) "Project". The land, buildings, structures, parking
areas, pedestrianways, and other improvements, together with all machinery and
equipment, all as provided in Exhibits "A", "B" and "C" to this Lease, as
modified or omitted from to time.
(g) "Project Costs". The total cost of land and all
labor, materials, equipment, supplies and other items and services that are
incurred by Lessor and are necessary to the construction of the Project,
including, but not limited to, financing costs, consulting fees, fees for
building permits and other governmental approvals, architectural fees, legal
fees of Lessor incurred in connection with this Lease and the Operating
Agreement of Lessor and other documentation necessary to the formation and
capitalization of Lessor, all as provided on Exhibit "E" to this Lease, as
modified or amended from time to time.
(h) "Substantial Completion" and "Substantially
Complete". The issuance by the City of Gilbert, Arizona of a certificate of
occupancy that allows Lessee to take possession of and use the Premises and the
completion of the Work such that the Premises are suitable and can be occupied
and used by Lessee for the purposes intended, and the completion all of the Work
as provided by the Plans with the exception of punch-list items that do not
impair Lessee's use or occupancy of the Premises.
62. Replacement Provisions. Paragraphs 9 and 14 of the Lease are
deleted in their entirety and replaced with the following provisions,
respectively:
"9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Partial Damage" shall mean damage
or destruction to the improvements on the Premises, the repair cost of which
damage or destruction is less than 50% of the then Replacement Cost of the
Premises immediately prior to such damage or destruction, excluding from such
calculation the value of the land.
(b) "Premises Total Destruction" shall mean
damage or destruction to the Premises, the repair cost of which damage or
destruction is 50% or more of the then Replacement Cost of the Premises
immediately prior to such damage or destruction, excluding from such calculation
the value of the land.
(c) "Insured Loss" shall mean damage or
destruction to improvements in the Premises, which was caused by an event
required to be covered by the
12
<PAGE>
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits involved.
(d) "Replacement Cost" shall mean the cost to
repair or rebuild the building(s), structure(s) and other improvements owned by
Lessor at the time of the occurrence to their condition existing immediately
prior thereto, including demolition, debris removal and upgrading required by
the operation of applicable building codes, ordinances, or laws, and without
deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean
the occurrence or discovery of a condition involving the presence of, or a
contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on,
or under the Premises.
9.2 Partial Damage--Insured Loss. If a Premises Partial
Damage that is an Insured Loss occurs, Lessor shall, at Lessor's expense, repair
such damage as soon as reasonably possible and this Lease shall continue in full
force and effect; provided, however, that Lessee shall, at Lessor's election,
repair any damage or destruction the total cost to repair of which is $10,000 or
less. The insurance proceeds shall be made available to the party making the
repairs. If the required insurance was not in force or the insurance proceeds
are not sufficient to effect such repairs, Lessee shall promptly contribute the
shortage in proceeds necessary to complete such repairs; provided, however, that
Lessee shall not be required to contribute the shortage in proceeds where such
shortage was due to the fact that, by reason of the unique nature of the
improvements, full replacement cost insurance coverage was not commercially
reasonable or available. If Lessee does not provide the shortage in proceeds
attributable to the unique aspects of the improvements within thirty (30) days
following receipt of written notice and request therefor, Lessor shall not be
required to fully restore the unique aspects of the Premises and Lessor may
terminate this Lease as to such unique aspects of the Premises sixty (60) days
following the occurrence of the damage or destruction. Unless otherwise agreed,
Lessee shall not be entitled to reimbursement from Lessor for any funds
contributed by Lessee to repair any damage or destruction. Premises Partial
Damage due to flood or earthquake shall be subject to Paragraph 9.3 rather than
Paragraph 9.2, but the net proceeds of any insurance shall be made available to
the party making the repairs.
9.3 Partial Damage--Uninsured Loss. If a Premises Partial
Damage that is not an insured loss occurs, Lessor may at Lessor's option,
either: (i) repair such damage as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect; or
(ii) give written notice to Lessee within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such damage of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the giving of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the repair of such damage
13
<PAGE>
totally at Lessee's expense and without reimbursement from Lessor. Lessee shall
provide Lessor with the required funds or satisfactory assurance thereof within
thirty (30) days following Lessee's said commitment. In such event, this Lease
shall continue in full force and effect, and Lessor shall proceed to make such
repairs as soon as reasonably possible, to the extent the funds are available.
If Lessee does not give such notice, and provide the funds or assurance thereof
within the times specified above, this Lease shall terminate as of the date
specified in Lessor's notice of termination.
9.4 Total Destruction. If a Premises Total Destruction
(including any destruction required by any authorized public authority) occurs
prior to the last five (5) years of the term of this Lease, Lessor shall repair
such damage as soon as reasonably possible and this Lease shall continue in full
force and effect. Notwithstanding the foregoing, if the required insurance was
not in force or the insurance proceeds are not sufficient to effect such
repairs, Lessee shall promptly contribute the shortage in proceeds necessary to
complete said repairs; provided, however, that Lessee shall not be required to
contribute the shortage in proceeds where such shortage was due to the fact
that, by reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable or available. If Lessee does
not provide the shortage in proceeds attributable to the unique aspects of the
improvements within thirty (30) days following receipt of written notice and
request therefor, Lessor shall not be required to fully restore the unique
aspects of the Premises and Lessor may terminate this Lease as to such unique
aspects of the Premises sixty (60) days following the occurrence of the
destruction. Notwithstanding any other provision of this Lease, if a Premises
Total Destruction occurs (including any destruction required by any authorized
public authority) during the last five (5) years of the term of this Lease,
Lessor may, at Lessor's option, either: (i) repair such damage as soon as
reasonably possible and this Lease shall continue in full force and effect
(subject to Lessee's right to terminate this Lease pursuant to paragraph 9.4A of
this Lease) or (ii) give written notice to Lessee within ten (10) days of the
Premises Total Destruction of Lessor's desire to terminate this Lease effective
as of the date of such damage or destruction.
9.4A Lessee's Absolute Right to Terminate. If a Premises
Partial Damage or Premises Total Destruction occurs, and the damage or
destruction cannot be fully repaired or replaced within two hundred ten (210)
days of the Premises Partial Damage or Premises Total Destruction, Lessee may,
at Lessee's option, by written notice to Lessor, terminate this Lease effective
as of the date specified by Lessee in the notice to Lessor (but no earlier than
the date of the Premises Partial Damage or Premises Total Destruction). Lessee
shall exercise its option to terminate this Lease pursuant to this Paragraph
within one hundred eighty (180) days after the Premises Partial Damage or
Premises Total Destruction/
9.4B Excess Insurance Proceeds. Lessee shall be entitled
to any insurance proceeds that exceed the cost of repair or restoration of the
Premises.
14
<PAGE>
9.5 Abatement of Rent; Lessee's Remedies.
(a) In the event of damage described in
Paragraph 9.2 (Partial Damage-Insured Loss), Paragraph 9.3 (Partial
Damage-Uninsured Loss), or Paragraph 9.4 (Total Destruction) whether or not
Lessor or Lessee repairs or restores the Premises, the Base Rent, Real Premises
Taxes, insurance premiums, and other charges, if any, payable by Lessee
hereunder for the period during which such damage, its repair or the restoration
continues (not to exceed the period for which rental value insurance is required
under Paragraph 8.3(b), shall be abated in proportion to the degree to which
Lessee's use of the Premises is impaired. Except for abatement of Base Rent,
Real Property Taxes, insurance premiums, and other charges, if any, as
aforesaid, all other obligations of Lessee hereunder shall be performed by
Lessee, and Lessee shall have no claim against Lessor for any damage suffered by
reason of any such repair or restoration.
(b) If Lessor shall be obligated to repair or
restore the Premises under the provisions of this paragraph 9 and shall not
commence, in a substantial and meaningful way, the repair or restoration of the
Premises within ninety (90) days after such obligation shall accrue, Lessee may,
at any time prior to the commencement of such repair or restoration, give
written notice to Lessor and to any Lenders of which Lessee has actual notice of
Lessee's election to terminate this Lease on a date not less than sixty (60)
days following the giving of such notice. If Lessee gives such notice to Lessor
and such Lenders and such repair or restoration is not commenced within thirty
(30) days after receipt of such notice, this Lease shall terminate as of the
date specified in said notice. If Lessor or a Lender commences the repair or
restoration of the premises within thirty (30) days after receipt of such
notice, this Lease shall continue in full force and effect. "Commence" as used
in this Paragraph shall mean either the unconditional authorization of the
preparation of the required plans, or the beginning of the actual work on the
Premises whichever first occurs."
"14. Condemnation.
14.1. Condemnation of Entire Premises. If the entire
Premises are taken under the power of eminent domain or sold under the threat of
the exercise of said power, this Lease shall terminate as of the first to occur
of: (i) the date a condemnation decree is entered, or (ii) if condemnation is by
consent decree or sale in lieu of condemnation, the date that such consent
decree or sale becomes effective.
14.2. Condemnation of Less than Entire Premises. If less
than all of the Premises are taken under the power of eminent domain or sold
under the threat of the exercise of said power (a "Partial Taking"), and such
Partial Taking has a material adverse impact on the business of Lessee or
results in the remainder of the Premises being unable to be substantially used
for the purposes intended, then, Lessee, in its discretion, may, by written
notice to Lessor, terminate this Lease as of the date a condemnation decree is
15
<PAGE>
entered, or if condemnation is by consent decree or sale in lieu of
condemnation, the date that such consent decree or sale becomes effective.
Lessee's election to terminate shall be made and given to Lessor within one
hundred eighty (180) days after the Partial Taking and shall be effective as of
the date specified by Lessee in the notice of election, but in no event earlier
than the date of Lessee's election to terminate.
14.3. Rent Reduction Upon Partial Taking. Upon the
occurrence of a Partial Taking, the Base Rent shall be adjusted by a fair and
equitable amount taking into account, among other factors, the loss of usable
rental space and the impact of the Partial Taking upon the business and
operations of Lessee. The amount of the reduced Base Rent shall not, in any
event, be greater than the Base Rent then in effect (without giving effect to
the Partial Taking) multiplied by a fraction, the numerator of which is equal to
that portion of the Project Costs attributable to the remainder of the Project
after giving effect to the Partial Taking, and the denominator of which is equal
to the amount of the total Project Costs.
14.4. Award. Subject to the right of a lender to
condemnation proceeds under any mortgage or deed of trust encumbering the
Premises, any award for the taking of all or any part of the Premises under the
power of eminent domain or any payment made under threat of the exercise of such
power shall be the property of Lessor, or as severance damages; provided,
however, that Lessee shall be entitled to any compensation separately awarded to
Lessee for Lessee's damages, including the value of Lessee's interest in this
Lease, Lessee's relocation expenses and/or loss of Lessee's Trade Fixtures. In
the event that this Lease is not terminated by reason of such condemnation,
Lessor shall to the extent of its net severance damages received, over and above
the legal and other expenses incurred by Lessor in the condemnation matter,
repair any damage to the Premises caused by such condemnation, except to the
extent that Lessee has been reimbursed therefor by the condemning authority.
Lessee shall be responsible for the payment of any amount in excess of such net
severance damages required to complete such repair."
LESSOR: LESSEE:
CRPB Investors, L.L.C., an Arizona Cerprobe Corporation, a Delaware
limited liability company corporation
By: P.B. Bell & Associates, Inc. By: ___________________________________
Randal L. Buness
Its: Managing Member
Its: Chief Financial Officer, Vice
By: _____________________ President and Secretary
Its: ____________________ Date: _________________________________
Date: ____________________________
16
<PAGE>
EXHIBIT "A"
DESCRIPTION OF WORKING DRAWINGS
PREPARED BY DEUTSCH & ASSOCIATES
1
<PAGE>
EXHIBIT "B"
WORK AGREEMENT
B-1
<PAGE>
EXHIBIT "C"
CONTRACTOR'S BUILDING AND PREMISES
CONSTRUCTION SPECIFICATIONS
C-2
<PAGE>
EXHIBIT "D"
HAZARDOUS SUBSTANCES ADDENDUM
D-1
<PAGE>
EXHIBIT "E"
ITEMIZATION OF PROJECT COSTS
D-2
<PAGE>
WHEN RECORDED RETURN TO:
K. David Lindner, Esq.
O'CONNOR, CAVANAGH, ET AL
One East Camelback Road, Suite 1100
Phoenix, Arizona 85012-1656
SHORT FORM MEMORANDUM OF LEASE AND PURCHASE OPTION
--------------------------------------------------
THIS SHORT FORM MEMORANDUM OF LEASE AND PURCHASE
OPTION evidences that there is in existence a Lease as hereinafter described. It
is executed by the parties hereto for recording purposes only as to the Lease
hereinafter described, and it is not intended and shall not modify, amend,
supersede or otherwise effect the terms and provisions of said Lease.
1. Name of Document: Standard Industrial/Commercial Single-Tenant
Lease-Net ("Standard Lease")
2. Addendum to Lease: The terms of the Standard Lease are amended
and supplemented by the First Addendum to
Lease executed by the Lessor and Lessee
effective as of the date of the Standard
Lease (the Form Lease and the First Addendum
to Lease are collectively referred to as the
"Lease")
3. Name of Lessor: CRPB INVESTORS, L.L.C., an Arizona limited
liability company
4. Name of Lessee: CERPROBE CORPORATION, a
Delaware corporation
5. Address of Lessor: c/o P.B. Bell & Associates, Inc.
8603 East Royal Palm Road, Suite 210
Scottsdale, Arizona 85258
Attention: Philip B. Bell
6. Address of Lessee: Cerprobe Corporation
600 South Rockford Drive
Tempe, Arizona 85281
Attention: Chief Financial Officer
7. Date of Lease: August 21, 1996
8. Term of Lease: Fifteen (15) years commencing on the
Commencement Date (as defined in the Lease).
9. Option to Extend: Lessee has the option to extend the Lease
Term for seven (7) successive periods of
five (5) years each.
10. Premises: The land, building and improvements more
particularly described on Schedule "A"
attached hereto.
11. Right of First Offer: If Lessor elects to sell the Premises,
Lessee shall have a right of first offer to
purchase the Premises upon and subject to
the terms and conditions described in the
Lease.
<PAGE>
12. Option to Purchase: Upon the occurrence of certain events more
particularly described in the Lease, Lessor
grants to Lessee an option to purchase the
Premises upon and subject to the terms
contained in the Lease.
13. Demise of Lease Premises: Lessor leases to Lessee and Lessee accepts
from Lessor the Leased Premises.
A copy of the Lease is on file with Lessor and Lessee at their
respective addresses set forth above.
IN WITNESS WHEREOF, parties have executed this Short Form
Memorandum of Lease this ____ day of August 1996.
LESSEE: LESSOR:
CERPROBE CORPORATION, CRPB INVESTORS, L.L.C., an Arizona
a Delaware corporation limited liability company
By: P.B. Bell & Associates, Inc.
Its:Managing Member
By: ______________________________
By: ______________________
Name: Randal L. Buness Name: ____________________
Its: _____________________
Its: Chief Financial Officer, Vice
President and Secretary
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this _____
day of August 1996, by Randal L. Buness, the Chief Financial Officer, Vice
President and Secretary of Cerprobe Corporation, a Delaware corporation, on
behalf of the corporation.
_____________________________________
Notary Public
My commission expires:
______________________
STATE OF ARIZONA )
) ss.
COUNTY OF MARICOPA )
The foregoing instrument was acknowledged before me this _____
day of August 1996, by ____________________ as ___________________ of P.B. Bell
& Associates, Inc., the managing member of CRPB Investors, L.L.C., an Arizona
limited liability company, on behalf of the limited liability company.
______________________________________
Notary Public
My commission expires:
______________________
2
<PAGE>
SCHEDULE "A"
------------
LEGAL DESCRIPTION OF LEASED PREMISES
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered
into as of the 26th day of June, 1996, by and between CERPROBE CORPORATION, a
Delaware corporation ("Employer"), and RANDAL L. BUNESS ("Employee").
RECITALS
--------
A. Employer is in the business of the design, manufacture, and
sale of probe cards for use in the semiconductor industry and for semiconductor
testing and the design, manufacture and sale of test and interface hardware
products, including, without limitation, performance boards, prober and handler
interfaces, including complete interface systems (digital, mixed signal and
analog), used by the semiconductor industry (the "Business").
B. Employer desires to employ Employee, and Employee desires
to accept such employment, on the terms and conditions set forth in this
Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing recitals and
the mutual covenants set forth in this Agreement, the parties hereto hereby
agree as follows:
1. Employment. Employer hereby employs Employee and Employee
hereby accepts such employment, to perform such duties and services for and on
behalf of Employer as may, from time to time, be determined by the President of
Employer. Employee shall devote Employee's full and undivided business time,
attention and efforts to Employer's business and to the performance of
Employee's duties under this Agreement, and shall fully and faithfully perform
all duties assigned to Employee under this Agreement, consistent with Employee's
position hereunder, to the best of Employee's abilities. Employee also agrees to
serve as Employer's Chief Financial Officer or in such other position as
Employer's Board of Directors shall determine from time to time.
2. Compensation. Employee shall be entitled to receive a per
annum salary of One Hundred Fifteen Thousand Dollars ($115,000) ("Salary") as
full compensation for all the services rendered by Employee during the term of
Employee's employment hereunder. Employee shall be entitled to receive the
Salary in fifty-two (52) equal payments; payments to be made every week
commencing on June 27, 1996, or pursuant to such other payment schedule
consistent with Employer's compensation policy as from time to time in effect
(less all applicable deductions for all taxes, including federal, state, and
FICA; insurance; pension plans; etc.).
3. Other Benefits. In addition to Employee's Salary, during
the term of Employee's employment hereunder, Employee shall be entitled to the
following:
<PAGE>
(a) Incentive Stock Option. Receive an option to
purchase Fifty Thousand (50,000) shares of Employer's Common Stock, par value
$.05 per share, such option to be granted at an option exercise price and
subject to such other terms and conditions of exercise as the Board of Directors
of Employer shall determine, in the exercise of its sole discretion.
(b) Pension Plans. Participation in such pension,
profit sharing and deferred compensation plans and programs, if any, as may be
provided from time to time by Employer to such other comparable level employees
of Employer. Participation in any other executive bonus plan(s) as may be
approved by the Board of Directors in the exercise of its sole discretion.
(c) Medical and Dental Benefits. Participation in
such group medical, accident and dental plans, if any, as may be provided from
time to time by Employer to such other comparable level employees of Employer.
(d) Vacation. Three (3) weeks paid vacation during
the term of this Agreement. Vacation shall be taken at such times as determined
by Employee and approved by Employer. Vacation benefits will be used in a manner
consistent with Employer's vacation policy as from time to time in effect.
(e) Reimbursement. Reimbursement within thirty (30)
days of the submittal of an approved expense report, for ordinary and necessary
out-of-pocket business expenses incurred by Employee in connection with the
business of Employer and Employee's duties under this Agreement. The term
"business expenses" shall include any item of expense that is reasonable,
ordinary or necessary in relation to Employee's duties hereunder. To obtain
reimbursement, Employee shall submit to Employer receipts, bills or sales slips
for the expenses incurred.
(f) Other Benefits. Such other fringe benefits, such
as life and disability insurance, as Employer may make generally available on a
nondiscriminatory basis to all other employees of Employer.
4. Term of Employment.
(a) Employment Term. The term of Employee's
employment hereunder shall commence on June 17,1996, and shall terminate June
16,1997, unless earlier terminated in accordance with the terms of this
Agreement.
(b) Termination. Notwithstanding anything contained
in this Agreement to the contrary, Employee's employment hereunder is entirely
at will, and may be terminated by Employer with or without cause, subject only
to the payment obligations of Employer as hereafter set forth. In the event
Employer terminates Employee's employment hereunder for Cause (as hereafter
defined), Employee's employment hereunder shall immediately terminate on the
effective date of such termination as established by Employer, and Employee
shall only receive Salary and any other benefits under this Agreement prorated
through the effective date of Employee's termination.
2
<PAGE>
For purposes of this Agreement, "Cause" means: (i) "Total and
Permanent Incapacity" (as hereinafter defined) of Employee; (ii) the failure or
inability (not as a consequence of any illness, accident or other disability, as
confirmed by competent medical evidence) of Employee to perform Employee's
duties hereunder for a period of thirty (30) days in a manner reasonably
satisfactory to Employer's Board of Directors, provided the decision of the
Board of Directors is not arbitrary or capricious, and is not made in bad faith
and further that the failure or inability is not as a consequence of any
illness, accident or other disability as confirmed by competent medical
evidence; or (iii) "Serious Misconduct" (as hereinafter defined) of Employee.
"Total and Permanent Incapacity" means such physical or mental condition of
Employee, including alcoholism, which renders Employee incapable of performing
Employee's duties hereunder for a period in excess of sixty (60) days. In the
event Employee is a Qualified Individual with a Disability, as defined in the
American with Disabilities Act, Employer shall not terminate Employee's
employment hereunder if Employee is able to perform the essential functions of
the Employee's job with or without reasonable accommodation from Employer.
"Serious Misconduct" means embezzlement or misappropriation of corporate funds;
other acts of Dishonesty (as hereinafter defined); activities harmful to the
reputation of Employer (other than as a consequence of good faith decisions made
by Employee in the normal performance of Employee's duties hereunder); the
conviction of or the plea by Employee to any criminal felony offense or any
criminal offense regarding dishonesty or moral turpitude; the refusal to perform
the duties assigned to Employee pursuant to this Agreement (unless such duties
shall be unlawful); or the breach of any of the terms or conditions contained in
this Agreement or any other Agreement between Employee and Employer.
"Dishonesty" shall include, but shall not be limited to, the furnishing of any
information, reports, documents or certificates by Employee to Employer which
Employee knew, believed or should have known to be false or misleading or
omitted to state a material fact necessary to be stated therein in order to make
any of the statements, or information therein not misleading.
In the event Employer terminates Employee's employment
hereunder, for reasons other than for Cause, Employee's employment hereunder
shall immediately terminate on the effective date of such termination as
established by Employer, and Employee shall only receive (i) Salary for the
remaining period of the term of this Agreement, payable on the dates such Salary
shall otherwise have been payable hereunder, and (ii) any other fringe benefits
under this Agreement prorated through the effective date of Employee's
termination.
Notwithstanding anything contained in this Agreement to the
contrary, Employee may resign and terminate Employee's employment hereunder,
with or without cause, subject to the requirement that Employee shall provide
Employer with not less than sixty (60) days' prior written notice. In such
event, Employee shall not receive any Salary or any other benefits under this
Agreement after the effective date of Employee's resignation.
(c) Death. In the event of the death of Employee
during the term of this Agreement, this Agreement and Employee's employment
hereunder shall terminate as of the date of the death of Employee, and
Employee's estate or personal representative shall be entitled to receive Salary
and other fringe benefits prorated for the period of Employee's employment to
the date of death.
3
<PAGE>
(d) Suspension. Employer shall have the right to
suspend Employee with full pay for any period of time the Board of Directors of
Employer deems, in its sole discretion, necessary or appropriate to investigate
Employee's conduct in connection with Section 4(b) hereof.
5. Noncompetition. During the period of Employee's employment
hereunder, and for a period of six (6) months from and after the date of
termination of Employee's employment hereunder (or such lesser period to the
maximum extent permitted by applicable law), neither Employee nor any person or
entity controlled (directly or indirectly) by Employee, whether as employer,
employee, proprietor, partner, stockholder (other than the holder of less than
five percent (5%) of the stock of a corporation the securities of which are
traded on a national securities exchange or in the over-the-counter market),
director, officer, consultant, agent or otherwise, shall within, into or from
the Restricted Territory (as defined below) engage or cause others to engage in
the Business unless first authorized in writing by Employer, which authorization
may be withheld in the sole and absolute discretion of Employer. For purposes of
this Agreement, the term "Restricted Territory" shall mean the United States of
America, and all other countries in which the Employer conducts the Business on
the date hereof. If Employee violates Employee's obligations contained in this
Section 5, then the time periods hereunder shall be extended by the period of
time equal to that period beginning when the activities constituting such
violation commenced and ending when the activities constituting such violation
terminated.
6. Nonsolicitation. During the period of Employee's employment
hereunder, and for a period of twelve (12) months from and after the date of
termination of Employee's employment hereunder (or such lesser period to the
maximum extent permitted by applicable law), neither Employee nor any person or
entity controlled (directly or indirectly) by Employee whether as employer,
employee, proprietor, partner, stockholder (other than the holder of less than
five percent (5%) of the stock of a corporation the securities of which are
traded on a national securities exchange or in the over-the-counter market),
director, officer, consultant, agent or otherwise, shall solicit (a) in respect
of the Business, any person or other entity that is, or was within the previous
twelve (12) month period immediately prior to the date of termination of
Employee's employment hereunder, a customer or supplier of Employer, or (b) any
person who, on such date, is an employee of Employer, for employment, or as an
independent contractor with any person or entity, unless first authorized in
writing by Employer, which authorization may be withheld in Employer's sole and
absolute discretion. If Employee violates Employee's obligations contained in
this Section 6, then the time periods hereunder shall be extended by a period of
time equal to that period beginning when the activities constituting such
violation commenced and ending when the activities constituting such violation
terminated.
7. Trade Secrets and Other Confidential Information. From and
after the date hereof, Employee shall not communicate or divulge to, or use for
the benefit of, any person, firm or corporation other than Employer and/or
Employer's subsidiaries and its or their agents and representatives, any of the
trade secrets, methods, formulas, business and/or marketing plans, processes or
any other proprietary or confidential information with respect to Employer, its
subsidiaries, its or their business, financial condition, business operations or
methods, or business prospects. The preceding sentence shall not apply to
information which (a) is, was or becomes generally known or available to the
public or the industry other than as a result of a disclosure by Employee in
violation of this Agreement, or (b) is required to be disclosed by law. Employee
shall advise Employer, in writing, of any request, including a subpoena or
similar legal inquiry, to disclose
4
<PAGE>
any such confidential information, such that Employer and/or its subsidiaries
can seek appropriate legal relief.
8. Return of Employer Property. Immediately upon the
expiration of this Agreement or the termination of Employee's employment with
Employer, whichever shall later occur, Employee shall return to Employer any and
all property of Employer, including, but not limited to, all documents,
agreements, schedules, statements, customer lists, supplier lists, plans,
designs, parts and equipment, that is in the possession or control (direct or
indirect) of Employee. Notwithstanding the foregoing, Employee shall immediately
return to Employer all such property described in this Section 8 upon
termination of this Agreement at any time for Cause.
9. Survival/Remedies/Severability. Employee specifically
acknowledges that (a) Employer currently has operating facilities located in the
Restricted Territory; (b) Employer receives much of its business from and
throughout the Restricted Territory; (c) Employer has plans to expand its
operations throughout the Restricted Territory; and (d) the geographic
restrictions contained in Section 5 hereof, and the length of time restrictions
in Sections 5, 6 and 7 hereof are each necessary and reasonable and were
negotiated with Employer. The restrictions and obligations set forth in Sections
5, 6, 7 and 8 hereof shall survive the expiration or termination of this
Agreement. The parties hereto hereby acknowledge and agree that the restrictions
and obligations set forth in Sections 5, 6, 7 and 8 hereof are reasonable and
necessary, and that any violation thereof would result in substantial and
irreparable injury to Employer, and that Employer may not have an adequate
remedy at law with respect to any such violation. Accordingly, Employee agrees
that, in the event of any actual or threatened violation thereof, Employer shall
have the right and privilege to obtain, in addition to any other remedies that
may be available, equitable relief, including temporary and permanent injunctive
relief, to cease or prevent any actual or threatened violation of any provision
hereof. Each and every provision set forth in Sections 5, 6, 7 and 8 hereof is
independent and severable from the others, and no restriction will be rendered
unenforceable by virtue of the fact that, for any reason, any other or others of
them may be unenforceable in whole or in part. If any provision in Sections 5,
6, 7 or 8 hereof is unenforceable for any reason whatsoever, that provision will
be appropriately limited and reformed to the maximum extent provided by
applicable law. If the scope of any restriction contained herein is too broad to
permit enforcement to its full extent, then such restriction shall be enforced
to the maximum extent permitted by law so as to be judged reasonable and
enforceable, and the parties agree that such scope may be modified by an
arbitrator or judge in any proceeding to enforce this Agreement. This includes,
without limitation, altering or enforcing only portions of the limits on
activity restrictions, the geographic scope, and the duration of the
restrictions unless to do so would be contrary to law or public policy.
10. Miscellaneous.
(a) Notices. All notices required or permitted to be
given hereunder shall be in writing and shall be deemed given when delivered in
person, or three (3) business days after being placed in the hands of a courier
service (e.g., DHL or Federal Express) prepaid or faxed provided that a
confirming copy is delivered forthwith as herein provided, addressed as follows:
5
<PAGE>
If to Employer:
---------------
CerProbe Corporation
600 South Rockford Drive
Tempe, Arizona 85281
Attention: C. Zane Close
FAX: 602-967-4636
If to Employee:
---------------
Randal L. Buness
3504 East Claremont Avenue
Paradise Valley, Arizona 85253
and/or to such other respective addresses and/or addressees as may be designated
by notice given m accordance with the provisions of this Section.
(b) Entire Agreement. This Agreement constitutes the
entire agreement between the parties and shall be binding upon and inure to the
benefit of the parties hereto and their respective legal representatives,
successors and permitted assigns. Except as set forth herein, the provisions of
this Agreement supersede any and all other agreements or understandings, whether
oral or written, between Employer and Employee, with respect to Employee's
employment by Employer. Any amendments, or alternative or supplementary
provisions to this Agreement must be made in writing and duly executed by an
authorized representative or agent of each of the parties hereto.
(c) Non-Waiver. The failure in any one or more
instances of a party to insist upon performance of any of the terms, covenants
or conditions of this Agreement, to exercise any right or privilege in this
Agreement conferred, or the waiver by said party of any breach of any of the
terms, covenants or conditions of this Agreement, shall not be construed as a
subsequent waiver of any such terms, covenants, conditions, rights or
privileges, but the same shall continue and remain in full force and effect as
if no such forbearance or waiver had occurred. No waiver shall be effective
unless it is in writing and signed by an authorized representative of the
waiving party. A breach of any representation, warranty or covenant shall not be
affected by the fact that a more general or more specific representation,
warranty or covenant was not also breached.
(d) Counterparts. This Agreement may be executed in
multiple count erparts, each of which shall be deemed to be an original, and all
such counterparts shall constitute but one instrument.
(e) APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED
AND CONTROLLED AS TO VALIDITY, ENFORCEMENT, INTERPRETATION, CONSTRUCTION, EFFECT
AND IN ALL OTHER RESPECTS BY THE INTERNAL LAWS OF THE STATE OF ARIZONA
APPLICABLE TO CONTRACTS MADE IN THAT STATE.
6
<PAGE>
(f) Construction. The parties hereto acknowledge and
agree that each party has participated in the drafting of this Agreement and
that this document has been reviewed by the respective legal counsel for the
parties hereto and that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be applied
to the interpretation of this Agreement. No inference in favor of, or against,
any party shall be drawn from the fact that one party has drafted any portion
hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
EMPLOYER: EMPLOYEE:
CerProbe Corporation
By: /s/ C. Zane Close /s/ Randal L. Buness
---------------------- ---------------------------
Name: C. Zane Close Randal L. Buness
----------------------
Its: President/CEO
----------------------
OPERATING AGREEMENT
OF
CRPB INVESTORS, L.L.C.
This Operating Agreement (the Agreement) is made and entered into by
and among those persons executing this Agreement as the Members as set forth on
Schedule A to this Agreement. In consideration of the foregoing and of the
mutual promises and conditions hereinafter set forth, the parties agree as
follows:
ARTICLE 1
Formation of Limited Liability Company
1.1 Company. The Members have formed a limited liability company
pursuant to the Arizona Limited Liability Company Act (the Act"). The name of
the company is CRPB Investors, L.L.C. (the "Company"), with such changes or
variations thereof as may be necessary to comply with the requirements of law or
regulatory bodies in any jurisdiction in which the Company may do business. It
is the intent of the Members that the Company be operated in a manner consistent
with its treatment as a "partnership" for federal and state income tax purposes.
It is also the intent of the Members that the Company not be operating or
treated as a "partnership" for purposes of Section 303 of the United States
Bankruptcy Code. No Member shall take any action inconsistent with the express
intent of the parties hereto as set forth herein.
1.2 Filing. The Articles of Organization have been filed and are in
effect in the State of Arizona. To the extent not provided for in this
Agreement, the Company and its Members shall be governed by the Act.
1.3 Character of Business. The Company shall not engage in any other
business or activity except as set forth in or contemplated by this Agreement.
The business of the Company shall be:
1.3.a. To acquire and take title to real property and to hold
for investment, maintain, develop, manage, improve, lease, sell, dispose of,
transfer, convey, mortgage and otherwise deal with such property;
1.3.b. To enter into, perform and carry out contracts and
agreements which are, in the judgment of the Manager, necessary, appropriate or
incidental to the accomplishment of the business and purposes of the Company;
1.3.c. To engage in all business activities permitted under
the law; and
1.3.d. To do any other acts or things which may be necessary,
appropriate, related or incidental, in the judgment of the Manager, to carry out
the business and purpose of the Company as stated above.
1
<PAGE>
1.4 Office and Principal Place of Business. The initial office and
principal place of business of the Company shall be 8603 East Royal Palm Road,
Suite 210, Scottsdale, Arizona 85258, or such substituted or additional place of
business as may be designated by the Manager from time to time.
1.5 Term. The Company's existence shall commence on the date of the
filing of the Articles of Organization and shall be governed by this Agreement
which provides for dissolution of the Company in accordance with Article 9,
dissolution of Company on the earliest to occur of the following:
1.5.a. December 3 1, 2047.
1.5.b. The Members holding not less than two-thirds (2/3) of
the issued and outstanding Units determine that the Company should be dissolved;
or
1.5.c. The Company sells or disposes of all or substantially
all of its interest in the Property and any promissory note, mortgage, deed of
trust, agreement of sale or other assets which the Company may acquire in
exchange for such Property.
1.6 Continuation of Company. Subject to all of the provisions of this
Agreement, the death, withdrawal, resignation, retirement, expulsion,
bankruptcy, insanity or substitution of any Member shall dissolve or terminate
the Company, unless the Members holding not less than two-thirds (2/3) of the
issued and outstanding Units consent to continue the business of the Company
pursuant to the voting procedures described in paragraph 10.2 below.
1.7 Members. The Members shall be as named herein, or any other Person
admitted to the Company as an additional Member. The addresses of the Members
are set forth on Schedule A which is attached hereto and made a part hereof by
this reference.
ARTICLE 2
Definitions
2.1 Definitions. Whenever used in this Agreement the following terms
shall have the meanings described below:
2.1.a. "Adjusted Capital Contributions" shall be the Capital
Contributions paid pursuant to Article 3 of this Agreement at any point, as
decreased from time to time by Distributions pursuant to paragraph 4.1.b below.
2.1.b. "Agreement" shall mean this Operating Agreement
pursuant to which the Company is organized, as the same may be amended from time
to time.
2.1.c. "Affiliate" shall mean, with respect to any Person, (I)
any Person directly or indirectly controlling, controlled by or under common
control with such Person, (ii) any Person owning or controlling 10% or more of
the outstanding voting interests of such Person, (iii) any officer, director, or
general manner of such Person, or (iv) any Person who is an officer, director,
general partner, trustee,
2
<PAGE>
or holder of 10% or more of the voting interests of any Person described in
clauses (I) through (iii) of this sentence.
2.1.d. "Capital Account" shall mean a Member's separate
capital account as determined from time to time pursuant to Article 4.
2.1.e. "Capital Contributions " shall mean, with respect to
any Member, the fair market value of any property and the total amount of any
money contributed to the Company by such Member at any point pursuant to Article
3, Capital Contributions.
2.1.f. "Capital Percentage" shall mean the ratio which the
Capital Contributions by each Member on the last day of each calendar month
bears to the total of all Capital Contributions by all Members as of that date,
without regard to Capital Accounts or the number of days during such months in
which a Person was a Member. The respective Capital Percentages of the Members
are set forth in Schedule A opposite each Member's name.
2.1.g. "Cash Available for Distribution" shall mean the excess
of Gross Receipts, after payment of any and all indebtedness currently payable
with respect to the Property, over expenses, costs, cash disbursements, and
other obligations, whether accrued or paid, without deductions for any
depreciation, and less a reasonable allowance for cash reserves for
contingencies and anticipated obligations, including property taxes, insurance,
assessments, capital improvements and replacements, as determined by the
Manager. At such time as the Manager determines that the unused balance of any
such reserves previously retained out of funds which would otherwise have been
Cash Available for Distribution is no longer necessary, the same shall thereupon
be deemed Cash Available for Distribution If during any month of operation
actual Cash Available for Distribution is less than ninety percent (90%) of the
monthly budgeted amount for such Distributions, all subsequent determinations of
Cash Available for Distribution shall be made upon the vote of the Members
holding two-thirds (2/3) of the total issued and outstanding Units herein
2.1.h. "Company" shall mean CRPB Investors, L C organized
pursuant to this Agreement
2.1.i. "Distributions" shall mean Cash Available for
Distribution paid to the Members with respect to any fiscal year of the Company.
2.1.j. "Gross Receipts" shall mean all cash received by the
Company from every source, excluding Capital Contributions and Assessments or
from any Company borrowing.
2.1.k. "Initial Capital Contributions" shall mean the total of
the capital contributions received from the Initial Members.
2.1.l. "Initial Construction Phase" shall mean the period
between the date of this Agreement and the date of 'Substantial Completion as
that term is defined in the lease referred to in paragraph 6.6 below.
3
<PAGE>
2.1.m. "Initial Construction Phase Return" with respect to any
Member who has contributed cash to the Company for its Units, means the Adjusted
Capital Contributions in cash of such Member existing from time-to-time during
the Initial Construction Phase of the Property multiplied by an interest rate
equal to ten percent (10%) per annum, cumulative but not compounded. Any such
Returns will be deemed to be a line item expense for purposes of computing Total
Project Costs as that term is defined in the Lease referred to in paragraph 6.6
below.
2.1.n. "Initial Members" shall mean P. B. Bell & Associates,
Inc., CORP, Inc., Cerprobe Corporation and the investor or investors that
contribute funds used to return $768,000 of Cerprobe Corporation's Capital
Contribution.
2.1.o. "Member" shall mean any Person admitted to the Company.
2.1.p. "Majority Vote" shall mean the vote of the Members
representing more than fifty percent (50%) of the Total Outstanding Units.
2.1.q. "Manager" shall mean P. B. Bell & Associates, Inc., an
Arizona corporation. The Manager shall also be a Member.
2.1.r. "Net Losses" shall mean the net losses of the Company
as determined for federal income tax purposes.
2.1.s. "Net Profits" shall mean the taxable income of the
Company as determined for federal income tax purposes, exclusive of net gains or
net losses recognized for federal Income tax purposes in a fiscal year from the
sale or other disposition of all or substantially all of the Property in
dissolution of the Company.
2.1.t. "Property" shall mean the real property as described on
Schedule B hereto and any building, structure or improvements now or hereafter
added thereto or thereon, and any other property, real, personal or mixed, or
any interest therein, thereafter acquired directly or indirectly by the Company
2.1.u. "Person" shall mean any natural person, partnership,
corporation, limited liability company, association or other legal entity.
2.1.v. "Recoupment" shall mean any point in time at which
cumulative Distributions equal one hundred percent (100%) of the total Capital
Contributions made by a Member.
2.1.w. "Total Outstanding Units" shall mean all Units issued
to Members.
2.1.x. "Unit" shall mean one (I) of the total one hundred
(100) ownership Interests outstanding in the Company to be acquired by the
Members and which shall represent the Capital Contribution to the Company
pursuant to Paragraph 3.1, "Capital Contributions." Ownership of Units shall
entitle the holder thereof to the Capital Percentage respecting such interest as
set forth on Schedule A, and an interest in the Net Profits, Net Losses,
credits, deductions, Distributions and any other rights
4
<PAGE>
of a Member as specified herein.
ARTICLE 3
Capital Contributions
3.1 Capital Contributions. The Company is authorized to accept an
unlimited amount of Capital Contributions and issue a maximum of one hundred
(100) Units.
3.1.a. The Company will admit as Members such Persons who have
contributed cash, property, or other consideration to the capital of the Company
for such Capital Percentage and Units as set forth on Schedule A hereto, as may
be amended from time to time.
3.1.b. The Company may issue fractional Units.
3.1.c. The Manager shall have the authority to admit the
Initial Members subject to paragraph 3.1.a The Manager shall, upon the admission
of Members, obtain the signature to and acceptance of this Agreement by the
Member and make the appropriate adjustments to Schedule A hereto respecting
Capital Contributions and Capital Percentages.
3.2 Additional Capital Contributions. In the event that the Company is
in need of capital in excess of the contributions set forth in Schedule A for
ordinary and necessary construction costs and for recurring expenses of the
Company such as real estate taxes and assessments, insurance premiums,
accounting and legal fees and similar expenses, additional Capital Contributions
shall be required to be contributed to the Company, to be payable in proportion
to the respective Units of the Members, up to an aggregate maximum of ten
percent (10%) of the Initial Capital Contribution of a Member. To the extent
contributions are needed in excess of such ten percent (10%), a Member shall
only be required to contribute its prorata share upon the vote of the Members
holding two-thirds (2/3) of the total issued and outstanding Units herein.
3.3 Failure to Make Additional Capital Contributions.
3.3.a. If a Member fails to make an Additional Capital
Contribution as required by Paragraph 3.2, Additional Capital Contributions, on
or before the specified payment date, the Manager shall deliver written notice
of such failure to the defaulting Member. If the defaulting Member fails to make
the required Additional Capital Contribution within the time specified in the
notice, such defaulting Member shall remain personally liable for the Additional
Capital Contribution until the Company receives the same and the Manager, to the
extent permitted by law, may at its option and on behalf of the Company: (I)
expel the defaulting Member from the Company by delivery of written notice
thereof to such Member; (ii) extend the time for payment; (iii) bring suit
against the defaulting Member for the amount in default, together with interest
thereon from the day such amount was due at the rate of eighteen percent (18%)
per annum plus collection expenses, including, without limitation, the fees and
disbursements of counsel for the Company; and/or (iv) pursue any other remedy or
course of action which the Manager deems to be appropriate and is permitted by
law.
5
<PAGE>
3.3.b. If a Member is expelled, such expulsion shall be
effective upon delivery of the Manager's written notice to the defaulting
Member. A Member who is adjudged a bankrupt may forthwith be expelled from the
Company without prior notice or the necessity of any further action by the
Manager. Upon expulsion, the expelled Member shall cease to have any further
right to vote as a Member or to attend or receive notice of any meetings of
Members or to otherwise participate in any decisions of the Members, the Manager
or the Company In the event the expelled Member is the Manager, then ail
management and administrative powers as manager' shall cease effective as of the
time of expulsion, and a new Manager shall be appointed by those Members holding
two-thirds (2/3) of the Units held by the non-expelled Members. Any expelled
Member shall also cease to participate in or receive any Net Profits, Net
Losses, Distributions, credits or deductions of the Company, commencing at the
time such expulsion occurs and thereafter for the term of the Company. An
expelled Member shall not be entitled to the return of its Adjusted Capital
Contributions to the Company until Recoupment has occurred with respect to all
of the unexpelled Members. The rights of an expelled Member to the return of its
Adjusted Capital Contributions shall be junior in all respect to the
Distributions of the remaining Members and shall be refunded, if at all, only
when all other Distributions to which the other Members are entitled have been
made.
3.3.c. The Manager shall deliver written notice to all Members
of the expulsion of a Member and shall request each Member to advise the
Manager, in writing, whether such Member wishes to acquire all or any of the
Units owned by the expelled Member immediately prior to the expulsion by paying
the delinquent contributions attributable to such Units of the expelled Member.
If more than one Member elects to purchase such Units within the time specified
in the notice, which shall be not less than ten (10) days after delivery of the
Manager's notice, they shall acquire such Units in the proportions that their
respective Units bear to each other and shall pay a proportionate share of the
delinquent contributions attributable to the Units of the expelled Member. If
none of the Members elects to acquire the Units or if some or all of the Members
elect to acquire only a portion of such Units, the Manager may purchase the
remaining Units or may sell such Units to a third person in consideration of the
fulfillment of all the following conditions: (I) payment of all delinquent
capital contributions attributable to the Units to be purchased; (2) written
agreement to pay all future capital contributions attributable to the Units to
be purchased; and (3) execution of a counterpart of this Agreement as a Member
If no third party purchases the Units of the expelled Member, the Company shall
have the option to purchase the Units by paying the delinquent contributions
attributable to such Units. In the event the Units of an expelled Member are
purchased as described above, the rights of an expelled Member to the return of
its Adjusted Capital Contributions shall be junior in all respects to the
Distributions of the remaining Members and shall be refunded, if at all, only
when all other Distributions to which the other Members are entitled have been
made.
3.4 Use of Capital Contributions. All Capital Contributions
shall be expended in furtherance of the business of the Company. No interest
shall be paid on Capital Contributions, except as otherwise permitted in this
Agreement. Pending the use of Capital Contributions in Company operations, such
Contributions will not be commingled with the funds of any other Person or
entity, except that the funds may be deposited in an account in the name of the
Company in such bank or other financial institution as the Manager may deem
appropriate or in a money market mutual fund or such other investments or
securities as determined by the Members holding not less than two-thirds (2/3)
of the issued and outstanding Units. 6
<PAGE>
3.5 Loans. If the Manager at any time or from time to time, determines
that the business of the Company requires funds for any reason in addition to
those contributed by the Members, one or more Members may lend such required
funds to the Company in such amounts as determined by the Manager but in
proportion among the Members willing to make loans according to their respective
Units owned herein, and at an annual interest rate equal to the prime interest
rate in effect at Bank of America plus two (2) percentage points, cumulative but
not compounded unless loans can be obtained elsewhere at more favorable terms.
Said loans shall be payable out of the general funds of the Company and shall in
no event be treated as contributions to the capital of the Company.
ARTICLE 4
Net Profits, Net Losses and Distributions
4.1 Allocation of Distributions. From and after the date of this
Agreement and until termination of the Company, no Distributions to the Members
shall be made except as provided in this Article. The Manager shall, from time
to time as it may deem appropriate, determine the amount of Cash Available for
Distribution, if any Distributions will be allocated among the Members in the
following manner:
4.1.a. Ninety-nine percent (99%) to the Members who have
Adjusted Capital Contribution balances from cash contributions prorata according
to their respective Capital Percentages and one percent (1%) to the Manager
until all such Members receive Distributions in an amount equal to their Initial
Construction Phase Return; then
4.1.b. To the Members in accordance with their respective
Capital Percentages.
4.2 Distributions and Admissions of Members. Upon the admission of a
Member, the share of Distributions allocable to such Member shall be determined
consistent with the portion of the year during which it was a Member.
4.3 Distributions and Withdrawal of Members. Although the Manager may
make Distributions with respect to the Units during the term of the Company, no
Member shall have the right to withdraw from the Company or to demand any
Distributions or a return of all or any part of its Capital Contributions. No
Member, by reason of its withdrawal from the Company, shall receive any
Distributions other than in such amounts and at such times as it would have
received had such Member not withdrawn from the Company.
4.4 Net Profits, Net Losses, Credits and Deductions.
4.4.a. Except as provided in subparagraph 4.4.c below, Net
Profits, Net Losses, credits and deductions of the Company with respect to each
fiscal year in which there are Distributions to the Members shall be allocated
among the Members (including the Manager) in the same ratio that Distributions
are allocated in Paragraph 4.1, Allocation of Distributions, in such fiscal
year. If there are no Distributions in any given fiscal year, Net Profits, Net
Losses, credits and deductions of the Company with respect to such fiscal year
shall be allocated among the Members (including the Manager)
7
<PAGE>
in the same ratio that Distributions would be allocated pursuant to Paragraph 4
1, Allocation of Distributions, in such fiscal year, taking into account the
cumulative Distributions made by the Company prior to such fiscal year.
4.4.b. If any Member is not a Member for an entire fiscal
year, or if its Capital Percentage changed during such year, the share of Net
Profits, Net Losses, Distributions, credits and deductions of the Company
allocable to such Member shall be determined consistent with the portion of the
year during which it was a Member and by taking into account its varying Capital
Percentages.
4.4.c. Net gains or net losses recognized for federal income
tax purposes in a fiscal year from the sale, including an installment sale or
other disposition of all or substantially all of the Property in dissolution of
the Company shall be allocated among the Members in the following manner:
4.4.c.1. Net gains shall be allocated to the Members
to increase their Capital Accounts by an amount equal to the net reductions made
to their Capital Accounts by reason of the allocation of Net Losses and other
items which, under Paragraph 4.5, capital Accounts, resulted in decreases in the
Members' Capital Accounts during the term of the Company (provided that if the
amount of net gains shall be Insufficient to accomplish the foregoing, then the
net gains shall be apportioned among the Members in the ratios that the Members
respective net reductions bear to each other).
4.4.c.2. Any balance of the net gains and any net
losses shall be allocated among the Members in the same ratio that Distributions
would be allocated among the Members pursuant to Paragraph 4.1, "Allocation of
Distributions, " as though there were no dissolution of the Company in such
fiscal year, taking into account the cumulative Distributions made prior to such
fiscal year.
4.5 Capital Accounts. The Company shall maintain a separate Capital
Account for each Member in accordance with the rules set forth in Section
1.704-1(b)(2)(iv) of the Treasury Regulations under the Internal Revenue Code
Subject to those rules, Capital Account shall mean the amount of any money paid
by the Member to the Company, increased by: (I) the fair market value of
property contributed by the Member to the Company (net of liabilities secured by
the property or to which the property is subject); and (ii) the net amount of
any income allocated to the Member; and decreased by: (a) the amount of money
paid to the Member; (b) the fair market value of property distributed to the
Member by the Company (net of liabilities secured by the property or to which
the property is subject); (c) the Member's share of expenditures of the Company
described in Section 705(a)(2)(B) of the Code (including, for this purpose,
losses which are nondeductible under Section 267(a)(1) or Section 707(b) of the
Code); (d) the Member's share of amounts paid or incurred by the Company to
organize the Company or to promote the sale of (or to sell) an interest in the
Company (except to the extent properly amortizable for tax purposes); and (e)
the net amount of loss allocated to the Member. The Capital Account of each
Member shall be calculated on December 31 of each calendar year.
4.6 Capital Account of Substituted Member. The Capital Account of a
substituted Member shall be, with respect to any Units transferred to such
substituted Member pursuant to Article 8, "Transfer of Company Interests," the
Capital Account of the transferor Member determined in accordance with Paragraph
4.5, "Capital Accounts," as of the transfer date on which the substitution is
8
<PAGE>
effective.
ARTICLE 5
Management
5.1. Manager's Powers. Subject to the Members' approval of the major
Decisions as provided in paragraph 5.2 below, the Manager shall have the
exclusive right, power and duty to manage the business and affairs of the
Company, with all powers necessary, advisable or convenient to that end. The
powers and duties of the Manager shall include, but are not limited to, the
following:
5.1.a. To execute all documents and do all things necessary to
acquire the Property, or to execute any other documents required in connection
with the acquisition, maintenance, development, operation or sale of the
Property or reasonable or necessary in connection with the Company business;
5.1.b. To enter into a construction loan for the Company for
$6,232,000 bearing interest at L.I.B.O.R plus 240 basis points or the prime rate
plus one-half percent (l/2%)from Guaranty Federal Bank with a five (5) year term
consisting of one (1) two (2) year period of interest-only and three (3) one (1)
year extension options thereafter with amortization of principal to commence
after the first two (2) years; the Manager is hereby authorized to execute such
promissory notes, security agreements and other loan documentation as necessary
to consummate the foregoing loan.
5.1.c. To employ or engage on behalf of the Company such
Persons, as in the Manager's exclusive discretion or judgment may be deemed
advisable for the proper operation of the business of the Company, upon such
terms and for such compensation as the Manager shall determine, provided that
such compensation paid by the Company shall not exceed the cost of obtaining
similar services from third parties;
5.1.d. To make, execute, acknowledge and deliver such
certificates, instruments and documents as may be required by, or may be
appropriate under, the laws of the State of Arizona in connection with the
conduct of business by the Company;
5.1.e. To enter into such contracts and execute, acknowledge
and deliver all instruments in connection therewith which the Manager deems
necessary to effectuate the powers set forth herein and to take all such action
in connection therewith as the Manager deems necessary or appropriate;
5.1.f. To establish and maintain operating bank accounts and
reserves for such purposes and in such amounts as the Manager deems appropriate
from time-to-time and in their discretion designate persons to have signature
authority on such accounts;
5.1.g. In addition to the specific rights and powers herein
granted, to engage in any activities necessary or incidental to the
accomplishment of any of the purposes and business which the Company was formed
to conduct;
5.1.h. To protect and preserve the title and interest of the
Company with respect to the
9
<PAGE>
Property and other assets now or hereafter owned by the Company;
5.1.i. To pay from the funds of the Company, before
delinquency and prior to the addition thereto of interest or penalties, all
taxes, assessments, rents and other impositions applicable to the Property and
other assets now or hereafter owned by the Company and undertake, when approved
by the Members holding at least two-thirds (2/3) of the Units, any action or
proceeding seeking to reduce such taxes, assessments, terms or other
impositions;
5.1.j. To retain or employ and coordinate the services of all
contractors, approved architects, engineers, accountants, attorneys and other
professional persons in connection with the construction of buildings and other
improvements;
5.1.k. To maintain all funds of the Company in an
interest-bearing account or accounts established by the Manager with a bank or
banks chartered in the United States as may from time to time be selected by the
Manager;
5.1.1. When permitted or required by this Agreement or
otherwise approved by the Members, to make distributions periodically to the
Members in accordance with the provisions of this Agreement,
5.1.m. To supervise or assure the prompt compliance with all
present and future laws, ordinances, orders, rules, regulations and requirements
of all federal, state and municipal governments, courts, departments,
commissions, boards and officers pertaining to the Company or the Property;
5.1.n. To make application for and obtain all necessary
governmental approvals and permits and perform such acts as shall be necessary
to effect compliance by the Company with all laws, rules, ordinances, statutes
and regulations of any governmental authority applicable to the renovation and
operation of the Property;
5.1.o. To maintain all books and records of the Company in
accordance with good and acceptable accounting practices;
5.1.p. To reimburse itself from the Company funds for its
reasonable expenses incurred in connection with its duties under this Agreement
but only to the extent provided for in the annual operating budget and
construction budget approved by the Members as provided in paragraphs 5.2.g and
5.2.h. below;
5.1.q. To perform any other obligations provided elsewhere in
this Agreement to be performed by the Manager; and
5.1.r. To give the Company's indemnification to the entity
insuring title to the Property to the extent required by such entity to
indemnify said title company for any losses caused by mechanic and materialman
liens created by construction activity begun before the closing of the
construction loan.
5.2 Major Decisions. Notwithstanding anything contained in
paragraph 5.1 above to the
10
<PAGE>
contrary, the following Company decisions ("Major Decisions") shall require the
vote of the Members holding at least two-thirds (2/3) of the issued and
outstanding Units herein:
5.2.a. Any sale, transfer or disposition or refinance of all
or any portion of the Property;
5.2.b. The release of any Retentions as that term is defined
under the construction contract with MT Builders LLC;
5.2.c. Following Substantial Completion of the Property, any
additional contracts covering the construction of any improvements or repairs or
alterations to the Property;
5.2.d. Except as provided in paragraph 3.1.c. above, the
admission of additional Members;
5.2.e. The initiation of any lawsuit or other legal proceeding
that involves an obligation in excess of 550,000;
5.2.f. The execution of the construction contract or contracts
for the Property;
5.2.g. Each annual operating budget;
5.2.h. The budget for the construction of the Property;
5.2.i. Except for the construction loan and the
indemnification of the title insurance company as provided in paragraph 5.1.r.
above, the mortgaging or the placing of any encumbrances on the Property or the
granting of any options, rights of first refusal, liens, pledges or security
interests, or the creation of any debt, guarantee or financial obligation in
excess of 525,000. No debt or other obligation shall be contracted or liability
incurred by or on behalf of the Company except by the Manager;
5.2.j. The filing or arbitrating of, adjusting, settling or
compromising of, or entering a confession of judgment with respect to any claim,
obligation, debt, demand, suit or judgment by or against the Company in an
amount greater than 550,000;
5.2.k. The construction of any capital improvements other than
those reflected in the construction budget;
5.2.1. The extension of credit to, or execution of any loan,
bond, guarantee, indemnity or accommodation endorsement relating to the debt or
obligation of another party;
5.2.m. Making an assignment for the benefit of creditors or
filing a petition under federal bankruptcy law or any state insolvency law;
5.2.n. Changing the designation of the holder of legal title
to the Property and any other property owned by the Company;
11
<PAGE>
5.2.o. Consenting to any rezoning or subdivision of the
Property or any other material change in the legal status thereof;
5.2.p. Entering into any agreement or arrangement with any
Member or Affiliate of any Member or reimbursing any expense or expenditure of
any Member or Affiliate unless such agreement, arrangement, expense or
expenditure is specifically disclosed and authorized in the construction budget
or the operating budget; and
5.2.q. The removal or appointment of any Person as "Manager"
of the Company or as manager of the Property except, however, that P. B. Bell &
Associates, Inc. shall in no event be removed as Manager until the earlier of
(I) October 5, 1996 or (ii) the satisfaction of the conditions of paragraph 8.6
a. below. If the Manager is removed pursuant to this paragraph 5.2.q., then
Cerprobe shall attempt to obtain from the lender the release of all the
guaranties on the construction loan of the Company and if unable to obtain those
releases, then to indemnify any and all guarantors from any losses under those
guaranties If the Manager is removed under this subparagraph 5.2.q after the
closing of the construction loan and Cerprobe Corporation is able to obtain a
release of the guaranties, the Manager shall return to the Company the Loan
Guaranty Fee less that pan of the Loan Guaranty Fee that equals the product of
the Loan Guaranty Fee multiplied by a fraction, the denominator of which shall
be 180 days and the numerator of which shall be the number of days that have
elapsed since the date of the closing of the construction loan. If the
guaranties are not released and the Manager only receives an indemnity from
Cerprobe Corporation, then the Manager shall not refund any of the Loan Guaranty
Fee.
5.3 Other Activities and Certain Transactions. The Manager shall devote
to the Company such time as is necessary to the proper conduct of the Company's
business The Manager and the Members shall at all times be free to engage
generally in all aspects of real estate ownership and management, including the
purchase, sale, development and management of real estate and the formation of
partnerships, joint ventures, other investment programs similar to the Company,
or in any other business or venture of every nature and description, even though
said other activities and organizations may compete or tend to compete with the
Company. The Manager and the other Members shall have no duty or obligation to
present to the Company any real or personal properties, or opportunities in
connection therewith, which they may discover. Neither the Company nor its
Members shall have any right by virtue of this Agreement in or to such other
ventures, partnerships or entities or to the income or profits derived
therefrom, provided, that this Paragraph shall not be construed to either
contract or expand the duty of the Manager to the Members or the Company.
5.4 Indemnification and Exculpation of Manager. The Manager shall not
be liable to the Company or the Members for or as a result of any act, omission
or error in judgment which was taken, omitted or made by the Manager in the
exercise of its judgment in good faith under this Agreement and which does not
constitute fraud, gross negligence or breach of fiduciary duty by the Manager.
The Manager may consult with such legal or other professional counsel as it may
select. Any action taken or omitted by it in good faith reliance on, or in
accordance with, the opinion or advice of such counsel shall be full protection
and justification to the Manager with respect to the actions taken or omitted.
The Company will defend, reimburse and indemnify and save and
hold the Manager
12
<PAGE>
harmless from any liability, loss or damage and any and all costs and expenses
reasonably incurred by it in connection with, or any action, suit or proceeding
of whatever nature threatened or brought against it, or in which it may be
involved as parties or otherwise, by reason of any act performed or omitted to
be performed by it in connection with the business of the Company authorized by
this Agreement, whether or not the Manager continues to be such at the time of
including such costs and expenses, including amounts paid or incurred by it in
connection with reasonable settlements of any such claim, action, suit or
proceeding, provided such act or omission was done, in the good faith judgment
of the Manager, in the best interests of the Company and did not constitute
fraud, gross negligence, breach of fiduciary duty or misconduct by the Manager.
5.5 Arbitration. In the event the fair market value of the Units of a
Terminated Member (as hereinbelow defined) cannot be agreed upon, any Member may
provide the other Members with written notice (the "Arbitration Notice") that
the decision must be submitted to binding arbitration. Each party shall name an
arbitrator within twenty (20) days after either party notifies the other in
writing that there is such a dispute existing, and the two (2) arbitrators shall
name a third (3rd) arbitrator. If either party fails to select an arbitrator
within twenty (20) days as required herein, or if the two (2) arbitrators fail
to select a third (3rd) arbitrator within fifteen (15) days after both have been
appointed, then the then Presiding Judge of the Maricopa County Superior Court
shall appoint such other arbitrator or arbitrators. The arbitrators shall render
a decision within sixty (60) days after their appointment and shall conduct all
proceedings pursuant to Arizona Revised Statutes, Section 12-1501 through
Section 12-1517, or the successor statutes, and the Rules of the American
Arbitration Association governing commercial transactions then existing, to the
extent that such rules are not inconsistent with said statutes and this
Agreement. Judgment upon the award rendered under arbitration may be entered in
any court having jurisdiction. The cost of the arbitration procedure shall be
borne by the losing party or, if the decision is not clearly in favor of one
party or the other, then the costs shall be borne as determined by such
arbitration proceeding.
5.6 Tax Matters Officer. The Manager will act as "Tax Matters Partner"
in accordance with the Internal Revenue Code, or any successor statute.
ARTICLE 6
Contractual Relationships With Manager, Members and Affiliates
6.1 Development Fee. The Company shall pay a Development Fee to P. B.
Bell & Associates, Inc., the Manager, in the amount of Two Hundred Thirty
Thousand Dollars ($230,000) for its services and assistance in the acquisition
of the Property. The Fee shall be paid Fifty Seven Thousand Five Hundred Dollars
($57,500) upon acquisition of the Property by the Company and the balance in
eight (8) equal monthly installments of Twenty One Thousand Five Hundred Sixty
Two and 50/100 Dollars ($21,562.50) beginning thirty (30) days from the date of
closing on the Property.
6.2 Construction Fee. The Company shall pay a Construction Fee to MT
Builders, LLC, an Affiliate of the Manager, in the amount of Two Hundred Fifty
Thousand Dollars ($250,000) for its services In supervising the construction of
the improvements on the Property pursuant to a separate construction Contract
with such Affiliate The Fee shall be paid Sixty Two Thousand Five Hundred
13
<PAGE>
Dollars ($62,500) upon commencement of construction of the improvements by the
Company and the balance in eight (8) equal monthly installments of Twenty Three
Thousand Four Hundred Thirty Seven Dollars and 50/100 Dollars ($23,437.50)
beginning thirty (30) days from the date of commencement of construction.
6.3 Management Fee. So long as P. B. Bell & Associates, Inc. is the
Manager of the Company, the Company will pay a Management Fee to P. B Bell &
Associates, Inc., the Manager, for its services in managing the Property
pursuant to a separate maintenance contract with P. B Bell & Associates. The Fee
will be equal to three-fourths of one percent (.75 %) of the triple-net lease
payments received by the Company payable monthly.
6.4 Loan Guarantee Fee. The Company shall pay a Loan Guarantee Fee to
P. B. Bell & Associates, Inc., the Manager, or to the principals of the Manager
as appropriate, equal to one percent (I %) of the face amount of any loan for
the project contemplated hereunder that the Manager or said principals guaranty.
Said Fee shall be paid in cash upon the Closing of the loan involved.
6.5 Reimbursement. The Company shall reimburse the Manager for the
costs incurred by the Manager for any organization expenses paid by them prior
to or after formation of the Company, including but not limited to earnest
deposits, legal, engineering and accounting fees, appraisal fees, environmental
engineering fees and other acquisition costs, mailing, copying costs and any
direct general and administrative expenses incurred by the Manager directly
related to the formation of the Company and acquisition, development and
operation of the Property. All such reimbursements shall be made within sixty
(60) days of submission of substantiation, cash permitting. After formation of
the Company, all expenses of the Company shall be billed directly to, and paid
by, the Company where practical. The Manager shall receive reimbursement of the
costs incurred for services such as accounting and other extraordinary services
which would normally be performed directly for the Company by independent
parties, but which the Manager may provide. No amounts charged to the Company
will exceed those which the Company would be required to pay to independent
parties for comparable services in the greater Phoenix, Arizona metropolitan
area.
6.6 Lease. Concurrently with the execution of this Agreement, the
Company will enter into a separate agreement with Cerprobe Corporation, a
Member, for the lease of the Property with improvements.
ARTICLE 7
Accounts, Books, Reports and Banking
7.1 Accrual Basis. The Company shall utilize the accrual method of
accounting.
7.2 Fiscal Year. The fiscal year of the Company shall be the calendar
year ending December 31 of each year.
7.3 Books. The Manager shall keep, at the expense of the Company, books
of account for the Company adequate for its purposes. The books of account shall
be maintained at the principal office
14
<PAGE>
of business of the Company and shall be open at all reasonable times to
inspection and copying by any Member upon advance notice to the Manager and as
otherwise provided in the Act. The books of account may, at the sole discretion
of the Manager, be compiled or reviewed at the end of each accounting year by an
accountant selected by the Manager.
7.4 Reports. The Manager shall make available to each Member, within
one hundred and twenty (120) days after the end of the Company's fiscal year, an
annual report (unaudited) of the activities of the Company during the period
covered to be prepared at the Company's expense. The Manager shall also provide
a monthly operating statement within thirty (30) days of the end of each month
reflecting the revenues and expenses of the Company for and during the preceding
month. The Manager also shall prepare and deliver to the Members for approval an
annual operating budget no later than December 1 of each year reflecting in
reasonable detail the projected revenues and expenses of the Company for the
next succeeding calendar year. The Manager agrees that it shall not authorize or
incur any debts, liabilities or expenses on behalf of the Company in excess of
the total amount projected therefor without the approval of the Members as
provided in paragraphs 5.2.g. and 5.2.h.
7.5 Income Tax Returns. The Income Tax Returns for the Company shall be
prepared by the accountant employed by the Manager at the expense of the
Company. A statement of each Member's share of income, credits, deductions,
etc., completed by said accountant in a final form which is satisfactory to the
Manager and to said accountant, shall be sent to all of the Members within
thirty (30) days after completion, but no later than March 15 of each year.
7.6 Access to and Maintenance of Records. The Manager shall maintain a
list of the names and last known business addresses of all Members at the
principal office of the Company. The list shall be made available for the review
of any Member or its designated representative at reasonable times and, upon
request either in person or by mail, the Manager shall furnish a copy of such
list to any Member or its designated representative for the cost of reproduction
and mailing.
ARTICLE 8
Transfer of Company Interests
8.1 General Restrictions on Transfer. A Member shall not assign,
transfer, hypothecate or sell all or any of its Units or other rights or
benefits in the Company or in any way pledge, grant a security interest in or
alienate or encumber its interest in the Company, except as permitted in
Paragraphs 8.2, "Permitted Transfers and Substitutions," and 8.3, "Right of
First Refusal," and any document or instrument or other action purponing to do
so shall be null and void.
8.2 Permitted Transfers and Substitutions. Each Member may sell, assign
or transfer its Units in the Company, without the consent of the Members, to any
(I) trust of which the Member is a Grantor or Trustee and a beneficiary (ii)
corporation which is wholly-owned by the Member; (iii) one or more Persons who
own one hundred percent (100%) of the equity or beneficial interest of the
Member, if the Member is a corporation, partnership or trust; (iv) partnership,
limited liability company or corporation of which the equity or beneficial
owners are the same Persons (and in the same percentages) as the equity or
beneficial owners of the Member, if the Member is a partnership, limited
15
<PAGE>
liability company, corporation or trust; or (v) private foundation; provided,
however, that any Person, partnership, limited liability company, corporation or
trust entitled to receive such a transfer shall succeed to all the rights and
obligations of the former Member as a substituted Member only upon satisfaction
of the requirements of Paragraph 8.4, "Substitution of Members."
8.3 Right of First Refusal. Any Member desiring to dispose of all or
any of its Units in the Company (the "Offering Member") in any manner other than
as provided in Paragraph 8.7, "Permitted Transfers and Substitutions," shall
comply with the following:
8.3.a. Such Member shall deliver notice to the Company and the
other Members of such proposed disposition. The notice must include (I) a copy
of the offer, which must be a bona fide offer, (ii) the name of the proposed
transferee, (iii) the price offered for the Units and any other terms and
conditions of the proposed disposition which the Members may request. Upon
receipt of such notice of proposed disposition, each such Member shall have the
option for a period of thirty (30) days from the delivery of the notice of
proposed transfer to purchase such Units at the same price and on the same
payment terms as specified in such notice. If more than one Member elects within
the foregoing time period to acquire such Units, such Members shall purchase
such Units in the proportions that their respective Capital Percentages bear to
each other. No Member shall be required to dispose of any portion of its Units
unless the Company and other Members, individually or collectively, agree to
acquire all of the Units it proposes to dispose.
8.3.b. If the Members do not exercise their options to
purchase the Units of the Offering Member, then the Offering Member may sell
said Units not purchased by the other Members within sixty. (60) days of the end
of the thirty (30) day option period to the proposed transferee at the price and
on the terms and conditions originally stated in the notice of proposed
transfer. If such a sale is consummated, the transferee shall become a
substituted Member only upon satisfaction of the requirements of Paragraph 8.4,
"Substitution of Members." If the sale is not consummated within such sixty (60)
day period, then the restrictions of Paragraph 8.1 shall again be in full force
and effect with respect to the Units of the Offering Member.
8.4 Substitution of Member. No assignee or transferee of a
Unit or any fraction thereof shall have the right to become a Member without the
consent of the Members holding two-thirds (2/3) of the issued and outstanding
Units (which consent may be withheld at the sole discretion of each Member) and
until the assignee assumes all of the obligations and accepts and adopts in
writing all of the terms and provisions of this Agreement, as the same may have
been amended.
8.5 Events of Termination of a Member. Except as otherwise
approved by the specific written consent of all of the remaining Members, a
Person ceases to be a Member ("Terminated Member") upon the occurrence of any of
the following events: death, disability, resignation, retirement, expulsion,
adjudication of bankruptcy, insolvency, insanity or incompetency, making an
assignment for the benefit of creditors, or the dissolution or termination of a
Member which is a corporation, limited liability company or partnership. If a
Member that is an individual dies, his or her personal representative,
administrator or trustee or, if he or she is adjudicated incompetent or insane,
his or her guardian or conservator, or if a Member is adjudicated a bankrupt,
its bankruptcy estate, shall have the rights of the Member for settling or
managing the estate. The death, withdrawal, resignation, retirement,
16
<PAGE>
expulsion, bankruptcy, insanity or substitution of a Member shall dissolve the
Company unless the Members holding at least two-thirds (2/3) of the issued and
outstanding Units consent to continue the business of the Company pursuant to
the voting procedures described in Paragraph 10.2 below. If such Members elect
to continue the business of the Company then the remaining Members shall have
the option of purchasing the interest of a Terminated Member at its then agreed
upon fair market value. The remaining Members shall have the right to pay such
purchase price with a minimum of ten percent (10%) down, the balance in annual
payments over a five (5) year period with interest equal to the prime rate in
effect at Bank of America plus two percent (2%), cumulative but not compounded.
In the event the fair market value of the Units of a Terminated Member cannot be
agreed upon, any Member may provide the other Members with written notice (the
"Arbitration Notice") that the decision must be submitted to binding arbitration
pursuant to paragraph 5.5 above.
8.6 Cerprobe's Option to Purchase RCORP's and Manager's Interest. The
Units of P. B. Bell & Associates. Inc. ("Bell") and RCORP, Inc. ("RCORP") may be
purchased by Cerprobe Corporation at certain times and under certain events as
follows:
8.6.a. The Manager and RCORP each agree that it shall cause
the following events to occur not later than October 5, 1996:
8.6.a.1. The contribution of sufficient equity from a
subsequent Member investor to return $768,000 of the Initial Capital
Contribution of Cerprobe Corporation; and
8.6.a.2. The closing of a construction loan
sufficient to construct the building and otherwise improve the Property as
required under the Lease referred to in paragraph 6.6 above when such loan
proceeds are added to the then remaining Capital Contributions of the Company.
8.6.b. In the event the Manager or RCORP fails to complete
either of these two events in the time provided, the Manager and RCORP, Inc.
shall be in default hereunder. Unless and until such default is cured, all
voting rights of the Manager and RCORP, Inc. hereunder shall immediately be
suspended and Cerprobe Corporation shall have the right % be and Cerprobe is
hereby appointed as attorney-in-fact for the Manager and RCORP to cast all votes
with respect to the Units held by the Manager and RCORP and to make all
decisions and to grant or withhold all approvals that otherwise could be
exercised, cast, made, granted or withheld by the Manager and RCORP until such
time as a substitute Manager is elected as provided herein. Manager and RCORP
expressly agree that neither of them shall have the right to cure such default
except upon the approval of Cerprobe which it may grant or withhold in its sole
and absolute discretion.
8.6.c. Additionally, in the event the Manager or RCORP fails
to complete either of the two events listed in 8.6.a. above in the time
provided, the Member Cerprobe Corporation or its designee, without further
notice to or approval of the Manager, shall then have the right, for a period of
ninety (90) days from such event of default, to purchase the interest of the
Manager and RCORP in the Company for the purchase price of One Dollar (51.00) to
be paid in cash and to remove Bell as the Manager of the Company and to appoint
itself or any other Person that is a member according to Cerprobe's sole and
absolute discretion. If Cerprobe does not exercise this purchase right within
said ninety (90) day period, said right shall lapse. If Bell and RCORP are
bought out pursuant to these provisions, the parties agree
17
<PAGE>
as follows:
8.6.c.1. RCORP and Bell shall execute and deliver to
Cerprobe or its designee on demand such documents and instruments as Cerprobe
deems necessary to effect the transfer to Cerprobe or its designee the Units
held by Bell and RCORP;
8.6.c.2. If the construction loan has been closed but
the investor funds required under paragraph 8.6.a.1 above have not been obtained
and contributed to the Company, then Cerprobe shall agree to indemnify Bell and
any and all guarantors from any losses under the guaranties on the construction
loan.
8.6.c.3. Cerprobe agrees to pay any remaining
reimbursements due Bell pursuant to paragraph 6.5 above; and
8.6.c.4. Bell agrees to pay to the Company any Loan
Guaranty Fee that Bell may have received pursuant to paragraph 6.4 above.
ARTICLE 9
Dissolution of Company
9.1 Distribution on Dissolution. In the event of a dissolution of the
Company in accordance with Paragraph 1.5 "Term," the Company shall be dissolved,
wound-up and liquidated and the proceeds of such liquidation shall be applied
and distributed in the following order of priority:
9.1.a. to the payment of the lawful debts and liabilities of
the Company (other than any loans or advances that may have been made by the
Members to the Company) and the expenses of dissolution, winding-up and
liquidation; then
9.1.b. to the establishment of any reserves which the
liquidator may deem reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Company or the liquidator arising out of or in
connection with the Company. The liquidator shall pay such reserves to an escrow
agent selected by the liquidator to be held by such agent for the purpose of
disbursing such reserves in payment of any of the aforementioned contingencies,
and, at the expiration of such period as the liquidator shall deem advisable, to
distribute the balance thereafter remaining in the manner hereinafter provided;
then
9.1.c. to the repayment of any loans or advances that may have
been made by any of the Members to the Company; provided that if the amount
available for such repayment shall be insufficient, then prorata on account
thereof.
9.1.d. to the Members that have net balances in their then
existing Capital Accounts until all of such balances have been reduced to zero;
provided that the foregoing Distributions shall be allocated to each Member in
the ratio that the Member's Capital Account bears to the Capital Accounts of ail
other Members having net balances in their Capital Accounts and provided further
that if any
18
<PAGE>
Member's Capital Account has a deficit balance (after giving effect to all
allocations for the current taxable year), such Member shall contribute to the
capital of the Company the amount necessary to restore such deficit balance to
zero.
9.2. Liquidation. If the Company is dissolved for any of the reasons
stated in paragraph 1.5, a Manager or some other Person selected by the vote of
the Members holding at least two-thirds (2/3) of the Units hereunder, shall act
as liquidator, to wind up the business affairs of the Company. The liquidator
shall have full power, authority and duty to sell and assign any or all of the
Company's assets and to pay or cause to be paid the Company's debts, liabilities
and obligations as provided in paragraph 9.1 above. The liquidator shall
immediately commence to wind up the Company affairs and shall liquidate the
assets of the Company as promptly as possible, but in an orderly and
businesslike manner so as not to involve undue sacrifice or injury to the
Company.
ARTICLE 10
Rights of Members
10.1 Matters upon which Members May Vote. Members shall have the right
to vote upon certain matters affecting the Company under the terms and
conditions set forth in Paragraph 10.2, "Voting Procedures and Meetings of the
Members." Action shall be taken on the following matters if the Members vote in
favor of such action by the vote of the Members holding at least two-thirds
(2/3) of the issued and outstanding Units hereunder:
10.1.a. Amendment of this Agreement;
10.1.b. Selection of a liquidator in the event of dissolution
of the Company if there is no Manager;
10.1.c. To elect a new Manager in the event of the resignation
or removal of P. B. Bell & Associates, Inc. as Manager.
10.2 Voting Procedures and Meetings of the Members.
10.2.a. Any Member holding more than ten percent (10%) of the
issued and outstanding Units may at any time call a meeting of the Members, or
call for a vote without a meeting of the Members, on matters on which the
Members are entitled to vote. The Manager shall call for such a meeting or vote
following receipt of written request for such a meeting of the Members ("Notice
Date"). Within two (2) days of such Notice Date, the Manager shall notify all
Members of record as of the Notice Date as to the time and place of the Company
meeting, if called, and the general nature of the business to be transacted at
such meeting.
19
<PAGE>
ARTICLE 11
Representations and Warranties of Members
11.1 Representations and Warranties of Member. The Members hereby
represent, warrant and covenant, each to the others, that the Member has
received, studied and independently evaluated the documents listed on Schedule C
hereto and each Member understands the terms and conditions of the transactions
evidenced by such documents and is capable of understanding real estate and
investment matters generally.
ARTICLE 12
General
12.1 Notices. All notices, consents, requests, demands and offers
required or permitted to be delivered pursuant to this Agreement will be in
writing and will be considered properly delivered when personally delivered,
telecopied or delivered by professional courier service to the party entitled
thereto or if mailed, then three (3) business days after mailing by certified
United States mail, postage prepaid, return receipt requested, addressed, to a
Manager or to a Member, to the address appearing on Schedule A to this
Agreement.
12.2 Further Documents. Each of the Members for itself, his or her
heirs, personal representatives, successors and assigns hereby covenants and
agrees that such Member shall from time to time and at such time as may be
required, execute such further agreements, supplemental agreements, assurances
of title, and other documents and instruments as may be reasonably required and
necessary to carry out Company business and to effectuate the provisions hereof.
This Agreement shall be binding on the Members and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns.
12.3 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, but all of which, taken
together, shall constitute one agreement. It shall not be required that any
single counterpart hereof be signed by all of the Members, so long as each
Member signs any counterpart hereof.
12.4 Applicable Law. This Agreement shall be governed by and construed
in accordance with the Arizona Limited Liability Company Act and the other laws
of the State of Arizona.
12.5 Attorneys' Fees. In case of any action or proceeding to compel
compliance with, or for a breach of, any of the terms and conditions of this
Agreement, the prevailing party shall be entitled to recover from the losing
party ail costs of such action or proceeding, including, but not limited to,
reasonable attorneys' fees.
12.6 Construction. Such pronouns as "he," "his," "him," "it," or "who"
with "Member" or "Member" or "Manager" as the antecedent shall be deemed to
refer also to each such persons or entity who is a woman, a partnership, a joint
venture, an association, a corporation or a trust. Whenever required by the
contact hereof, the singular shall include the plural and vice versa, and the
masculine
20
<PAGE>
gender shall include the feminine and neuter genders, and vice versa. Section
headings and captions contained in this Agreement are inserted only as a matter
of convenience and for reference and in no way define, limit, extend or describe
the scope of this Agreement or the intent of any provision hereof.
12.7 Severability. This Agreement is intended to be performed in
accordance with, and only to the extent permitted by, all applicable laws,
ordinances, rules and regulations of the jurisdictions in which the Company does
business. If any provision of this Agreement, or any application thereof to any
person or circumstances shall, for any reason and to any extent, be invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected thereby, but
shall be enforced to the greatest extent permitted by law.
12.8 Entire Agreement. This Agreement contains the entire agreement and
understanding between the parties and supersedes any prior understandings and
agreements between or among them respecting the subject matter contained herein.
There are no representations or warranties, oral or written, expressed or
implied, between or among the parties hereby relating to the subject matter of
this Agreement which are not fully expressed herein.
12.9 Organization Expenses. All legal, recording and related expenses
in connection with the formation and qualification of this Company and purchase
of the Property shall be considered and treated as Company expenses, subject to
the limitations in the budgets approved by the Members, as provided elsewhere in
this Agreement.
[The remainder of this page has intentionallty been left blank.]
21
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Operating
Agreement of Company to be effective the 18th day of September, 1996.
MANAGER:
P. B. BELL & ASSOC'S, INC., an Arizona
corporation
By /s/ P. B. Bell
----------------------------------------------
PHILLIP B. BELL, President
MEMBERS:
RCORP, INC., an Arizona corporation
By /s/ Ronald L. Clifton
----------------------------------------------
RONALD L. CLIFTON, President
CERPROBE CORPORATION, a Delaware corporation
By /s/ Randal L. Buness
----------------------------------------------
RANDAL L. BUNESS, Chief Financial Officer,
Vice President and Secretary
THE LEIGHTON-OARE FOUNDATION, INC.
By /s/ Judd C. Leighton
----------------------------------------------
JUDD C. LEIGHTON
/s/ Judd C. Leighton
----------------------------------------------
/s/ Mary Morris Leighton
----------------------------------------------
By /s/ Judd C. Leighton
----------------------------------------------
MARY MORRIS LEIGHTON
Pursuant to Power of Atty
dated 2-12-93
22
<PAGE>
THE PLYM FOUNDATION
By /s/ James F. Keenan
----------------------------------------------
JAMES F. KEENAN
THE EDWARD & IRMA HUNTER FOUNDATION
By /s/ James F. Keenan
----------------------------------------------
JAMES F. KEENAN
23
<PAGE>
SCHEDULE A
CRPB INVESTORS, L.L.C.
<TABLE>
<CAPTION>
Initial
Member Capital Number Capital Capital
Name and Address Contributions of Units Percentage Account
=============================================================================================================================
<S> <C> <C> <C> <C>
P. B. Bell & Associates, Inc. Land Purchase and Sale 16.2 16.2% $270,264
8603 East Royal Palm Road Agreement Rights, Plans and
Suite 210 Specifications, Negotiated Net
Scottsdale, Arizona 85258 Lease with Tenant, Formation
of Entity and Loan Guaranties
RCORP, INC. Value Engineering and Site 1.8 1.8% $30,029
1717 East Morten Negotiations
Suite 210
Phoenix, Arizona 85020
Cerprobe Corporation Cash 35.96 35.96% $600,000
600 South Rockford Drive
Tempe, Arizona 85281
The Leighton-Oare Foundation, Cash 11.99 11.99% $200,000
Inc.
211 West Washington, #2400
South Bend, IN 46601
Mr. Judd C. Leighton Cash 5.995 5.995% $100,000
211 West Washington, #2400
South Bend, IN 46601
Mary Morris Leighton Cash 5.995 5.995% $100,000
211 West Washington, #2400
South Bend, IN 46601
The Plym Foundation Cash 11.03 11.03% $184,000
423 Sycamore Street, #101
Niles, MI 49120
The Edward & Irma Hunter Cash 11.03 11.03% $184,000
Foundation
423 Sycamore Street, #101
Niles, MI 49120
TOTAL $1,668,293
=============================================================================================================================
</TABLE>
24
<PAGE>
SCHEDULE B
Property Description
25
<PAGE>
EXHIBIT A
A portion of the Southwest quarter of Section 34, Township 1 South, Range 5 East
of the Gila and Salt River Base and Meridian, Maricopa County, Arizona, more
particularly described as follows:
Commencing at the Southwest Corner of said Section 3, said point being a brass
cap in handhold;
thence North 02 degrees, 54' 47" West (record North 02 degrees 53' 38"
West), along the West line of said Section 3, a distance of 1613.68 feet
(recorded 1613.22 feet) to the brass cap in handhole monumented intersection of
the said West section line and the monument line of West San Angelo Street as
shown on CONTINENTAL TECH CENTER, a Map of Dedication as recorded in Book 308 of
Maps, page 17, Maricopa County Records;
thence North 88 degrees 45' 42" East, along said monument line of West
San Angelo Street, a distance of 1393.81 feet to a point;
thence South 01 degrees 14' 18" East, perpendicular to the
aforementioned monument line of West San Angelo Street, a distance of 65.00 feet
to a one-half inch iron bar, said point being the Northwest corner of parcel and
the Point of Beginning;
thence North 88 degrees 45' 42" East, a distance of 419.03 feet to a
one-half inch iron bar, said point being on the arc of a circle, the center of
which bears North 01 degrees 14' 18" West, a distance of 2162.50 feet;
thence Northeasterly along said arc, through a central angle of 08
degrees 31' 43", a distance of 321.89 feet, to a one-half inch iron bar, said
point also being on the arc of a second circle, the center of which bears North
77 degrees 36' 55" East, a distance of 1565.00 feet;
thence Southeasterly along said arc, through a central angle of
01degrees 18' 35", a distance of 35.77 feet to a one-half inch iron bar;
thence South 13 degrees 42' 40" East, a distance of 123.85 feet to a
one-half inch iron bar, said point being on the arc of a third circle, the
center of which bears South 76 degrees 18' 37" West, a distance of 685.00 feet;
thence Southwesterly along said arc; through a central angle of 04
degrees 56' 26", a distance of 59.07 feet to a non-tangent point, said point
being a one-half inch iron bar;
thence South 13 degrees 37' 50" East, a distance of 72.85 feet to a
one-half inch iron bar, said point lying 55.00 feet West of the monument line of
Fiesta Boulevard;
thence South 02 degrees 46' 30" East, along said line, a distance of
347.41 feet to a one-half inch iron bar;
thence South 88 degrees 45' 42" West, a distance of 809.00 feet to a
one-half inch iron bar;
thence North 01 degrees 14' 18" West, a distance of 608.62 feet to the
Point of Beginning.
Described property being in and forming a part of the Town of Gilbert, Arizona
and comprising an area of 483,845 square feet or 11.1076 acres more or less.
REGISTERED LAND SURVEYOR
CERTIFICATE NO.
19809
CHRISTOPHER S.
AULERICH
DATE SIGNED
9/19/__
ARIZONA, U.S.A.
<PAGE>
PARCEL No. 2:
Nonexclusive easement for use and enjoyment in and to the Common Areas (as
defined in that certain Declaration of Covenants, Conditions, Restrictions and
Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 86-419846, as
amended by that certain First Amendment to Declaration of Covenants, Conditions,
Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument
No. 88-494774, re-recorded in Instrument No. 88-516441 and Instrument No.
89-312262, and as assigned and assumed by that certain Assignment and Assumption
of Declarant's Rights Under the Declaration of Covenants, Conditions,
Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument
No. 92-0420403, that certain Assignment and Assumption of Declarant's Rights
Under the Declaration of Covenants, Conditions, Restrictions and Easements for
CONTINENTAL TECH CENTER recorded in Instrument No. 92-0420406 and that certain
Assignment and Assumption of Declarant's Rights Under the Declaration of
Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER
recorded in Instrument No. 94-0889207).
PARCEL NO. 3:
A permanent, nonexclusive easement for vehicular and pedestrian ingress and
egress in, upon, over and across the Landscape Tracts, described as Landscape
Tract No. 3 of CONTINENTAL TECH CENTER, according to Book 308 of Maps, page 17,
records of Maricopa County, Arizona; and Landscape Tract No. 9 of CONTINENTAL
TECH CENTER PARCEL 5C, according to Book 320 of Maps, page 21, records of
Maricopa County, Arizona (as defined in that certain Declaration of Covenants,
Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in
Instrument No. 86-419846, as amended by that certain First Amendment to
Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL
TECH CENTER recorded in Instrument No. 88-494774, re-recorded in Instrument No.
88-516441 and Instrument No. 89-312262, and as assigned and assumed by that
certain Assignment and Assumption of Declarant's Rights Under the Declaration of
Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER
recorded in Instrument No. 92-0420403, that certain Assignment and Assumption of
Declarant's Rights Under the Declaration of Covenants, Conditions, Restrictions
and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 92-0420406
and that certain Assignment and Assumption of Declarant's Rights Under the
Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL
TECH CENTER recorded in Instrument No. 94-0889207).
<PAGE>
PARCEL NO. 4:
A temporary license for and during the construction phase of the improvements on
Parcel No. 1 hereinabove described, to enter upon the Landscape Tracts described
as Landscape Tract No. 3 of CONTINENTAL TECH CENTER, according to Book 308 of
maps, page 17, records of Maricopa County, Arizona; and Landscape Tract No. 9 of
CONTINENTAL TECH CENTER PARCEL 5C, according to Book 320 of Maps, page 21,
records of Maricopa County, Arizona (as defined in that certain Declaration of
Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER
recorded in Instrument No. 86-419846, as amended by that certain First Amendment
to Declaration of Covenants, Conditions, Restrictions and Easements for
CONTINENTAL TECH CENTER recorded in Instrument No. 88-494774, re-recorded in
Instrument No. 88-516441 and Instrument No. 89-312262, and as assigned and
assumed by that certain Assignment and Assumption of Declarant's Rights Under
the Declaration of Covenants, Conditions, Restrictions and Easements for
CONTINENTAL TECH CENTER recorded in Instrument No. 92-0420403, that certain
Assignment and Assumption of Declarant's Rights Under the Declaration of
Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER
recorded in Instrument No. 92-0420406 and that certain Assignment and Assumption
of Declarant's Rights Under the Declaration of Covenants, Conditions,
Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument
No. 94-0889207).
<PAGE>
SCHEDULE C
Company Supporting Documents
----------------------------
Project Proposal Booklet
Phase I Environmental Report
Geotechnical Evaluation Report
Seismic Study
ALTA Land Title Survey
Title Report Information in connection with the Property
Lease Documentation and all exhibits
Operating Agreement (attached herewith)
Construction Loan Commitment from Guaranty Federal Bank and supporting
documentation
Construction Contract with MT Builders
26
Cerprobe Corporation
Computation of Per Share Earnings
Exhibit 11
(Unaudited)
(in thousands, except EPS data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Common shares outstanding beginning of period 4,420 4,010 4,096 3,223
Effect of Weighting Shares:
New shares issued 0 0 0 508
Exercised employee stock options 88 156 185 150
Outstanding employee stock options 173 239 113 142
Converted convertible preferred stock 97 0 32 0
Converted convertible subordinated debentures 0 0 78 0
------ ------ ------ ------
Primary 4,778 4,405 4,504 4,023
====== ====== ====== ======
Common shares outstanding beginning of period 4,420 4,010 4,096 3,223
Effect of Weighting Shares:
New shares issued 0 0 0 508
Exercised employee stock options 88 156 185 150
Outstanding employee stock options 174 232 118 232
Converted convertible preferred stock 97 0 32 0
Outstanding convertible preferred stock 519 0 622 0
Outstanding convertible subordinated debentures 485 595 517 595
Converted convertible subordinated debentures 0 0 78 0
------ ------ ------ ------
Fully diluted 5,783 4,993 5,648 4,708
====== ====== ====== ======
Net income $ 663 $ 512 $2,531 $1,692
====== ====== ====== ======
Net income per common and common
common equivalent shares:
Net income per share
Primary 0.14 0.12 0.56 0.42
====== ====== ====== ======
Fully diluted 0.11 0.10 0.45 0.36
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Condensed Consolidated Balance Sheet at September 30, 1996 and the Condensed
Consolidated Statements of Operations and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 7,232,995
<SECURITIES> 2,260,063
<RECEIVABLES> 5,347,219
<ALLOWANCES> 178,000
<INVENTORY> 3,811,354
<CURRENT-ASSETS> 19,312,590
<PP&E> 10,883,656
<DEPRECIATION> 4,201,728
<TOTAL-ASSETS> 29,137,720
<CURRENT-LIABILITIES> 3,992,752
<BONDS> 957,277
26
0
<COMMON> 245,464
<OTHER-SE> 23,507,708
<TOTAL-LIABILITY-AND-EQUITY> 29,137,720
<SALES> 28,159,069
<TOTAL-REVENUES> 28,159,069
<CGS> 15,285,366
<TOTAL-COSTS> 23,879,986
<OTHER-EXPENSES> 167,194
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 167,194
<INCOME-PRETAX> 4,609,075
<INCOME-TAX> 2,162,000
<INCOME-CONTINUING> 2,530,884
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,530,884
<EPS-PRIMARY> 0.56
<EPS-DILUTED> 0.45
</TABLE>
