As filed with the Securities and Exchange Commission on December 6, 1996
Registration No. 333-15785
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CERPROBE CORPORATION
(Exact name of registrant as specified in its Charter)
DELAWARE 3670 86-0312814
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation) Classification Code Number) Identification Number)
---------------
600 South Rockford Drive
Tempe, Arizona 85281
(602) 967-7885
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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C. Zane Close
Cerprobe Corporation
600 South Rockford Drive
Tempe, Arizona 85281
(602) 967-7885
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
Richard B. Stagg, Esq. Kathleen R. McLaurin, Esq.
O'Connor, Cavanagh, Anderson, Jones Day Reavis & Pogue
Killingsworth & Beshears, P.A. 2300 Trammel Crow Center
One East Camelback, Suite 1100 2001 Ross Avenue
Phoenix, Arizona 85012 Dallas, Texas 75201
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Approximate Date of Commencement of Proposed Sale to the Public:
As soon as practicable after the Registration Statement becomes effective.
If the securities being registered on this form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [ ]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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SUBJECT TO COMPLETION, DATED DECEMBER 6, 1996
CERPROBE CORPORATION
PROSPECTUS
400,000 SHARES OF COMMON STOCK
The 400,000 shares of Common Stock, $0.05 par value per share
("Cerprobe Common Stock"), of Cerprobe Corporation, a Delaware corporation
("Cerprobe"), offered hereby will be issued by Cerprobe to the shareholders of
CROUTE, Inc., a Texas corporation ("C-Route"), together with cash in the
aggregate amount of $4.6 million, subject to adjustment, in exchange for all of
the issued and outstanding shares of common stock of C-Route in connection with
the proposed merger of C-Route with and into C-Route Acquisition, Inc., a
Delaware corporation and a wholly-owned subsidiary of Cerprobe ("C-Route
Acquisition") (the "Merger"). Immediately prior to the Merger, COMPUROUTE,
INCORPORATED, a Texas corporation ("CompuRoute"), approximately 89% of the stock
of which is owned by C-Route, will be merged with and into C-Route, with each
outstanding share of common stock of CompuRoute being exchanged for one share of
common stock of C-Route (the "CompuRoute Merger" and, together with the Merger,
the "Mergers"). The Merger is subject to the terms and conditions set forth in
an Agreement of Merger and Plan of Reorganization dated October 25, 1996 by and
among Cerprobe, C-Route Acquisition, C-Route, CompuRoute, and Souad Shrime
("Mrs. Shrime"), C-Route's principal shareholder, a copy of which is attached to
this Prospectus as Appendix A (the "Merger Agreement"). The CompuRoute Merger
will be subject to the terms and conditions set forth in an Agreement and Plan
of Merger dated October 25, 1996, between C-Route and CompuRoute, a copy of
which is attached to this Prospectus as Appendix B (the "CompuRoute Merger
Agreement"). The number of shares of Cerprobe Common Stock and the amount of
cash to be received by each C-Route shareholder in connection with the Merger,
assuming all options, warrants, or other rights to acquire C-Route stock have
been exercised or relinquished as described herein, is set forth in Annex A-2 to
the Merger Agreement. Assuming the issuance of 129,774 shares of C-Route common
stock in connection with the exercise of any options, warrants, or other rights
convertible into C-Route common stock acquired in connection with the CompuRoute
Merger, each share of C-Route common stock will be exchanged for approximately
$.47 in cash and approximately .04 newly issued shares of Cerprobe Common Stock.
The Merger is subject to approval by the shareholders of C-Route and the
CompuRoute Merger is subject to approval by the shareholders of C-Route and
CompuRoute at a special joint meeting of shareholders to be held on December __,
1996 (the "Meeting"). Neither the Merger nor the CompuRoute Merger is required
to be approved by Cerprobe's stockholders.
This Prospectus is included as part of a Registration Statement on Form
S-4 (together with all amendments, supplements, exhibits and schedules thereto,
the "Registration Statement") with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended (the "Securities
Act") relating to the Cerprobe Common Stock issuable in connection with the
Merger.
NO PROXY IS BEING REQUESTED IN CONNECTION WITH THE
MEETING AND YOU ARE REQUESTED NOT TO SEND A PROXY.
See "Risk Factors" beginning on page 14 for a discussion of certain
important factors that should be considered by shareholders of C-Route and
CompuRoute prior to determining how to vote at the Meeting.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Cerprobe expects to pay expenses of this offering of approximately
$300,000.
On December __, 1996, the closing price of Cerprobe Common Stock
(Symbol: CRPB) was $_______ per share, as reported by Nasdaq.
The date of this Prospectus is December __, 1996.
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TABLE OF CONTENTS
AVAILABLE INFORMATION..................................................... 3
SUMMARY................................................................... 4
SELECTED HISTORICAL AND PRO FORMA......................................... 9
FINANCIAL DATA............................................................ 9
COMPARATIVE PER SHARE DATA................................................ 13
RISK FACTORS.............................................................. 14
THE MEETING............................................................... 20
THE MERGER................................................................ 21
THE COMBINED COMPANY...................................................... 33
INFORMATION CONCERNING CERPROBE........................................... 37
INFORMATION CONCERNING C-ROUTE AND ITS SUBSIDIARIES....................... 58
PRO FORMA FINANCIAL INFORMATION RELATIVE TO THE MERGER.................... 65
CERPROBE - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................................... 71
C-ROUTE - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION.................................................. 78
DESCRIPTION OF CAPITAL STOCK.............................................. 81
COMPARISON OF RIGHTS OF SECURITY HOLDERS.................................. 82
LEGAL MATTERS............................................................. 84
EXPERTS................................................................... 84
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS................................ F-1
APPENDIX A - THE MERGER AGREEMENT
APPENDIX B - THE COMPUROUTE MERGER AGREEMENT
APPENDIX C - ARTICLE 5.12 OF THE TBCA REGARDING APPRAISAL RIGHTS
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY CERPROBE, OR ANY OTHER PERSON OR ENTITY. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY
SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF C-ROUTE,
COMPUROUTE, OR CERPROBE SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
Cerprobe is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Commission. Such reports, proxy and information statements and other information
may be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following Regional Offices of the Commission: New York Regional Office, Seven
World Trade Center, New York, New York 10048, and Chicago Regional Office, 500
West Madison Street, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549 upon payment of the prescribed fees. The Commission
also maintains a Web site that contains reports, proxy and information
statements, and other materials that are filed through the Commission's
Electronic Data Gathering, Analysis, and Retrieval system. This Web site can be
accessed at http://www.sec.gov. Cerprobe Common Stock is quoted on the Nasdaq
National Market. Reports, proxy and information statements, and other
information concerning Cerprobe may be inspected at the National Association of
Securities Dealers, Inc. at 1735 K Street, N.W. Washington, D.C. 20006.
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, contained in
this Prospectus and the Appendices hereto, all of which should be carefully
reviewed. The information contained herein with respect to Cerprobe and C-Route
and its subsidiaries has been supplied by each respective entity. Additionally,
the information contained herein with respect to the Mergers is qualified by
reference to the Merger Agreement and the CompuRoute Merger Agreement attached
hereto as Appendices A and B, respectively, and incorporated herein by
reference. All references herein to the "Combined Company" mean "Cerprobe" and
its subsidiaries following consummation of the Mergers. Unless the context
otherwise requires, all references herein to "C-Route" mean CROUTE, Inc. and its
subsidiaries. This Prospectus contains forward-looking statements that involve
significant risks and uncertainties, particularly with respect to the
anticipated results of the combined operations of Cerprobe, C-Route, and
CompuRoute following the Mergers. The Combined Company's actual results could
differ materially from those anticipated in these forward-looking statements as
a result of a variety of factors, including potential difficulties associated
with integrating the operations of the Combined Company and other factors set
forth in "Risk Factors" and elsewhere in this Prospectus.
The Companies
Cerprobe Corporation
Cerprobe designs, manufactures, and markets high-performance probing
and interface products for use in the testing of integrated and hybrid
electronic circuits for the semiconductor industry. Cerprobe's probing and
interface products enable semiconductor manufacturers, such as Intel, Motorola,
and IBM, among others, to test the integrity of their integrated circuits during
the batch fabrication process used in manufacturing integrated circuits in wafer
form. Testing integrated circuits during the batch fabrication stages of the
manufacturing process permits semiconductor manufacturers to identify defective
products early in the manufacturing process, which improves overall product
quality and lowers manufacturing costs. Cerprobe markets its probing and
interface products worldwide to semiconductor manufacturers, both those that
manufacture integrated circuits for resale and those that manufacture integrated
circuits for inclusion in their own products.
Cerprobe's revenues have grown substantially during the last five
years. Cerprobe believes it achieved this growth by addressing many of the
challenges associated with the testing of complex integrated circuits through a
combination of strengths, including advanced technical capabilities, a broad
line of high-quality products, and close relationships with leading integrated
circuit manufacturers. Cerprobe's strategy is to continue increasing its
domestic market share and expanding into international markets. To implement
this strategy, Cerprobe intends to: (i) focus on technological innovation, (ii)
maintain strong customer relationships, (iii) emphasize quality products, (iv)
increase focus on international opportunities, and (v) expand product lines and
applications.
Cerprobe was incorporated in California in 1976 and reincorporated in
Delaware in May 1987. Cerprobe is a publicly-held company whose common stock is
listed for quotation on the Nasdaq National Market (Symbol: "CRPB"). Cerprobe
maintains its principal executive offices at 600 South Rockford Drive, Tempe,
Arizona 85281, and its telephone number is (602) 967-7885. Cerprobe has five
production and sales facilities in the United States, an additional four sales
facilities in the United States, and two international production and sales
facilities: one in East Kilbride, Scotland and one in Singapore. Each of
Cerprobe's facilities are located in proximity to semiconductor manufacturing
centers in the U.S., Europe, and Asia.
CROUTE, Inc. and Subsidiaries
C-Route is a privately-held holding company that owns approximately 89%
of the common stock of CompuRoute. CompuRoute designs, manufactures, and markets
complex, multilayered printed circuit boards ("PCBs") primarily for use in
semiconductor testing applications. CompuRoute also offers a wide range of
PCB-related services including PCB computer-aided design ("CAD") layout, artwork
photo plotting, specialty CAD artwork layout, and
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electronic design. Until October 25, 1996, C-Route also owned approximately 98%
of the stock of Electronic Modules, Inc., a Texas corporation ("EMI") that was
engaged in producing and marketing typewriter and facsimile enhancement products
until July 1995 when it ceased operations and sold its assets to CompuRoute. On
October 25, 1996, Mrs. Shrime, the principal shareholder of C-Route, purchased
all shares of EMI capital stock held by C-Route. Accordingly, EMI is no longer a
subsidiary of C-Route. CompuRoute, however, continues to market products under
the EMI name. See "Information Concerning C-Route and Its Subsidiaries." The
mailing address for C-Route and its subsidiaries is c/o C-Route, Inc., 10365
Sanden Drive, Dallas, Texas 75238 and the telephone number is (214) 340-0543.
The Combined Company
Following consummation of the Mergers, the Combined Company will be in
the business of developing, manufacturing, and marketing integrated circuit
probe card products, hybrid circuit probe card products, and interface
assemblies, and the design, manufacture, and marketing of complex, multilayer
PCBs, primarily for use in semiconductor testing applications. After
consummation of the Mergers, the Combined Company will be managed by Cerprobe's
existing management. Cerprobe does not currently anticipate material changes in
the Combined Company's business strategy or market focus, although Cerprobe
expects to respond as its management deems appropriate to changes in its market
or competitive environment. No assurance can be given that the Mergers will be
consummated and, if consummated, no assurance can be given that the businesses
combined thereby can be successfully integrated.
The Mergers
General
If the CompuRoute Merger and the Merger are approved by the
shareholders of CompuRoute and C-Route, respectively, CompuRoute will be merged
with and into C-Route and, immediately thereafter, C-Route will be merged with
and into C-Route Acquisition. C-Route Acquisition will be the surviving
corporation and will be a wholly-owned subsidiary of Cerprobe. Upon consummation
of the CompuRoute Merger, each outstanding share of CompuRoute common stock will
be exchanged for one share of C-Route common stock and each option, warrant, or
other right to acquire CompuRoute common stock (a "CompuRoute Option") will be
converted into an option, warrant, or other right to acquire an identical number
of shares of C-Route common stock on the same terms and conditions as the
CompuRoute Option. Immediately thereafter, upon consummation of the Merger, each
share of common stock of C-Route, including shares acquired pursuant to the
exercise of options, warrants, or other rights to acquire C-Route common stock
issued in connection with the CompuRoute Merger, will be exchanged for a pro
rata portion of $4.6 million in cash, subject to adjustment as described herein,
and 400,000 newly issued shares of Cerprobe Common Stock. The number of shares
of Cerprobe Common Stock and the amount of cash to be received by each C-Route
shareholder in connection with the Merger, assuming all options, warrants, or
other rights to acquire C-Route stock have been exercised or relinquished as
described herein, is set forth in Annex A-2 to the Merger Agreement. Assuming
the issuance of 129,774 shares of C-Route common stock in connection with the
exercise of any options, warrants, or other rights convertible into C-Route
common stock acquired in connection with the CompuRoute Merger, each share of
C-Route common stock will be exchanged for approximately $.47 in cash and
approximately .04 newly issued shares of Cerprobe Common Stock. See "The
Merger." As a result, immediately after consummation of the Merger, Cerprobe
will be the sole stockholder of C-Route Acquisition (the name of which will be
changed to CompuRoute, Inc. following the Merger), and the shareholders of
C-Route and CompuRoute will be, subject to the rights of dissenting
shareholders, stockholders of Cerprobe.
Shareholder Approval
A special joint meeting of shareholders for C-Route and CompuRoute (the
"Meeting") is scheduled to be held on December ____, 1996 at 10365 Sanden Drive,
Dallas, Texas, commencing at 10:00 a.m., local time. At the Meeting,
shareholders of CompuRoute and C-Route will consider and vote upon a proposal to
approve the CompuRoute Merger and the CompuRoute Merger Agreement, pursuant to
which CompuRoute will be merged with and into C-Route, and, immediately
thereafter, C-Route's shareholders will consider and vote upon a proposal to
approve the
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Merger and the Merger Agreement, pursuant to which C-Route will be merged with
and into C-Route Acquisition. See "The Merger - Terms of the Transactions." The
Board of Directors of each of C-Route and CompuRoute has approved the CompuRoute
Merger and the related CompuRoute Merger Agreement and the Board of Directors of
each of C-Route, Cerprobe, and C-Route Acquisition has approved the Merger and
the related Merger Agreement. No vote by the stockholders of Cerprobe is
required in connection with the Mergers.
The Merger Agreement requires the affirmative vote by the holders of
not less than two-thirds of the outstanding shares of C-Route entitled to vote
to adopt and approve the Merger and the Merger Agreement. The CompuRoute Merger
Agreement requires the affirmative vote of the holders of not less than
two-thirds of the outstanding shares of CompuRoute and C-Route, respectively,
entitled to vote to adopt and approve the CompuRoute Merger and the CompuRoute
Merger Agreement. Mrs. Shrime currently holds approximately 93% of the
outstanding common stock of C-Route and has agreed to vote in favor of the
Merger and the Merger Agreement. Similarly, C-Route currently owns approximately
89% of the outstanding shares of common stock of CompuRoute and has informed the
CompuRoute Board of Directors that it intends to vote in favor of the CompuRoute
Merger and the CompuRoute Merger Agreement.
Appraisal Rights
If the Merger is consummated, shareholders of C-Route will have certain
rights to dissent and demand appraisal of, and receive payment in cash at the
fair value of, their shares of C-Route common stock pursuant to the Texas
Business Corporation Act (the "TBCA"), provided that such holders comply with
the appropriate procedures for appraisal rights required by applicable Texas
law. Under Texas law, a dissenting shareholder must file, prior to the meeting,
a written objection to the action stating, among other things, that the
shareholder's right to dissent will be exercised if the Merger (or the
CompuRoute Merger) becomes effective. Among other actions the shareholder must
take, the shareholder also must not vote in favor of the Merger (or, if
applicable, the CompuRoute Merger). Any shareholder contemplating the exercise
of appraisal rights is urged to carefully review the provisions of Articles 5.12
and 5.13 of the TBCA (a copy of which is attached to this Prospectus as Appendix
C), particularly with respect to the procedural steps required to perfect the
right of appraisal. The obligation of Cerprobe to consummate the Merger is
subject to the condition that holders of not more than 5% of C-Route's common
stock elect to exercise their appraisal rights under Texas law. In addition, if
the CompuRoute Merger is consummated, shareholders of CompuRoute will be
entitled to exercise their appraisal rights under Texas law with respect to
their shares of CompuRoute common stock, provided that such holders comply with
the appropriate procedures for appraisal rights acquired by applicable Texas
law. See "The Merger - Dissenters' Rights of Appraisal" and Appendix C.
Stock Options; Warrants
In connection with the CompuRoute Merger, the CompuRoute Options will
automatically be converted into options, warrants, and other rights to acquire
an identical number of shares of C-Route common stock subject to the same terms
and conditions set forth in the CompuRoute Options. In connection with the
Merger, any options, warrants, or other rights to acquire shares of C-Route
common stock, including the options, warrants, or other rights to acquire
C-Route common stock issued in connection with the CompuRoute Merger, will
automatically vest and may be exercised or relinquished in exchange for a pro
rata portion of the consideration to be received in connection with the Merger
based on the number of shares of C-Route common stock to be received upon
exercise of such option, warrant, or other right to acquire C-Route common
stock. No optionholder will be required to deliver the exercise price for such
options. Instead, the amount of cash to be received by each C-Route shareholder
who also owns options, warrants, or other rights to acquire C-Route common stock
will be reduced by the aggregate exercise price of such options, warrants, or
other rights to acquire C-Route common stock.
No shares of Cerprobe Common Stock, nor any other securities of
Cerprobe, including any options or warrants, will be issued in exchange for any
options, warrants, or other rights to acquire shares of C-Route or CompuRoute
common stock. Pursuant to the Merger Agreement, C-Route has agreed to cause all
options, warrants, or other rights to acquire shares of C-Route's stock to have
been vested and exercised prior to the consummation of the Merger.
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Trading Market
The Cerprobe Common Stock to be received by C-Route shareholders, other
than Mrs. Shrime, will be freely tradeable immediately following the
consummation of the Merger, subject to certain limitations, providing each
holder an opportunity either to liquidate or retain the investment in Cerprobe
Common Stock. Mrs. Shrime has agreed not to sell any Cerprobe Common Stock
received in connection with the Merger during the 12-month period following
consummation of the Merger and, thereafter, not to sell any of such shares
during the succeeding 12-month period in an amount more than the greater of 1%
of the shares of Cerprobe Common Stock then outstanding, or 50,000 shares, in
any 90-day period. Subject to this lock-up agreement, Ms. Shrime will have
certain registration rights with respect to the resale of the shares of Cerprobe
Common Stock received in the Merger so long as she is subject to the volume
limitations of Rule 145 under the Securities Act. The Cerprobe Common Stock to
be received by the shareholders of C-Route will be quoted on the Nasdaq National
Market under the symbol "CRPB", which should provide such holders greater
liquidity relative to the common stock of C-Route and CompuRoute, neither of
which is traded publicly. The closing sale price per share of Cerprobe Common
Stock on the Nasdaq National Market was $9.75 on August 19, 1996, the last
trading day prior to the public announcement that Cerprobe and C-Route and its
subsidiaries had entered into a revised letter of intent with respect to the
Merger. See "Information Concerning Cerprobe - Dividends on and Market Prices of
Cerprobe Common Stock."
Risk Factors
The proposed Merger involves substantial risk. The following risk
factors, among others, together with all of the other information appearing in
this Prospectus, should be carefully considered by C-Route and CompuRoute
shareholders, in light of their particular investment objectives and financial
circumstances, prior to determining how to vote at the Meeting: (i) there are
significant uncertainties and risks relating to the integration of the
operations of Cerprobe, C-Route, and CompuRoute; (ii) Cerprobe may in the future
make additional acquisitions, which could adversely affect the liquidity,
results of operation, and financial condition of Cerprobe and result in possible
dilution to its existing stockholders; and (iii) substantial risks are
associated with the potential volatility in the market price of Cerprobe Common
Stock upon consummation of the Merger. See "Risk Factors."
Certain Federal Income Tax Consequences
Cerprobe, C-Route, and CompuRoute intend to treat the Merger and the
CompuRoute Merger as reorganizations pursuant to Sections 368(a)(1)(A) and
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code") . As
such, the Mergers will not represent a taxable event to any of the companies.
The C-Route and CompuRoute shareholders , however, will be taxed on the cash
received in the Merger in an amount equal to the lesser of (i) the gain that
would have been realized had the shareholders exchanged their stock for Cerprobe
Common Stock and cash in a taxable transaction, or (ii) the amount of cash
received. The character of the income or gain recognized will depend on each
shareholder's individual circumstances. Assuming the value of Cerprobe Common
Stock exceeds the cash received by the C-Route and CompuRoute shareholders on
the Effective Date of the Mergers, Cerprobe believes that, based on advice of
counsel, the Mergers will more likely than not be treated as reorganizations
under the Code.
Alternatively, the IRS could take the position that the Merger
represents a taxable sale of the combined assets of C-Route and CompuRoute to
Cerprobe in exchange for Cerprobe Common Stock and cash. As such, C-Route would
be required to recognize taxable gain or loss upon the sale of such assets. The
value of the Cerprobe Common Stock and cash received and any liabilities assumed
by Cerprobe would be allocated to C-Route's assets and compared to C-Route's
basis in the assets. The difference would represent the gain or loss required to
be recognized by C-Route. The character of the gain or loss would depend upon
the character of each asset sold. The C-Route shareholders (including the former
CompuRoute shareholders who receive C-Route stock in the CompuRoute Merger)
would also recognize gain or loss upon the receipt of Cerprobe Common Stock and
cash in liquidation of C-Route. The amount of the gain or loss would be equal to
the excess of the fair market value of Cerprobe Common Stock and cash received
by the shareholder over the shareholder's basis in its stock. The character of
the gain or loss generally would be capital.
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Neither Cerprobe nor C-Route or CompuRoute have requested an opinion
from counsel or a private letter ruling from the IRS with respect to the tax
treatment of the Mergers. The C-Route and CompuRoute shareholders are urged to
consult with their own tax advisors with respect to the specific tax
consequences to them of the Mergers. See "The Merger - Certain Federal Income
Tax Consequences."
Accounting Treatment
The Merger will be accounted for by Cerprobe under the purchase method
of accounting in accordance with generally accepted accounting principles. See
"The Merger - Accounting Treatment."
Conditions to Consummation of the Merger
Consummation of the Merger is conditioned upon the fulfillment or
waiver of certain conditions set forth in the Merger Agreement, including a
condition that holders of not more than 5% of the common stock of C-Route
exercise appraisal rights under Texas law. For a detailed description of the
conditions to the Merger, see "The Merger - Terms of the Transactions."
Effective Date of the Merger
If the Merger is approved by the requisite vote of the shareholders of
C-Route and the other conditions to consummation of the Merger are satisfied or
waived, including approval of the CompuRoute Merger by the shareholders of
CompuRoute, the Merger will become immediately effective at the time a
Certificate of Merger is accepted for filing with the Secretary of State of
Delaware and Articles of Merger are accepted for filing with the Secretary of
State of Texas or such later date and time as may be specified in the respective
Certificate of Merger or Articles of Merger (the "Effective Date"). The
Certificate of Merger and Articles of Merger will be filed only upon
satisfaction or waiver of the conditions contained in the Merger Agreement. The
CompuRoute Merger will become immediately effective at the time Articles of
Merger are accepted for filing with the Secretary of State of Texas and will be
filed only upon satisfaction or waiver of the conditions contained in the
CompuRoute Merger Agreement.
Record Date; Voting Rights
Only the holders of record of shares of common stock of CompuRoute and
C-Route at the close of business on ____________, 1996 (the "Record Date") are
entitled to notice of, and to vote at, the Meeting regarding approval and
adoption of the CompuRoute Merger. Each share of common stock of CompuRoute and
C-Route is entitled to one vote upon the approval and adoption of the CompuRoute
Merger. Only the holders of record of shares of common stock of C-Route at the
close of business on the Record Date are entitled to notice of, and to vote at,
the Meeting regarding approval and adoption of the Merger. Each share of common
stock of C-Route is entitled to one vote upon the approval and adoption of the
Merger. CompuRoute shareholders who are not also holders of C-Route common stock
as of the Record Date will not be entitled to vote on the Merger nor the Merger
Agreement, and therefore will not be entitled to appraisal rights in connection
with the Merger. See "The Meeting - Dissenters' Rights of Appraisal."
Interest of Certain Persons in the Mergers
In connection with the Merger, Cerprobe or a wholly-owned subsidiary of
Cerprobe will purchase the land and building currently used by C-Route and
CompuRoute and owned by Mrs. Shrime, the beneficial owner of approximately 93%
of C-Route common stock, for a total purchase price of $1.2 million and the
assumption of a promissory note, secured by the property, which has an
outstanding principal balance of approximately $1,040,000. In addition, Cerprobe
will offer employment agreements to certain officers and key employees of
CompuRoute to be effective upon consummation of the Merger. None of such
individuals, however, will be executive officers of Cerprobe following the
Merger. See "The Merger - Interests of Certain Persons."
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SELECTED HISTORICAL AND PRO FORMA
FINANCIAL DATA
The following selected historical financial information of Cerprobe and
C-Route has been derived from their respective historical consolidated financial
statements and should be read in conjunction with the consolidated financial
statements and the notes thereto included elsewhere in this Prospectus. The
Cerprobe and C-Route historical consolidated financial statement data as of and
for the nine months ended September 30, 1995 and 1996, are unaudited and have
been prepared on the same basis as the historical information and, in the
opinion of their respective management, contain all adjustments, consisting only
of normal recurring adjustments, necessary for the fair presentation of the
results of operations for such periods.
The following selected pro forma combined financial data has been
derived from the pro forma combined condensed financial statements, which give
effect to the Merger as a purchase transaction, and should be read in
conjunction with such pro forma financial statements and the notes thereto,
which are included elsewhere in this Prospectus. For pro forma purposes,
Cerprobe's consolidated statements of income for the year ended December 31,
1995, and for the nine months ended September 30, 1996, have been combined with
the consolidated statements of operations of C-Route for the year ended December
31, 1995, and for the nine months ended September 30, 1996 giving effect to the
Merger as if it occurred on January 1, 1995. For pro forma purposes, Cerprobe's
consolidated balance sheet as of September 30, 1996 has been combined with the
consolidated balance sheet of C-Route as of September 30, 1996, giving effect to
the Merger as if it had occurred on September 30, 1996.
The pro forma information is presented for illustrative purposes only
and is not necessarily indicative of the operating results or financial position
that would have occurred if the Merger had been consummated at the dates
indicated, nor is it necessarily indicative of future operating results or
financial position.
The historical information for Cerprobe as of and for the years ended
December 31, 1991, 1992, 1993, 1994, and 1995 has been derived from audited
financial statements for the periods presented. The historical information for
C-Route has been derived from audited financial statements for the years ended
December 31, 1993, 1994, and 1995 and as of December 31, 1994 and 1995. The
information as of December 31, 1991, 1992 and 1993 and for the years ended
December 31, 1991 and 1992 is unaudited.
9
<PAGE>
CERPROBE CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine months ended
Year ended December 31, September 30,
---------------------------------------------------- ----------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of
Income Data:
Net sales $ 6,382 $ 8,060 $ 11,212 $ 14,251 $ 26,098 $ 17,969 $ 28,159
Cost of goods sold 4,443 4,914 6,768 8,214 13,706 9,391 15,285
-------- -------- -------- -------- -------- -------- --------
Gross margin 1,939 3,146 4,444 6,037 12,392 8,578 12,874
Operating expenses:
Selling, general and administrative 1,729 1,827 2,398 3,693 7,502 5,110 7,871
Engineering and product development 218 246 336 417 707 529 724
-------- -------- -------- -------- -------- -------- --------
Total operating expenses 1,947 2,073 2,734 4,110 8,209 5,639 8,595
-------- -------- -------- -------- -------- -------- --------
Operating income (loss) (8) 1,073 1,710 1,927 4,183 2,939 4,279
Other income (expense), net (407) (282) (118) (4) 31 20 330
-------- -------- -------- -------- -------- -------- --------
Income (loss) before income taxes, minority
interest and extraordinary item (415) 791 1,592 1,923 4,214 2,959 4,609
Income taxes -- (321) (90) (710) (1,812) (1,267) (2,162)
Minority interest in loss of subsidiary -- -- -- -- -- -- 84
-------- -------- -------- -------- -------- -------- --------
Income (loss) before extraordinary item (415) 470 1,502 1,213 2,402 1,692 2,531
Extraordinary item -- 301 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss) $ (415) $ 771 $ 1,502 $ 1,213 $ 2,402 $ 1,692 $ 2,531
======== ======== ======== ======== ======== ======== ========
Net income (loss) per common and common
equivalent share
Primary:
Net income (loss) per share $ (0.18) $ 0.31 $ 0.41 $ 0.36 $ 0.59 $ 0.42 $ 0.49
Shares used in per share calculation 2,245 2,502 3,688 3,387 4,071 4,023
5,126
Fully diluted:
Net income (loss) per share $ (0.18) $ 0.21 $ 0.35 $ 0.30 $ 0.49 $ 0.36 $ 0.45
======== ======== ======== ======== ======== ======== ========
Shares used in per share calculation 2,245 3,680 4,349 4,007 4,862 4,708 5,648
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of
-------------------------------------------- Sept. 30,
1991 1992 1993 1994 1995 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Working capital $ 648 $ 1,551 $ 2,777 $ 3,572 $ 4,772 $15,320
Total assets 1,959 3,083 4,674 7,015 14,967 29,138
Long-term debt 1,022 859 748 791 981 957
Stockholders' equity 172 1,303 3,063 4,923 10,656 23,753
</TABLE>
10
<PAGE>
CROUTE, INC. AND SUBSIDIARIES
SELECTED HISTORICAL FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
Nine months ended
Year ended December 31, September 30,
------------------------------------------------ -----------------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Net revenues $ 6,724 $ 5,947 $ 6,586 $ 5,957 $ 8,694 $ 6,309 $ 7,872
Cost of sales 4,916 4,500 4,167 4,111 6,063 4,351 5,518
------- ------- ------- ------- ------- ------- -------
Gross margin 1,808 1,447 2,419 1,846 2,631 1,958 2,354
Operating expenses:
Selling and administrative 2,192 1,793 1,521 1,329 1,604 1,092 1,506
------- ------- ------- ------- ------- ------- -------
Operating income (loss) (384) (346) 898 517 1,027 866 848
Other income (expense), net (215) (454) (333) (71) (84) 4 (83)
------- ------- ------- ------- ------- ------- -------
Income (loss) before income taxes, minority
interest and extraordinary item (599) (800) 565 446 943 870 765
Income tax expense -- -- (5) (169) (104) (104) (50)
Minority interest in (earnings) loss of subsidiary (122) 56 (144) (298) (119) (127) (73)
------- ------- ------- ------- ------- ------- -------
Income (loss) before extraordinary item (721) (744) 416 (21) 720 639 642
Extraordinary item -- -- 304 2,908 -- -- --
------- ------- ------- ------- ------- ------- -------
Net income (loss) $ (721) $ (744) $ 720 $ 2,887 $ 720 $ 639 $ 642
======= ======= ======= ======= ======= ======= =======
Net income (loss) per common and common
equivalent share
Primary:
Net income (loss) per share $ (0.08) $ (0.09) $ 0.08 $ 0.34 $ 0.08 $ 0.07 $ 0.07
Shares used in per share calculation 8,598 8,598 8,598 8,598 8,598 8,598 8,600
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of
------------------------------------------------ September
1991 1992 1993 1994 1995 30, 1996
---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Working capital (deficiency) $(1,139) $(1,596) $ (80) $ 252 $ 91 $ 754
Total assets 2,372 1,558 1,709 2,286 3,999 4,272
Long-term debt 2,502 2,416 305 352 567 848
Stockholders' equity (deficit) (3,554) (4,296) (3,700) (63) 1,403 2,045
</TABLE>
11
<PAGE>
SELECTED PRO FORMA COMBINED FINANCIAL DATA
(In thousands, except per share data)
Year ended Nine months ended
December 31, September 30,
1995 1996
------------ -----------------
Consolidated Statement of
Income Data:
Net sales $ 34,792 $ 36,031
Cost of goods sold 19,769 20,803
-------- --------
Gross margin 15,023 15,228
Operating expenses:
Selling, general and administrative 9,278 9,505
Engineering and product development 707 724
-------- --------
Total operating expenses 9,985 10,229
-------- --------
Operating income 5,038 4,999
Other income (expense), net (53) 247
-------- --------
Income before income taxes and minority
interest 4,985 5,246
Income taxes (1,847) (2,161)
Minority interest in loss of subsidiary 84
-------- --------
Net income $ 3,138 $ 3,169
======== ========
Net income per common and common equivalent
share
Primary:
Net income per share $ 0.70 $ 0.57
======== ========
Shares used in per share calculation 4,471 5,526
Fully diluted:
Net income per share $ 0.60 $ 0.52
======== ========
Shares used in per share calculation 5,262 6,048
As of
September 30, 1996
------------------
Consolidated Balance Sheet Data:
Working capital $ 8,934
Total assets 30,506
Long-term debt 1,804
Stockholders' equity 21,769
12
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data of
Cerprobe and C-Route and combined per share data and equivalent per share data
on an unaudited pro forma basis after giving effect to the Merger as a purchase
transaction. This data should be read in conjunction with the selected
historical financial data, the selected pro forma combined financial data, the
pro forma combined condensed financial statements, and the separate historical
consolidated financial statements of Cerprobe and C-Route, respectively, and the
notes thereto, included elsewhere in this Prospectus. The unaudited pro forma
combined financial data are not necessarily indicative of the operating results
or financial position that would have been achieved had the Merger been
consummated at the dates indicated and should not be construed as representative
of future operations.
<TABLE>
<CAPTION>
Year Nine months
ended ended
December 31, 1995 September 30, 1996
----------------- ------------------
<S> <C> <C>
Historical-Cerprobe
Net income per share $ 0.49 $ 0.45
Book value per share (1) 2.60 4.84
Pro forma combined
Net income per share (2)(3) 0.60 0.52
Book value per share (2)(3) 4.10
Historical-C-Route
Net income per share 0.08 0.07
Book value per share (1) 0.16 0.24
Equivalent pro forma per share (4)
Net income per share 0.03 0.02
Book value per share 0.19
Market value per share preceding announcement of merger
Market value per Cerprobe share-Historical 9.75
Market value per C-Route share-Historical (5)
</TABLE>
_____________
(1) The historical book value per share is computed by dividing
stockholders' equity by the number of shares of common stock
outstanding at the end of each period.
(2) Pro forma combined net income per share data reflects Cerprobe's and
C-Route's combined per share data for the fiscal year ended December
31, 1995 and the nine months ended September 30, 1996. The pro forma
combined net income per share data is based on the weighted average
number of common and common equivalent shares of Cerprobe Common Stock
after giving effect to the issuance of 400,000 shares in connection
with the Merger. The pro forma combined book value per share data
reflects Cerprobe's and C-Route's per share data after giving effect to
the Merger as a purchase.
(3) Cerprobe and C-Route estimate they will incur certain direct
transaction costs associated with the Merger. The pro forma combined
book value per share data gives effect to estimated direct transaction
costs of $300,000 as if such costs had been incurred as of September
30, 1996, but the effects of these costs have not been reflected in the
pro forma combined net income per share data.
(4) Equivalent pro forma per share amounts are calculated by multiplying
the pro forma combined net income and book value per share amounts by
the exchange ratio.
(5) C-Route common stock is not traded on any securities market or
exchange. Preceding the announcement of the Merger, there was no market
for the shares of C-Route.
See "Pro Forma Financial Information Relative to the Merger" and the
accompanying notes thereto.
13
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, all of the
risk factors listed below should be considered carefully by the shareholders of
C-Route and CompuRoute. These factors should be considered in conjunction with
the other information included or incorporated by reference in this Prospectus.
In accordance with the provisions of the Private Securities Litigation Reform
Act of 1995, the cautionary statements and risk factors set forth below identify
important trends, factors, and currently known developments that could cause
actual results to differ materially from those in any forward-looking statements
contained in this Prospectus.
Uncertainties Accompanying Integration of Acquired Business; Management of
Growth
Significant uncertainties accompany any business combination and its
implementation with respect to the ability of the Combined Company to integrate
administrative functions, management resources, and sales and marketing
distribution systems in order to achieve operating efficiencies. There can be no
assurance that Cerprobe will be able to successfully integrate the operations of
CompuRoute following the Merger. The inability to achieve the anticipated
operating efficiencies could have a material adverse effect on the Combined
Company's operating results following the Merger. The consummation of the Merger
also will result in significant growth of the Combined Company's operations. To
manage this growth effectively, the Combined Company will be required to expand
its existing operating and financial systems and controls and to manage a
substantial increase in its employee base. To the extent that the Combined
Company's management is unable to assume or perform these combined duties, the
business of the Combined Company following the Merger could be materially
adversely affected. There can be no assurance that the management systems and
controls currently in place or any steps taken to expand such management systems
and controls will be adequate in the future.
No Fairness Opinions
Although the respective Boards of Directors of C-Route, CompuRoute and
Cerprobe believe that the terms of the Mergers are in the best interests of
their respective stockholders, no opinion has been obtained by any of the
parties as to the fairness, from a financial point of view, of the terms of the
Mergers. In addition, because Cerprobe and C-Route negotiated a no-shop
provision pending consummation of the Merger, alternative offers were not
solicited. Thus, no assurance can be given that the terms of the Mergers are
fair, from a financial point of view, to the shareholders of C-Route and
CompuRoute. The terms of the Merger, including the consideration to be received
by C-Route's shareholders, have been determined by arms-length negotiations
between C-Route, CompuRoute, and Cerprobe. The terms of the Mergers do not
necessarily bear any relationship to the assets, earnings, book value, or any
other commonly accepted criteria for valuation with respect to C-Route or
CompuRoute. Accordingly, shareholders of C-Route and CompuRoute should carefully
evaluate the terms of the Merger and the CompuRoute Merger in determining
whether to accept Cerprobe Common Stock and cash or to dissent and seek
appraisal rights.
Factors Affecting Operating Results
The Combined Company's operating results will be affected by a wide
variety of factors which could have a material adverse effect on its net sales
and profitability, many of which are beyond its control. These factors include
the Combined Company's ability to design and introduce new products on a timely
basis, customer demand for the Combined Company's products, the level of orders
that are received and can be delivered in a quarter, customer order patterns,
product performance and reliability, utilization of manufacturing capacity, the
availability and cost of raw materials, equipment and other supplies, the
cyclical nature of the semiconductor industry, technological changes,
competition and competitive pressures on prices, and economic conditions in the
U.S. and worldwide markets served by the Combined Company. The Combined
Company's products are used in the testing of integrated circuits used by a wide
variety of computer, automotive, communications, and aerospace manufacturers and
users. A slowdown in demand for products that utilize integrated and hybrid
circuits as a result of economic or other conditions in the U.S. or worldwide
markets served by the Combined Company could have a material adverse effect on
its operating results.
Federal Income Tax Risks
The tax consequences to C-Route , CompuRoute, and their respective
shareholders may vary depending on whether the amount of cash received by the
shareholders exceeds the fair market value of the Cerprobe Common Stock received
by the shareholders as of the Effective Date of the Mergers. If the cash
received by the shareholders exceeds the fair market value of the Cerprobe
Common Stock received by the shareholders, the IRS could assert that the Mergers
should be treated as a fully taxable exchange (or sale) of the combined assets
of C-Route and CompuRoute, followed by the taxable liquidation of C-Route,
because the Merger would fail to meet published IRS guidelines, which would
require that the shareholders exchange at least 50 percent by value of their
C-Route stock for Cerprobe Common Stock for the Mergers to be treated as a
reorganization (the "continuity of interest guideline").
If the Mergers do not meet the continuity of interest test and are
therefore not treated for federal income tax purposes as reorganizations within
the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code, the Mergers
will be treated as a fully taxable sale of the combined assets of C-Route and
CompuRoute (the "Sale"), followed by the complete liquidation of C-Route (the
"Liquidating Distribution"). As a result, C-Route will recognize taxable gain or
loss upon the Sale, and the C-Route shareholders (including the former
CompuRoute shareholders who receive C-Route stock in the CompuRoute Merger) will
recognize gain or loss upon receipt of the Liquidating Distribution (consisting
of Cerprobe Common Stock and cash) in exchange for their C-Route stock.
14
<PAGE>
Dependence on New Products and Technologies
The Combined Company will operate in an industry subject to rapid
change. Technological advances, the introduction of new products, and new design
and manufacturing techniques could materially adversely affect the Combined
Company's operations unless it is able to adapt to the resulting change in
conditions. The Combined Company's future operating results will depend to a
significant extent on its ability to continue to develop and introduce new
products on a timely basis which compete effectively on the basis of price,
performance, and delivery and which address customer requirements. The success
of new products depends on various factors, including proper new product
selection, timely completion and introduction of new product designs, and
development of support tools and collateral literature that make complex new
products easy for engineers to understand. There can be no assurance that any
new products will receive or maintain substantial market acceptance. If the
Combined Company is unable to design, develop, and introduce competitive
products on a timely basis, its future operating results may be materially
adversely affected.
Inability to Maintain Manufacturing Yields and Delivery Schedules
The design and manufacture of probe cards, interface products, and PCBs
by the Combined Company are highly complex processes that are sensitive to a
wide variety of factors, including the level of contaminants in the
manufacturing environment, impurities in the materials used, and the performance
of the design and production personnel and equipment. As is typical in the
industry, each of Cerprobe and CompuRoute from time to time has experienced
lower than anticipated manufacturing yields and lengthening of delivery
schedules. The Combined Company's operating results could be materially
adversely affected if it is unable to maintain high levels of productivity
and/or to maintain satisfactory delivery schedules.
Competition
Cerprobe competes with several well established domestic corporations
in the integrated circuit probe card market, including Probe Technology
Corporation, Wentworth Laboratories, Inc., and Micro-Probe, Incorporated, as
well as numerous smaller competitors and is becoming increasingly subject to
significant competition internationally as it expands into foreign markets. Such
competitors manufacture and market epoxy ring probe cards, which represent the
significant majority of the domestic and international markets, and metal blade
probe cards, which represent only a small portion of those markets. Cerprobe
also encounters competition in the manufacture and sale of ceramic blade probe
cards, although ceramic blade probe cards currently are produced by Cerprobe and
only to a limited extent by Wentworth Laboratories, Inc. and Accuprobe, Inc. and
represent only a small portion of the total market for probe cards. Competition
may increase in the future as integrated circuitry and probing technology become
more sophisticated. Cerprobe competes primarily on the basis of price,
performance, and delivery.
Cerprobe competes with several domestic companies in the ATE interface
market, including ESH, Inc. ("ESH"), Micro Ceramix, Pier Electronics, Troyco,
and CompuRoute, as well as numerous smaller competitors. Cerprobe believes that
ESH and CompuRoute are the only domestic competitors with complete in-house
design, fabrication, and assembly capabilities. Other competitors currently
provide only one or two of these services (usually design and assembly) but
could acquire other capabilities and compete with Cerprobe in the future. In
design services, Cerprobe competes with small design houses such as Dolphin
Designs, as well as the in-house design groups of its customers. Such
competitors produce sophisticated ATE interfaces made of specialty materials
that are capable of superior electrical performance. Competition may increase in
the future as test equipment and testing technology become more sophisticated.
CompuRoute encounters competition from a variety of companies engaged
in each facet of its business, including design, fabrication, and assembly. In
design services, CompuRoute competes not only with companies such as Automated
Circuit Design ("ACD") and ESH, but also with the in-house design groups of its
customers. Although CompuRoute's customers have outsourced an increasing amount
of design work to outside vendors such as CompuRoute during the past two years,
there can be no assurance that this trend will continue. In addition, there
15
<PAGE>
are numerous PCB fabricators in the U.S., any one of which may compete directly
with CompuRoute. Specifically, MulTech Engineering Consultants and UniCircuits,
Incorporated specialize in high layer count ATE PCBs such as those manufactured
by CompuRoute. CompuRoute believes, however, that ESH is the only PCB fabricator
specializing in the semiconductor ATE market with in-house design, fabrication,
and assembly capability. Other companies, however, could acquire this capability
and compete with CompuRoute in the future.
Risks of International Trade and Currency Exchange Fluctuations
Approximately 16% of Cerprobe's net sales in the nine month period
ended September 30, 1996 were to international customers. Given Cerprobe's
efforts in establishing production and sales facilities in Scotland and
Singapore, as well as a planned facility in Taiwan, Cerprobe anticipates that
sales to international customers will increase in the future. The foreign
manufacture and sale of products and the purchase of raw materials and equipment
from foreign suppliers may be materially adversely affected by political and
economic conditions abroad. Protectionist trade legislation in either the United
States or foreign countries, such as a change in the current tariff structures,
export compliance laws or other trade policies, as well as Cerprobe's ability to
form effective joint venture alliances in order to compete in restrictive
markets, could materially adversely affect Cerprobe's ability to manufacture or
sell products in foreign markets and purchase materials or equipment from
foreign suppliers. In countries in which Cerprobe conducts business in local
currency, currency exchange fluctuations could adversely affect Cerprobe's net
sales or costs. In addition, the laws of certain foreign countries may not
protect Cerprobe's intellectual property rights to the same extent as the laws
of the United States.
A portion of Cerprobe's foreign transactions are denominated in
currencies other than the U.S. dollar. Such transactions expose Cerprobe to
exchange rate fluctuations for the period of time from inception of the
transaction until it is settled. Cerprobe has not engaged in transactions to
hedge it currency risks, but may do so in the future. Although Cerprobe has not
incurred any material exchange gains or losses, there can be no assurance that
fluctuations in the currency exchange rates in the future will not have a
material adverse effect on Cerprobe's operations.
Only a small portion of CompuRoute's revenue represents international
sales and most of such revenue represents sales to foreign operations of
domestic companies such as Motorola, Inc. and Texas Instruments, Inc.
Accordingly, CompuRoute does not believe that fluctuations in international
currencies will have a significant impact on CompuRoute's sales and profits.
However, if CompuRoute expands its international sales, currency fluctuations
could have a material adverse effect on its future operating results.
Cyclicality of the Semiconductor Industry; Significant Capital Requirements
The semiconductor industry in general has been characterized by
cyclicality. The industry has experienced significant economic downturns at
various times, characterized by diminished product demand, accelerated erosion
of average selling prices, and production over-capacity. Cerprobe has sought to
reduce its exposure to industry cyclicality by selling products to a
geographically diverse base of customers across a broad range of market
applications. CompuRoute's business is dependent generally on the regional
semiconductor market in Texas, but because it develops prototypes for new
products, CompuRoute typically is not affected significantly by cyclicality or
production fluctuations in the semiconductor industry. However, the Combined
Company may experience substantial period-to-period fluctuations in future
operating results due to general industry conditions or events occurring in the
general economy. Although the semiconductor industry has experienced increased
demand in the past, there is no assurance that the Combined Company will
continue to experience the current level of demand for its products.
The probe card, ATE interface, and PCB fabrication industries are also
capital intensive. In order to remain competitive, the Combined Company must
continue to make significant investments in capital equipment for production and
research and development. As a result of the increase in fixed costs and
operating expenses related to these capital expenditures, the Combined Company's
operating results may be materially adversely affected if net sales do not
increase sufficiently to offset the increased costs. The Combined Company may
from time to time
16
<PAGE>
seek additional equity or debt financing to provide for the capital expenditures
required to maintain or expand its production facilities and capital equipment.
The timing and amount of any such capital requirements cannot be predicted at
this time and will depend on a number of factors, including demand for the
Combined Company's products, product mix, changes in industry conditions, and
competitive factors. There can be no assurance that any such financing will be
available on acceptable terms, and that any additional equity financing would
not result in additional dilution to existing investors.
Risks Associated with Acquisition Strategy
The success of Cerprobe's acquisition strategy will depend primarily on
its ability to identify, acquire, and operate other businesses that complement
Cerprobe's existing business. There can be no assurance that any suitable
acquisitions can be identified or consummated or that the operations of any
businesses that are acquired will be successfully integrated into Cerprobe's
operations. In addition, increased competition for acquisition candidates could
increase purchase prices for acquisitions to levels that make such acquisitions
unfavorable. As of the date of this Prospectus, Cerprobe has no binding
agreements to effect any acquisitions other than the Merger. Cerprobe
anticipates that it will use cash and/or its securities, including Cerprobe
Common Stock, as the primary consideration for any future acquisitions. The
size, timing, and integration of any future acquisitions could cause substantial
fluctuations in operating results from quarter to quarter. Consequently,
operating results for any quarter may not be indicative of the results that may
be achieved for any subsequent fiscal quarter or for a full fiscal year. These
fluctuations could materially adversely affect the market price of Cerprobe
Common Stock.
Potential Liability for Failure to Comply with Environmental Regulations
Each of Cerprobe and CompuRoute is subject to a variety of federal,
state, and local governmental regulations related to the use, storage, discharge
and disposal of toxic, volatile or otherwise hazardous chemicals used in its
manufacturing process. Although each of Cerprobe and CompuRoute believes that
its activities are in substantial compliance with presently applicable
environmental regulations, the failure to comply with present or future
regulations could result in fines being imposed on the Combined Company,
suspension of its production, or a cessation of its operations. Such regulations
could require the Combined Company to acquire costly equipment or to incur other
significant expenses to comply with environmental regulations. Any failure by
the Combined Company to control the use of, or adequately restrict the discharge
of, hazardous substances could subject it to future liabilities. See
"Information Concerning C-Route and its Subsidiaries - Government Regulations."
Dependence on Management and Other Key Personnel
The Combined Company's success depends upon the retention of certain
key personnel and the recruitment and retention of additional key personnel. The
loss of existing key personnel or the failure to recruit and retain necessary
additional personnel by the Combined Company could materially adversely affect
its business prospects. There can be no assurance that the Combined Company will
be able to retain its current personnel or attract and retain necessary
additional personnel. Future growth will further increase the demand on the
Combined Company's resources and require the addition of new personnel and the
development of additional expertise by existing personnel. The failure of the
Combined Company to attract and retain personnel with the requisite expertise or
to develop such expertise internally could materially adversely affect the
prospects for its success. Cerprobe has entered into employment agreements with
certain executive officers that are effective for one year and are each subject
to automatic renewal for terms of one year.
CompuRoute does not have employment agreements with any of its key
personnel. In addition, CompuRoute faces strong competition from other companies
for certain key technical personnel, primarily PCB designers.
17
<PAGE>
Control by Current Stockholders
The directors and executive officers of Cerprobe and their affiliates
currently own beneficially approximately 29.8% of Cerprobe Common Stock.
Immediately following the completion of the Merger, these persons would
beneficially own approximately 27.7% of Cerprobe Common Stock. Accordingly,
these persons, if they act as a group, will be able to elect at least one member
to the Combined Company's Board of Directors and may be able to exert
significant influence regarding the outcome of other matters requiring approval
by the stockholders of the Combined Company.
Mrs. Shrime, chairperson of the Board of Directors of each of C-Route
and CompuRoute, beneficially owns approximately 93% of C-Route common stock,
which in turn beneficially owns approximately 89% of the shares of CompuRoute
common stock. Accordingly, Mrs. Shrime is able to control the outcome of matters
requiring approval by the shareholders of C-Route and CompuRoute.
Price Volatility of Cerprobe Common Stock
The market price of Cerprobe Common Stock has experienced significant
volatility during the past two years. See "Information Concerning Cerprobe -
Dividends on and Market Prices of Cerprobe Common Stock." The trading price of
Cerprobe Common Stock in the future could be subject to wide fluctuations in
response to quarterly variations in operating results of Cerprobe and others in
its industry, actual or anticipated announcements concerning Cerprobe or its
competitors, changes in analysts' estimates of Cerprobe's financial performance,
general conditions in the semiconductor industry, general economic and financial
conditions, and other events or factors. In addition, the stock market has
experienced extreme price and volume fluctuations which have adversely affected
the market prices for many companies involved in high technology manufacturing
and related industries and which often have been unrelated to the operating
performance of such companies. These broad market fluctuations and other factors
could have a material adverse effect on the market price of Cerprobe Common
Stock.
Shares Eligible for Future Sale
Sales of substantial amounts of Cerprobe Common Stock in the public
market following the Merger could adversely affect prevailing market prices. As
of November 1, 1996, there were 5,037,821 shares of Cerprobe Common Stock
outstanding, 4,010,228 shares of which are freely transferable without
restriction under the Securities Act. Of the 400,000 shares of Cerprobe Common
Stock to be issued in connection with the Merger, 68,965 shares will be
generally freely tradable after their issuance, and the remaining 330,035
shares, which will be acquired by Mrs. Shrime, will be subject to Rule 145 of
the Securities Act, which requires affiliates to sell any stock acquired in the
Merger in accordance with the volume and manner of sale restrictions under Rule
144 of the Securities Act. In addition, Mrs. Shrime has agreed not to sell,
publicly or privately, any shares acquired by her in connection with the Merger
during the first 12 months following the Merger, and no more than the greater of
1% of the outstanding shares of Cerprobe Common Stock, or 50,000 shares, in any
90-day period during the succeeding 12-month period. Subject to the terms of
this lock-up agreement, Mrs. Shrime will have certain registration rights
covering the resale of shares of Cerprobe Common Stock acquired by her in the
Merger for as long as she is subject to the volume limitations on resale under
Rule 145.
Cerprobe also has outstanding 54,706 restricted shares, as that term is
defined under Rule 144 (the "Restricted Shares"), held by non-affiliates that
are eligible for resale in the public market without restriction pursuant to
Rule 144(k) under the Securities Act, and 201,584 Restricted Shares that are
eligible for sale in the public market subject to compliance with the volume
limitations and other requirements of Rule 144 under the Securities Act.
Cerprobe also has registered for offer and sale up to 801,465 shares of Common
Stock that are reserved for issuance pursuant to Cerprobe's stock option plans.
Until December 15, 1996, holders of $485,000 in principal amount of Convertible
Subordinated Debentures may convert the debentures into 485,000 shares of
Cerprobe Common Stock, and have certain registration rights with respect to such
shares. In accordance with the terms of Cerprobe's Convertible Preferred Stock,
up to 27,839 additional shares of Cerprobe Common Stock may be issued upon
conversion of the Convertible Preferred Stock. See "Description of Capital
Stock." Cerprobe also
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has the authority to issue additional shares of Common Stock and shares of one
or more series of Convertible Preferred Stock. The issuance of such shares could
result in the dilution of the voting power of the shares of Cerprobe Common
Stock issued in connection with the Merger and could have a dilutive effect on
earnings per share.
Patents, Licenses, and Intellectual Property Claims
Cerprobe and CompuRoute have acquired certain patents, licenses, and
other intellectual property rights covering certain of their respective products
and manufacturing processes. While Cerprobe and CompuRoute consider these
patents, licenses, and other intellectual property rights to be important,
neither Cerprobe nor CompuRoute considers any single patent to be material to
the conduct of its business.
Change in Control Provisions
Cerprobe's First Restated Certificate of Incorporation (the "Restated
Certificate") and the Delaware General Corporation Law (the "Delaware GCL")
contain provisions that may have the effect of making more difficult or delaying
attempts by others to obtain control of Cerprobe, even when these attempts may
be in the best interest of stockholders. The Restated Certificate also
authorizes the Board of Directors, without stockholder approval, to issue one or
more series of preferred stock which could have voting and conversion rights
that adversely effect the voting power of the holders of Cerprobe Common Stock.
The Delaware GCL also imposes conditions on certain business combination
transactions with "interested stockholders" (as defined therein). See
"Description of Capital Stock."
Interests of Certain Persons
Upon consummation of the Merger, Cerprobe or a wholly-owned subsidiary
of Cerprobe will purchase the land and building owned by Mrs. Shrime and
currently used by C-Route and CompuRoute for a total purchase price of
approximately $2.2 million, including $1.2 million in cash and the assumption of
a promissory note, secured by the property, which has a principal balance of
approximately $1,040,000. In addition, Cerprobe will offer employment agreements
to each of Gary Fuller, Tom McMinn, Terry Ritz, and Phil Walden, who currently
are officers of CompuRoute, to be effective upon consummation of the Merger.
None of such individuals, however, will be executive officers of Cerprobe
following the Merger.
Immediately prior to the Effective Date, all intercompany notes, cash
advances, payables and accrued benefits between Mrs. Shrime (and her affiliates)
and CompuRoute or C-Route will be deemed paid in full. As of the date of the
Merger Agreement, these amounts included approximately $235,409 owed to Mrs.
Shrime by CompuRoute and C-Route and approximately $236,075 owed to CompuRoute
and C-Route by Mrs. Shrime.
Dependence of CompuRoute on Key Customer
One customer, Texas Instruments, Inc., accounted for approximately 51%,
45%, and 31% of CompuRoute's revenue in 1995, 1994, and 1993, respectively. The
loss of this customer would have a material adverse effect on CompuRoute's
business, financial condition, and operating results.
Forward-Looking Information That May Prove Inaccurate
This Prospectus contains various forward-looking statements that are
based on certain assumptions made by Cerprobe and C-Route as well as assumptions
made in reliance on information currently available to those companies. When
used in this Prospectus, the words "believe," "expect," "anticipate,"
"estimate," "should," "will likely," and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks, uncertainties, and assumptions, including those identified under "Risk
Factors." Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated, or projected.
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THE MEETING
Time, Place, and Date of the Meeting
The special joint meeting of shareholders of C-Route and CompuRoute
(the "Meeting") will be held on December __, 1996 commencing at 10:00 a.m.,
local time, at 10365 Sanden Drive, Dallas, Texas.
Purpose of the Meeting
At the Meeting, holders of common stock of CompuRoute and C-Route,
respectively, will be asked to consider and vote upon a proposal to approve and
adopt the CompuRoute Merger upon the terms and conditions set forth in the
CompuRoute Merger Agreement attached hereto as Appendix B, and holders of common
stock of C-Route will be asked to consider and vote upon a proposal to approve
and adopt the Merger upon the terms and conditions set forth in the Merger
Agreement attached hereto as Appendix A, together with such other matters as may
properly be brought before the Meeting. It is not anticipated that any matter
other than those discussed in this Prospectus will be brought before the
Meeting.
Record Date; Voting Rights
Only the holders of record of shares of common stock of CompuRoute and
C-Route at the close of business on ____________________, 1996 (the "Record
Date") are entitled to notice of, and to vote at, the Meeting regarding approval
and adoption of the CompuRoute Merger, and upon each other matter properly
submitted at such Meeting. Each share of common stock of CompuRoute and C-Route
is entitled to one vote upon the approval and adoption of the CompuRoute Merger
and any other matter properly submitted at the Meeting.
Only the holders of record of shares of common stock of C-Route at the
close of business on the Record Date are entitled to notice of, and to vote at,
the Meeting regarding approval and adoption of the Merger, and upon each other
matter properly submitted at such Meeting. Each share of common stock of C-Route
is entitled to one vote upon the approval and adoption of the Merger and any
other matter properly submitted at the Meeting. CompuRoute shareholders who are
not also holders of C-Route common stock as of the Record Date will not be
entitled to vote on the Merger nor the Merger Agreement, and therefore will not
be entitled to appraisal rights in connection with the Merger. CompuRoute
shareholders, however, will be entitled to appraisal rights in connection with
the CompuRoute Merger. See "The Meeting - Dissenters' Rights of Appraisal."
Vote Required
The presence, in person, of shareholders holding a majority of the
outstanding shares of common stock of C-Route and CompuRoute, respectively,
entitled to vote will constitute a quorum at the Meeting. The affirmative vote
of shareholders of record representing not less than two-thirds of the issued
and outstanding stock of C-Route is necessary to approve the Merger and the
related Merger Agreement and the affirmative vote of shareholders of record
representing not less than two-thirds of the issued and outstanding shares of
common stock of CompuRoute and C-Route, respectively, is necessary to approve
the CompuRoute Merger and the related CompuRoute Merger Agreement. Mrs. Shrime
currently holds approximately 93% of the issued and outstanding common stock of
C-Route and has agreed to vote those shares in favor of the Merger Agreement and
the Merger. Similarly, C-Route currently owns approximately 89% of the issued
and outstanding shares of common stock of CompuRoute and has informed the Board
of Directors of CompuRoute that it intends to vote in favor of the CompuRoute
Merger and the CompuRoute Merger Agreement. Neither C-Route nor CompuRoute
intends to solicit proxies for the Meeting.
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THE MERGER
Background of the Merger
In March 1995, Cerprobe acquired Fresh Test Technology Corporation
("Fresh Test"). Prior to its acquisition by Cerprobe, Fresh Test had maintained
a business relationship with CompuRoute. Following the acquisition, Mr. Bob
Bench, formerly the chief operating officer of Fresh Test and thereafter, the
chief financial officer of Cerprobe, introduced Mr. Zane Close, Cerprobe's
president and chief executive officer , to Dr. George P. Shrime, the principal
shareholder and chief executive officer of CompuRoute. Following this initial
contact, in April 1995, Messrs. Close and Bench requested a meeting with and met
with Dr. Shrime regarding a possible business relationship between the two
companies. Subsequent to that date, Cerprobe undertook to assess and research
the acquisition of PCB fabricators, including CompuRoute. At a meeting of
Cerprobe's Board of Directors in August 1995, Cerprobe's board authorized Mr.
Close to negotiate the terms of a possible acquisition of CompuRoute with Dr.
Shrime. Thereafter, Mr. Close and Dr. Shrime continued discussions regarding a
possible acquisition. Following these discussions, on December 11, 1995,
Cerprobe's Board of Directors approved the basic terms of an agreement in
principle to acquire CompuRoute.
On January 23, 1996, Mr. Close and Dr. Shrime executed a letter of
intent providing for the merger between the companies involving an exchange of
stock in a manner complying with generally accepted accounting principles for
pooling of interest treatment. On January 23, 1996, Cerprobe and CompuRoute
jointly issued a press release announcing the letter of intent. The letter of
intent provided for Cerprobe to acquire all of the issued and outstanding shares
of capital stock of C-Route, CompuRoute, and EMI in exchange for 920,000 shares
of Cerprobe Common Stock, which were to have been registered under the
Securities Act. Pursuant to the letter of intent, each of C-Route, CompuRoute,
and EMI were to be merged with and into three separate wholly-owned subsidiaries
of Cerprobe. The letter of intent also provided for Cerprobe to purchase the
land and building owned by Dr. Shrime and used by C-Route and CompuRoute in
exchange for 75,000 shares of Cerprobe Common Stock.
While each of the companies was undertaking due diligence in connection
with the proposed transaction, on May 19, 1996, Dr. Shrime passed away and his
wife, Souad Shrime, succeeded to a controlling interest in CompuRoute. Following
Dr. Shrime's death, Mr. Close informed CompuRoute through Mr. C. William Dedmon,
Jr. of Southwest Securities, CompuRoute's financial advisor, and Gary Fuller,
CompuRoute's chief operating officer, that representatives of CompuRoute should
contact Mr. Close if and when CompuRoute wished to renew discussions regarding
the proposed acquisition. Thereafter, Mr. Fuller contacted Mr. Close to renew
discussions regarding the proposed acquisition. As a result, in June 1996, Mr.
Close, Mr. Randal L. Buness, who replaced Mr. Bench as Cerprobe's chief
financial officer, Mr. Michael K. Bonham, Cerprobe's senior vice president-sales
and marketing, and Ms. Roseann L. Tavarozzi, Cerprobe's then vice
president-finance met with Mrs. Shrime and Mr. Fuller regarding a merger between
the two companies on terms substantially different than those contemplated in
the original letter of intent. Others in attendance at this meeting included Mr.
Dedmon and Darvin Schmidt, representing Southwest Securities, and Mrs. Shrime's
attorney and accountant. Throughout June and July 1996, Mrs. Shrime consulted
with counsel for C-Route and CompuRoute with respect to the ongoing discussions
with Cerprobe. During the same period, counsel for C-Route and CompuRoute
discussed the proposed terms of the transaction with counsel for Cerprobe. On
July 1, 1996, Cerprobe's Board of Directors approved the basic terms of a
revised agreement in principle with respect to the contemplated acquisition. On
August 8, 1996, Messrs. Close and Buness and counsel for Cerprobe met with Mrs.
Shrime, her attorney, and counsel for C-Route and CompuRoute to further discuss
the terms of a revised letter of intent. Following these discussions, Cerprobe
and CompuRoute executed a revised letter of intent on August 16, 1996, which
superseded the terms of the original letter of intent. The revised letter of
intent provided for Cerprobe to acquire all of the issued and outstanding shares
of capital stock of C-Route, CompuRoute, and EMI in exchange for 400,000 shares
of Cerprobe Common Stock and $4,600,000 in cash. The revised letter of intent
also required Mrs. Shrime to agree not to sell any Cerprobe Common Stock
received in connection with the Merger during the 12-month period following
consummation of the Merger and, thereafter, not to sell, publicly or privately,
any of such shares during the 12-month period following the initial 12-month
period in excess of certain specified amounts as described in "The Merger -
Resales; Affiliates." In addition, the revised letter of intent provided for the
acquisition by Cerprobe of the land and building owned by
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Mrs. Shrime and currently used by C-Route and CompuRoute in exchange for
$1,200,000 in cash and the assumption of a promissory note with a principal
balance of approximately $1,000,000. Subsequently, each of the parties conducted
due diligence investigations and conducted further negotiations, which resulted
in additional changes to the structure of the contemplated acquisition,
including eliminating EMI as a party to the Mergers on the basis of its lack of
business operations. Ultimately, the parties executed a definitive merger
agreement on October 25, 1996.
Reasons for the Merger
Cerprobe
The Board of Directors of Cerprobe has approved and adopted the Merger
and the Merger Agreement. In reaching its determinations, the Board of Directors
of Cerprobe considered the following factors, among others, all of which
supported its determination:
- - Marketplace Synergy/Penetration. CompuRoute designs and fabricates high
performance custom PCBs used primarily in the semiconductor testing
process, a process that also requires probe cards and ATE interfaces
such as those manufactured by Cerprobe. While Cerprobe specializes in
the probe card and custom ATE interface segments of the semiconductor
testing market, CompuRoute specializes in producing generic ATE
interfaces and custom device under test ("DUT") PCBs, which would
expand the Combined Company's presence in the semiconductor testing
market. Because both companies manufacture products used in the same
industry, they solicit business from some of the same customers. In
addition, CompuRoute has established strong customer relations with
customers that Cerprobe has targeted for expansion of its probe card
and custom ATE interface products. Accordingly, Cerprobe's Board of
Directors determined that the acquisition could present significant
cross marketing opportunities in the Combined Company.
- - PCB Manufacturing Capability-Vertical Integration. Cerprobe typically
subcontracts with outside vendors to fabricate PCBs designed by
Cerprobe for use in its semiconductor testing products. By acquiring
CompuRoute, which designs and manufactures complex multilayer PCBs used
primarily in the semiconductor testing process, Cerprobe obtains a
manufacturing capability it did not previously have. Cerprobe believes
that having its own manufacturing capability for PCBs is an important
capability in meeting customers' increasingly demanding delivery
schedules. Cerprobe believes that the acquisition of CompuRoute will
give it a distinct advantage over other United States suppliers of ATE
PCBs in that only one domestic competitor has in-house PCB fabrication
capability. Cerprobe's Board of Directors determined that having
in-house PCB fabrication capability could provide the Combined Company
with a potential competitive advantage over other United States
suppliers of probe card and interface products, most of which do not
have a similar capability.
- - Product Line Expansion-Horizontal Diversification. CompuRoute offers a
variety of products to the ATE industry, including complex, multilayer
PCBs; evaluation modules, electronic devices that allow the user to
test DUTs; and auto verifiers, an electronic piece of equipment which
allows the user to prepare a test set up off line. Cerprobe believes
that the acquisition of CompuRoute will allow Cerprobe to complement
its existing product line by offering these additional products to its
existing customers and to the former customers of CompuRoute and by
offering increased resources to continue research and development with
respect to products under development by CompuRoute. Cerprobe's Board
of Directors determined that CompuRoute offered a variety of existing
products and products under development that could be marketed to
Cerprobe's substantially more extensive customer base.
Cerprobe's Board of Directors also considered the possible negative
implications resulting from the death of CompuRoute's founder and chief
executive officer, environmental concerns with respect to CompuRoute's former
manufacturing facility, and the concentration of a significant amount of
CompuRoute's business in a single customer. Based on information obtained
through Cerprobe's due diligence investigation, Cerprobe's Board of Directors
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determined that CompuRoute's existing management team was capable of carrying on
operations following Dr. Shrime's death, environmental concerns were alleviated
as a result of actions taken by CompuRoute, and the relationship between
CompuRoute and its substantial customer was strong.
The foregoing discussion of the information and factors considered by Cerprobe's
Board of Directors is not intended to be exhaustive but is believed to include
all material factors used by Cerprobe's Board of Directors in developing its
recommendation. Cerprobe's Board of Directors did not quantify or attach any
particular weight to the various factors that it considered in reaching its
determination that the Merger is in the best interests of its stockholders.
C-Route and CompuRoute
At the meeting of the Boards of Directors of C-Route and CompuRoute
(collectively, the "Directors") held on October 25, 1996, the Directors
determined that the CompuRoute Merger and the Merger, respectively, and the
other transactions contemplated by the Merger Agreement, are in the best
interests of the shareholders of each of CompuRoute and C-Route. In reaching
their determination, the Directors considered a number of factors, including:
(a) the proposed terms of the transaction, including the fact that C-Route and
CompuRoute shareholders would get a portion of their consideration in cash and
the balance in Cerprobe Common Stock providing both the opportunity to achieve
liquidity and to continue an investment in the Combined Company; (b) information
concerning the financial condition, results of operations, and prospects of
CompuRoute and C-Route, both as separate entities and combined with Cerprobe and
a determination that C-Route's prospects would be enhanced due to the relatively
stronger financial position of Cerprobe; (c) information concerning the
potential effects of a combination of Cerprobe with CompuRoute and C-Route,
including, among other considerations, CompuRoute's ability to increase its
sales to current customers of Cerprobe, CompuRoute's ability after the Mergers
to manufacture PCBs for Cerprobe and to increase its net sales significantly,
CompuRoute's enhanced ability to expand its product base in connection with the
integration of the Cerprobe product line with CompuRoute's Auto-Verifier product
line, the opportunity to expand sales outside CompuRoute's predominantly Texas
customer base, increased access to capital after the Mergers, and the liquidity
available to stockholders of Cerprobe not currently available to shareholders of
C-Route and CompuRoute, respectively; (d) the historical and recent market
prices of Cerprobe stock, including the volatility in price of Cerprobe Common
Stock in the two months immediately preceding execution of the Merger Agreement;
(e) the opportunity of C-Route shareholders to continue as stockholders in the
Combined Company through the Cerprobe Common Stock to be paid to them in the
Merger; and (f) the options available to C-Route, including the likelihood that
remaining independent over the long term would not result in greater value to
C-Route, CompuRoute or their shareholders due to the need for additional capital
and management talent that the merger with Cerprobe would provide.
The foregoing discussion of the information and factors considered by
the Boards is not intended to be exhaustive but is believed to include all
material factors considered by the respective Boards of Directors in developing
their recommendations. Neither of such Boards quantified or attached any
particular weight to the various factors that it considered in reaching its
determination that the Mergers are in the best interests of their respective
shareholders.
The Merger Agreements
THE INFORMATION CONTAINED IN THIS PROSPECTUS WITH RESPECT TO THE MERGER
AGREEMENT AND THE COMPUROUTE MERGER AGREEMENT IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE COMPLETE TEXT OF THE RESPECTIVE MERGER AGREEMENTS, ATTACHED
HERETO AS APPENDICES A AND B, RESPECTIVELY, WHICH ARE INCORPORATED HEREIN BY
REFERENCE.
On October 25, 1996, Cerprobe, C-Route Acquisition, C-Route,
CompuRoute, and Mrs. Shrime executed the Agreement of Merger and Plan of
Reorganization attached to this Prospectus as Appendix A. The Merger Agreement
provides for the merger of C-Route with and into C-Route Acquisition, a
wholly-owned subsidiary of Cerprobe, upon the terms and subject to the
conditions set forth in the Merger Agreement. On October 25, 1996, C-Route and
CompuRoute executed the Agreement and Plan of Merger attached to this Prospectus
as Appendix B.
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The CompuRoute Merger Agreement provides for the merger of CompuRoute with and
into C-Route upon the terms and subject to the conditions set forth in the
CompuRoute Merger Agreement. The consummation of the Merger is subject to
consummation of the CompuRoute Merger.
Representations and Warranties
The Merger Agreement contains various representations and warranties of
the parties thereto. Generally, the representations and warranties of C-Route
and CompuRoute relate to: (i) the corporate organization and standing of C-Route
and CompuRoute; (ii) the authority and enforceability of the Merger Agreement
and the non-contravention of the Merger Agreement with any agreement, law, or
charter document of C-Route and CompuRoute; (iii) the capitalization of and
rights to acquire securities of or interests in C-Route and CompuRoute; (iv) the
financial statements of C-Route and CompuRoute and absence of undisclosed
liabilities, (v) tax matters, (vi) the assets, liabilities, and operations of
C-Route and CompuRoute; (vii) regulatory matters and compliance with laws;
(viii) agreements and contracts with third parties and affiliates; (ix) consents
and approvals required in connection with the Merger Agreement; (x) employee
matters; (xi) disclosures regarding pending and threatened litigation; (xii) the
accuracy of information provided by C-Route and CompuRoute for inclusion in this
Prospectus and the Registration Statement of which this Prospectus forms a part;
and (xiii) intellectual property matters.
Generally, the representations of Cerprobe and C-Route Acquisition
relate to: (i) their respective corporate organization and standing, (ii) the
authority and enforceability of the Merger Agreement and the non-contravention
of the Merger Agreement with any charter documents; (iii) the absence of pending
and threatened litigation; (iv) consents and approvals required in connection
with the Merger Agreement; (v) capitalization; (vi) the accuracy of Cerprobe's
financial statements and securities filings; and (vii) the accuracy of the
information provided by Cerprobe and its subsidiaries for inclusion in this
Prospectus and the Registration Statement of which this Prospectus forms a part.
Covenants and Obligations
The Merger Agreement sets forth certain obligations of C-Route and
CompuRoute pending the earlier of the Effective Date and the abandonment or
termination of the Merger. See "The Merger-Conditions; Termination." C-Route and
CompuRoute have agreed to use their reasonable best efforts to retain their
businesses intact, and that they will not do any of the following without
providing notice to, and in certain cases, obtaining consent from, Cerprobe,
among other things: (i) engage in any practice or take any action other than in
the ordinary course of business in accordance with past practices; (ii) create
or allow any liens with respect to any assets or properties, other than leases
for nondelinquent taxes or liens created as a result of an equipment lease
transaction; (iii) incur any indebtedness for borrowed money, except as incurred
as a result of an equipment lease transaction; (iv) sell or transfer any
material assets or properties, except sales of product inventories in the
ordinary course of business; (v) acquire or enter into any agreement to acquire
the stock or assets of any other person or entity; (vi) make any material change
in the conduct or nature of any aspect of their business; (vii) waive any
material rights; (viii) pay any shareholder or any shareholder's affiliate,
except for employee wages; (ix) incur or commit to incur any individual capital
expenditures in excess of $10,000, or in the aggregate in excess of $25,000; (x)
amend employment contracts or the terms and conditions of employment of any
officer, director, or employee earning annual compensation in excess of $50,000;
(xi) except for certain legal, accounting, and consulting fees, pay any
management or consulting fees; (xii) hire any employee with an annual salary in
excess of $35,000; (xiii) make any change in the Articles of Incorporation or
Bylaws; (xiv) merge or consolidate with or into any corporation other than
CompuRoute; nor (xv) make any distribution to any of its shareholders with
respect to their shares of stock.
In connection with the Merger, Mrs. Shrime has agreed to indemnify
Cerprobe and C-Route Acquisition in connection with certain claims, including
breaches of representations and warranties and the failure to comply with any
covenants, warranties or agreements under the Merger Agreement. The obligations
of Mrs. Shrime to indemnify Cerprobe and C-Route Acquisition pursuant to this
indemnification agreement is limited to $7,171,800, which reflects the agreed
value of the Merger consideration to be paid to Mrs. Shrime as of the date of
execution of the Merger Agreement.
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No Solicitation
Pursuant to the Merger Agreement, Mrs. Shrime has agreed that she will
not negotiate the acquisition of C-Route nor CompuRoute with any other person,
firm, or entity, other than Cerprobe, and will not herself, nor permit C-Route
or CompuRoute to, directly or indirectly, enter into any discussions with, or
disclose any information in relation to, the capital stock or assets of C-Route
or CompuRoute to any other person, firm, or other entity prior to December 31,
1996, with a view to the sale or exchange of the assets or capital stock of such
companies.
Conditions; Termination
The obligation of Cerprobe to consummate the Merger is subject to
satisfaction or waiver of the following conditions: (i) the accuracy in all
material respects of the representations and warranties of Mrs. Shrime, C-Route,
and CompuRoute set forth in the Merger Agreement; (ii) the performance in all
material respects by Mrs. Shrime, C-Route, and CompuRoute of all obligations
required to be performed by such parties prior to the closing of the Merger;
(iii) the sale of the real property by Mrs. Shrime to Cerprobe; (iv) the
execution and delivery of certain agreements, certificates, and other documents
by Mrs. Shrime and C-Route; (v) the receipt by Cerprobe of certain environmental
assessment reports, in form and content satisfactory to Cerprobe; (vi) the
effectiveness of the Registration Statement and the absence of any stop order;
(vii) all material customer contracts remaining in effect as of the Effective
Date, and Cerprobe having obtained all necessary consents and approvals with
respect to the change of control and ownership of C-Route and CompuRoute from
applicable customers; (viii) the absence of, or the termination or cancellation
of, any outstanding subscriptions, options, warrants, or other rights,
agreements, or commitments obligating C-Route or CompuRoute to issue any
additional shares of their capital stock, or any options or rights with respect
thereto, or any securities convertible into or exchangeable for any shares of
the capital stock or other securities of C-Route or CompuRoute; (ix) the
requisite approval of the Merger by a vote of shareholders; (x) the holders of
not more than 5% of the outstanding shares of the common stock of C-Route shall
have exercised appraisal rights; (xi) the approval and consummation of the
CompuRoute Merger; (xii) the Merger Agreement shall have been filed with, and
accepted for filing by, the Secretary of State for each of the States of Texas
and Delaware; (xiii) the execution of employment agreements between C-Route
Acquisition and Gary Fuller, Tom McMinn, Terry Ritz, and Phil Walden on terms
and conditions satisfactory to C-Route Acquisition and the individuals; and
(xiv) Cerprobe and C-Route Acquisition shall have received disclosure schedules
from Mrs. Shrime satisfactory to Cerprobe in its sole discretion.
The obligations of Mrs. Shrime, C-Route and CompuRoute to consummate
the Merger are also subject to the satisfaction or waiver of the following
conditions: (i) the accuracy in all material respects of the representations and
warranties of Cerprobe and C-Route Acquisition set forth in the Merger
Agreement; (ii) C-Route Acquisition having secured the release from liability
for any personal guaranty issued by Dr. George P. Shrime, Mrs. Shrime, or any of
the other shareholders with respect to any liability of C-Route or CompuRoute
for borrowed money; (iii) the performance in all material respects by Cerprobe
and C-Route Acquisition of all obligations required to be performed by such
companies prior to the closing of the Merger; (iv) the delivery of certain
documents, certificates, and legal opinions by Cerprobe and C-Route Acquisition;
(v) the requisite approval of the Merger by the Board of Directors and sole
stockholder of C-Route Acquisition; (vi) the effectiveness of the Registration
Statement and the absence of any stop order; (vii) the absence of any action or
proceeding prohibiting the Merger or any of the transactions contemplated by the
Merger Agreement or otherwise making the consummation of the Merger illegal;
(viii) the Merger Agreement having been filed with, and accepted for filing by,
the Secretary of State for each of the States of Texas and Delaware; (ix) the
purchase by Cerprobe or a wholly owned subsidiary from Mrs. Shrime of the
property currently used by C-Route and its subsidiaries; and (x) the closing
price of Cerprobe Common Stock on the Nasdaq National Market being not less than
$7.00 per share on the trading day immediately preceding the Closing.
To the extent that any of the conditions to consummation of the Merger
have not been satisfied or are waived, the failure to meet such condition could
be considered material to the transaction depending upon the facts and
circumstances that resulted in the failure to satisfy such condition. Although
none of the parties to the Merger
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intend to waive the satisfaction of any condition to the Merger if material to
the transaction, there can be no assurance that any party will not waive any
specific condition. Accordingly, C-Route and CompuRoute shareholders will not
have the opportunity to consider the effect of any waiver of a condition to the
Mergers.
The Merger Agreement may be terminated by Cerprobe in the event that
the conditions to closing for Cerprobe have not been satisfied in full or
waived. The Merger Agreement may be terminated by Mrs. Shrime, C-Route or
CompuRoute if the closing conditions to their performance have not been
satisfied in full or waived.
The consummation of the CompuRoute Merger is subject to certain
conditions including the approval of the CompuRoute Merger Agreement by the
shareholders of each of CompuRoute and C-Route and the filing of the respective
Articles of Merger with and acceptance by the Texas Secretary of State.
Effect of the Merger
The Merger
Assuming approval of the CompuRoute Merger and the Merger by the
shareholders of CompuRoute and C-Route, respectively, (i) CompuRoute will merge
with and into C-Route;, (ii) C-Route will merge with and into C-Route
Acquisition; (iii) the separate existences of C-Route and CompuRoute will cease;
(iv) C-Route Acquisition will be the surviving corporation in the Merger and
will change its name to CompuRoute, Inc.; and (v) the internal corporate affairs
of C-Route Acquisition will continue to be governed by the laws of the State of
Delaware.
Certificate of Incorporation and Bylaws
Pursuant to the terms of the Merger Agreement, the Certificate of
Incorporation and Bylaws of C-Route Acquisition as in effect immediately prior
to the effectiveness of the Merger will continue to be the Certificate of
Incorporation and Bylaws of C-Route Acquisition following the Merger.
Directors and Officers
At the closing of the Merger, all persons serving as officers or
directors of C-Route Acquisition will continue to serve in those positions
following the Merger.
Consideration for the Merger; Conversion of Common Stock
At or immediately prior to the closing of the Merger, all of the issued
and outstanding shares of the common stock of C-Route, including the shares of
C-Route common stock issued in connection with the CompuRoute Merger, will be
exchanged for 400,000 shares of Cerprobe Common Stock, which are being
registered under the Securities Act, pursuant to the Registration Statement of
which this Prospectus is a part, and a total of $4.6 million in cash, subject to
adjustment as described herein. The number of shares of Cerprobe Common Stock
and the amount of cash to be received by each C-Route shareholder in connection
with the Merger, assuming all options, warrants, or other rights to acquire
C-Route stock have been exercised or relinquished as described herein, is set
forth in Annex A-2 to the Merger Agreement, which is included as Appendix A to
this Prospectus. See "The Merger - The Merger Agreements - Stock Options;
Warrants." As a result, assuming the issuance of 129,774 shares of C-Route
common stock in connection with the exercise of any options, warrants, or other
rights convertible into C-Route common stock acquired in connection with the
CompuRoute Merger, each share of common stock of C-Route will be exchanged for
approximately $0.47 in cash and approximately .04 newly issued shares of
Cerprobe Common Stock.
The cash component of the Merger Consideration will be reduced by
$25,000 for each $0.0625 by which the closing price per share of Cerprobe Common
Stock on the Nasdaq National Market on the trading day immediately preceding the
closing is greater than $10.125, except that in no event will the cash component
be reduced by more than $100,000.
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<PAGE>
At the closing of the Merger, Mrs. Shrime will place 150,000 shares of
the Cerprobe Common Stock received by her in connection with the Merger into
escrow for a period of 24 months following the Effective Date, subject to
certain adjustments, pursuant to the terms of an Escrow and Security Agreement
(the "Escrow Agreement"). Pursuant to the terms of the Escrow Agreement,
Cerprobe will have the right to submit claims to the Escrow Agent (as defined in
the Escrow Agreement) and, following a claims procedure, seek to recover the
escrowed shares or proceeds thereof for any claim for which indemnity is proper
pursuant to the terms of the Merger Agreement.
Stock Options; Warrants
In connection with the CompuRoute Merger, the CompuRoute Options will
automatically be converted into options, warrants, and other rights to acquire
an identical number of shares of C-Route common stock subject to the same terms
and conditions set forth in the CompuRoute Options. In connection with the
Merger, any options, warrants, or other rights to acquire shares of C-Route
common stock, including the options, warrants, or other rights to acquire
C-Route common stock issued in connection with the CompuRoute Merger, will
automatically vest and must be exercised or relinquished in exchange for a pro
rata portion of the consideration to be received in connection with the Merger
based on the number of shares of C-Route common stock to be received upon
exercise of such option, warrant, or other right to acquire C-Route common
stock. The amount of cash to be received by each C-Route shareholder who also
owns options, warrants, or other rights to acquire C-Route common stock will be
reduced by the aggregate exercise price of such options, warrants, or other
rights to acquire C-Route common stock. For information regarding the number of
shares of Cerprobe Common Stock and the amount of cash to be received by each
C-Route shareholder in the Merger, see Annex A-2 to the Merger Agreement, which
is attached as Appendix A to this Prospectus.
Effective Date
Promptly following the receipt of all required government approvals and
satisfaction or waiver (where permissible) of the other conditions of the
Merger, the Merger will be consummated and will become effective at the time at
which the corresponding Certificate and Articles of Merger to be filed pursuant
to the Delaware GCL and the TBCA are accepted for filing by the respective
Secretaries of State of Delaware and Texas or such later date and time as may be
specified in the Certificate and Articles of Merger (the "Effective Date"). It
is currently anticipated that if all conditions under the Merger Agreement have
been satisfied or waived, where permissible, including the approval and adoption
of the Merger Agreement by the shareholders of C-Route, the Effective Date will
occur on or after the Meeting.
Exchange of Certificates
American Securities Transfer, Inc. has been selected to act as Exchange
Agent (the "Exchange Agent") for the purpose of effectuating the delivery of the
shares of Cerprobe Common Stock (or proceeds thereof) to be issued in the
Merger. Pursuant to the terms of the Merger Agreement, 400,000 shares of
Cerprobe Common Stock and $4.6 million in cash, subject to adjustment, will be
distributed to the former C-Route shareholders on a pro rata basis. However,
150,000 of the shares of Cerprobe Common Stock to be delivered to Mrs. Shrime
will be placed in escrow for 24 months, subject to certain adjustments, to
satisfy certain indemnification obligations of Mrs. Shrime, C-Route and
CompuRoute to Cerprobe. Promptly after the Effective Date, Cerprobe will cause
the Exchange Agent to send each shareholder of C-Route at the Effective Date a
Letter of Transmittal advising such shareholders of the terms of the exchange of
Cerprobe Common Stock effected by the Merger and the procedures for surrendering
C-Route and CompuRoute stock certificates in exchange for the consideration
provided for in the Merger Agreement. Elections by the shareholders of C-Route
and CompuRoute made in the Letter of Transmittal will be irrevocable. The
shareholders of C-Route and CompuRoute are requested not to surrender their
certificates for exchange until they receive a Letter of Transmittal and
instructions from the Exchange Agent.
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<PAGE>
Resales; Affiliates
The shares of Cerprobe Common Stock to be issued to the shareholders of
C-Route in connection with the Merger will be freely tradeable under the
Securities Act, except for shares of Cerprobe Common Stock issued to any person
deemed to be an affiliate of C-Route for purposes of Rule 145 under the
Securities Act at the time of the Meeting ("Affiliates"). Affiliates may not
resell the shares of Cerprobe Common Stock acquired in connection with the
Merger except pursuant to an effective registration statement under the
Securities Act covering such shares, or in compliance with Rule 144 or Rule 145
promulgated under the Securities Act or another applicable exemption from the
regulation requirements of the Securities Act. In addition, Mrs. Shrime has
agreed not to sell any Cerprobe Common Stock received in connection with the
Merger during the 12-month period following the consummation of the Merger and,
thereafter, not to sell, publicly or privately, any of such shares during the
succeeding 12-month period in an amount more than the greater of 1% of the
shares of Cerprobe Common Stock then outstanding, or 50,000 shares, in any
90-day period. Subject to the terms of this lock-up agreement, Mrs. Shrime has
certain registration rights covering the resale of the shares of Cerprobe Common
Stock acquired in the Merger for so long as she is subject to the volume
limitations of Rule 145.
Accounting Treatment
The Merger will be accounted for by Cerprobe under the purchase method
of accounting in accordance with generally accepted accounting principles. This
accounting method requires the allocation of the cost of an acquired enterprise
to all identifiable assets acquired and liabilities assumed based on their fair
values at date of acquisition. To the extent that there is an excess of the cost
of the acquired enterprise over the sum of the amounts assigned to identifiable
assets acquired less liabilities assumed, this amount shall be recorded as
goodwill.
Certain Federal Income Tax Consequences
The following discussion is a summary of the material federal income
tax consequences of the CompuRoute Merger and the Merger to Cerprobe, C-Route,
CompuRoute, and the shareholders of C-Route and CompuRoute, but does not purport
to be a complete analysis of all the potential tax effects of the Mergers. The
discussion is based upon the Code, Treasury Regulations, Internal Revenue
Service ("IRS") rulings and judicial decisions now in effect, all of which are
subject to change at any time by legislative, judicial, or administrative
action, and any such change may be applied retroactively. No information is
provided herein with respect to foreign, state, or local tax laws or estate and
gift tax considerations. The shareholders of C-Route and CompuRoute are urged to
consult their own tax advisors as to the specific tax consequences to them of
the Mergers.
Neither Cerprobe nor C-Route or CompuRoute has requested an opinion
from their respective legal counsel with respect to the income tax consequences
of the Mergers. No ruling will be requested from the IRS with respect to the
federal income tax consequences of the Mergers. Accordingly, no assurance can be
given that the IRS will characterize the Mergers as reorganizations or as
taxable transactions in which CompuRoute is liquidated into C-Route, followed by
the sale of the combined assets of CompuRoute and C-Route to Cerprobe and the
taxable liquidation of C-Route. No assurance can be given that the IRS will not
challenge the companies' tax treatment of the Mergers, or that such a challenge,
if made, will not be successful. However, Cerprobe, C-Route, and CompuRoute
intend to treat the Mergers as reorganizations pursuant to Sections 368(a)(1)(A)
and 368(a)(2)(D) of the Code.
Based upon the facts and representations set forth in the Merger
Agreements, Cerprobe will not recognize any gain or loss for federal income tax
purposes upon the completion of the Mergers. The issuance of cash and the
issuance by a corporation of its own stock are generally not taxable events.
Therefore, Cerprobe will not recognize any taxable gain or loss based upon its
issuance of its stock and cash in the Merger.
The tax consequences to C-Route , CompuRoute, and their respective
shareholders may vary depending on whether the amount of cash received by the
shareholders exceeds the fair market value of the Cerprobe Common Stock received
by the shareholders as of the Effective Date of the Merger. If the cash received
by the shareholders exceeds the fair market value of the Cerprobe Common Stock
received by the shareholders, the IRS could assert
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<PAGE>
that the Merger should be treated as a fully taxable exchange (or sale) of the
combined assets of C-Route and CompuRoute, followed by the taxable liquidation
of C-Route, because the Merger would fail to meet published IRS guidelines,
which would require that the shareholders exchange at least 50 percent by value
of their C-Route stock for Cerprobe Common Stock for the Merger to be treated as
a reorganization (the "continuity of interest guideline"). The continuity of
interest guideline represents only an IRS ruling position with respect to
reorganizations, however, and transactions falling slightly under the 50 percent
level have been afforded reorganization treatment by the courts. Assuming the
value of Cerprobe Common Stock exceeds the cash received by the C-Route and
CompuRoute shareholders on the Effective Date of the Mergers, Cerprobe believes
that, based upon the advice of counsel, the Mergers will more likely than not be
treated as reorganizations under the Code.
If the Mergers satisfy the continuity of interest test, the Mergers
will be treated for federal income tax purposes as reorganizations within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. C-Route and
Cerprobe intend to treat the Merger in this manner. If the Mergers qualify as
reorganizations, neither C-Route nor CompuRoute will recognize gain or loss for
federal income tax purposes upon the completion of the Mergers and their
shareholders will have the following federal income tax consequences: (i) no
taxable gain or loss will be recognized upon the receipt of Cerprobe Common
Stock; (ii) income or gain will be recognized based upon the cash received in an
amount equal to the lesser of (a) the gain that would have been realized had the
shareholder exchanged their stock for Cerprobe Common Stock and cash in a
taxable transaction, or (b) the amount of cash received; (iii) the tax basis of
the Cerprobe Common Stock received in the Merger will be equal to the
shareholder's basis in the stock surrendered, decreased by any money received
and any loss recognized in the exchange and increased by any gain recognized in
the exchange; (iv) the holding period of the Cerprobe Common Stock to be
received in the Merger will include the holding period of the stock surrendered
in exchange therefor; and (v) if cash is received in lieu of a fractional share
of Cerprobe Common Stock, gain or loss will be recognized in an amount equal to
the difference between the cash received and the shareholder's basis in such
fractional share.
The character of any income or gain realized by a C-Route or CompuRoute
shareholder based upon the receipt of cash in the Mergers would depend upon each
shareholder's individual circumstances. If the stock surrendered by such
shareholder in the Merger was a capital asset in the hands of such shareholder,
any gain realized will be treated as capital gain, provided that the receipt of
cash is not essentially equivalent to a dividend. Treatment of the cash as
essentially equivalent to a dividend will depend on each shareholder's
individual factual circumstances. Each shareholder of C-Route or CompuRoute
should consult his or her tax advisor regarding the character of gain recognized
by that shareholder.
If the Mergers do not meet the continuity of interest test and are
therefore not treated for federal income tax purposes as reorganizations within
the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code, the Mergers
will be treated as a fully taxable sale of the combined assets of C-Route and
CompuRoute (the "Sale"), followed by the complete liquidation of C-Route (the
"Liquidating Distribution"). As a result, C-Route will recognize taxable gain or
loss upon the Sale, and the C-Route shareholders (including the former
CompuRoute shareholders who receive C-Route stock in the CompuRoute Merger) will
recognize gain or loss upon receipt of the Liquidating Distribution (consisting
of Cerprobe Common Stock and cash) in exchange for their C-Route stock.
In general, upon the sale of an asset, the seller will recognize gain
or loss in an amount equal to the difference between the Amount Realized by the
seller and the tax basis of the asset sold. The "Amount Realized" is any cash
plus the fair market value of property other than cash received by the seller
plus the amount of any liabilities assumed by the purchaser. The consideration
received by C-Route in connection with the Sale will be comprised of Cerprobe
Common Stock and cash and any liabilities that Cerprobe may assume with respect
to certain assets. The fair market value of the Cerprobe Common Stock will be
the market price of a share of Cerprobe Common Stock at the Effective Date of
the Merger multiplied by the number of shares of Cerprobe Common Stock. The
Amount Realized is therefore the fair market value of Cerprobe Common Stock at
the Effective Date plus the cash received by C-Route and any liabilities assumed
by Cerprobe. The Amount Realized will be allocated among C-Route's assets and
compared to the basis of each asset, with the character of any gain or loss
recognized by C-Route being ordinary or capital depending on the nature of each
asset sold. Cerprobe will take a basis in the assets equal to the Amount
Realized (plus Cerprobe's expenses of the transaction).
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Each shareholder of C-Route (including the former CompuRoute
shareholders who receive C-Route stock in the CompuRoute Merger) will recognize
gain or loss upon the Liquidating Distribution in an amount equal to the gain
realized upon the disposition of its C-Route stock, which is the excess of the
fair market value of any property plus the cash received in the Liquidating
Distribution over the shareholder's basis in its C-Route stock. Any gain
recognized will generally be capital in nature. If the stock surrendered in the
Liquidating Distribution was a capital asset in the hands of such shareholder,
any gain or loss will be treated as capital gain or loss. The capital gain or
loss will be short term capital gain or loss if the stock had been held for one
year or less as of the Effective Date of the Merger and long term capital gain
or loss if the stock had been held for more than one year as of the Effective
Date of the Merger. Each C-Route shareholder (including the former CompuRoute
shareholders who receive C-Route stock in the CompuRoute Merger) should consult
with such shareholder's tax advisor regarding whether the shareholder's stock is
a capital asset and the differences in tax treatment between long term and short
term capital gains and losses.
Dissenters' Rights of Appraisal
If the Mergers are consummated, shareholders of CompuRoute and C-Route
who did not vote in favor of the Mergers will have certain rights to dissent and
(assuming compliance with the statutory requirements for exercising such rights)
demand appraisal of, and payment in cash at the fair value of, their shares of
CompuRoute and C-Route stock (the "Shares") pursuant to the TBCA. Under the
TBCA, such rights, if the statutory procedures were complied with, could lead to
a judicial determination of the fair value (excluding any element of value
arising from the accomplishment or expectation of the Mergers) required to be
paid in cash to such dissenting shareholders for their Shares. The value so
determined could be more or less than the consideration per Share to be paid in
the Mergers.
Any shareholder of record of C-Route or CompuRoute who objects to the
Merger or the CompuRoute Merger, respectively, may elect to have his or her
Shares appraised under the procedures of the TBCA and to be paid the appraised
value of his Shares, which, pursuant to Article 5.12(A)(1)(a) of the TBCA, will
be the fair value of the Shares, excluding any appreciation or depreciation in
anticipation of the Merger or the CompuRoute Merger. Any shareholder
contemplating the exercise of appraisal rights is urged to carefully review the
provisions of Articles 5.12 and 5.13 of the TBCA (a copy of which is attached
hereto as Appendix C), particularly with respect to the procedural steps
required to perfect the right of appraisal. If the right of appraisal is lost
due to the shareholder's failure to comply with the procedural requirements of
Articles 5.12 and 5.13 of the TBCA, the shareholder will receive the
consideration provided in the Mergers without interest for each Share owned. Set
forth below is a summary of the procedures relating to the exercise of the right
of appraisal which should be read in conjunction with the full text of Articles
5.12 and 5.13 of the TBCA.
Article 5.12 of the TBCA provides that, with respect to the Merger (or
the CompuRoute Merger), the dissenting shareholder must file, prior to the
Meeting, a written objection to the action stating that the shareholder's right
to dissent will be exercised if the Merger (or the CompuRoute Merger) becomes
effective and giving the shareholder's address, to which notice of the approval
of the Merger (or the CompuRoute Merger) must be delivered or mailed. If the
Merger (or the CompuRoute Merger) is effected and the dissenting shareholder did
not vote in favor of the Merger (or the CompuRoute Merger), Cerprobe will,
within 10 days after the Effective Date, deliver or mail to the shareholder
written notice that the Merger (or the CompuRoute Merger) was effected. In order
to exercise the right of appraisal, the dissenting shareholder must, within 10
days from the delivery or mailing of the notice from Cerprobe, make written
demand ("Demand") on Cerprobe for payment of the fair value of the shareholder's
Shares, which Demand must state the number and class of Shares owned by the
dissenting shareholder, and the shareholder's estimate of the fair value of the
Shares. Any shareholder failing to make Demand within the 10 day period will be
bound by the Merger or the CompuRoute Merger, whichever is applicable.
Such Demand should be executed by or for such shareholder of record,
duly and correctly, as such shareholder's name appears on the certificate(s)
formerly representing the Shares. If Shares are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the Demand
should be made in such capacity. If Shares are owned of record by more than one
person, as in a joint tenancy or tenancy in common, the Demand should be
executed by or for all joint owners. Any shareholder who has made a Demand may
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withdraw the Demand at any time before payment for the Shares is made or before
any petition asking for a determination of the fair value of the Shares is
filed.
Within 20 days after making a Demand, the dissenting shareholder must
submit the certificates representing the Shares to Cerprobe for notation thereon
that a Demand has been made. The failure of a shareholder to submit the Shares
will terminate the shareholder's rights of appraisal.
Within 20 days after receipt by Cerprobe of a Demand, Cerprobe must
deliver or mail to the shareholder a written notice that either (i) sets out
that Cerprobe accepts the amount claimed in the Demand and agrees to pay that
amount within 90 days after the Effective Date and upon the surrender of the
duly endorsed certificates, or (ii) contains an estimate by Cerprobe of the fair
value of the Shares, together with an offer to pay the estimated amount within
90 days after the Effective Date. If Cerprobe responds to the Demand with an
estimate of the fair value of the Shares and the shareholder wishes to accept
Cerprobe's estimate, Cerprobe must receive written notice from the shareholder
accepting such estimate within 60 days after the shareholder receives the
estimate from Cerprobe and surrendering the duly endorsed certificates formerly
representing such shareholder's Shares. If, within 60 days after the Effective
Date the value of the Shares is agreed upon between the shareholder and
Cerprobe, payment for the Shares will be made within 90 days after the Effective
Date and upon surrender of the certificates duly endorsed. Upon payment of the
agreed value, the shareholder will cease to have any interest in the Shares or
in Cerprobe.
If, within the period of 60 days after the Effective Date the
shareholder and Cerprobe do not agree on the fair value of the Shares, then the
shareholder may, within 60 days following the expiration of such 60 day period,
file a petition in any court of competent jurisdiction in the county in which
the principal office of Cerprobe is located, to obtain a judicial finding and
determination of the fair value of the shareholder's Shares. Upon filing such
petition, the shareholder must serve Cerprobe with a copy of such petition.
Within 10 days after being served with a copy of the petition, Cerprobe must
file with the court a list of shareholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached. All shareholders listed will be notified as to the time and place of
the hearing of the petition. All shareholders thus notified and Cerprobe will
then be bound by the final judgment of the court. After the hearing of the
petition, the court will appoint one or more qualified appraisers who will
determine the fair value of the Shares and will file a report of that value with
the clerk of the court. Each party will have reasonable opportunity to submit to
the appraisers pertinent evidence as to the value of the Shares. Either party
may make exceptions to the appraiser's report. The court will then determine the
fair value of the Shares and will direct Cerprobe, upon receipt of duly endorsed
certificates, to pay the value together with interest thereon beginning on the
91st day after the Effective Date to the date of the judgment to the
shareholders entitled to payment, as determined by the court. Upon payment of
the value of the Shares and the interest thereon, the dissenting shareholders
will cease to have any interest in those Shares or in Cerprobe.
If holders of 5% or more of the outstanding shares of C-Route common
stock perfect their dissenter's rights, Cerprobe has the right pursuant to the
Merger Agreement to terminate the Merger. If Cerprobe exercises its termination
right in such event, the Merger will not be consummated and shareholders of
C-Route who perfected their dissenter's rights will not receive any cash payment
but will continue to hold their Shares of C-Route.
Interests of Certain Persons
Upon consummation of the Merger, Cerprobe or a wholly-owned subsidiary
of Cerprobe will purchase the land and building owned by Mrs. Shrime and
currently used by C-Route and CompuRoute for a total purchase price of
approximately $2.2 million, including $1.2 million in cash and the assumption of
a promissory note, secured by the property, which has a principal balance of
approximately $1,040,000. In addition, Cerprobe will offer employment agreements
to each of Gary Fuller, Tom McMinn, Terry Ritz, and Phil Walden, who currently
are officers of CompuRoute, to be effective upon consummation of the Merger.
None of such individuals, however, will be executive officers of Cerprobe
following the Merger.
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Immediately prior to the Effective Date, all intercompany notes, cash
advances, payables and accrued benefits between Mrs. Shrime (and her affiliates)
and CompuRoute or C-Route will be deemed paid in full. As of the date of the
Merger Agreement, these amounts included approximately $235,409 owed to Mrs.
Shrime by CompuRoute and C-Route and approximately $236,075 owed to CompuRoute
and C-Route by Mrs. Shrime.
Certain Expenses
Pursuant to the provisions of the Merger Agreement, all costs and fees
(including those for legal and accounting services of C-Route and CompuRoute
incurred in connection with the Mergers will be borne by C-Route and CompuRoute
to the extent that the costs and fees for such legal services do not exceed in
the aggregate $50,000. To the extent legal costs and fees associated with the
Mergers exceed $50,000, such amounts will be borne by Mrs. Shrime. All costs and
fees for investment banking and financial advisory services of Southwest
Securities will be borne by C-Route and CompuRoute.
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THE COMBINED COMPANY
Business of the Combined Company After the Merger
Following the consummation of the Merger, Cerprobe, directly or through
one or more subsidiaries, will acquire all of the assets and liabilities and
succeed to the business and operations of C-Route. To the extent that the Merger
is not consummated, the assets and liabilities of C-Route will not constitute a
part of the Combined Company.
The Combined Company will be in the business of developing,
manufacturing, and marketing high-performance printed circuit boards and probing
and interface products for use in the testing of integrated and hybrid
electronic circuits. Although Cerprobe is currently performing an ongoing
evaluation regarding the nature and scope of the operations of the Combined
Company following the consummation of the Merger, various short-term and
long-term strategic considerations will need to be addressed following such
consummation with regard to the integration and consolidation of the various
businesses comprising the Combined Company. Many of the operational and
strategic decisions with respect to the business of the Combined Company have
not been made and may not be made prior to the consummation of the Merger.
Significant uncertainties and risks relating to the businesses and operations of
the Combined Company and the integration of its various businesses and assets
exist as of the date hereof and can be expected to continue to exist following
consummation of the Merger. For example, to manage the anticipated growth and
the operations of the Combined Company, the Combined Company will be required,
among other things, to expand its existing operating and financial systems and
controls and to manage a substantial increase in its employee base. The
inability to manage the anticipated growth in operations and to achieve the
anticipated operating efficiencies could have a material adverse effect on the
Combined Company's operating results following the Merger. For discussion of
other risk factors relating to the operations of the Combined Company, see "Risk
Factors." The quality, timing, and manner of decisions made by management of the
Combined Company with respect to the integration and operation of its various
businesses and assets following the consummation of the Merger will materially
affect the operations of the Combined Company and its financial results. See
"Risk Factors - Uncertainties Accompanying Integration of Acquired Business;
Management of Growth."
The Combined Company will continue to be subject to all the liabilities
of Cerprobe, C-Route, and CompuRoute. Although Cerprobe anticipates that the
Combined Company will continue to operate C-Route Acquisition (the name of which
will be changed to CompuRoute, Inc. following the Merger) as a wholly-owned
subsidiary, any pre-existing litigation or other liabilities affecting C-Route
or CompuRoute may still materially affect the Combined Company.
Management of the Combined Company
Following the consummation of the Merger, Cerprobe's existing
management will manage the Combined Company. Cerprobe does not expect to retain
as officers former officers of CompuRoute, but will likely retain a number of
management personnel of CompuRoute.
Security Ownership of Principal Stockholders and Management
The following table sets forth (a) certain information regarding
beneficial ownership of Cerprobe Common Stock as of November 1, 1996 with
respect to (i) each director; (ii) each Named Officer set forth in the Summary
Compensation Table under the section entitled "Executive Compensation"; (iii)
all directors, executive officers, and key employees of Cerprobe as a group;
(iv) each person known by Cerprobe to be the beneficial owner of more than 5% of
Cerprobe Common Stock; and (v) each person who, by virtue of the Merger, will
become an owner of more than 5% of Cerprobe Common Stock and (b) the effect of
the Merger (assuming the consummation of the Merger) on the amount and
percentage of current holdings of shares of Cerprobe Common Stock owned
beneficially by each of such persons. The information as to beneficial ownership
is based upon statements furnished to Cerprobe by such persons.
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<TABLE>
<CAPTION>
Name and Address Beneficial Ownership Pro Forma Beneficial Ownership
of Beneficial Owner(1) Before the Merger(2) After the Merger(2)
- ---------------------- -------------------- ------------------------------
Number Percent(3) Number Percent(3)
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Ross J. Mangano 613,500(4) 12.1% 613,500 11.2
Ross J. Mangano, et al., Trustees 380,200 7.6% 380,200 7.0
112 W. Jefferson Blvd.
Suite 613
South Bend, IN 46601
William A. Fresh 344,297(5) 6.8% 344,297 6.3
Judd C. Leighton 260,000(6) 4.9% 260,000 4.6
112 W. Jefferson Blvd.
Suite 603
South Bend, IN 46601
Mary Morris Leighton 260,000(7) 4.9% 260,000 4.6
112 W. Jefferson Blvd.
Suite 603
South Bend, IN 46601
Kenneth W. Miller 197,236(8) 3.9% 197,236 3.6
C. Zane Close 71,600(9) 1.4% 71,600 1.3
Donald F. Walter 23,000(10) * 23,000 *
Michael K. Bonham 106,700(11) 2.1% 106,700 1.9
Eswar Subramanian 110,900(12) 2.1% 110,900 2.0
Henry Wong 78,677(13) 1.6% 78,677 1.4
Souad Shrime 0 * 331,262(14) 6.1
All executive officers and directors
as a group (eight persons) 1,584,910(15) 29.8% 1,584,910 27.7
</TABLE>
____________
*Less than 1%.
(1) Each director, nominee and officer of Cerprobe may be reached through
Cerprobe at 600 South Rockford Drive, Tempe, Arizona 85281.
(2) Unless otherwise indicated, and subject to community property laws
where applicable, all shares are owned of record by the persons named
and the beneficial ownership consists of sole voting power and sole
investment power.
(3) The percentages shown include the shares of Cerprobe Common Stock
actually owned as of November 1, 1996 and the shares of Cerprobe Common
Stock that the identified person or group had the right to acquire
within 60 days of November 1, 1996 pursuant to the exercise of stock
options or conversion of securities. In calculating the percentage of
ownership, all shares of Cerprobe Common Stock that the identified
person or group had the right to acquire within 60 days of November 1,
1996 upon the exercise of stock options or conversion of securities are
deemed to be outstanding for the purpose of computing the percentage of
the shares of Cerprobe Common Stock owned by such person or group, but
are not deemed to be outstanding for the purpose of computing the
percentage of the shares of Cerprobe Common Stock owned by any other
person.
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(4) Includes 20,000 shares in the name of Nat & Co. voted pursuant to a
power of attorney, 51,300 shares in the name of Oliver & Company voted
pursuant to a power of attorney, 120,000 shares in the name of Millie
M. Cunningham voted pursuant to a power of attorney, 380,200 shares
held in the name of Troon & Co., Ross J. Mangano, et al., Trustees for
which Mr. Mangano serves as a trustee, 10,000 shares which Mr. Mangano
has the right to acquire at an exercise price of $1.00 per share
pursuant to the exercise of options granted in September 1992, 20,000
shares which Mr. Mangano has the right to acquire at an exercise price
of $5.75 per share pursuant to the exercise of options granted in
September 1994, and 2,000 shares which Mr. Mangano has the right to
acquire at an exercise price of $8.25 per share pursuant to the
exercise of options granted in June 1995.
(5) Includes 162,700 shares held by WAF Investment Company, a company 100%
owned by Mr. Fresh and his wife, and 78,477 shares held by Orem Tek
Development Corp., a company 100% owned by Mr. Fresh, and reflects
2,000 shares which Mr. Fresh has the right to acquire at an exercise
price of $8.25 per share pursuant to the exercise of options granted in
June 1995.
(6) Includes 200,000 shares with respect to which Judd C. Leighton has the
right to acquire sole voting and investment power pursuant to the
conversion of $200,000 in principal amount of Cerprobe's 12 1/2%
Convertible Subordinated Debentures due December 15, 1996, which are
convertible at any time prior to maturity into shares of Cerprobe
Common Stock at the rate of $1.00 per share, and 60,000 shares with
respect to which Mr. Leighton has the right to acquire shared voting
and investment power pursuant to the conversion of $60,000 in principal
amount of Cerprobe's 12 1/2% Convertible Subordinated Debentures due
December 15, 1996, held by Leighton-Oare Foundation, Inc., a
corporation for which Mr. Leighton and his wife, Mary Morris Leighton,
serve as directors.
(7) Includes 200,000 shares with respect to which Mary Morris Leighton has
the right to acquire sole voting and investment power pursuant to the
conversion of $200,000 in principal amount of Cerprobe's 12 1/2%
Convertible Subordinated Debentures due December 15, 1996, which are
convertible at any time prior to maturity into shares of Cerprobe
Common Stock at the rate of $1.00 per share, and 60,000 shares with
respect to which Mrs. Leighton has the right to acquire shared voting
and investment power pursuant to the conversion of $60,000 in principal
amount of Cerprobe's 12 1/2% Convertible Subordinated Debentures due
December 15, 1996 held by Leighton-Oare Foundation, Inc., a corporation
for which Mrs. Leighton and her husband, Judd C. Leighton, serve as
directors.
(8) Includes 115,236 shares held by U.S. Trust Company of California, N.A.,
as trustee for the Kenneth W. Miller Charitable Remainder Unitrust. Mr.
Miller disclaims beneficial ownership with respect to these shares.
Also includes 20,000 shares which Mr. Miller has the right to acquire
at an exercise price of $5.75 per share pursuant to the exercise of
options granted in September 1994, and 2,000 shares which Mr. Miller
has the right to acquire at an exercise price of $8.25 per share
pursuant to the exercise of options granted in June 1995.
(9) Includes 60,000 shares which Mr. Close has the right to acquire at an
exercise price of $5.75 per share pursuant to the exercise of options
granted in September 1994.
(10) Includes 20,000 shares which Mr. Walter has the right to acquire at an
exercise price of $5.75 per share pursuant to the exercise of options
granted in September 1994 and 2,000 shares which Mr. Walter has the
right to acquire at an exercise price of $8.25 per share pursuant to
the exercise of options granted in June 1995.
(11) Includes 50,000 shares which Mr. Bonham has the right to acquire at an
exercise price of $5.75 per share pursuant to the exercise of options
granted in September 1994.
(12) Includes 35,000 shares which Mr. Subramanian has the right to acquire
at an exercise price of $5.75 per share pursuant to the exercise of
options granted in September 1994.
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<PAGE>
(13) Includes 10,000 shares which Mr. Wong has the right to acquire at an
exercise price of $10.50 per share pursuant to the exercise of options
granted in August 1995, 4,000 shares which Mr. Wong's spouse has the
right to acquire at an exercise price of $10.50 per share pursuant to
the exercise of options granted in August 1995, and 6,666 shares which
Mr. Wong has the right to acquire at an exercise price of $5.75
pursuant to the exercise of options granted in September 1994.
(14) Includes 1,227 shares held by Mrs. Shrime's children.
(15) Includes 279,666 shares of Common Stock that members of the group had
the right to acquire as of November 1, 1996 or within 60 days of
November 1, 1996, pursuant to the exercise of stock options.
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<PAGE>
INFORMATION CONCERNING CERPROBE
General
Cerprobe designs, manufactures, and markets high-performance probing
and interface products for use in the testing of integrated and hybrid
electronic circuits for the semiconductor industry. Cerprobe's probing and
interface products enable semiconductor manufacturers, such as Intel, Motorola,
and IBM, among others, to test the integrity of their integrated circuits during
the batch fabrication process used in manufacturing integrated circuits in wafer
form. Testing integrated circuits during the batch fabrication stage of the
manufacturing process permits semiconductor manufacturers to identify defective
products early in the manufacturing process, which improves overall product
quality and lowers manufacturing costs. Cerprobe markets its probing and
interface products worldwide to semiconductor manufacturers, both those who
manufacture integrated circuits for resale and those who manufacture integrated
circuits for inclusion in their own products.
Industry Background
During the past three decades, the demand for integrated circuits has
increased dramatically. The semiconductor has enabled the electronics industry
to decrease the size, improve the performance, and expand the capabilities of
electronic products, such as computers and cellular phones. As the electronics
industry has become more sophisticated, it has developed the technology to
reduce the size of components and to fabricate a complete electronic circuit on
a single substrate referred to in the industry as a "chip." A number of
components integrated on a single chip to form a circuit is known as an
"integrated circuit." Integrated circuits are widely used in the automotive,
computer, telecommunications, and consumer electronics industries. Demand for
products incorporating integrated circuits continues to increase as
semiconductor manufacturers have decreased the size and improved the performance
capabilities of integrated circuits. In addition, as a result of advances in
technology, the amount and complexity of the circuitry integrated within a
single chip has grown significantly. An interconnection of integrated circuits
and discrete electronic components on a substrate is a "hybrid circuit." Hybrid
circuits may contain as few as one and as many as 50 chips, potentially costing
thousands of dollars. Because one flaw in the substrate could cause the entire
assembly to be defective, it is important for hybrid circuit manufacturers to
identify defective substrates through testing.
Integrated circuits generally are manufactured using a batch
fabrication process, pursuant to which integrated circuits are fabricated by
repeating a complex series of process steps on a wafer substrate, which is
usually made of silicon and measures three to eight inches in diameter. A
finished wafer consists of many integrated circuits (each referred to as a
"die"), the number depending on the size of the circuits and the size of the
wafer.
Semiconductor manufacturers use probing equipment during the design and
manufacturing processes to verify design specifications, identify defective
integrated circuits, ensure conformance with quality standards, and classify
integrated circuits according to performance characteristics. Most semiconductor
manufacturers test integrated circuits by probing the dies in wafer form to
determine whether each individual integrated circuit meets design
specifications. Probing involves establishing temporary electrical contact
between the device under test ("DUT") and automatic test equipment ("ATE"). The
number of dies on any wafer meeting specifications varies depending upon the
complexity of the circuit and other manufacturing-related aspects. Semiconductor
manufacturers concerned with maintaining profit margins test each integrated
circuit two or three times before completion of the fabrication process. Testing
is performed during the wafer fabrication process ("in-line testing") and at the
completion of the wafer fabrication process ("end-of-line testing") to measure
electrical parameters which verify the reliability of the wafer fabrication
process, while functional testing is performed after the wafer fabrication
("wafer sort") to identify integrated circuits that do not conform to particular
electrical specifications. Semiconductor manufacturers use probe cards and ATE
interfaces primarily during the wafer sort, which occurs before the separation
and packaging of each individual integrated circuit. After probing, integrated
circuits that meet specifications are separated from the batch and bonded onto
plastic, ceramic, or other packages with extended leads. Integrated circuits
that do not meet specifications are discarded. Consequently, the testing of
integrated circuits in wafer form is important to avoid incurring the
significant expense of assembling dies that do not meet specifications.
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Probe cards and ATE interfaces are also used for in-line testing and
are used for research and development and quality and process control
applications. In-line testing requires special equipment features such as
cleanroom compatibility, as tests are carried out during the manufacturing
process. This testing is done to verify the manufacturing process while wafers
are in an unfinished state where corrective action to the process can be taken.
Testing also provides integrated circuit manufacturers with valuable data used
to maintain process controls. Testing can alert manufacturers to flaws in the
fabrication process or the equipment used by identifying recurring defects.
Integrated circuit testing also enables semiconductor manufacturers to
generate reliable yield data. Yield is defined as the ratio of the number of
integrated circuits on a wafer that meet the specifications at the end of the
process compared to the number of integrated circuits on a wafer at the
beginning of the fabrication process. Yield data allows manufacturers to measure
the efficiency of their production process and adjust production techniques
accordingly. Yield data from testing also can enable manufacturers to decrease
raw materials and reduce costs if yields are higher than expected.
The Wafer Probing Process
Semiconductor manufacturers test integrated circuits by means of a
probing system, which transmits electrical signals to the integrated circuits
and analyzes the signals upon their return. The principal components of a
probing system include: (i) a probe card, which consists of a printed circuit
board containing numerous probes positioned to "touchdown" on or make electrical
contact with a series of metallized pads on the integrated circuits; (ii) a
prober, which moves the wafers into position enabling the probe card probes to
touchdown on the pads; (iii) automatic test equipment ("ATE"), which transmits
the electrical signals to the integrated circuits and evaluates signals upon
their return; and (iv) an ATE interface, which transmits the electrical signals
between the ATE and the probe card.
The probe card utilizes a number of probes designed to separately
contact or "probe" a series of electrical contact points (or "pads") on the
integrated circuit. Because the type and complexity of the integrated circuit to
be tested vary, the number and positioning of the probes and the size of each
probe card must be custom designed for the specific integrated circuits being
tested to ensure proper alignment. Each ATE interface generally must be custom
designed for each probe card. An ATE and a prober can be used to test integrated
circuits of various sizes, types, and degrees of complexity and generally are
not specific to the integrated circuit being tested.
During the probing process, the prober positions each integrated
circuit on a wafer so that the pads on the integrated circuit align under and
make contact with the probes on the probe card. The ATE transmits electrical
signals through the ATE interface to the probe card, then to the metallized pads
on the integrated circuit and then evaluates the signals it receives from the
probe card to determine whether a particular integrated circuit meets design
specifications. The probing process also determines the performance capabilities
of each integrated circuit.
The testing of integrated circuits can run from milliseconds to over a
minute depending on the complexity of the semiconductor device, as some
integrated circuits contain more than three million interconnects. Unlike most
of the equipment used in the semiconductor manufacturing process, which
typically has a long life cycle, probe cards have a short life span. Probe cards
for application specific integrated circuits ("ASICs") might be used once and
then discarded. The average life of a probe card typically ranges from 200,000
to 500,000 touchdowns. However, damage due to faulty test handling equipment or
operator error can render a probe card useless prior to expiration of its normal
useful life. Cerprobe estimates that about one-third of its probe cards become
obsolete within six months after sale.
The Market for Probe Card and ATE Interfaces
Cerprobe sells its probe cards and ATE interfaces in the United States,
European, and Asian markets. The Japanese market is comprised of semiconductor
fabrication facilities located in Japan, which currently are serviced by
Cerprobe's Japanese competitors.
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Recent trends, including rapidly growing demand for semiconductors and
advances in semiconductor technology, have driven increased demand for probing
devices, such as probe cards and ATE interfaces. As demand for semiconductors
increases, semiconductor manufacturers typically require additional probing
devices to meet their growing capacity requirements. Conversely, to the extent
demand for semiconductors lessens, semiconductor manufacturers are likely to
reduce their demand for probing devices. Integrated circuit technology is
changing rapidly due to constantly increasing demands for greater functionality
and higher speeds. Advances in integrated circuit design and process
technologies have enabled manufacturers to produce smaller integrated circuits
with even greater circuit densities, levels of integration, and complexity to
meet these demands. Advances in semiconductor technology have resulted in higher
pin counts, more varied configurations, and increasingly complex semiconductor
devices. As a result of the increased complexity of integrated circuits and
shorter product lifecycles, demand for sophisticated probing devices has
increased.
These trends in the integrated circuit market have caused corresponding
trends in the probe card and ATE interface markets. Testing more complex
integrated circuits requires more sophisticated probe cards and ATE interfaces.
The increased sophistication of integrated circuits also has resulted in
increased testing time, which lowers integrated circuit production rates. In
addition, probe cards and ATE interfaces must have greater performance
capabilities in order to test the increasingly complex circuitry and higher pin
counts of integrated circuits. Probing device manufacturers also must have the
capability to handle increasingly varied integrated circuit configurations.
Integrated circuit manufacturers are putting added emphasis on greater accuracy
and testing speed and quicker turnaround times for probing devices.
Cerprobe Strategy
Cerprobe's revenues have grown substantially during the last five
years. Cerprobe believes it achieved this growth by addressing many of the
challenges associated with the testing of complex integrated circuits through a
combination of strengths, including advanced technical capabilities, a broad
line of high-quality products, and close relationships with leading integrated
circuit manufacturers. Cerprobe's strategy is to increase its domestic market
share and to continue expanding into international markets. Cerprobe's
implementation of this strategy includes the following key elements:
- - Focus on Technological Innovation. Cerprobe is focusing more heavily on
engineering and research and development to produce a variety of
high-performance custom-designed probe cards that have the ability to
test more complex integrated circuits and to test at higher speeds.
Cerprobe supports higher integrated circuit production rates through
the use of leading edge materials and proprietary circuit design
methods in its probe cards and ATE interfaces. SEMATECH, the U.S.
semiconductor industry consortium which defines the standards for
future semiconductor products, recently awarded Cerprobe two research
and development contracts. Cerprobe currently is developing new
integrated circuit testing systems for the semiconductor industry. The
latest research and development contract calls for Cerprobe to
determine the best solutions for probing the interior contact points of
semiconductors. Demand for such testing devices is driven by the
continuing shrinkage of semiconductors, which is leading to more
complex integrated circuits. Cerprobe intends to continue its emphasis
on engineering and research and development in an effort to anticipate
and address technological advances in semiconductor processing.
- - Maintain Strong Customer Relationships. Cerprobe maintains
long-standing relationships with many of its customers. Cerprobe's
development of products and product enhancements is market driven.
Engineering, sales, and management personnel collaborate closely with
customer counterparts to determine customers' needs and specifications.
Cerprobe's probing devices are custom designed for testing specific
semiconductor devices. Cerprobe expects to continue to strengthen its
existing customer relationships by continuing to provide quality
products and high levels of service and support.
- - Provide Quality Products and Service. Cerprobe strives to maintain its
reputation as a provider of high-quality products and services. This
high quality level is achieved through rigorous inspection and testing
of products, and the application of sound Quality Management policies
and practices. ISO 9000, the internationally recognized standard for
Quality Management, sets the criterion for Cerprobe's quality system
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<PAGE>
and is being implemented at all manufacturing sites. A cornerstone of
the Quality Management system is Cerprobe's advanced metrology tools
that ensure precise measurements of all key product parameters. As the
size of integrated circuits is driven smaller by advances in integrated
circuit technology, the accuracy of measurements becomes increasingly
important. Cerprobe's Quality and Engineering departments work together
to define measurement needs and identify tools that can achieve the
desired results. Cerprobe believes that its size and production methods
allow it to provide its customers with high-quality products and quick
turnaround times.
- - Expand to International Markets. Cerprobe intends to continue expansion
into international markets including Europe and Asia. Cerprobe has
begun to pursue these markets by aggressively mounting a focused sales
and marketing effort directed at selected key semiconductor
manufacturers abroad. Cerprobe believes that its recent international
successes are in part due to its strategy of locating manufacturing
plants close to its customer sites. Cerprobe's international expansion
includes the location of full-service sales and manufacturing
facilities in East Kilbride, Scotland and in Singapore.
- - Expand Product Lines and Applications. Cerprobe intends to capitalize
on its market position and technical expertise to further broaden
existing product lines through internally developed products and from
time to time through acquisitions. For example, Cerprobe's acquisition
of Fresh Test Technology Corporation enabled Cerprobe to offer an
expanded product line, including ATE interfaces and custom-designed
printed circuit boards. The acquisition of Fresh Test and the proposed
acquisition of C-Route provides Cerprobe with greater opportunities for
product development. This strategy also enables Cerprobe to offer its
customers a total system solution.
Products
Cerprobe's probe cards generally range in price 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. Most probe cards are delivered within one to three weeks of the
receipt of a customer's order and appropriate specifications.
Probe Card Products
Probe card products constitute the significant majority of Cerprobe's
business. A probe card used in the testing of an integrated or hybrid circuit
utilizes a number of probes designed to separately contact or "probe" a series
of metallized pads on the integrated or hybrid circuit. Through the number and
positioning of the probes, probe cards are individually designed for the
specific integrated or hybrid circuits being tested. Probe cards are
manufactured according to the customer's specifications, which vary depending
upon the type and complexity of the circuit to be tested.
The metallized pads on the circuit to be tested generally are located
on the periphery of the circuit. As the number of pads increases due to the type
and complexity of the circuit being tested, certain customers place pads in the
center as well as on the periphery of the circuit being tested. This design is
known as an "array."
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There are four types of probe card technologies currently available.
1. CerCardTM/epoxy ring technology uses probes that connect
directly to a printed circuit board. Probe cards using this
type of technology are capable of high-speed, high-density
probing. Cerprobe introduced the CerCardTM in October 1990.
Sales of the CerCardTM generated approximately 68% of
Cerprobe's revenues in 1995 as compared to approximately 73%
of Cerprobe's revenues in 1994. Cerprobe anticipates that the
CerCardTM will continue to account for a substantial portion
of Cerprobe's probe card business in the future.
2. Ceramic/metal blade technology uses a ceramic or metal blade
attached to a needle designed to make contact with the pads.
Probe cards using ceramic blade technology, which was
developed and patented by Cerprobe, are capable of low-speed,
low-density probing. With optional features, the ceramic blade
can be used for high-speed probing. Cerprobe will continue to
manufacture ceramic blade probe cards; however, Cerprobe
expects that ceramic blade probe cards will account for a
decreasing portion of Cerprobe's probe card business in the
future.
3. Buckle beam technology uses vertical probes that emerge from a
pattern that mirrors the pattern of the pads on the integrated
or hybrid circuit being tested. Probe cards using this
technology are capable of probing pads in the center of an
integrated or hybrid circuit using an "array" design. This
technology generally is used for high-density, low-speed
applications.
4. Membrane technology uses a thin film flexible circuit with
"bumps," rather than probes, designed to make contact with the
pads. Probe cards using this technology were introduced in
1988 and are intended for high-speed, high-density
applications.
All of Cerprobe's probe card products utilize either CerCardTM/epoxy
ring or ceramic blade technology. Cerprobe estimates that products utilizing
these technologies account for approximately 85% of the world market for
integrated and hybrid circuit probe card products, that products utilizing the
metal technology account for approximately 10% of the world market, and that
products using other technologies constitute less than 5% of the available world
market.
Cerprobe has invested over 20 years in the design of different types of
printed circuit boards, blades, and probes and the manufacturing processes
required to assemble these products into a finished probe card. Because the
signals carried by the probe card are very sophisticated and vary by customer,
Cerprobe manufactures many types of printed circuit boards, blades and probes,
each of which may be individually designed to meet the specifications of each
customer.
ATE Interface Products
An interface is used to carry signals from the ATE to the probe card.
An interface typically consists of two intricate multi-layer printed circuit
boards connected by either a system of cables varying in length from less than
one inch up to six feet or spring loaded contact pins. One end of the interface
connects to the ATE and the other to a probe card fixture mounted on a prober
that holds the probe card in a stationary position. Cerprobe's computer-aided
design system is used to design the interfaces, each of which has hundreds of
intricate signal lines. In each case, the integrity of the test is highly
dependent on maintaining the quality of the signal between the ATE and the
integrated or hybrid circuit being tested.
Cerprobe's interface product line transmits a "clean" signal from the
ATE to the probe card and carries a return signal back to the ATE after the
circuit processes the signal. Cerprobe's interface products are designed to
optimize the integrity of return signal data through the reduction of channel
crosstalk and the matching of delay times and impedance, thereby realizing
accurate circuit yields. Yield is the ratio of good circuits to total circuits
per processed wafer and is an important cost factor for Cerprobe's customers.
Because Cerprobe's interfaces provide reliable yield data by allowing for clear
signal transmission, interfaces can also be cost saving devices.
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Cerprobe's interface products feature ease of mechanical installation in the
prober and facilitate access to the wafer during testing.
Generally, each combination of ATE and prober ordered by a customer
will require a different interface. Interface products range from small single
board cable type interfaces for less complex systems to high speed/frequency
digital or mixed signal (analog and digital) interfaces used in testing more
complex integrated circuits. Prices for interfaces range from $1,000 to $65,000
per system.
Cerprobe also produces another interface product known as a planarized
"motherboard" ("PMB"), which is a modified probe card fixture sometimes used in
the manufacture, repair, and inspection of probe cards. Customers of Cerprobe
that maintain and inspect their probe cards will continue to purchase PMBs even
though their demand for other interface products may decrease. In addition,
motherboards are a necessary part of Cerprobe's manufacturing operations.
Cerprobe sales of ATE interfaces have increased as a result of the
acquisition in 1995 of Fresh Test Technology Corporation, a company engaged
primarily in the design, manufacture, and sale of interface products.
Research and Development
Cerprobe recently has expanded its engineering and research and
development efforts. Cerprobe has been successful in controlling expenditures
for research and development by collaborating with certain customers who pay
Cerprobe to develop new product innovations. Engineering and product development
expenses were $706,680, $417,198, and $335,659 for the years ended December 31,
1995, 1994, and 1993, respectively, and $724,230 and $529,068 for the nine
months ended September 31, 1996 and 1995, respectively.
Cerprobe has been awarded two research and development contracts with
SEMATECH, a consortium of leading U.S. semiconductor manufacturers and the U.S.
government formed to promote technological innovation in the U.S. semiconductor
industry. In the first agreement with SEMATECH, Cerprobe concentrated on the
extension of present technology to include tighter pitches (i.e., placing probes
closer together) as well as developing higher frequency testing characteristics.
Advances in semiconductor technology have resulted in the shrinkage of circuitry
patterns (from 200 microns to 90 microns, and smaller pad pitches) and increases
in speed from 33 Megahertz to over 100 Megahertz. As semiconductors have become
more sophisticated, the need to place the pads in the middle of the integrated
circuit as well as on the perimeter has developed. An area array probe card
makes it possible to test circuitry pads or bumps no matter where they are
located on the integrated circuit. The second agreement with SEMATECH calls for
Cerprobe to determine the best solution for probing the interior contact points
of semiconductors. Pursuant to this agreement, as Cerprobe matches funds
contributed by SEMATECH, Cerprobe retains the rights to any technology developed
through these research and development efforts. Cerprobe also believes it gains
an added benefit from the SEMATECH relationship by being able to work with its
semiconductor manufacturer partners to anticipate and address technological
advances in semiconductor processing and testing.
Manufacturing
The manufacturing process for Cerprobe's products consists of the
assembly of the component parts of each of its products, which are manufactured
at Cerprobe's Tempe and Chandler, Arizona; San Jose, California; Westboro,
Massachusetts; Austin, Texas; East Kilbride, Scotland; and Singapore facilities.
The raw materials used by Cerprobe in its manufacturing process include ceramic,
tungsten, and printed circuit boards, all of which are readily available in the
marketplace. The components purchased by Cerprobe from other manufacturers are
obtained from a variety of suppliers, some of which are custom-designed in
accordance with Cerprobe's specifications.
In August 1994, Cerprobe established and now operates a manufacturing,
repair, and sales facility in East Kilbride, Scotland. Cerprobe's objective in
establishing and operating this facility is to serve its existing customers in
Europe and to expand its sales efforts throughout Europe. To conduct operations
in Europe, Cerprobe has formed Cerprobe Europe, Limited in the United Kingdom as
a wholly-owned subsidiary of Cerprobe.
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Cerprobe established, through a joint venture, a full service
manufacturing, repair, and sales facility in Singapore that will serve the Asian
market. The facility commenced operations in the second quarter of 1996.
Cerprobe established a third international, manufacturing, repair, and
sales facility in Hsin Chu, Taiwan. Cerprobe anticipates that this facility will
become operational by the end of 1996.
Marketing and Sales
Since beginning operations, Cerprobe has developed an extensive North
American customer base. These customers represent the major merchant
manufacturers of integrated circuits (businesses that manufacture for resale in
the market), such as Motorola, Intel, National Semiconductor, and others. In
addition, a significant part of Cerprobe's revenues are derived from sales to
captive semiconductor operations (businesses that produce semiconductors for
their own use), such as IBM and AT&T. In 1995, two of Cerprobe's customers,
Intel and Motorola, accounted for 18.8% and 11.4%, respectively, of Cerprobe's
net sales. No other customer accounted for more than 10% of Cerprobe's net sales
in 1995. These merchant semiconductor manufacturers and captive semiconductor
operations provide Cerprobe with a well-balanced base consisting of customers
whose products serve communications, computer, automotive, and
military/aerospace applications.
In addition to serving high-volume established manufacturers, Cerprobe's
products also are designed to meet the needs of emerging and leading edge
technology firms such as those offering ASICs and GaAs (Gallium Arsenide
devices).
Purchasers of probing products generally place a high value on service.
Technical features and product quality also are attributes expected by
Cerprobe's customers. Although the service needs of customers currently are
receiving a great deal of attention by all businesses, the unique needs of
purchasers of probing products dictate an unusually high level of responsiveness
in this area. The products produced by Cerprobe usually require a great deal of
customization in order to meet customer specifications. Response time, product
design specifications, and rapid delivery typically are critical factors in
customer satisfaction. In addition, the customer's evaluation of the design and
performance of completed probing products can be quite subjective. To facilitate
satisfaction of its customer's servicing needs, Cerprobe maintains five regional
service centers in various regions of the United States and a manufacturing,
repair, and sales facility in East Kilbride, Scotland and in Singapore to
provide service to both the European and Asian markets.
In addition to its regional service facilities, Cerprobe reaches its
domestic customers with its sales personnel and regional representatives. Like
its regional service facilities, Cerprobe's sales personnel are strategically
located to facilitate rapid response to major market centers and key customers.
Cerprobe maintains sales offices in Richardson, Texas; Beaverton, Oregon;
Colorado Springs, Colorado; and Boca Raton, Florida.
In both Europe and the Far East, Cerprobe has utilized a network of
independent distributors. Currently, Cerprobe's international business
represents approximately 16% of sales. Cerprobe, however, recognizes the
potential in these markets and is positioning itself to initiate a more
aggressive marketing and sales program in the international market in the
future. In particular, Cerprobe intends to expand its sales efforts throughout
Europe and has established and currently operates a manufacturing, repair, and
sales facility in East Kilbride, Scotland for the purpose of serving customers
in Europe. In continuing that effort, in June 1995, Cerprobe established a joint
venture in Singapore for the purpose of developing a full service manufacturing,
repair, and sales facility reaching markets in Southeast Asia. Cerprobe
currently is negotiating Pioneer Status with the Singapore Economic Development
Agency, which, if granted, would provide certain tax exemptions with respect to
Cerprobe's operations in Singapore. Cerprobe's Singapore facility commenced
operations in the second quarter of 1996.
Cerprobe's strategic marketing plan is aimed primarily at increasing
its share of the probe card market through continued expansion of CerCardTM
product sales both domestically and internationally. The CerCardTM allows
Cerprobe to service both the higher pin count probe card market and customers
who currently use epoxy ring probe card technology exclusively. Cerprobe also is
working with key customers in the development of products and improvements that
will enhance Cerprobe's existing product line.
43
<PAGE>
Competition
Cerprobe encounters competition from a number of well established
domestic competitors in the integrated circuit probe card market, including
Probe Technology Corporation, Wentworth Laboratories, Inc., and Micro-Probe,
Incorporated, as well as numerous smaller competitors. Cerprobe's competitors
manufacture and market epoxy ring probe cards, which have been accepted in the
marketplace for over 20 years, and metal blade probe cards, which have been
accepted in the marketplace for over 15 years. Cerprobe estimates that epoxy
ring and ceramic blade probe cards comprise approximately 85% of the world
market and metal blade probe cards comprise approximately 10% of the world
market. Cerprobe estimates that products using other technologies constitute
less than 5% of the available world market. Cerprobe believes that it, and to a
limited extent Wentworth Laboratories, Inc. and Accuprobe, Inc., are the only
current manufacturers of ceramic blade probe cards. It is expected that
competition will increase in the future as integrated circuitry and probing
technology become more sophisticated. Manufacturers of integrated circuit probe
cards compete primarily on the basis of product performance, service, delivery
time, and price. Cerprobe believes that it compares favorably with its
competitors in these areas.
Hand-wired connections have been Cerprobe's principal competition in
interface circuitry. Historically, ATE end users have hand-wired the connections
between the ATE and the probe card. However, more recently, the market in
advanced interface circuitry is developing both domestically and
internationally, and increased competition has emerged from other probe card
manufacturers, ATE manufacturers, and other companies. Competition in interface
circuitry will be on the basis of performance specifications, service, and
price.
Competition in the international market is significant and similar to
that faced in the domestic market. Most of the probe cards sold outside the
United States use epoxy ring technology, built under license from U.S.
manufacturers. Cerprobe's competitive challenges in the international market are
expected to be similar to those experienced domestically.
Patents
Cerprobe received a patent in November 1991 for a new probing
technology which offers product features that are useful in testing TAB (Tape
Automated Bonding) mounted chips, multi-chip substrates, integrated circuits
with gold pads or solder bumps, and devices having multiple rows of test points
around or within the periphery of the chip. In addition, in January 1995,
Cerprobe received a patent for an enhanced version of Cerprobe's CerCardTM
product known as a Transmission Line Probe Assembly, which is capable of testing
at higher speeds than Cerprobe's current product line.
Cerprobe strives to improve existing technology and will pursue patent
protection for any new products it may develop in connection with such efforts.
However, there can be no assurance that future patents on new products will be
sought or issued or that Cerprobe's present patent position will cover its
development of new products. Cerprobe believes that its success will depend
primarily on the technological competence and creative skills of its personnel
rather than the protection of its existing patent or future patents.
Employees
Cerprobe has several key employees and the loss of any one of them
might have a temporary adverse effect on Cerprobe's business prospects. Cerprobe
maintains a key man life insurance policy on C. Zane Close, Cerprobe's Chief
Executive Officer, in the amount of $1,000,000. Cerprobe currently has 365
employees. There are no collective bargaining agreements and Cerprobe considers
its relations with its employees to be good.
Raw Materials
The raw materials and components used by Cerprobe in the manufacturing
process are available from a broad supplier base. These raw materials and
components are readily available. Cerprobe has experienced no significant
shortages in the recent past. Raw materials include ceramic, tungsten, single
and multiple printed circuit boards with a variety of machined mechanical parts,
probe needles, and metallized ceramic blades.
44
<PAGE>
Government Regulations
Federal, state, and local provisions regulating the discharge of
materials into the environment have not had a material effect on Cerprobe's
business. Cerprobe has made certain leasehold improvements in order to comply
with Environmental Protection Agency and local regulations. Cerprobe believes
that it is in full compliance with these regulations. Cerprobe, however, is
unable to predict what effect, if any, the adoption of more stringent
regulations would have on its future operations.
Properties
Cerprobe's current principal executive offices and primary
manufacturing facility are located at 600 S. Rockford Drive, Tempe, Arizona.
Cerprobe leases approximately 30,000 square feet of office and manufacturing
space at that location. The lease expires on March 31, 1997. Cerprobe also
leases approximately 15,581 square feet of office and manufacturing space in
Chandler, Arizona. The term of the lease expires on November 30, 1998. Cerprobe
leases an additional 5,470 square feet of office and warehouse space in
Chandler, Arizona pursuant to a lease ending December 31, 1996. Cerprobe also
leases space for its manufacturing facilities in San Jose, California; Westboro,
Massachusetts; and Austin, Texas; as well as in East Kilbride, Scotland; Hsin
Chu, Taiwan; and Singapore. In addition, Cerprobe leases space for its sales
offices in Richardson, Texas; Beaverton, Oregon; Colorado Springs, Colorado; and
Boca Raton, Florida. Cerprobe's aggregate monthly rental payments for these
facilities are approximately $78,000.
In September 1996, construction began on Cerprobe's new corporate
headquarters facility in Gilbert, Arizona. Cerprobe expects the facility to be
completed in the spring of 1997. In addition to executive and administrative
offices, the facility will house Cerprobe's manufacturing and research and
development operations. Upon completion, Cerprobe intends to consolidate its
Arizona operations, which are currently divided between three locations, into
the 83,000 square foot facility, which is being constructed on a 12-acre parcel
of land. The facility and land is owned by CRPB Investors, L.L.C. ("CRPB
Investors"). Cerprobe owns a 36% interest in CRPB Investors. Cerprobe has
entered into a long-term lease with CRPB Investors commencing on the date of
substantial completion of the facility. The initial lease rate is dependent on
final construction cost, but currently is estimated at approximately $73,000 per
month. Cerprobe believes that its existing facilities are adequate to meet its
requirements until additional production capacity becomes available upon
completion of the new facility.
Legal Proceedings
Cerprobe is not a party to, nor is any of its property the subject of,
any material pending legal proceedings.
Dividends on and Market Prices of Cerprobe Common Stock
Cerprobe Common Stock began trading in the over-the-counter market on
the Nasdaq system on September 29, 1983 and commenced trading on the Nasdaq
National Market on August 10, 1995 under the symbol "CRPB." On December 3, 1996,
the closing sale price for Cerprobe Common Stock was $11.00. The following table
sets forth, for the periods indicated, the high and low last sale prices of
Cerprobe Common Stock for the periods indicated, as reported on the Nasdaq
National Market.
45
<PAGE>
High Low
---- ---
1994:
First Quarter.......................... 6 1/2 5
Second Quarter......................... 5 1/4 4 1/2
Third Quarter.......................... 5 3/4 5 1/2
Fourth Quarter......................... 4 3/4 4 1/4
1995:
First Quarter.......................... 6 5
Second Quarter......................... 8 1/4 5 1/2
Third Quarter(1)....................... 10 1/2 10
Fourth Quarter......................... 17 16 3/4
1996:
First Quarter.......................... 15 1/4 12 3/8
Second Quarter......................... 14 1/8 11 1/2
Third Quarter.......................... 12 1/8 7 7/8
_______________
(1) Prior to August 10, 1995, prices represent high and low bid quotations
on Nasdaq. Bid quotations represent interdealer quotations, which
exclude retail markups or mark-downs and commissions and may not
necessarily represent actual transactions.
Cerprobe paid a one time dividend of $.03 per share on its Common Stock
on May 23, 1994, but typically does not pay dividends on its Common Stock and
does not anticipate that it will do so in the future. Cerprobe currently does
not intend to declare or pay any cash dividends, and intends to retain any
future earnings for reinvestment in its business. Payments of dividends in the
future will depend on Cerprobe's growth, profitability, financial condition, and
other factors that the Cerprobe Board of Directors may deem relevant.
On August 19, 1996, the last trading day prior to the public
announcement that Cerprobe, C-Route, and Mrs. Shrime had entered into a revised
letter of intent with respect to the Merger, the closing sale price per share of
Cerprobe Common Stock was $9.75 per share, as reported on the Nasdaq National
Market.
As of November 1, 1996, there were approximately 1,634 record holders
of Cerprobe Common Stock.
46
<PAGE>
Management
Directors and Executive Officers
The following table sets forth certain information regarding Cerprobe's
directors and executive officers.
<TABLE>
<CAPTION>
Name Age Position(s) with Cerprobe
- ---- --- -------------------------
<S> <C> <C>
Ross J. Mangano 51 Chairman of the Board of Directors
C. Zane Close 47 President, Chief Executive Officer, and Director
Kenneth W. Miller 64 Director
Donald F. Walter 64 Director
William A. Fresh 68 Director
Michael K. Bonham 58 Senior Vice President-Sales and Marketing
Eswar Subramanian 39 Senior Vice President and Chief Operating Officer
Henry Wong 36 Vice President and Executive Director of Cerprobe Asia
Randal L. Buness 39 Vice President, Chief Financial Officer, Secretary, and
Treasurer
Roseann L. Tavarozzi 42 Vice President-Corporate Controller and Assistant
Secretary
</TABLE>
__________
Ross J. Mangano has served as the Chairman of the Board of
Directors of Cerprobe since February 1993 and as a director of Cerprobe since
February 1988. Mr. Mangano has been employed by Oliver Estate, Inc., an
Indiana-based management company, since 1971 and has served as vice
president-investments for Oliver Estate, Inc. since 1980. Mr. Mangano also is an
investment analyst for Oliver Estate, Inc. Since December 1993, Mr. Mangano has
been a member of the board of directors of Cole Taylor Financial Group, a
publicly-held bank holding company based in Wheeling, Illinois.
C. Zane Close joined Cerprobe in July 1990 as its President
and Chief Executive Officer and has also served as a director of Cerprobe since
that time. From February 1985 to September 1989, Mr. Close served as vice
president of operations and thereafter, until July 1990, as vice president and
general manager of Probe Technology Corporation, a California corporation that
develops, manufactures, and markets probing devices for use in the testing of
integrated and hybrid circuits.
Kenneth W. Miller has served as a director of Cerprobe since
1979. Mr. Miller served as the Treasurer of Cerprobe from June 1994 to June 1996
and as the Secretary of Cerprobe from October 1991 to June 1996. Since January
1993, Mr. Miller has served as a business consultant to various companies
involved in the high technology industry. From April 1991 until October 1991,
Mr. Miller was the marketing director of Scranton Engineering, Inc., a
manufacturer of hybrid circuits and ceramic circuit boards located in Costa
Mesa, California. From September 1988 until April 1991, Mr. Miller served as the
marketing director of Advanced Packaging Systems, a manufacturer of high-density
ceramic and polymer thin film interconnect products. From 1981 to September
1988, Mr. Miller served as the president of Interamics, a San Diego-based
company that manufactured ceramic packages for integrated circuits and hybrid
substrates. From January 1977 to the time he joined Interamics, Mr. Miller was
vice president and general manager of a division of Siltec Corporation, a San
Francisco-based manufacturer of silicon wafers and ceramic packages.
47
<PAGE>
Donald F. Walter has served as a director of Cerprobe since
May 1, 1991. Since 1982, Mr. Walter has been a financial consultant and is the
principal of Walter & Keenan Financial Consulting Co., a financial consulting
firm located in Niles, Michigan. Since 1982, Mr. Walter has served as a director
of National Standard Co., a public company based in Niles, Michigan that
manufactures specialty wire products. Since 1988, Mr. Walter has served as a
director of Metro BanCorp, a publicly-held bank based in Indianapolis, Indiana.
William A. Fresh has served as a director of Cerprobe since
April 7, 1995. Mr. Fresh co-founded Fresh Test Technology Corporation, a company
recently acquired by Cerprobe ("Fresh Test"), and Fresh Quest Corporation, a
designer and manufacturer of probe and interface test technology for the
semiconductor industry. He served as Chairman of the Board and Chief Executive
Officer of Fresh Test from January 1986 through March 1995 and has served as the
Chairman of the Board and Chief Executive Officer of Fresh Quest Corporation
since January 1992. Mr. Fresh also has served as the Chairman of the Board and
Chief Executive Officer of Magellan Technology, a public holding company, Orem
Tek Development Corp., a real estate development company, and Satellite Images
System Corporation, a medical information processing company, since May 1990,
May 1991, and February 1992, respectively, and as Chairman of the Board of EFI
Electronics, a publicly-held power conditioning company, and Fresh Technology
Company, a PC-based software company, since February 1991 and May 1991,
respectively.
Michael K. Bonham joined Cerprobe in July 1990 and has served
as Senior Vice President - Sales and Marketing since June 1996. Prior to that
time, Mr. Bonham served as Vice President of Sales and Marketing from July 1990
to June 1996. From October 1988 to June 1990, Mr. Bonham was marketing manager
of Tektronix, Incorporated, a manufacturer of electronic test measurement
equipment, IC Probe and Curve Tracer Group. From September 1984 to October 1988,
Mr. Bonham was major account manager and consulting sales engineer for the
Semiconductor Cast Systems division of Tektronix.
Eswar Subramanian has served as Senior Vice President and
Chief Operating Officer of Cerprobe since June 1996. Prior to that time, Mr.
Subramanian served as its Vice President of Engineering from July 1990 to June
1996. Immediately prior to joining Cerprobe, Mr. Subramanian was director of
development at Probe Technology Corporation, where he was responsible for the
development and establishment of new probing technology and its production
operations. From November 1984 to April 1990, Mr. Subramanian was engineering
manager at Probe Technology Corporation and was responsible for the design,
development, manufacture, and engineering of probing products.
Henry Wong joined Cerprobe in July 1990 and has served as Vice
President and Executive Director of Cerprobe Asia since June 1996. Mr. Wong
served as Vice President of Production of Cerprobe from July 1991 to June 1996.
Prior to joining Cerprobe, Mr. Wong was chief technologist of probe card
production at Probe Technology Corporation, where he was involved in the
manufacture and design of probe cards as well as production operations and
research and development. Prior to his affiliation with Probe Technology
Corporation in 1983, Mr. Wong worked with Rucker and Kolls, a California
manufacturer of probe cards.
Randal L. Buness has served as Vice President, Chief Financial
Officer, Secretary, and Treasurer of Cerprobe since June 1996. From September
1994 to June 1996, Mr. Buness served as Vice President-Finance and
Administration, Chief Financial Officer, Secretary, and Treasurer of Three-Five
Systems, Inc., a publicly-held company traded on the New York Stock Exchange.
Mr. Buness served as Chief Financial Officer, Secretary, and Treasurer of United
Medical Network from January 1993 to September 1994. From January 1989 to
January 1993, Mr. Buness worked as a self-employed consultant. Mr. Buness served
as principal and manager with Arthur Young from January 1986 to January 1989 and
served as a manager, senior, and staff accountant with Price Waterhouse from
July 1979 to January 1986. Mr. Buness is a Certified Public Accountant.
48
<PAGE>
Roseann L. Tavarozzi joined Cerprobe in March 1994 and has
served as its Vice President - Corporate Controller since June 1996. Ms.
Tavarozzi served as Vice President-Finance of Cerprobe from April 1995 to June
1996. From March 1994 to March 1995, Ms. Tavarozzi served as Vice President and
Chief Financial Officer. Prior to joining Cerprobe, Ms. Tavarozzi was the
corporate controller for Quorum International, Ltd., an international
distributor of security products based in Phoenix, Arizona. From May 1989 until
April 1992, Ms. Tavarozzi was the controller-mid continent for Core-Mark
International, Inc., an international distributor of consumable products. Ms.
Tavarozzi is a Certified Public Accountant.
Directors hold office until their successors have been elected
and qualified. All officers are elected by the Board of Directors and hold
office until their successors have been duly elected and qualified, or until
resignation or removal. There currently is no classification of the Board of
Directors. There are no family relationships among any of the directors or
officers of Cerprobe.
In connection with the issuance of Cerprobe's Convertible
Subordinated Debentures, which mature on December 15, 1996, Cerprobe agreed with
one of the holders of the Convertible Subordinated Debentures to appoint Mr.
Walter to the Board and thereafter to nominate Mr. Walter as a director so long
as $250,000 in principal amount of the Convertible Subordinated Debentures held
by such holder and his affiliates remains outstanding. As of the date of this
Prospectus, such holder and his affiliates had notified Cerprobe of their intent
to convert the entire $485,000 in outstanding principal amount of the
Convertible Subordinated Debentures by December 15, 1996. In addition, the
employment agreement between Cerprobe and Mr. Close provides that Cerprobe will
cause Mr. Close to be nominated to the Board of Directors so long as Mr. Close
is employed by Cerprobe. The stockholders of Cerprobe, however, have no
obligation to vote for Mr. Walter or Mr. Close and may withhold or distribute
votes in their discretion. Cerprobe knows of no other arrangements or
understandings between any director or executive officer and any other person
pursuant to which he has been selected as a director or executive officer.
Certain Transactions
Judd C. Leighton and Mary Morris Leighton, who together
beneficially own Convertible Subordinated Debentures that are convertible into
460,000 shares of Cerprobe Common Stock, beneficially own an approximately 24%
interest in CRPB Investors, L.L.C, a limited liability company formed for the
purpose of owning and operating the 83,000 square foot facility Cerprobe will
lease to serve as Cerprobe's headquarters. See "Information Concerning Cerprobe
- - Properties." Henry Wong, a Vice President of Cerprobe and Executive Director
of Cerprobe Asia, owns 10% of Cerprobe Asia PTE LTD, Cerprobe's joint venture in
Singapore.
49
<PAGE>
Executive Compensation
Summary of Cash and Other Compensation
The following table sets forth information concerning the
compensation for the fiscal years ended December 31, 1995, 1994, and 1993 earned
by Cerprobe's Chief Executive Officer and Cerprobe's three most highly
compensated executive officers whose aggregate cash compensation exceeded
$100,000 for services rendered in all capacities to Cerprobe and its
subsidiaries for the last fiscal year (the "Named Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
Long Term Compensation
--------------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------------------
Other Restricted All
Annual Stock LTIP Other
Name and Compensation Award(s) Options Payouts Compen-
Principal Position Year Salary($) Bonus($) ($) (4) $ /SARs(#) ($) sation($)
- ------------------ ---- --------- -------- --------- --- -------- ----- ---------
<S> <C> <C> <C> <C> <C>
C. Zane Close, President 1995(1) 135,000 35,000 -
and Chief Executive Officer 1994(2) 116,252 13,000 - 60,000
1993(3) 108,567 29,600 -
Eswar Subramanian, 1995(1) 108,000 25,000 -
Senior Vice President and 1994(2) 98,067 12,000 - 35,000
Chief Operating Officer 1993(3) 90,067 23,700 -
Michael K. Bonham, 108,000 25,000 -
Senior Vice President - 1995(1) 100,033 12,000 - 50,000
Sales and Marketing 1994(2) 90,067 23,700 -
1993(3)
Henry Wong, Vice 1995(1) 100,000 15,750 - 25,000
President and Executive 1994(2) 87,018 5,000 - 20,000
Director of Cerprobe Asia 1993(3) 80,073 5,000 -
</TABLE>
___________
(1) Includes $34,346, $44,863, $32,462, and $15,000 in salary and/or bonus
earned by Messrs. Close, Subramanian, Bonham, and Wong, respectively,
in 1995 but deferred to a future year.
(2) Includes $26,242, $23,662, $16,223, and $14,567 in salary and/or bonus
earned by Messrs. Close, Subramanian, Bonham, and Wong, respectively,
in 1994 but deferred to a future year.
(3) Includes $26,324, $21,840, $21,735, and $19,515 in salary and/or bonus
earned by Messrs. Close, Subramanian, Bonham, and Wong, respectively,
in 1993 but deferred to a future year.
(4) Other annual compensation did not exceed the lesser of $50,000 or 10%
of the total salary and bonus for any of the Named Officers except as
noted.
50
<PAGE>
Option Grants
The following table provides information on stock options granted to
Cerprobe's Named Officers during the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
Option Grants In Last Fiscal Year
Individual Grants
-----------------------------------------------------------------
Potential Realizable
Value at Assumed
Number of Annual Rates of Stock
Securities % of Total Price Appreciation for
Underlying Options Exercise Option Term(2)
Options Granted Price Expiration ----------------------
Name Granted (#) Fiscal Year ($/Sh) Date 5% ($) 10% ($)
- ------------------ ---------- ----------- ------ ---- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Henry Wong 25,000(1) 12.14% $10.50 2000 $72,524 $160,259
</TABLE>
_____________
(1) The option agreement provides that the options vest ratably over five
years beginning in 1995.
(2) Calculated from a base price equal to the exercise price of each
option, which was the fair market value of Cerprobe Common Stock on the
date of grant. The amounts represent only certain assumed rates of
appreciation.
Option Exercises and Holdings
The following table provides information on options exercised
in the last fiscal year by Cerprobe's Named Officers and the value of each such
Named Officer's unexercised options at December 31, 1995.
<TABLE>
<CAPTION>
Aggregated Option Exercises In Last Fiscal Year And
Option Value as of December 31, 1995
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Fiscal Year-End (#) at Fiscal Year-End ($)(2)
Shares --------------------------------- --------------------------------
Acquired on Value
Name Exercise (#) Realized ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
C. Zane Close 60,000 $175,000 40,000 20,000 $470,000 $235,000
Eswar Subramanian 30,000 $236,250 23,334 11,666 $274,175 $137,076
Michael K. Bonham 30,000 $236,250 23,334 16,666 $391,675 $195,826
Henry Wong -0- -0- 18,334 26,666 $191,675 $218,326
</TABLE>
- ---------------------
(1) Calculated based on the market price at exercise multiplied by the
number of options exercised less the total exercise price of the
options exercised.
(2) Calculated based on $17.50, which was the closing sale price of
Cerprobe Common Stock as quoted on the Nasdaq National Market on
December 29, 1995, multiplied by the number of applicable shares
in-the-money less the total exercise price.
51
<PAGE>
Employment Agreements and Other Arrangements
Pursuant to employment agreements with Cerprobe, (each of which is
subject to automatic renewal for succeeding terms of one year unless either
party gives notice at least 90 days prior to the expiration of any term of its
intention not to renew) Messrs. Close, Bonham, Subramanian, and Wong receive
$165,000, $140,000, $125,000, and $112,000, respectively, in annual base salary
during the term of their employment. Each of the employment agreements provides
for additional increases in the base salary and bonuses as may be determined by
Cerprobe's Board of Directors in its sole discretion. Each of the agreements may
be terminated with or without cause by Cerprobe upon 90 days written notice to
the employee, and each employee may terminate his obligations under the
agreement by giving Cerprobe at least 90 days notice of his intent to terminate.
Committees of the Board of Directors
Ross J. Mangano, Kenneth W. Miller, and Donald F. Walter serve on the
Audit Committee. The Audit Committee was established by the Board of Directors
to serve as a focal point for communications between non-committee directors,
Cerprobe's independent auditors and Cerprobe's management as their duties relate
to financial accounting, reporting, and controls. The Audit Committee is
responsible for assisting the Board of Directors and fulfilling its fiduciary
responsibilities with respect to accounting policies and reporting practices.
Ross J. Mangano, Kenneth W. Miller, and Donald F. Walter are members of
Cerprobe's Compensation Committee. The Compensation Committee is primarily
responsible for reviewing officer compensation and making recommendations to the
Board of Directors regarding officer salaries and incentive compensation. The
Compensation Committee also is responsible for the administration of Cerprobe's
Stock Option Plans.
Director Compensation
Each outside director of Cerprobe receives $3,000 each quarter and a
fee of $500 for each meeting of the Board of Directors attended. Outside
directors also are eligible to receive stock options pursuant to Cerprobe's
stock option plans and are reimbursed for expenses incurred in attending
meetings. Directors do not receive additional compensation for committee
participation or special assignments.
Employee Benefit Plans
In 1983, the Board of Directors and Cerprobe's stockholders adopted an
incentive stock option plan in order to provide for the grant of options to
employees to purchase shares of Cerprobe Common Stock that qualified as
"incentive stock options" under Section 422A of the Internal Revenue Code of
1954, as amended. The incentive stock option plan originally provided for the
issuance of options to purchase a total of 100,000 shares of Cerprobe Common
Stock. On January 7, 1984, the Board of Directors approved, and on May 5, 1984,
the stockholders ratified, the reservation of an additional 120,000 shares of
Cerprobe Common Stock for issuance upon the exercise of options under the
incentive stock option plan.
On February 2, 1987, the Board of Directors approved, and on May 2,
1987, the stockholders ratified, a Plan of Modification to the incentive stock
option plan in order to allow Cerprobe certain tax deductions which were not
allowed under the incentive stock option plan. The Plan of Modification
converted the incentive stock option plan to a non-qualified stock option plan
(the "Non-Qualified Plan") and effected a re-grant of all options previously
granted under the incentive stock option plan. The original vesting schedules
for previously granted options were not affected by the re-grant. On April 22,
1988, the Board of Directors approved the reservation of an additional 150,000
shares of Cerprobe Common Stock for issuance upon the exercise of options under
the Non-Qualified Plan, thereby increasing the total number of shares subject to
the Non-Qualified Plan to 370,000.
52
<PAGE>
On April 3, 1989, the Board of Directors approved, and on May 6, 1989,
the stockholders ratified, the adoption of an incentive stock option plan (the
"ISO Plan") to provide for the grant of options to key executive, managerial or
supervisory employees or other employees who are deemed by the Board of
Directors to have performed extraordinary services to Cerprobe, which options
will qualify for the tax benefits accorded "incentive stock options" as defined
in Section 422A of the Code. The Board of Directors also approved an amendment
to Cerprobe's Non-Qualified Plan on April 3, 1989 to provide that Cerprobe's
directors who are not employees of Cerprobe, and thus not eligible to receive
incentive stock options under the ISO Plan ("Unaffiliated Directors"), would be
eligible to receive options under the Non-Qualified Plan.
In connection with the adoption of the ISO Plan, all existing options
under the Non-Qualified Plan granted prior to April 3, 1989 were permitted to be
exchanged for incentive stock options under the ISO Plan at the option of the
holder. Subsequent to the adoption of the ISO Plan, the number of shares
reserved for issuance under the Non-Qualified Plan was reduced from 370,000 to
150,000. In July 1990, however, the number of shares reserved for issuance under
the Non-Qualified Plan was increased to 565,000 in order to grant options to
Messrs. Close, Subramanian, Bonham, and Wong in connection with their employment
by Cerprobe and in May 1991, the number of shares reserved for issuance under
the Non-Qualified Plan was again increased to 685,000. A maximum of 500,000
shares of Cerprobe Common Stock was reserved for issuance upon exercise of
options granted under the ISO Plan.
The Non-Qualified Plan and the ISO Plan together are referred to herein
as the "Stock Option Plans."
The purpose of the Stock Option Plans is to aid Cerprobe in attracting
and retaining directors and employees and to provide such persons with an
incentive to purchase a proprietary interest in Cerprobe in order to create an
increased personal interest in Cerprobe's continued success and progress,
thereby motivating them to exert their best efforts on behalf of Cerprobe. The
Stock Option Plans are administered by the Board of Directors, which has the
sole authority and discretion to select employees to participate in the Stock
Option Plans, to grant options under the Stock Option Plans, to specify the
terms and conditions of the options (within the limitations of the Stock Option
Plans), and otherwise to interpret and construe the terms and provisions of the
Stock Option Plans and any agreements governing options granted under the Stock
Option Plans. The Stock Option Plans authorize the Board of Directors to
delegate its administrative authority and discretion under the Stock Option
Plans to the Compensation Committee of the Board of Directors.
The exercise price of any options granted under the ISO Plan may not be
less than 100% of the fair market value of shares of Cerprobe Common Stock at
the time the option is granted (or, for incentive stock options granted to a
person who, at the time of the grant, is the beneficial owner of more than 10%
of the combined voting power of all classes of voting stock then outstanding of
Cerprobe or any parent or subsidiary of Cerprobe (a "10% Beneficial Owner"), not
less than 110% of the fair market value of Cerprobe Common Stock at the date of
grant). All options granted under the ISO Plan expire ten years from the date of
grant (five years in the case of a 10% Beneficial Owner), unless an earlier
expiration date is provided in the option agreement. The term of each option
granted under the Non-Qualified Plan is fixed by the Board of Directors or the
Compensation Committee at the date of grant. Options granted under the Stock
Option Plans are non-transferable by the optionholder, otherwise than by will or
the laws of descent and distribution, and are exercisable during the
optionholder's lifetime only by the optionholder, or in the event of the death
of the optionholder, by a person who acquires the right to exercise the option
by the laws of descent and distribution.
Only key executive, managerial or supervisory employees of Cerprobe,
including directors who also are full time employees, and other employees who
are deemed by the Board of Directors to have performed extraordinary services to
Cerprobe, are eligible to receive options granted under the ISO Plan. Although
all employees of Cerprobe are eligible to receive options under the
Non-Qualified Plan, the Board of Directors intends to grant options under the
Non-Qualified Plan primarily to Cerprobe's Unaffiliated Directors.
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The Stock Option Plans authorize the Board of Directors to amend the
Stock Option Plans without stockholder approval whenever the Board of Directors
deems an amendment proper and in the best interests of Cerprobe. However, the
Board of Directors may not amend the ISO Plan or otherwise take any action with
respect to the ISO Plan which would prevent any option granted under the ISO
Plan from qualifying as an "incentive stock option" within the meaning of
Section 422A of the Code. Moreover, the Board of Directors may not, without
stockholder approval, increase the aggregate number of shares of Cerprobe Common
Stock which are subject to the ISO Plan, reduce the exercise price at which
options may be granted under the ISO Plan or at which any outstanding option may
be exercised, or extend the term of the ISO Plan. Unless previously terminated
by the Board of Directors, the ISO Plan will terminate on April 3, 1999.
As a result of the adoption of the ISO Plan on April 3, 1989, all
options granted under the Non-Qualified Plan prior to April 3, 1989 (which had
not previously been canceled) were permitted to be exchanged for options under
the ISO Plan at the option of the holder; provided, however, that no options
granted under the ISO Plan in exchange for options previously granted under the
Non-Qualified Plan were permitted to be issued at a price that was less than
100% of the fair market value of Cerprobe Common Stock at the time of the
exchange and re-grant (or, for incentive stock options granted to a 10%
Beneficial Owner, not less than 110% of the fair market value of the Cerprobe
Common Stock at the date of the exchange and re-grant). Such options generally
are exercisable over a three year period, with one-third exercisable on the date
of grant and an additional one-third to become exercisable on each anniversary
of the date of grant. For certain information regarding the exercise of options
by Named Officers, see the table entitled "Aggregated Option Exercises In Last
Fiscal Year And Option Value As Of December 31, 1995."
As of November 1, 1996, there were outstanding options to acquire
320,631 shares of Cerprobe Common Stock under the Stock Option Plans.
1995 Stock Option Plan
On May 9, 1995, the Board of Directors adopted the 1995 Stock Option
Plan (the "1995 Plan") and on June 27, 1995, Cerprobe's stockholders approved
the 1995 Plan, which is divided into two programs: the Discretionary Grant
Program and the Automatic Grant Program. The Discretionary Grant Program
provides for the grant of options to acquire Cerprobe Common Stock ("Options"),
the direct grant of Cerprobe Common Stock ("Stock Awards"), the grant of stock
appreciation rights ("SARs"), or the grant of other cash awards ("Cash Awards")
(Stock Awards, SARs, and Cash Awards are collectively referred to herein as
"Awards"). Options and Awards under the 1995 Plan may be issued to key
personnel, directors, consultants, and other independent contractors who provide
valuable services to Cerprobe and its subsidiaries (collectively, "Eligible
Persons"). The Options issued may be incentive stock options or nonqualified
stock options. Cerprobe believes that the Discretionary Grant Program represents
an important factor in attracting and retaining executive officers and other key
employees and constitutes a significant part of its compensation program,
providing them with an opportunity to acquire a proprietary interest in Cerprobe
and giving them an additional incentive to use their best efforts for the
long-term success of Cerprobe. The Automatic Option Program provides for the
automatic grant of options to acquire the Cerprobe Common Stock ("Automatic
Options"). Automatic Options are granted to non-employee members of Cerprobe's
Board of Directors. Cerprobe believes that the Automatic Option Program promotes
the interests of Cerprobe by providing such directors the opportunity to acquire
a proprietary interest, or otherwise increase their proprietary interest, in
Cerprobe and an increased personal interest in Cerprobe's continued success and
progress.
Shares Subject to the 1995 Plan
A maximum of 500,000 shares of Cerprobe Common Stock may be issued
under the 1995 Plan. If any Option or SAR terminates or expires without having
been exercised in full, stock not issued under such Option or SAR will again be
available for the purposes of the 1995 Plan. If any change is made in the stock
subject to the
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1995 Plan, or subject to any Option or SAR granted under the 1995 Plan (through
merger, consolidation, reorganization, recapitalization, stock dividend,
split-up, combination of shares, exchange of shares, change in corporate
structure, or otherwise), the 1995 Plan provides that appropriate adjustments
will be made as to the maximum number of shares subject to the 1995 Plan, and
the number of shares and exercise price per share of stock subject to
outstanding Options. There were outstanding Options to acquire 281,000 shares of
Cerprobe Common Stock under the 1995 Plan as of November 1, 1996.
Eligibility and Administration
Options and Awards may be granted only to persons ("Eligible Persons")
who at the time of grant are either (i) key personnel (including officers and
directors) of Cerprobe, or (ii) consultants and independent contractors who
provide valuable services to Cerprobe. Options that are incentive stock options
may be granted only to key personnel of Cerprobe who are also employees of
Cerprobe.
The Eligible Persons under the Discretionary Grant Program are divided
into two groups, and there is a separate administrator (each a "Plan
Administrator") for each group. One group consists of Eligible Persons who are
executive officers and directors of Cerprobe and all persons who own 10% or more
of Cerprobe's issued and outstanding stock. The power to administer the 1995
Plan with respect to those persons rests exclusively with a committee ("Senior
Committee") comprised of two or more disinterested directors who are appointed
by the Board of Directors. The power to administer the 1995 Plan with respect to
the remaining Eligible Persons is vested with the Board of Directors of Cerprobe
or with a committee of two or more directors appointed by the Board of
Directors. Each Plan Administrator determines (i) which of the Eligible Persons
in its group will be granted Options and Awards; (ii) the amount and timing of
the grant of such Options and Awards; and (iii) such other terms and conditions
as may be imposed by the Plan Administrator consistent with the 1995 Plan.
To the extent that granted Options are incentive stock options, the
terms and conditions of those Options must be consistent with the qualification
requirements set forth in the Code.
Exercise of Options
The expiration date, maximum number of shares purchasable, and the
other provisions of the Options are established at the time of grant, provided
that no options may be granted for terms of more than 10 years. Options vest and
thereby become exercisable in whole or in one or more installments at such time
as may be determined by the Plan Administrator upon the grant of the Options.
However, a Plan Administrator has the discretion to provide for the automatic
acceleration of the vesting of any Options or Awards granted under the
Discretionary Grant Program in the event of a "Change in Control." The
definition of "Change in Control" includes the following events: (i) the
acquisition of beneficial ownership by certain persons, acting alone or in
concert with others, of 40% or more of Cerprobe Common Stock pursuant to a
tender offer which the Board of Directors recommends that Cerprobe's
stockholders not accept, or (ii) a change in the composition of the Board of
Directors occurs such that those individuals who were elected to the Board of
Directors at the last stockholders' meeting at which there was not a contested
election for Board membership subsequently ceased to comprise a majority of the
Board of Directors by reason of a contested election.
The exercise prices of Options will be determined by a Plan
Administrator, but if an Option is intended to be an incentive stock option may
not be less than 100% (110% if the Option is granted to a 10% Beneficial Owner)
of the fair market value of the Cerprobe Common Stock at the time of the grant.
To exercise an Option, the optionholder will be required to deliver to Cerprobe
full payment of the exercise price for the shares as to which the Option is
being exercised. Generally, Options can be exercised by delivery of cash, bank
cashier's check, or shares of Cerprobe Common Stock.
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Termination of Employment or Services
Options granted under the 1995 Plan are nontransferable other than by
will or by the laws of descent and distribution upon the death of the
optionholder and, during the lifetime of the optionholder, are exercisable only
by such optionholder. In the event of the death or termination of the employment
or services of the participant (but never later than the expiration of the term
of the Option), Options may be exercised within 90 days thereafter. If
termination is by reason of permanent disability, however, Options may be
exercised by the optionholder or the optionholder's estate or successor by
bequest or inheritance during the period ending 180 days after the
optionholder's retirement (but not later than the expiration of the term of the
Option). Termination of employment at any time for cause immediately terminates
all Options held by the terminated employee.
Awards
A Plan Administrator also may grant Awards to Eligible Persons under
the 1995 Plan. Awards may be granted in the form of SARs, Stock Awards, or Cash
Awards.
Awards granted in the form of SARs entitle the recipient to receive a
cash payment equal to the appreciation in market value of a stated number of
shares of Cerprobe Common Stock from the price on the date the SAR was granted
or became effective to the market value of the Cerprobe Common Stock on the date
first exercised or surrendered. The Plan Administrators may, consistent with the
1995 Plan, determine such terms, conditions, restrictions and/or limitations, if
any, on any SARs.
Awards granted in the form of Stock Awards entitle the recipient to
receive shares of Cerprobe Common Stock directly. Awards granted in the form of
cash entitle the recipient to receive direct payments of cash depending on the
market value or the appreciation of the Common Stock or other securities of
Cerprobe. The Plan Administrators may determine such other terms, conditions, or
limitations, if any, on any Awards.
The 1995 Plan states that it is not intended to be the exclusive means
by which Cerprobe may issue options or warrants to acquire its Common Stock,
stock awards, or any other type of award. To the extent permitted by applicable
law, Cerprobe may issue any other options, warrants, or awards other than
pursuant to the 1995 Plan without stockholder approval.
Terms and Conditions of Automatic Options
Each year at the meeting of the Board of Directors held immediately
after the annual meeting of stockholders, each non-employee Board member is
granted an Automatic Option to acquire 2,000 shares of Common Stock ("Annual
Automatic Option"). Each non-employee Board member serving on the date the 1995
Plan was approved by Cerprobe's stockholders received an automatic grant of
options to acquire 2,000 shares of Common Stock on that date (the "Initial
Existing Director Grant"). New non-employee members of the Board of Directors
will receive an Automatic Option to acquire 20,000 shares of Common Stock
("Initial Automatic Option") on the date of their first appointment or election
to the Board. Each Automatic Option becomes exercisable and vests in a series of
three equal and successive annual installments, with each annual installment to
become exercisable on the day before Cerprobe's annual meeting of stockholders
occurring in the applicable year. A non-employee member of the Board is not
eligible to receive an Annual Automatic Option if the grant date is within 30
days of such non-employee member receiving an Initial Automatic Option.
The exercise price per share of Cerprobe Common Stock subject to each
Automatic Option is equal to 100% of the fair market value per share on the date
of the grant of the Automatic Option. Each Automatic Option expires on the tenth
anniversary of the date on which an Automatic Option grant was made.
Non-employee Board members also may be eligible to receive Options or Awards
under the Discretionary Grant Program or option grants or direct stock issuances
under any other plans of Cerprobe. Cessation of service on the Board terminates
any
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Automatic Options for shares that were not vested at the time of such cessation.
Automatic Options are nontransferable other than by will or the laws of descent
and distribution on the death of optionholder and, during the lifetime of the
optionholder, are exercisable only by such optionholder.
Duration and Modification
The 1995 Plan will remain in force until May 9, 2005. The Board of
Directors of Cerprobe may at any time suspend, amend, or terminate the 1995
Plan, except that without approval by the affirmative vote of the holders of a
majority of the outstanding shares of Cerprobe Common Stock present in person or
by proxy at a meeting of stockholders of Cerprobe convened for such purpose, the
Board of Directors may not (i) increase, except in the case of certain organic
changes to Cerprobe, the maximum number of shares of Cerprobe Common Stock
subject to the 1995 Plan, (ii) reduce the exercise price at which Options may be
granted or the exercise price for which any outstanding Options may be
exercised, (iii) extend the term of the 1995 Plan, (iv) change the class of
persons eligible to receive Options or Awards under the 1995 Plan, or (v)
materially increase the benefits accruing to participants under the 1995 Plan.
Notwithstanding the foregoing, the Board of Directors may amend the 1995 Plan
from time to time as it deems necessary in order to meet the requirements of any
amendments to Rule 16b-3 under the Securities Exchange Act of 1934 without the
consent of the stockholders of Cerprobe.
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INFORMATION CONCERNING C-ROUTE AND ITS SUBSIDIARIES
History
C-Route was formed to consolidate the operations of CompuRoute and EMI.
C-Route serves as a holding company and is the majority shareholder of the
capital stock of CompuRoute.
Formed in 1972, CompuRoute provides design, manufacturing, and assembly
for custom printed circuit boards ("PCBs") and specializes in circuit board
assemblies that are incorporated in automated test equipment ("ATE") used in
semiconductor testing. Companies that utilize CompuRoute's products and services
are primarily semiconductor manufacturers but also include third-party
manufacturers of ATE equipment that sell their products to semiconductor
manufacturers.
EMI was formed in 1984 to produce enhancement products for a then new
line of IBM typewriters. EMI produced a series of memory expansion boards, disk
drives, and video interfaces and became one of the largest providers of
typewriter enhancement products in the U.S. with over 600 dealers worldwide. In
1988, EMI also began to produce facsimile enhancement products that were sold
under the EMI SmarterFax name, which also were sold by third-party manufacturers
under their own brand names. As demand for typewriters decreased and many of the
enhancements for facsimile became integrated into fax machines, EMI reduced its
operations to a maintenance and support level. In July 1995, EMI's shareholders
agreed to sell all of EMI's assets to CompuRoute and EMI ceased to function as
an operational entity. CompuRoute, however, has continued to market products
under the EMI name. On October 25, 1996, Mrs. Shrime purchased all of the shares
of EMI common stock held by C-Route. Accordingly, EMI is no longer a subsidiary
of C-Route. The 100 shares of CompuRoute stock held by EMI will be redeemed by
CompuRoute in connection with the CompuRoute Merger.
Production of Core Products
For a description of the development of the semiconductor testing
market and the role of PCBs in that market, see "Information Concerning Cerprobe
- - Industry Background."
Printed Circuit Board Assemblies
PCB assemblies involve three separate production stages: design,
fabrication, and assembly. Customers may use outside vendors such as CompuRoute
for any or all of the stages. Design consists of taking the customer input and
doing a layout of the PCB on a personal computer or workstation. When the design
is complete, the design is transferred to film using a laser photo plotter. This
film is used to place the image on copper-clad material, which then uses a
chemical process to remove the unwanted copper. If multiple layers are required
then they are combined in a high temperature press. The PCB is then plated with
metals such as tin-lead, nickel, or gold. The boards are then assembled by
soldering components on the PCB. In the case of test boards for the
semiconductor industry these completed test boards are then used for testing
integrated circuits.
When a semiconductor company completes the design of a new integrated
circuit, the design must be verified before it can be produced in volume
quantities. Usually a small test lot of this integrated circuit is produced to
be used in verification of the design and to provide prototype parts prior to
volume production. The initial verification process is accomplished at the wafer
level. See "Information Concerning Cerprobe - Industry Background." These
initial wafers sometimes have additional test points provided to aid the
engineer in the verification process. The time to produce this initial lot of
wafers can be as little as 15 to 20 days, and, during this time, PCBs to be used
in the testing process must be designed, fabricated, and assembled. If the
integrated circuit passes the initial testing at the wafer level, each die on
the wafer is separated and bonded onto plastic, ceramic, or other packages with
extended leads. The packaged integrated circuit ("IC") must then be tested to
validate design and performance specifications. As ICs become more complex and
package size is decreased, the requirements for
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PCBs used in IC testing also increase, requiring more precise equipment to meet
the demands for tighter tolerances and more layers.
When the IC is approved for production, additional test PCBs must be
fabricated and, in some cases, new designs may be required because the tester
used in production testing may be different than the one used to verify the
prototype. PCBs are custom designed, manufactured, and assembled for each type
of IC and placed on ATE testers to perform this function. Packaged devices are
loaded into a handler and the ATE test board is placed on the tester and coupled
to the handler. The handler then automatically inserts each IC into the ATE test
board, and the tester tests the IC and signals the handler if the IC is good or
defective so the handler can automatically sort the ICs that pass the test.
Because ICs are manufactured in a complicated process in batches or lots where
thousands of the same circuits can be manufactured at the same time, the need to
test these circuits between lots is critical in order to detect failures and
adjust the process to increase yields and reduce costs.
Market for ATE Printed Circuit Boards
The market for CompuRoute's products depends on the wider market for
printed circuit boards in all electronic applications and to the market for
semiconductors in general. As discussed under "Information Concerning Cerprobe -
The Market for Probe Card and ATE Interfaces", rapidly growing demand for
semiconductors and advances in semiconductor technology has resulted in
increased demand for ATE test boards.
Product life, which is the time between the introduction of a new
product until it becomes obsolete due to new products that are faster, smaller,
and more feature laden, is becoming shorter, requiring companies to "invent" new
and better products in less time to be competitive. The time to market, which is
the time to design and produce a new IC, is becoming less and the demand to
reduce this time even further is growing because of the growing competition
among semiconductor manufacturers to be first to market and gain a competitive
edge. These factors have resulted in increased demand for ATE test boards which
can be produced in a rapid manner.
CompuRoute Strategy
CompuRoute has addressed many of the challenges associated with the
testing of complex integrated circuits through advanced technical capabilities,
by offering turnkey solutions including design, fabrication, and assembly in one
location, thereby reducing the critical cycle time and number of vendors
required by semiconductor manufacturers, and by maintaining close relationships
with leading semiconductor manufacturers.
CompuRoute intends to implement this strategy through the following:
- - Investment in Technology. In late 1995, CompuRoute invested
approximately $1,000,000 in a new automated wet-line which provides
more precise control over PCB plating operations as well as increased
capacity. CompuRoute has invested $200,000 to date in 1996 in new PCB
design equipment to increase its capacity to meet increased demand for
its products. CompuRoute anticipates that additional equipment
purchases to further enhance its production capability will be made in
1996. To support customer needs, CompuRoute can provide services seven
days a week. CompuRoute also is working with ATE manufacturers to
produce higher performance PCBs using new materials and processes.
- - Maintain Strong Customer Relationships. CompuRoute believes that
attention to customer needs forms the basis for its strong
relationships with many long term customers. CompuRoute personnel
interface with customers at all levels from design through production
to assure that the needs of each customer are understood. In addition,
each CompuRoute customer is assigned to a customer representative who
is available to provide quotes, give status of current jobs, and
provide any assistance that the customer may require. CompuRoute's
quality and customer service departments work together to provide
customers with high quality products, services, and prompt turn around
times.
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- - Provide Quality Products and Service. CompuRoute believes it provides
high-quality products and services in the ATE PCB market. CompuRoute
continues to implement equipment upgrades to improve the quality of its
products. In addition, ISO 9000, the internationally recognized
standard for quality management, is being implemented in the design,
fabrication, assembly and customer service areas in Dallas.
- - Provide "One Stop Shopping" and Calendar Day Schedules. Because of the
need to produce test PCBs quickly, it is a major advantage for IC
manufacturers to have their design, fabrication, and assembly done at
one location using a single vendor. Dealing with a single vendor
permits the semiconductor manufacturer to reduce the number of purchase
orders, the number of technical information copies, and the lost time
for shipment between various vendors. CompuRoute is one of the few
vendors to provide "one stop shopping" without the use of
subcontractors. CompuRoute is already providing calendar day schedules
to some of its customers for design and fabrication. This allows
customers to count weekends as work days, reducing the cycle time to
get their products into test.
- - Expand Sales Territory. The majority of CompuRoute's business is in the
state of Texas. CompuRoute has doubled its design and sales force in
the Austin, Texas area and moved into new office space in July 1996 to
accommodate this expansion. CompuRoute anticipates that additional
sales will be generated from the numerous semiconductor companies in
this area. Design capability also has been added to CompuRoute's
Chandler, Arizona office to provide support for sales efforts in this
location. Management is evaluating extending CompuRoute's marketing and
sales efforts to gain access to the west coast market of semiconductor
fabrication facilities. CompuRoute also is considering expansion in
international markets, primarily to the international affiliates of
existing U.S. customers.
- - Expand Product Lines and Services. CompuRoute intends to expand its
product base through strategic alliances with other vendors in the ATE
market. In January, CompuRoute signed an agreement with Tecknit to
become the exclusive sales representative for PC-33 "Fuzz button"
interconnection products in the state of Texas. CompuRoute also offers
complete design, fabrication, and assembly of probe cards through
pricing agreements with Cerprobe to provide probe tip assembly.
Strategic alliances also have been established for fabrication of sheet
metal and machined parts, high volume assembly, and MIL-SPEC PCB
fabrication. CompuRoute presently is evaluating additional areas for
possible expansion in the area of burn-in boards, computer boards, and
new high performance materials.
Products
CompuRoute products can be divided into four product or service
categories: (i) CompuRoute sales, (ii) EMI/office product sales, (iii)
consulting services, and (iv) other sales. For the nine months ended September
30, 1996, CompuRoute sales accounted for 97% of CompuRoute's sales.
CompuRoute Core Products and Services
CompuRoute's core products and services consist of the following:
Manufacturing ATE PCBs
CompuRoute manufactures ATE boards for testing of ICs in package form.
Some boards mount directly on the tester test head while others are
interface or daughter boards which consist of multiple boards connected
either by cables or pogo pins. These products may be used for either
manual test or volume production testing. CompuRoute has developed a
number of master data bases for different ATEs which are used as a
starting design which is then customized for the particular IC to be
tested.
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Non ATE Boards
Certain non-ATE boards consist of low-technology, single or
double-sided PCBs. Because non ATE boards are fairly simple to
manufacture, competition is greater and margins are lower, although
volumes tend to be higher and usually production can be scheduled over
a longer period of time. Other non-ATE boards consist of high
performance boards similar in complexity to ATE PCBs.
PCB Design Services
Design services from CompuRoute are available in its Dallas and Austin,
Texas and Chandler, Arizona facilities. CompuRoute also provides PCB
designers at customer locations on long term contracts. While most
designs are also fabricated at CompuRoute, some design is done for
customers whose boards are beyond CompuRoute's current fabrication
capabilities.
Photoplotting Services
CompuRoute provides complete laser photoplotting services to create the
tooling film necessary for fabrication. This area is under temperature
and humidity control to minimize film shrinkage or growth. These
services are used in-house and also available to outside customers.
Assembly
CompuRoute assembles both through hole and SMT printed circuit boards
in small volumes. CompuRoute uses outside vendors to do high volume
assembly using wave solder machines for through hole and pick and place
and IR for SMT technology. CompuRoute assembles boards with customer
supplied parts or obtains the parts if requested by the customer. For
customers for which CompuRoute is the sole vendor for assembly,
CompuRoute maintains customer inventories and provides materials
management, restocking, and inventory control on premises.
Probe Cards
CompuRoute manufactures probe cards that are used to test ICs in wafer
form. CompuRoute also manufactures probe card interfaces which are used
to interface the probe card to the tester. In relationships with
vendors such as Cerprobe and Probe Technology, CompuRoute is able to
provide its customers with assembled probe cards.
Auto Verifier Products
CompuRoute sells a product called an auto-verifier which can be used to
test ATE interface boards off-line, thereby eliminating the need for
valuable ATE tester time which is better utilized testing parts. Each
system consists of a test fixture, computer, printer, and test matrix
interface mounted on a custom cart.
EVM Products
CompuRoute began providing Evaluation Modules (EVMs) in late 1995. EVMs
are assembled PCBs used by semiconductor manufacturers to demonstrate
the capabilities of their products. CompuRoute has provided EVMs for
such products as analog-to-digital converters, phase-lock loops, and
audio amplifiers. CompuRoute assists with the conceptual design,
provides electronic design and schematics, PCB layout and design
services, fabricates PCBs, orders parts, assembles the product,
performs final testing, and delivers
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a finished product ready to ship to the customer. In addition, in some
cases, CompuRoute has developed the software (if microprocessors are
involved) and provided product write-ups and documentation.
Other Products and Services
Consulting
CompuRoute provides consulting to individuals or companies to determine
if new products are feasible, manufacturable, and cost effective to
meet market requirements. If positive results are obtained, prototypes
are designed and built and assistance is provided with manufacturing.
In addition, CompuRoute provides certain services to semiconductor
manufacturers in connection with patent litigation. CompuRoute provides
research on prior art patents, examines products, and evaluates the
possibility of infringement, and designs, fabricates, and assembles
court exhibits to assist in providing proof of patent concepts to the
court.
Since 1993, consulting revenue has declined significantly reflecting
CompuRoute's commitment to focus on its core products and services
business.
EMI Products
CompuRoute acquired the rights to certain EMI products and continues to
produce these products. Due to the relatively small portion of
CompuRoute's revenue attributable to this product line, these products
are not being actively marketed and will continue to be produced until
the volume makes the line unprofitable. The EMI products still produced
are as follows:
Communications Director
This product is a consumer product which allows a single
incoming telephone line to be shared with three devices,
usually a fax, phone, and data modem. It has voice message
capability and automatic fax detection and switching. An
optional version will recognize distinctive ringing and switch
according to the ring pattern.
Mailbox Manager
This is a facsimile enhancement product that provides: 100
confidential mailboxes, notification of fax receipts, fax
forwarding, broadcasting of faxes to 100 locations, memory
storage of faxes (if fax machine out of paper or inoperative)
and remote retrieval of faxes stored in memory.
FIRM
FIRM or Fax Information Retrieval Manager is a product used to
store documents such as forms, bid specifications, sales or
product literature and prompts the caller with custom voice
messages and menus on how to retrieve the information
remotely.
Accounting Manager
This product provides for accounting records of time and
number of pages transmitted or received based on user entered
account codes. Costs per page or minute or both can be entered
and different costs can be applied for local, long distance,
and international calls. Certain customers purchase customized
versions of this product which interfaces with a debit card
reader to create a public fax product.
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Arabic Typewriters
EMI retained the rights to its Arabic/English and
Farsi/English typewriter software developed in conjunction
with LEXMARK, INC. for use in their electronic typewriters.
Orders are received from Lexmark for EPROMS and manuals for
incorporation into their typewriter products prior to shipment
to the middle-east market.
Other
CompuRoute provides other services such as custom art work and tooling (film)
for customers.
Research and Development
CompuRoute's research and development falls into two major categories,
new product development and materials and process enhancements. New product
development has resulted in introductions such as the auto-verifier, EVM's and
probe cards. Materials and process enhancements is a continuing program of
improving CompuRoute's technology primarily in PCB design and fabrication.
Because its customers pay CompuRoute to develop new product innovations,
CompuRoute does not incur a material amount of expenditures for research and
development.
Manufacturing
CompuRoute's fabrication and assembly operations are conducted in its
Dallas facility. Printed circuit boards are manufactured using various raw
materials. Most of the products manufactured consist of multi-layer PCBs up to
22 layers which are impedance controlled. Drilling, lamination, plating, and
silk-screening and soldermask are all done in-house.
Marketing and Sales
CompuRoute operates sales and design offices in Dallas and Austin,
Texas, and Chandler, Arizona. CompuRoute also has a sales representative in
Austin who works with its direct sales force. International sales are supported
by the Dallas office with most of the sales internationally associated with
Texas Instruments, Inc. and Motorola, Inc. CompuRoute anticipates increasing its
sales force to geographical areas which it does not presently serve.
Competition
CompuRoute encounters competition for its core products and services
from a number of vendors such as ESH and UniCircuits and numerous smaller design
and fabrication shops. It is not known how many offer complete turnkey solutions
using total in-house resources for design, fabrication, and assembly. CompuRoute
believes that the key competitive factors in its industry include cycle time,
cost, experience, vertical integration and technical capabilities. As a result
of the completion of its new manufacturing facility and purchase of new
equipment, CompuRoute believes that it is well-positioned to increase
manufacturing capacity and to meet increasingly demanding delivery schedules.
The Company believes that the integration of design, manufacturing and assembly
in one operation is a significant advantage over many of its competitors.
Dependence on Key Customer
One customer, Texas Instruments, Inc., accounted for approximately 51%,
45%, and 31% of CompuRoute's revenues in 1995, 1994 and 1993, respectively. The
loss of this customer would have a severe adverse effect on CompuRoute's
business.
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Patents
C-Route currently owns no patents that are significant to its business.
Employees
CompuRoute has several key employees, the loss of any of whom could
have a temporary adverse effect on CompuRoute's business prospects. CompuRoute
currently has approximately 110 employees and employs several contract design
engineers under short-term contracts. There are no collective bargaining
agreements, and CompuRoute considers its relations with its employees to be
good.
Raw Materials
The raw materials and components used by CompuRoute in its
manufacturing and assembly operations are available from numerous suppliers.
CompuRoute has not experienced any shortages in materials, which include various
PCB materials, chemicals, and components.
Government Regulations
CompuRoute is subject to federal, state, and local provisions
regulating the discharge of materials into the environment. These laws and
regulations are constantly changing and it is impossible to predict the effect
they may have on CompuRoute in the future. CompuRoute, in association with an
environmental consultant, has completed a remediation of its former leased
fabrication facility and has filed the appropriate documents with the state of
Texas for certification of completion. To date, costs incurred by CompuRoute in
connection with such remediation have not been material. It is anticipated that
the state will act on CompuRoute's application by the end of 1996.
CompuRoute believes it is in substantial compliance with all federal,
state, and local provisions regarding the handling, storage, and disposal of
hazardous materials, and that it has obtained all necessary permits. CompuRoute
does not anticipate any future material expenditures to remain in substantial
compliance with presently applicable environmental regulations.
Properties
CompuRoute leases its facility located at 10365 Sanden Dr., Dallas,
Texas from its principal shareholder. This approximately 35,000 square foot
facility was custom built for CompuRoute in 1995 and the design, assembly, and
sales divisions occupied the building in July 1995. PCB manufacturing operations
were moved to this location in January 1996. In connection with the proposed
Mergers, Cerprobe has agreed to purchase such facility. See "Certain
Transactions." CompuRoute also leases space for its design and sales force in
Austin, Texas under a lease which expires in 1999.
Legal Proceedings
Neither C-Route nor CompuRoute is a party to any material pending legal
proceedings.
No Market for Shares
There is no market for the shares of C-Route or CompuRoute and no
market is expected to develop. None of these corporations have paid dividends on
their shares of common stock.
64
<PAGE>
PRO FORMA FINANCIAL INFORMATION RELATIVE TO THE MERGER
Pro Forma Combined Condensed Financial Information
(Unaudited)
The following unaudited pro forma combined condensed financial statements assume
a business combination between Cerprobe and C-Route accounted for as a purchase
transaction in accordance with generally accepted accounting principles. The pro
forma combined condensed financial statements are based on the historical
consolidated financial statements and the notes thereto of Cerprobe and C-Route,
and should be read in conjunction with the financial statements included
elsewhere in this Prospectus. Cerprobe and C-Route historical consolidated
financial statement data as of September 30, 1996, and for the nine months ended
September 30, 1996, have been prepared on the same basis as the historical
information derived from audited financial statements, and, in the opinion of
their respective management, contain all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the results of
operations for such periods. The pro forma combined condensed balance sheet
combines Cerprobe's September 30, 1996, condensed consolidated balance sheet
with C-Route's September 30, 1996, condensed consolidated balance sheet giving
effect to the Merger as if it had occurred on September 30, 1996. The pro forma
combined condensed statements of income combine Cerprobe's historical condensed
consolidated statements of operations for the year ended December 31, 1995 and
the unaudited nine months ended September 30, 1996, with the corresponding
C-Route historical condensed consolidated statements of operations for the year
ended December 31, 1995 and the unaudited nine months ended September 30, 1996,
respectively, giving effect to the Merger as if it had occurred on January 1,
1995.
Pursuant to a Real Estate Purchase Agreement, upon consummation of the Merger,
Cerprobe will purchase the land and building owned by Mrs. Shrime and currently
used by C-Route for a total of approximately $2.2 million, consisting of $1.2
million in cash and the assumption of a promissory note secured by the property
with a principal balance of approximately $1.04 million. The pro forma combined
condensed balance sheet as of September 30, 1996 gives effect to this purchase,
through pro forma adjustments, as if it had occurred on September 30, 1996. The
pro forma combined condensed statements of income for the year ended December
31, 1995 and the nine months ended September 30, 1996 give effect to this
purchase, through pro forma adjustments, as if it had occurred on January 1,
1995.
The pro forma information is presented for illustrative purposes only and is not
necessarily indicative of the operating results or financial position that would
have occurred if the Merger had been consummated at the dates presented, nor is
it necessarily indicative of future operating results or financial position. The
unaudited pro forma combined condensed financial statements do not incorporate
any benefits from cost savings or synergies of operations of the combined
companies that may occur. Cerprobe and C-Route anticipate incurring direct
transaction costs related to the Merger. The purchase price has been allocated
to the assets acquired and liabilities assumed based on their fair values as of
September 30, 1996. The final purchase price allocation is not expected to
differ materially from this allocation.
These pro forma combined condensed financial statements should be read in
conjunction with the historical consolidated financial statements and the
related notes thereto of Cerprobe and C-Route included elsewhere herein.
65
<PAGE>
<TABLE>
PRO FORMA COMBINED CONDENSED BALANCE SHEET
September 30, 1996
(In thousands)
(Unaudited)
<CAPTION>
Pro Forma Pro Forma
Cerprobe C-Route Adjustments Combined
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 7,233 $ 339 $ (4,600) (a) $ 1,772
-- -- (1,200) (b) --
Marketable securities 2,260 -- -- 2,260
Accounts receivable, net 5,169 1,087 -- 6,256
Income taxes receivable 364 -- -- 364
Inventories 3,812 325 -- 4,137
Prepaid expenses 138 134 -- 272
Deferred income taxes 337 -- -- 337
------- ------- ----------------- -------
Total current assets 19,313 1,885 (5,800) 15,398
Property and equipment, net 6,682 2,112 2,240 (b) 11,034
Other assets 3,143 275 226 (a) 4,074
-- -- 430 (a)
29,138 4,272 (2,904) 30,506
======= ======= ================= =======
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable $ 1,850 $ 282 $ -- $ 2,132
Accrued expenses 1,308 396 300 (c) 2,004
Current portion of long-term debt 350 453 1,040 (b) 1,843
Convertible subordinated debentures 485 -- -- 485
------- ------- ----------------- -------
Total current liabilities 3,993 1,131 1,340 6,464
Long-term debt, less current portion 957 847 -- 1,804
Other liabilities 406 34 -- 440
Minority interest 29 216 (216) (e) 29
Stockholders' equity
Preferred stock -- -- --
Common stock 246 85 (85) (d) 266
-- -- 20 (a) --
Additional paid-in-capital 17,488 1,683 2,580 (a) 20,068
-- -- (1,683) (d) --
Retained earnings 5,997 276 (4,584) (a) 1,413
-- -- (276) (d)
Cumulative translation adjustment 22 -- -- 22
------- ------- ----------------- -------
Total stockholders' equity 23,753 2,044 (4,028) 21,769
------- ------- ----------------- -------
Total liabilities and
stockholders' equity $29,138 $ 4,272 $ (2,904) $30,506
======= ======= ================= =======
</TABLE>
See accompanying notes to pro forma combined condensed financial statements.
66
<PAGE>
<TABLE>
PRO FORMA COMBINED CONDENSED
STATEMENT OF INCOME
Year ended December 31, 1995
(in thousands, except per share data)
(Unaudited)
<CAPTION>
Pro Forma Pro Forma
Cerprobe C-Route Adjustments Combined
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
Net sales $ 26,098 $ 8,694 $ -- $ 34,792
Cost of goods sold 13,706 6,063 -- 19,769
-------- -------- -------- --------
Gross margin 12,392 2,631 -- 15,023
Operating expenses:
Selling, general and administrative 7,502 1,604 58 (f) 9,278
-- -- 28 (g) --
-- -- 86 (h) --
Engineering and product development 707 -- -- 707
-------- -------- -------- --------
Total operating expenses 8,209 1,604 172 9,985
-------- -------- -------- --------
Operating income 4,183 1,027 (172) 5,038
Other income (expense) net 31 (84) -- (53)
-------- -------- -------- --------
Income before income taxes and
minority interest 4,214 943 (172) 4,985
Income tax provision (1,812) (104) 69 (i) (1,847)
Minority interest in earnings of
subsidiary -- (119) 119 (e) --
-------- -------- -------- --------
Net income $ 2,402 $ 720 $ 16 $ 3,138
======== ======== ======== ========
Net income per common and common
equivalent share
Primary:
Net income per share $ 0.59 $ 0.08 -- $ 0.70
Shares used in per share calculation 4,071 8,598 -- 4,471
Fully Diluted:
Net income per share $ 0.49 -- -- $ 0.60
Shares used in per share calculation 4,862 -- -- 5,262
</TABLE>
See accompanying notes to pro forma combined condensed financial statements.
67
<PAGE>
<TABLE>
PRO FORMA COMBINED CONDENSED
STATEMENT OF INCOME
Nine Months ended September 30, 1996
(in thousands, except per share data)
(Unaudited)
<CAPTION>
Pro Forma Pro Forma
Cerprobe C-Route Adjustments Combined
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
Net sales $ 28,159 $ 7,872 $ -- $ 36,031
Cost of goods sold 15,285 5,518 -- 20,803
-------- -------- -------- --------
Gross margin 12,874 2,354 -- 15,228
Operating expenses:
Selling, general and administrative 7,871 1,506 43 (f) 9,505
-- -- 21 (g) --
-- -- 64 (h) --
Engineering and product development 724 -- -- 724
-------- -------- -------- --------
Total operating expenses 8,595 1,506 128 10,229
-------- -------- -------- --------
Operating income 4,279 848 (128) 4,999
Other income (expense) net 330 (83) -- 247
-------- -------- -------- --------
Income before income taxes and 4,609 765 (128) 5,246
minority interest in subsidiary
Income tax provision (2,162) (50) 51 (i) (2,161)
Minority interest in loss (earnings) of
subsidiary 84 (73) 73 (e) 84
-------- -------- -------- --------
Net income $ 2,531 $ 642 $ (4) $ 3,169
======== ======== ======== ========
Net income per common and common
equivalent share
Primary:
Net income per share $ 0.49 $ 0.07 -- $ 0.57
Shares used in per share calculation 5,126 8,600 -- 5,526
Fully Diluted:
Net income per share $ 0.45 -- -- $ 0.52
Shares used in per share calculation 5,648 -- -- 6,048
</TABLE>
See accompanying notes to pro forma combined condensed financial statements.
68
<PAGE>
Notes to Pro Forma Combined Condensed Financial Statements
Note 1. General Information
The Unaudited Pro Forma Combined Condensed Statements of Income are presented as
if the Merger occurred on January 1, 1995. The Unaudited Pro Forma Condensed
Combined Balance Sheet is presented assuming the Merger occurred on September
30, 1996. The combination is expected to be recorded as a purchase transaction
in accordance with generally accepted accounting principles and, accordingly,
C-Route assets and liabilities are recorded at their estimated fair values at
the date of the Merger.
The Unaudited Pro Forma Condensed Financial Statements reflect the issuance of
400,000 shares of Cerprobe Common Stock, $.05 par value, and the payment of $4.6
million in cash, in exchange for 100% of the outstanding shares of C-Route; as
well as the payment of $1.2 million in cash and the assumption of the remaining
principal balance of approximately $1.04 million on the original promissory note
for the land and building owned by Mrs.
Shrime and currently used by C-Route.
Certain reclassifications of C-Route balances have been made to conform to the
Cerprobe reporting format.
Note 2. Pro Forma Adjustments
(a) The purchase price has been allocated to the assets acquired and liabilities
assumed based on their fair values as follows (in thousands):
Purchase Price:
Common Stock $ 20
Additional paid in capital 2,580
Cash consideration 4,600
Acquisition Costs 300
-------
Total $ 7,500
Assets acquired and liabilities assumed:
Working capital $ 754
Fixed assets 2,112
Other assets 275
Purchased research and development 4,584
Assembled workforce 430
Goodwill 226
Liabilities assumed (881)
-------
$ 7,500
A 33% discount on the value of Cerprobe Common Stock from its market value of
$9.75 per share on the day immediately preceding the date of announcement of the
Merger has been recorded due to certain restrictions placed on the 330,035
shares to be issued to Mrs. Shrime, the majority shareholder of C-Route. These
restrictions are contained in an agreement between Cerprobe and Mrs. Shrime
pursuant to which Mrs. Shrime has agreed not to sell, publicly or privately, any
shares acquired by her in connection with the Merger during the first 12 months
following the Merger, and no more than the greater of 1% of the outstanding
shares of Cerprobe Common Stock, or 50,000 shares, in any 90-day period during
the succeeding 12-month period. See "Shares Eligible for Future Sale."
The items of working capital, fixed assets, other assets, and long-term debt and
other liabilities are recorded at C-Route's historical book value which
approximates fair value on the date of the Merger.
69
<PAGE>
The amount allocated to purchased research and development was determined by
performing a valuation of estimated incremental future cash flows resulting from
existing products and products under development by C-Route using technology
that has no alternative future use. The amount of the discounted future cash
flows related to products under development using technology that has no
alternative future use has been recorded as purchased research and development
and charged to operations as of the date of the consummation of the Merger and
thus does not impact the Pro Forma Combined Condensed Statements of Income.
No adjustment has been made for the subsequent disposition of EMI by C-Route as
EMI's assets and results of operations were not material.
(b) To adjust for the issuance of cash, assumption of remaining principal
balance on the original promissory note and to record the associated assets in
connection with the acquisition of the land and building from Mrs.
Shrime.
(c) To adjust for total direct costs expected to be incurred in connection with
the Merger.
(d) To reverse the equity accounts of C-Route. See purchase price allocation in
note (a) above.
(e) To adjust for the minority interest in C-Route's subsidiaries. In connection
with the Merger, Cerprobe will be acquiring the minority interests.
(f) To record depreciation on the building acquired from Mrs. Shrime in
connection with the Merger. The building is being depreciated over 31.5 years.
The purchase price was allocated $429,000 to land and $1,811,000 to building.
(g) To record the amortization of goodwill resulting from the Merger. The
goodwill is being amortized over 8 years.
(h) To record the amortization of the assembled workforce resulting from the
Merger. The assembled workforce is being amortized over 5 years.
(i) To adjust income taxes for additional expenses that would have been incurred
had the Merger been completed on January 1, 1995.
Note 3. Pro Forma Net Income Per Share
The Pro Forma Combined Condensed Statements of Income for Cerprobe and C-Route
have been prepared as if the Merger was completed on January 1, 1995. The pro
forma combined net income per common and common equivalent share is based on the
weighted average number of common and common equivalent shares of Cerprobe
Common Stock after giving effect to the issuance of 400,000 shares to C-Route in
connection with the Merger.
70
<PAGE>
CERPROBE - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Introduction
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. Cerprobe 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 Cerprobe's 1995 acquisition of Fresh Test
Technology.
Cerprobe 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 to its
customers through its full service manufacturing and sales facilities in
Scotland and Singapore. In addition, Cerprobe has leased space for a Taiwan
facility under the name of Cerprobe Taiwan Co., Ltd. This subsidiary is in the
start-up phase. Although marketing and sales operations are in place,
manufacturing operations are not yet fully operational. Cerprobe intends to
continue to expand in Southeast Asia as it believes that area is the fastest
growing region for the semiconductor industry.
Cerprobe believes the increase in domestic market share resulted from
Cerprobe's expanded capacity in its existing facilities which provided increased
support to Cerprobe's customers. Cerprobe emphasized customer support and
engineering leadership.
Besides increasing its market share, Cerprobe also has expanded its
product line. Historically, Cerprobe has produced high performance probing and
interface products for use in the testing of integrated and hybrid circuits in
the semiconductor industry. Through the acquisition of Fresh Test Technology
Corporation, Cerprobe expanded its product line to include the design and
manufacture of interface assemblies. This acquisition was completed on April 3,
1995 with the issuance of 712,500 shares of Cerprobe's Common Stock to the
stockholders of Fresh Test Technology Corporation. The acquisition allowed the
combination of product lines and the consolidation of engineering expertise.
In order to continue to broaden Cerprobe's product line, Cerprobe
entered into a letter of intent to acquire CompuRoute, the proposed acquisition
of which is described in the Prospectus. CompuRoute is a designer and fabricator
of printed circuit boards and assemblies used in the testing of semiconductors.
If consummated, the acquisition of CompuRoute will expand Cerprobe's current
product line both internally and externally and increase Cerprobe's distribution
network.
In order to continue to be a leading performer in the semiconductor
industry, Cerprobe intends to support an aggressive research and development
program. Recently, Cerprobe was awarded two contracts by SEMATECH, the
consortium of government and semiconductor partners that oversees the
development of new standards for the industry. These contracts position Cerprobe
as a technological leader in its industry. Cerprobe anticipates an added benefit
from the ability to work with Cerprobe's semiconductor manufacturer partners in
anticipating and addressing technology advances in semiconductor processing and
testing.
71
<PAGE>
In January 1996, Cerprobe completed a private placement of $10 million
of Series A Preferred Stock to a group of institutional investors. The holders
of the Series A Preferred Stock are entitled to certain liquidation preferences,
conversion rights, and other privileges as described in Cerprobe's Annual Report
on Form 10-KSB for the year ended December 31, 1995. See Note 6 to Cerprobe's
Consolidated Financial Statements. Cerprobe believes that this equity financing
will allow it to execute its strategy of rapid growth through internal expansion
and strategic alliances without the constraints of capital limitations for the
foreseeable future.
Results of Operations -
Years Ended December 31, 1995
and December 31, 1994
Net Sales
Net sales in 1995 were $26,098,637, an increase of 83% over net sales
of $14,251,485 in 1994. This increase in net sales reflects a continuation of
higher order rates for Cerprobe's probe card products, especially CercardTM, and
the contribution from the 1995 acquisition of Fresh Test Technology Corporation.
Approximately $4,000,000 of 1995 net sales resulted from interface product
sales.
International net sales in 1995 were $2,965,171 compared to $691,295 in
1994, an increase of 329%.
Gross Margin
The gross margin in 1995 was $12,392,202, an increase of 105% from the
gross margin of $6,037,519 in 1994. Gross margin as a percentage of sales
increased from 42% in 1994 to 47% in 1995. The increase in gross margin is
primarily a result of fixed manufacturing costs being spread over a larger sales
base. Although growth in the semiconductor industry positively impacted sales,
price competition in the market place continued to prevent Cerprobe from
increasing product prices.
Cerprobe believes its ability to continue to increase its manufacturing
capacity and inventory levels to meet customer demand and maintain satisfactory
delivery schedules will be important competitive factors. As a result of
increasing fixed costs and operating expenses related to expanding its
manufacturing capacity and increasing inventory levels, Cerprobe's operating
results may be adversely affected if net sales do not sufficiently maintain
their present level to offset the increased costs.
Engineering and Product Development Expenses
Engineering and product development expenses increased 69% to $706,680
in 1995 from $417,198 in 1994. Engineering and product development expenses as a
percentage of sales were 2.7% in 1995 compared to 2.9% in 1994. This increase
represents a controlled expansion of research and development efforts to pursue
the development of new integrated circuit testing systems for the future. This
effort will support Cerprobe's strategy to maintain its position as an industry
leader.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $7,502,598,
or 29% of net sales in 1995, from $3,693,401, or 26% of net sales in 1994. The
increase in selling, general and administrative expenses resulted primarily from
the increase in fixed general and administrative costs due to Cerprobe's
continued facility expansion and the acquisition of Fresh Test Technology
Corporation.
72
<PAGE>
Other Income (Expense)
Total other income (expense) was $31,050 in 1995 compared to ($3,576)
in 1994. Other income (expense) primarily results from interest income on cash
balances and interest expense on debentures and financed property and equipment.
Cerprobe expects a decrease in interest expense in 1996 due to the anticipated
conversion of Cerprobe's outstanding Convertible Subordinated Debentures on or
prior to March 29, 1996 and December 15, 1996.
Income Taxes
Cerprobe's effective tax rate was 43% in 1995 versus 37% in 1994. The
effective tax rate on United States income is 38%; on a consolidated basis,
however, the effective tax rate is 43% due to nondeductible tax losses generated
by the Scotland subsidiary.
Net Income
Net income for 1995 was $2,402,247, an increase of $1,189,424, or 98%
over net income of $1,212,823 in 1994. This increase is primarily due to the
increase in net sales and gross margin.
Results of Operations -
Years Ended December 31, 1994
and December 31, 1993
Cerprobe's net sales in 1994 increased 27.1% from 1993, primarily as a
result of increased sales of its CerCardTM product line. The significant sales
increase in the CerCardTM product line was due primarily to an increase in
market share and continued strength in the semiconductor industry.
The gross margin increased $1,594,000 from the comparable figure in the
prior year. Gross margin as a percentage of sales increased from approximately
40% in 1993 to approximately 42% in 1994. The increase in gross margin resulted
primarily from the increase in net sales and the positive effect of fixed costs
being spread over a larger revenue base. Although the strength in the
semiconductor industry positively impacted sales, price competition in the
market place continued to prevent Cerprobe from raising prices for its products.
Engineering and product development expenses increased by $81,539, or
approximately 24%, from the prior period, reflecting a continued stabilization
of these expenses since the significant reduction from 1990 to 1991. This effort
to maintain engineering and product development expenses at lower than
historical levels reflected Cerprobe's strategy to focus engineering activity on
improvements in current technology rather than the development and
implementation of new products. During 1994, Cerprobe continued tight controls
over research and development spending.
Although Cerprobe experienced a substantial increase in net sales and
an increase in the gross margin, Cerprobe's net income decreased from $1,502,358
in 1993 to $1,212,823 in 1994. The decrease in net income was primarily due to
an increase in income taxes of $620,521 and a loss from start-up operations with
respect to its newly established facility in East Kilbride, Scotland, equal to
approximately $437,000. Interest expense in 1994 was approximately $115,000, a
slight decrease from the $132,000 of interest expense in 1993.
73
<PAGE>
Results of Operations -
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 Cerprobe's probe card products and the contribution of interface
products from Cerprobe's 1995 acquisition of Fresh Test Technology.
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 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
Cerprobe'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 Cerprobe's probe card and interface products.
The minority interest from Asian operations for the nine months ended
September 30, 1996 of $83,809 represents Cerprobe's joint venture partner's
share (30%) of the loss from Asian operations. During the nine months ended
September 30, 1996, the Asian operations have been in the initial start-up
phase, which includes training and build-up of inventory.
For the nine months ended September 30, 1996, Cerprobe's income tax
rate was 46% compared to 43% for the same period in 1995. The increase in income
tax rate was due to the nondeductibility of losses from Cerprobe's European and
Asian subsidiaries.
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<PAGE>
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
Cerprobe 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, Cerprobe 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.
During the nine months ended September 30, 1996, Cerprobe 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 $1,024,583, 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. At September 30, 1996, other current liabilities decreased $93,693, or
10%, to $834,935, reflecting a conversion of subordinated debentures.
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.
Cerprobe 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.
Cerprobe 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. Cerprobe will be the sole
tenant of the approximately 83,000 square foot facility, which will permit
Cerprobe to consolidate all of its Arizona activities. See "Information
Concerning Cerprobe - Properties."
In April 1996, Cerprobe 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.
If the remaining holders of the Convertible Preferred Stock elect to
convert their shares into shares of Cerprobe Common Stock based on the current
market price of Cerprobe Common Stock, Cerprobe would be required to issue more
than 800,000 shares of Cerprobe Common Stock. To insure compliance with Nasdaq
National Market rules requiring shareholder approval of issuances of Cerprobe
Common Stock representing greater than 20% of all shares outstanding, Cerprobe
has the right to redeem any shares of Convertible Preferred Stock that,
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if converted, would result in the issuance of more than 800,000 shares of
Cerprobe Common Stock. In such event, Cerprobe may redeem those shares of
Convertible Preferred Stock for cash in an amount determined by a formula based
on the current market price of Cerprobe Common Stock. If the holders of all
outstanding shares of Convertible Preferred Stock had elected to convert their
shares on October 24, 1996, Cerprobe 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 Cerprobe 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 Cerprobe Common Stock decreases, and will
decrease if the price of Cerprobe Common Stock increases.
Cerprobe 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. Cerprobe 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 Cerprobe's
primary lender, or by lease financing arrangements.
Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (SFAS No. 121). SFAS No. 121 becomes effective for
fiscal years beginning after December 15, 1995. The adoption of the statement
will not have a significant impact on Cerprobe's financial statements.
In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock- Based Compensation" (SFAS No. 123). SFAS No. 123
is effective for transactions entered into in fiscal years beginning after
December 15, 1995. Cerprobe will not be adopting the measurement and recognition
criteria of this statement. Thus, it will not have a significant impact on
Cerprobe's financial statements.
Inflation and Changing Prices
Cerprobe is impacted by inflationary trends and business trends within
the semiconductor industry and by the general condition of the national and
international semiconductor markets. Market price pressures are exerted on
American semiconductor manufacturers by a global marketplace and global
competition. Such pressures mandate that semiconductor manufacturers closely
scrutinize the prices they pay for goods and services purchased from Cerprobe
and other suppliers. Accordingly, the price structure for Cerprobe's products
must be competitive. Although continued strength in the semiconductor industry
continued to have a positive impact on Cerprobe's sales during 1995, significant
competition continued to prevent Cerprobe from raising prices on its products.
Changes in Cerprobe's supplier prices did not have a significant impact
on revenues or income from operations during 1995 or 1994.
As a result of Cerprobe's operation of the manufacturing, repair and
sales facility in Scotland, Cerprobe's foreign transactions may be denominated
in currencies other than the U.S. dollar. Such transactions may expose Cerprobe
to exchange rate fluctuations for the period of time from inception of the
transaction until it is settled. There can be no assurance that fluctuations in
the currency exchange rate in the future will not have an adverse impact on
Cerprobe's foreign operations.
In addition, Cerprobe may purchase a substantial portion of its raw
materials and equipment from foreign suppliers and will incur labor costs in a
foreign currency. The foreign manufacture and sale of products and the purchase
of raw materials and equipment from foreign suppliers may be adversely affected
by political and economic conditions abroad. Protective trade legislation in
either the United States or foreign countries, such as a change in the current
tariff structures, export compliance laws or other trade policies, could
adversely affect Cerprobe's ability
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to manufacture or sell its products in foreign markets and purchase materials or
equipment from foreign suppliers. In countries in which Cerprobe conducts
business in local currency, currency exchange fluctuations could adversely
affect Cerprobe's net sales or costs.
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995
Statements in this section regarding the expansion of Cerprobe's
operations in southeast Asia and adequacy of sources of capital are forward
looking statements. Words such as "expects", "intends", "believes",
"anticipates," "should," 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 "Risk Factors."
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C-ROUTE - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Introduction
C-Route was formed in November 1994 to consolidate the operations of
CompuRoute and EMI. The consolidated financial statements include the accounts
of C-Route, CompuRoute, and EMI, following such consolidation, and the combined
accounts of CompuRoute and EMI at their carrying values for periods prior
thereto. CompuRoute provides design, manufacturing and assembly services for
custom printed circuit boards and specializes in circuit board assemblies that
are used on automated test equipment for the testing of semiconductor devices.
Prior to July 1995, EMI provided office product enhancements for telecopiers,
typewriters, and word processors. In July 1995, EMI transferred all of its
assets to CompuRoute. In October 1995, CompuRoute's management determined to
stop providing enhancements for typewriters and word processors. At that time,
the management of C-Route decided to focus on its core services and products and
deemphasized sales of office product enhancements.
Results of Operations-
Years Ended December 31, 1995
and December 31, 1994
Revenues for the year ended December 31, 1995 increased to $8,694,282
from $5,957,369 in the prior year, primarily reflecting increased sales of core
services and products to existing customers as well as sales to new customers.
Cost of sales increased to $6,063,313 in 1995 from $4,110,747 in 1994
and as a percent of sales remained relatively stable at 69.7% for 1995 as
compared to 69.0% in 1994.
Selling, general and administrative expenses increased to $1,604,245 in
1995 from $1,329,371 in 1994 but as a percentage of sales declined to 18.5% from
22.3%. The increase in costs in 1995 primarily reflects increased compensation
costs, including commissions paid to sales employees.
Interest expense increased to $110,944 in 1995 compared to $77,978 in
1994 reflecting increased borrowings associated with manufacturing equipment
purchased in 1995.
Income before income taxes, minority interest and extraordinary items
increased to $942,656 for 1995 as compared to $445,840 in 1994 for the reasons
stated above.
Income tax expense decreased to $103,643 from $169,483 as a result of
the impact of the operating loss carry forward from EMI which became applicable
to offset income tax expense of the combined entity beginning in the second half
of 1995.
Income before extraordinary items was $720,061 for 1995 compared to a
loss before extraordinary items of $21,365 in 1994 reflecting increased revenues
in 1995.
Net income was $720,061 in 1995 compared to $2,886,678 in 1994,
primarily because of an extraordinary gain on restructuring of debt in 1994 due
to cancellation of convertible debentures in the face amount of $2,000,000 plus
accrued interest.
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Years Ended December 31, 1994
and December 31, 1993
Revenues for the year ended December 31, 1994 declined to $5,957,369
from $6,586,064 in the prior year reflecting primarily a decrease in sales of
EMI products and consulting revenues which was offset in part by an increase in
sales of core services and products.
Cost of sales declined slightly to $4,110,747 in 1994 from $4,167,250
in 1993 but as a percentage of sales increased to 69.0% from 63.3%. The decline
in 1994 reflects the impact of decreased labor costs partially offset by
increased materials costs in 1994.
Selling, general and administrative expenses declined to $1,329,371 in
1994 from $1,521,470 in 1993 and as a percentage of sales declined to 22.3% from
23.1% primarily as a result of a decrease in salaries and commissions for
marketing associated with CompuRoute's core services and products.
Interest expense declined to $77,978 in 1994 from $332,378 in 1993
primarily as a result of a restructuring of debt during 1994.
Income before income taxes, minority interest and extraordinary items
declined to $445,840 in 1994 from $564,521 in 1993 for the reasons described
above.
Income tax expense rose to $169,483 in 1994 as compared to $4,988 in
1993 primarily reflecting the impact of the benefit of CompuRoute's operating
loss carry forwards which were substantially utilized prior to 1994.
CompuRoute incurred a loss before extraordinary items of $21,365 in
1994 compared to income before extraordinary items of $415,975 in 1993. Net
income was $2,886,678 in 1994 as compared to $719,975 in 1993 reflecting an
extraordinary gain on restructuring of debt in each of 1994 and 1993.
Nine Months Ended September 30, 1996
Compared to Nine Months Ended September 30, 1995
Revenues rose to $7,872,191 for the nine months ended September 30,
1996 as compared to $6,308,892 for the comparable prior year period reflecting
strong demand for CompuRoute's core products.
Cost of sales increased to $5,518,121 in the 1996 period from
$4,350,853 in the 1995 period and increased as a percent of sales to
approximately 70.1% in the 1996 period from 69% in the 1995 period. The increase
in cost of sales as a percent of sales in the 1996 period is primarily the
result of increased compensation expense and an increase in third party
contracted services.
Selling, general and administrative expenses increased to $1,506,293
for the 1996 period from $1,092,281 in the comparable 1995 period and as a
percentage of sales increased to 19.1% from 17.3%. The increase reflects
increased administrative costs, including professional fees for completion of
audited financial statements and legal fees associated with the Merger,
compensation expense and depreciation, as well as increased marketing expenses,
the most significant portion of which related to increased commissions.
Interest expense increased to $99,230 in the first nine months of 1996
compared to $55,965 in the comparable period of 1995 reflecting the impact of
interest on increased borrowings associated with manufacturing equipment
purchases in late 1995.
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After the effect of certain relocation costs of approximately $125,000
in the first half of 1996, income before income taxes, minority interest, and
extraordinary items decreased to $765,236 in the 1996 period from $869,620 in
the 1995 period. The relocation expenses related to relocation of CompuRoute's
fabrication facility.
Income tax expense declined to $50,755 in the first nine months of 1996
as compared to $103,643 in the first nine months of 1995 as a result of the
utilization of EMI operating loss carry forwards in the 1996 period.
Net income rose to $641,540 in the 1996 period from $639,142 in the
prior year period.
Liquidity and Capital Resources
The primary source of cash for the operations of C-Route and its
subsidiaries is internally generated cash. Cash flows provided by operations
were $1,195,197 in 1995 as compared to $572,962 in 1994. The increase in 1995 is
primarily attributable to improvements in profitability of operations in such
period. Net cash used in investing activities was $875,620 in 1995 as compared
to $113,922 in 1994. The increase in 1995 primarily resulted from purchases of
manufacturing equipment. Net cash used in financing activities was $143,756 in
1995 compared to $134,489 in 1994. Cash and cash equivalents were $523,620 at
December 31, 1995 compared to $347,799 at December 31, 1994.
For the nine months ended September 30, 1996, cash flows provided by
operations were $538,114 as compared to $483,753 for the same period in 1995.
The increase in the 1996 period is primarily attributable to non-cash items such
as depreciation related to increased equipment purchases offset by a decrease in
current assets. Net cash used in investing activities for the first nine months
of 1996 was $359,475 as compared to $373,090 for the same period in 1995,
reflecting a reduction in the purchase of equipment for the same period of 1996.
Net cash used in financing activities for the first nine months of 1996 was
$362,792 as compared to $72,123 for the same period of 1995 primarily because of
payments made in connection with capital leases for manufacturing and design
equipment. Cash and cash equivalents were $339,467 at September 30, 1996
compared to $386,339 at September 30, 1995.
C-Route believes its current cash and cash equivalents together with
cash flows from its operations will be sufficient to fund its operations for the
next year. However, C-Route anticipates purchasing approximately $800,000 in
capital equipment in the next 12 months and will have to obtain a credit
facility to finance such purchase. Management is currently negotiating to obtain
such facility. There can be no assurance that such credit facility can be
obtained or if obtained as to the terms thereof.
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DESCRIPTION OF CAPITAL STOCK
Except regarding the election of directors, the holders of Cerprobe
Common Stock are entitled to one vote for each share on all matters submitted to
a vote of stockholders. Every stockholder entitled to vote at any election for
directors has the right to cumulate his votes. Subject to preferences that may
be applicable to any then outstanding preferred stock, the holders of Cerprobe
Common Stock will be entitled to receive such dividends, if any, as may be
declared by the Board of Directors from time to time out of legally available
funds. Upon liquidation, dissolution or winding up of Cerprobe, the holders of
Cerprobe Common Stock will be entitled to share ratably in all assets of
Cerprobe that are legally available for distribution, after payment of all debts
and other liabilities and subject to the prior rights of holders of any
preferred stock then outstanding. The holders of Cerprobe Common Stock have no
preemptive, subscription, redemption, or conversion rights. The rights,
preferences and privileges of holders of Cerprobe Common Stock are subject to
the rights of the holders of Cerprobe's Series A Convertible Preferred Stock and
will be subject to the rights of the holders of shares of any series of
preferred stock that Cerprobe may issue in the future.
All outstanding shares of Cerprobe Common Stock are, and the shares of
Cerprobe Common Stock to be issued in connection with the Merger will be, when
issued and delivered, validly issued, fully paid, and nonassessable.
On January 18, 1996, Cerprobe issued 1,000 shares of Series A
Convertible Preferred Stock for $10 million (the "Convertible Preferred Stock").
The net proceeds of this offering were $9,400,000. Holders of shares of
Convertible Preferred Stock are entitled to a liquidation preference of $10,000
for each share outstanding plus an amount equal to 6% of the original purchase
price per annum from the date of issuance. The Convertible Preferred Stock is
convertible, based on the original purchase price plus 6% per annum until the
date of conversion, into Cerprobe Common Stock at a conversion price equal to
the lesser of $16.55 or 90% of the average 5-day closing price prior to the
conversion date. Subject to earlier conversion, the Convertible Preferred Stock
will convert automatically at the end of two years. Cerprobe may call the
Convertible Preferred Stock at any time in minimum amounts of $2 million at a
price of 125% of par.
In connection with the issuance of the Convertible Preferred Stock ,
Cerprobe also issued warrants to the placement agent to purchase 39,275 shares
of Cerprobe Common Stock at an exercise price of $16.55 per share beginning in
January 1997 and expiring in January 2000.
As of September 30, 1996, 477 shares of Convertible Preferred Stock had
been converted into 538,726 shares of Cerprobe Common Stock. Accordingly, 523
shares of Convertible Preferred Stock were outstanding at September 30, 1996.
The terms of the Convertible Preferred Stock also provide that no more than
800,000 shares of Cerprobe Common Stock may be issued upon conversion. If more
than 800,000 shares of Cerprobe Common Stock would be required to be issued upon
conversion of any remaining shares of Convertible Preferred Stock, Cerprobe must
redeem those shares for cash. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
Cerprobe's First Restated Certificate of Incorporation (the "Restated
Certificate") and Bylaws (the "Bylaws") contain a number of other provisions
relating to corporate governance and to the rights of stockholders. These
provisions include (i) the authority of the Board of Directors to fill vacancies
on the Board of Directors; (ii) the authority of the Board of Directors to issue
series of preferred stock with such voting rights and other powers as the Board
of Directors may determine; (iii) notice requirements relating to nominations to
the Board of Directors and to the raising of business matters at stockholder
meetings; (iv) a provision that special meetings of the stockholders may be
called only by the Chairman of the Board, the President or the Board of
Directors or by written demand of the holders of 33% of all issued and
outstanding shares of Cerprobe entitled to vote at such meeting; (v) a provision
allowing the Board of Directors to consider certain factors when evaluating
certain matters such as tender offers; (vi) a prohibition on stockholder action
by written consent; (vii) a provision requiring the satisfaction
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of certain minimum price and procedural requirements in connection with certain
transactions such as business combinations; and (viii) the requirement that
certain "anti-takeover" provisions in the Restated Certificate may be amended
only by super majority vote.
Cerprobe is subject to the provisions of Section 203 of the Delaware
GCL. In general, this statute prohibits a publicly held Delaware corporation
from engaging, under certain circumstances, in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person becomes an interested stockholder, unless (i)
prior to the date at which the stockholder became an interested stockholder, the
Board of Directors approved either the business combination or the transaction
in which the stockholder becomes an interested stockholder, (ii) upon
consummation of the transaction in which the stockholder becomes an interested
stockholder, the stockholder owned at least 85% of the outstanding voting stock
of the corporation (excluding shares held by directors who are officers or held
in certain employee stock plans); or (iii) the business combination is approved
by the Board of Directors and by two-thirds of the outstanding voting stock of
the corporation (excluding shares held by the interested stockholder) at a
meeting of stockholders (and not by written consent) held on or subsequent to
the date of the business combination. An "interested stockholder" is a person
who, together with affiliates and associates, owns (or at any time within the
prior three years did own) 15% or more of the corporation's voting stock.
Section 203 defines a "business combination" to include mergers, consolidations,
stock sales and asset based transactions, and other transactions resulting in a
financial benefit to the interested stockholder.
COMPARISON OF RIGHTS OF SECURITY HOLDERS
Upon consummation of the Mergers, shareholders of C-Route and
CompuRoute, each a Texas corporation, will become stockholders of Cerprobe, a
Delaware corporation. As stockholders of a Delaware corporation, their rights
will differ in certain respects from those of shareholders of a Texas
corporation. In the opinion of Cerprobe, the following constitute the material
differences between Texas and Delaware corporate law with respect to rights of
stockholders and the effects of those differences on stockholders are noted
below:
Mergers. Under Delaware law, stockholders of the surviving corporation
have no right to vote, except under limited circumstances, on the acquisition by
merger directly into the surviving corporation of companies that are
substantially smaller than the surviving corporation (i.e., where the amount of
the surviving corporation's common stock to be issued or delivered under the
plan of merger does not exceed 20% of the total shares outstanding immediately
prior to the acquisition). For those mergers requiring stockholder approval,
only a simple majority vote of the total number of outstanding shares of capital
stock entitled to vote thereon is required, regardless of the fact that more
than one class may be outstanding, unless the certificate of incorporation
provides to the contrary. (Cerprobe's Restated Certificate does not so provide.)
Under Cerprobe's Restated Certificate, certain business combinations involving
Cerprobe and any beneficial owner of 15% or more of the outstanding voting stock
of Cerprobe or any affiliate of such owner, must be approved by the holders of
66 2/3% of the outstanding voting stock, unless approved by a majority of the
continuing directors (as defined therein) or certain minimum price and
procedural requirements are met.
Under Texas law, shareholders have the right to vote on all mergers to
which the corporation is a party (except for the merger into the surviving
corporation of subsidiaries owned 90% or more by the surviving corporation, for
which a stockholder vote also is not required under Delaware law). An
affirmative vote of two-thirds of all outstanding shares is required under Texas
law to approve all such mergers. In certain circumstances, different classes of
securities may be entitled to vote separately as classes with respect to such
transactions.
Charter Amendments. In general, under Delaware law, a corporation's
charter may be amended by a majority vote of the total number of outstanding
shares of capital stock entitled to vote thereon, and a majority vote of the
outstanding stock of each class entitled to vote thereon as a class. However,
under Cerprobe's Restated Certificate, certain charter provisions, including (i)
the granting of discretions to the Board of Directors of Cerprobe to consider
various factors when determining whether to take or refrain from certain
corporation actions; (ii) the
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election to be governed by Section 203 of the Delaware GCL; (iii) the
elimination of actions by written consent of stockholders; and (iv) the adoption
of a fair price provision may only be repealed or amended by the affirmative
vote of the holders of at least 66 2/3% of the outstanding voting stock. In
general, the holders of the outstanding shares of a class are entitled to vote
as a class upon a proposed amendment if the proposed amendment would alter or
change the powers, preferences or special rights of the shares of such class so
as to affect them adversely or if the charter otherwise grants such a class
vote. Under Texas law, a corporation's charter may be amended by the affirmative
vote of holders of two-thirds of the total outstanding shares entitled to vote
thereon and of two-thirds of the shares within each class of outstanding shares
entitled to vote thereon as a class. In general, the holders of the outstanding
shares of a class are entitled to vote as a class upon a proposed amendment
under more circumstances under Texas law than under Delaware law.
Limitation of Director Liability. Under Delaware law, stockholders may
eliminate the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
(subject to certain exceptions). (Cerprobe's Restated Certificate so provides.
Although Texas law permits a similar provision, the Articles of Incorporation,
as amended, of C-Route and CompuRoute provide no such limitation.)
Shareholders' Consents. Although Delaware law permits any action
required to be taken at an annual or special meeting of stockholders to be taken
without a meeting by written consent of a majority of the stockholders under
certain circumstances, Cerprobe's Restated Certificate prohibits any action by
written consent of the stockholders. Under Texas law, a meeting is required to
take all such action unless the unanimous consent of the shareholders is
obtained.
Newly Created Directorships. Under Delaware law, any number of
directorships to be filled by reason of an increase in the authorized number of
directors may be filled by a majority of the directors then in office absent a
contrary provision in the certificate of incorporation or the bylaws. (Neither
Cerprobe's Restated Certificate nor its Bylaws contain any such contrary
provision.) Texas law provides that only two such directorships may be filled by
the directors during the period between any two successive annual meetings of
shareholders.
Call of Shareholders' Meetings. Under Texas law, holders of 10% of all
the outstanding shares entitled to vote have the right to call a special
shareholders' meeting, unless the charter provides for a lesser or greater
percentage (but not more than 50%). However, under C-Route's Bylaws, holders of
at least 25% of all the outstanding shares entitled to vote have the right to
call a special shareholders' meeting. No similar right exists under Delaware
law.
Dissenters' Rights of Appraisal. Under Texas law, shareholders are
entitled to dissenters' rights of appraisal, as summarized under "Dissenters'
Rights of Appraisal." See Appendix C. Stockholders of a Delaware corporation are
entitled to similar dissenters' rights. However, in certain circumstances, under
Delaware law no dissenters' appraisal rights are available to the holders of
shares of any class or series of stock of a constituent corporation in a merger
or consolidation that, as the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of stockholders to act
upon the merger or consolidation, were either (i) listed on a national
securities exchange or (ii) held of record by more than 2,000 stockholders.
Under Delaware law stockholders of a constituent corporation surviving a merger
are not entitled to appraisal rights if the merger did not require stockholder
approval. Unless otherwise provided in the certificate of incorporation, under
Delaware law stockholders are not entitled to dissenters' appraisal rights upon
a sale of all or substantially all of the assets of the corporation not made in
the usual and regular course of its business, as they are under Texas law.
(Cerprobe's First Restated Certificate does not so provide.)
While there are other differences between Delaware and Texas law
relating to corporations, the foregoing constitute the differences regarded by
Cerprobe as material to the rights of stockholders. Holders of Cerprobe Common
Stock have many rights similar to those to which the holders of C-Route and
CompuRoute common stock are entitled. The principal similarities are as follows:
each stockholder is entitled to such dividends as the board
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of directors may declare from legally available funds, and each stockholder is,
upon liquidation, entitled to receive, pro rata, any assets distributed to
holders of common stock. However, holders of Cerprobe Common Stock are entitled
to cumulative voting rights in the election of directors and holders of C-Route
and CompuRoute common stock are not so entitled. In addition, holders of C-Route
and CompuRoute common stock have no preemptive rights to subscribe for or
purchase any shares of stock that may be issued from time to time by C-Route and
holders of Cerprobe Common Stock have no preemptive rights.
The rights of the holders of Cerprobe Common Stock are subject to the
prior rights of holders of Cerprobe Preferred Stock. See "Description of Capital
Stock."
LEGAL MATTERS
The validity of the shares of Cerprobe Common Stock being offered
hereby is being passed upon for Cerprobe by O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, a Professional Association, One East Camelback Road,
Suite 1100, Phoenix, Arizona 85012-1656.
EXPERTS
The consolidated financial statements of Cerprobe Corporation and
subsidiaries as of December 31, 1995 and 1994, and for each of the years in the
three-year period ended December 31, 1995, have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
The consolidated financial statements of CROUTE, Inc. and subsidiaries
as of December 31, 1995 and 1994, and for each of the years in the three-year
period ended December 31, 1995, have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
CERPROBE CORPORATION AND SUBSIDIARIES
Independent Auditors' Report .......................................................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996
(unaudited) ....................................................................................... F-3
Consolidated Statements of Income for the Years Ended December 31, 1993, 1994,
and 1995 and the Nine Months Ended September 30, 1995 and 1996 (unaudited) ....................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1993,
1994 and 1995 and the Nine Months Ended September 30, 1996 (unaudited) ........................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993,
1994 and 1995 and the Nine Months Ended September 30, 1995 and 1996 (unaudited) .................. F-6 to F-7
Notes to Consolidated Financial Statements ............................................................ F-8 to F-21
CROUTE, INC. AND SUBSIDIARIES
Independent Auditors' Report .......................................................................... F-22
Consolidated Balance Sheets as of December 31, 1994 and 1995 and September 30, 1996
(unaudited) ....................................................................................... F-23
Consolidated Statements of Operations for the Years Ended December 31, 1993,
1994 and 1995 and the Nine Months Ended September 30, 1995 and 1996 (unaudited) .................. F-24
Consolidated Statements of Stockholders' Equity (Deficit) for the Years Ended
December 31, 1993, 1994 and 1995 and the Nine Months Ended September 30, 1996 (unaudited) ........ F-25
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993,
1994 and 1995 and the Nine Months Ended September 30, 1995 and 1996 (unaudited) .................. F-26 to F-27
Notes to Consolidated Financial Statements ............................................................ F-28 to F-36
</TABLE>
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Cerprobe Corporation:
We have audited the accompanying consolidated balance sheets of Cerprobe
Corporation and subsidiaries as of December 31, 1994 and 1995 and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cerprobe Corporation
and subsidiaries as of December 31, 1994 and 1995 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Phoenix, Arizona
February 2, 1996, except
as to note 17, which is
as of October 25, 1996
F-2
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, September 30,
--------------------------------------- ------------------
Assets 1994 1995 1996
------------------ ------------------ ------------------
(unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 738,319 263,681 7,232,995
Marketable securities -- -- 2,260,063
Accounts receivable, net of allowance
of $23,000 in 1994, $173,000 in 1995
and $178,000 at September 30, 1996 2,201,712 4,377,041 5,169,219
Inventories 1,693,198 2,802,081 3,811,354
Prepaid expenses 52,571 111,673 138,245
Income taxes receivable -- 163,464 364,116
Deferred income taxes 93,974 270,599 336,598
------------------ ------------------ ------------------
Total current assets 4,779,774 7,988,539 19,312,590
------------------ ------------------ ------------------
Property and equipment, net 2,146,080 4,667,786 6,681,928
Goodwill, net of amortization of $197,109
in 1995 and $386,081 at September 30,
1996 -- 1,923,396 1,734,424
Patents and technology, net of amortization
of $16,826 in 1995 and $30,985 at
September 30, 1996 -- 74,013 59,854
Other assets 89,519 313,716 1,348,924
------------------ ------------------ ------------------
Total assets $ 7,015,373 14,967,450 29,137,720
================== ================== ==================
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' December 31, September 30,
--------------------------------------- ------------------
Equity 1994 1995 1996
------------------ ------------------ ------------------
(unaudited)
<S> <C> <C> <C>
Current liabilities:
Accounts payable $ 443,559 1,499,853 1,849,836
Accrued expenses 663,904 788,599 1,307,981
Convertible subordinated debentures -- 595,000 485,000
Current portion of note payable -- 123,743 124,770
Current portion of capital leases 100,312 209,885 225,165
------------------ ------------------ ------------------
Total current liabilities 1,207,775 3,217,080 3,992,752
Convertible subordinated debentures 595,000 -- --
Note payable, less current portion -- 408,376 312,584
Capital leases, less current portion 195,716 572,830 644,693
Deferred income taxes -- 66,123 66,123
Other liabilities 93,928 46,801 339,159
------------------ ------------------ ------------------
Total liabilities 2,092,419 4,311,210 5,355,311
------------------ ------------------ ------------------
Minority interest -- -- 29,211
Stockholders' equity:
Preferred stock, $.05 par value;
authorized 10,000,000 shares; issued
and outstanding 523 shares of Series
A Convertible Preferred Stock
($5,449,551 liquidation preference) -- -- 26
Common stock, $.05 par value;
authorized, 10,000,000 shares; issued
and outstanding, 3,223,351 shares in
1994, 4,095,851 shares in 1995 and
4,909,279 shares at September 30, 1996 161,167 204,792 245,464
Additional paid-in capital 3,685,432 7,239,410 17,488,202
Retained earnings 1,064,217 3,466,464 5,997,348
Unearned compensation -- (241,872) --
Foreign currency translation adjustment 12,138 (12,554) 22,158
------------------ ------------------ ------------------
Total stockholders' equity 4,922,954 10,656,240 23,753,198
------------------ ------------------ ------------------
Total liabilities and
stockholders' equity $ 7,015,373 14,967,450 29,137,720
================== ================== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30,
------------------------------------------------- -------------------------------
1993 1994 1995 1995 1996
-------------- -------------- -------------- -------------- --------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net sales $ 11,211,511 14,251,485 26,098,637 17,968,454 28,159,069
Costs of goods sold 6,767,505 8,213,966 13,706,435 9,390,742 15,285,366
-------------- -------------- -------------- -------------- --------------
Gross margin 4,444,006 6,037,519 12,392,202 8,577,712 12,873,703
-------------- -------------- -------------- -------------- --------------
Expenses:
Engineering and product
development 335,659 417,198 706,680 529,068 724,230
Selling, general and
administrative 2,398,243 3,693,401 7,502,598 5,110,197 7,870,390
-------------- -------------- -------------- -------------- --------------
Total expenses 2,733,902 4,110,599 8,209,278 5,639,265 8,594,620
-------------- -------------- -------------- -------------- --------------
Operating income 1,710,104 1,926,920 4,182,924 2,938,447 4,279,083
-------------- -------------- -------------- -------------- --------------
Other income (expense):
Interest income 1,471 18,882 44,697 34,576 345,356
Interest expense (131,887) (115,254) (153,758) (134,207) (167,194)
Other income 12,670 92,796 140,111 119,726 151,830
-------------- -------------- -------------- -------------- --------------
Total other income
(expense) (117,746) (3,576) 31,050 20,095 329,992
-------------- -------------- -------------- -------------- --------------
Income before income
taxes and minority
interest 1,592,358 1,923,344 4,213,974 2,958,542 4,609,075
Minority interest in loss of
subsidiary -- -- -- -- 83,809
Income taxes (90,000) (710,521) (1,811,727) (1,267,000) (2,162,000)
-------------- -------------- -------------- -------------- --------------
Net income $ 1,502,358 1,212,823 2,402,247 1,691,542 2,530,884
============== ============== ============== ============== ==============
Income per common and common
equivalent share:
Primary net income per
share $ 0.41 0.36 0.59 0.42 0.49
============== ============== ============== ============== ==============
Weighted average number
of common and common
equivalent shares
outstanding 3,687,740 3,387,220 4,071,233 4,022,993 5,125,942
============== ============== ============== ============== ==============
Fully diluted net income
per share $ 0.35 0.30 0.49 0.36 0.45
============== ============== ============== ============== ==============
Weighted average number
of common and common
equivalent shares
outstanding 4,348,872 4,006,801 4,862,137 4,708,352 5,647,789
============== ============== ============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Number of Number of
Preferred Common
Shares Shares
Issued and Preferred Issued and Common
Outstanding Stock Outstanding Stock
----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Balance, January 1, 1993 -- $ -- 2,619,518 $ 130,975
Conversion of subordinated deben-
tures, net of $6,143 costs -- -- 5,000 250
Stock options exercised -- -- 351,500 17,575
Net income -- -- -- --
----------------- ----------------- ----------------- ------------------
Balance, December 31, 1993 -- -- 2,976,018 148,800
Conversion of subordinated deben-
tures -- -- 40,000 2,000
Stock options exercised -- -- 207,333 10,367
Tax benefit of disqualifying disposi-
tions -- -- -- --
Cash dividends paid ($.03 a share) -- -- -- --
Translation adjustment -- -- -- --
Net income -- -- -- --
----------------- ----------------- ----------------- ------------------
Balance, December 31, 1994 -- -- 3,223,351 161,167
Issuance of stock options at less
than fair market value -- -- -- --
Compensation expense related to stock
options -- -- -- --
Stock options exercised -- -- 160,000 8,000
Tax benefit of disqualifying dispo-
sitions -- -- -- --
Issuance of common stock for acqui-
sition -- -- 712,500 35,625
Translation adjustment -- -- -- --
Net income -- -- -- --
----------------- ----------------- ----------------- ------------------
Balance, December 31, 1995 -- -- 4,095,851 204,792
Conversion of subordinated deben-
tures (unaudited) -- -- 110,000 5,500
Issuance of convertible preferred
stock and warrants, net of issu-
ance costs of $600,000 (unaudited) 1,000 50 -- --
Conversion of convertible preferred
stock (unaudited) (477) (24) 538,726 26,937
Compensation expense related to stock
options (unaudited) -- -- -- --
Stock options exercised (unaudited) -- -- 164,702 8,235
Tax benefit of disqualifying dispo-
sitions (unaudited) -- -- -- --
Translation adjustment (unaudited) -- -- -- --
Net income (unaudited) -- -- -- --
----------------- ----------------- ----------------- ------------------
Balance, September 30, 1996
(unaudited) 523 $ 26 4,909,279 $ 245,464
================= ================= ================= ==================
</TABLE>
<TABLE>
<CAPTION>
Foreign
Additional Retained Currency Total
Paid-in Earnings Unearned Translation Stockholders'
Capital (Deficit) Compensation Adjustment Equity
--------------- ------------------ ------------------ ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1993 2,733,997 (1,561,487) -- -- 1,303,485
Conversion of subordinated deben-
tures, net of $6,143 costs (1,393) -- -- -- (1,143)
Stock options exercised 241,041 -- -- -- 258,616
Net income -- 1,502,358 -- -- 1,502,358
--------------- ------------------ ------------------ ---------------- ----------------
Balance, December 31, 1993 2,973,645 (59,129) -- -- 3,063,316
Conversion of subordinated deben-
tures 38,000 -- -- -- 40,000
Stock options exercised 191,326 -- -- -- 201,693
Tax benefit of disqualifying disposi-
tions 482,461 -- -- -- 482,461
Cash dividends paid ($.03 a share) -- (89,477) -- -- (89,477)
Translation adjustment -- -- -- 12,138 12,138
Net income -- 1,212,823 -- -- 1,212,823
--------------- ------------------ ------------------ ---------------- ----------------
Balance, December 31, 1994 3,685,432 1,064,217 -- 12,138 4,922,954
Issuance of stock options at less
than fair market value 387,000 -- (387,000) -- --
Compensation expense related to stock
options -- -- 145,128 -- 145,128
Stock options exercised 199,464 -- -- -- 207,464
Tax benefit of disqualifying dispo-
sitions 340,170 -- -- -- 340,170
Issuance of common stock for acqui-
sition 2,627,344 -- -- -- 2,662,969
Translation adjustment -- -- -- (24,692) (24,692)
Net income -- 2,402,247 -- -- 2,402,247
--------------- ------------------ ------------------ ---------------- ----------------
Balance, December 31, 1995 7,239,410 3,466,464 (241,872) (12,554) 10,656,240
Conversion of subordinated deben-
tures (unaudited) 104,500 -- -- -- 110,000
Issuance of convertible preferred
stock and warrants, net of issu-
ance costs of $600,000 (unaudited) 9,399,950 -- -- -- 9,400,000
Conversion of convertible preferred
stock (unaudited) (26,913) -- -- -- --
Compensation expense related to stock
options (unaudited) (192,489) -- 241,872 -- 49,383
Stock options exercised (unaudited) 556,744 -- -- -- 564,979
Tax benefit of disqualifying dispo-
sitions (unaudited) 407,000 -- -- -- 407,000
Translation adjustment (unaudited) -- -- -- 34,712 34,712
Net income (unaudited) -- 2,530,884 -- -- 2,530,884
--------------- ------------------ ------------------ ---------------- ----------------
Balance, September 30, 1996
(unaudited) 17,488,202 5,997,348 -- 22,158 23,753,198
=============== ================== ================== ================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31, September 30,
------------------------------------------------- -------------------------------
1993 1994 1995 1995 1996
-------------- -------------- -------------- -------------- --------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income $ 1,502,358 1,212,823 2,402,247 1,691,542 2,530,884
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amor-tization 306,708 458,436 1,125,584 485,502 1,339,227
Tax benefit from stock
options exercised -- 482,461 340,170 -- 407,000
Loss (gain) on sale of
equipment -- (50) 4,787 6,444 --
Deferred income taxes -- (93,974) (110,502) (8,901) (65,999)
Provision for losses on
accounts receivable (8,373) 24,000 12,000 51,000 5,000
Provision for obsolete
inventory 30,000 67,200 80,000 95,000 46,000
Compensation expense -- -- 145,128 -- 49,383
Loss applicable to
minority interest -- -- -- -- (83,809)
Changes in operating
assets and liabilities:
Accounts receivable (273,552) (907,762) (1,444,689) (859,701) (797,178)
Inventories (434,984) (51,285) (1,038,216) (935,603) (1,055,273)
Prepaid expenses and
other assets (49,828) (59,418) (389,988) (322,438) (461,780)
Income taxes receivable -- -- (163,464) -- (200,652)
Accounts payable and
accrued expenses 123,558 315,979 724,796 168,549 869,365
Other liabilities (18,456) 90,356 (42,289) 424,133 292,358
-------------- -------------- -------------- -------------- --------------
Net cash provided by
operating activities
1,177,431 1,538,766 1,645,564 795,527 2,874,526
-------------- -------------- -------------- -------------- --------------
Investing activities:
Capital expenditures (500,938) (1,354,694) (1,960,775) (1,187,269) (2,896,861)
Purchase of marketable
securities -- -- -- -- (2,260,063)
Investment in CRPB
Investors, L.L.C. -- -- -- -- (600,000)
Cost incurred in Fresh
Test Technology -- -- (402,865) (402,865) --
acquisition
Cash acquired in purchase
of Fresh Test -- -- 321,167 321,167 --
Proceeds from sale of
equipment -- 50 42,062 43,613 --
-------------- -------------- -------------- -------------- --------------
Net cash used in
investing activities (500,938) (1,354,644) (2,000,411) (1,225,354) (5,756,924)
-------------- -------------- -------------- -------------- --------------
</TABLE>
F-6
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
Years ended December 31, Nine months ended
September 30,
------------------------------------------------- -------------------------------
1993 1994 1995 1995 1996
-------------- -------------- -------------- -------------- --------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Financing activities:
Dividends paid $ -- (89,477) -- -- --
Net payments under line of
credit agreement (155,614) -- -- -- --
Principal payments on note
payable and capital
leases (274,466) (79,603) (302,563) (253,692) (261,000)
Net proceeds from issuance
of convertible preferred
stock -- -- -- -- 9,400,000
Net proceeds from issuance
of common stock 252,473 201,693 207,464 207,464 564,980
Net proceeds from minority
interest in subsidiary -- -- -- -- 113,020
-------------- -------------- -------------- -------------- --------------
Net cash provided by
(used in) financing
activities (177,607) 32,613 (95,099) (46,228) 9,817,000
-------------- -------------- -------------- -------------- --------------
Effect of exchange rates on
cash -- 12,138 (24,692) (18,479) 34,712
Net increase (decrease) in
cash and cash equivalents 498,886 228,873 (474,638) (494,534) 6,969,314
Cash and cash equivalents,
beginning of year 10,560 509,446 738,319 738,319 263,681
-------------- -------------- -------------- -------------- --------------
Cash and cash equivalents, end
of period $ 509,446 738,319 263,681 243,785 7,232,995
============== ============== ============== ============== ==============
Supplemental schedule of non-
cash investing and
financing activities:
Conversion of sub-
ordinated debentures $ 5,000 40,000 -- -- 110,000
============== ============== ============== ============== ==============
Equipment acquired under
capital leases and
issuance of note payable $ 161,072 195,293 1,056,817 547,613 253,378
============== ============== ============== ============== ==============
Supplemental disclosures of
cash flow information:
Interest paid $ 133,539 115,873 153,690 110,263 118,685
============== ============== ============== ============== ==============
Income taxes paid
(refunded) $ 65,323 (9,731) 1,679,876 1,679,876 1,812,000
============== ============== ============== ============== ==============
Issuance of stock for
purchase of Fresh Test
Technology -- -- 2,662,969 2,662,969 --
============== ============== ============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
Cerprobe Corporation (the Company) designs, manufactures, and markets
high-performance probing and interface products for use in the testing of
integrated and hybrid electronic circuits for the semiconductor industry.
The Company markets its products worldwide to semiconductor
manufacturers.
The following are the significant accounting and financial policies used
in the preparation of these consolidated financial statements of the
Company:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. The Company's subsidiaries include
Cerprobe Europe, Limited, which was established in February 1994 in
Scotland, and Cerprobe Asia Holdings PTE LTD, which was established in
June 1995 in Singapore. Cerprobe Asia Holdings PTE LTD is a 70% owner of
Cerprobe Asia PTE LTD. 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. An officer of the Company owns
10% of Cerprobe Asia PTE LTD. All significant intercompany transactions
have been eliminated in consolidation.
Interim Financial Information
The balance sheet as of September 30, 1996, the statements of income and
cash flows for the nine months ended September 30, 1995 and 1996, and the
statement of stockholders' equity for the nine months ended September 30,
1996 have been prepared by the Company without audit. The data disclosed
in these notes to the consolidated financial statements for these periods
are also unaudited. 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 for the interim periods have been condensed or omitted in
accordance with regulations of the Securities and Exchange Commission.
Financial results for the period ended September 30, 1996 are not
necessarily indicative of the results to be expected for the full year.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements
in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in banks and cash
invested in short-term securities with original maturities of three
months or less.
F-8
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Marketable Securities
The Company accounts for marketable securities under Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("SFAS No. 115"). At September
30, 1996, marketable securities consist of a U.S. Treasury Note,
including accrued interest, for $2,260,063 at 6 3/8%, maturing on July
15, 1999. Under SFAS No. 115, the marketable security has been
categorized as available-for-sale and is stated at fair value with any
unrealized holding gain or loss included in the financial statements as a
component of stockholders' equity until realized. The marketable security
is available for current operations and has been classified in the
financial statements as a current asset.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method)
or market.
Property and Equipment
Property and equipment are stated at cost and depreciated by the
straight-line method over the following estimated useful lives:
Manufacturing tools and equipment 3-7 years
Office furniture and equipment 3-7 years
Computer software 3 years
Leasehold improvements Life of lease
Goodwill
Goodwill represents the amount by which the cost of businesses purchased
exceeds the fair value of the net assets acquired. Goodwill is amortized
over a period of eight years using the straight-line method. The Company
continually evaluates whether events and circumstances have occurred that
indicate the remaining estimated useful life of goodwill may warrant
revision or that the remaining balance may not be recoverable. When
factors indicate that the asset should be evaluated for possible
impairment, the Company uses an estimate of the undiscounted net cash
flows over the remaining life of the asset in measuring whether the asset
is recoverable.
Patents and Technology
Patents and technology are stated at fair value at the date of
acquisition less accumulated amortization and are amortized over a period
of five years using the straight-line method. Research and development
costs and any costs associated with internally developed patents,
formulas or other proprietary technology are expensed in the period
incurred.
F-9
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Income Taxes
Effective January 1, 1993, the Company adopted the asset and liability
method of accounting for income taxes prescribed by Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes." Under the asset and liability method of SFAS No. 109, deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under SFAS
109, the effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment
date.
Foreign Currency Translation
The financial statements of the Company's Scotland and Singapore
subsidiaries are translated into United States dollars in accordance with
SFAS No. 52, Foreign Currency Translation. Assets and liabilities of the
subsidiaries are translated into United States dollars at current
exchange rates. Income and expense items are translated at the average
exchange rate for the year. The resulting translation adjustments are
recorded as a separate component of stockholders' equity.
Revenue Recognition
The Company records revenue when goods are shipped.
Net Income Per Share
Primary net income per common and common equivalent share is computed
using the weighted average number of common shares outstanding during
each period, shares issuable upon exercise of stock options and warrants
using the treasury stock method, and the assumed issuance of common
shares upon conversion of preferred stock as if such conversion occurred
at the beginning of the year, when the effect of such issuances are
dilutive. The calculation of fully diluted net income per common and
common equivalent share assumes that the convertible subordinated
debentures and Convertible Preferred Stock were converted into common
stock at the beginning of the year, when dilutive.
Reclassifications
Certain reclassifications have been made to the 1993 and 1994 financial
statements to conform to the 1995 presentation.
F-10
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
--------------------------------------- ------------------
1994 1995 1996
------------------ ------------------ ------------------
(unaudited)
<S> <C> <C> <C>
Raw materials $ 777,199 1,655,974 2,250,649
Work-in-process 967,999 1,229,107 1,689,705
Reserve for obsolete inventories (52,000) (83,000) (129,000)
------------------ ------------------ ------------------
$ 1,693,198 2,802,081 3,811,354
================== ================== ==================
</TABLE>
(3) Property and Equipment
Property and equipment consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
--------------------------------------- ------------------
1994 1995 1996
------------------ ------------------ ------------------
(unaudited)
<S> <C> <C> <C>
Manufacturing tools and
equipment $ 3,056,849 4,825,724 6,671,614
Office furniture and equipment
839,521 1,722,312 2,783,528
Leasehold improvements 439,894 759,843 881,554
Construction in progress 41,620 398,838 507,185
Computer software 39,775 39,775 39,775
Accumulated depreciation and
amortization (2,271,579) (3,078,706) (4,201,728)
------------------ ------------------ ------------------
$ 2,146,080 4,667,786 6,681,928
================== ================== ==================
</TABLE>
F-11
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Accrued Expenses
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
--------------------------------------- ------------------
1994 1995 1996
------------------ ------------------ ------------------
(unaudited)
<S> <C> <C> <C>
Accrued payroll and related
taxes $ 204,297 482,866 910,957
Accrued income taxes 376,442 -- --
Other accrued expenses 83,165 305,733 397,024
------------------ ------------------ ------------------
$ 663,904 788,599 1,307,981
================== ================== ==================
</TABLE>
(5) Convertible Subordinated Debentures, Note Payable and Line of Credit
On March 29, 1991, the Company issued $600,000 of 12.5% convertible
subordinated debentures due December 15, 1996. The debentures are
convertible into 600,000 shares of common stock, subject to adjustment.
In addition, the Company issued $400,000 of 11% convertible subordinated
debentures due March 29, 1996. The 11% debentures are convertible into
400,000 shares of common stock, subject to adjustment. Interest on the
debentures is due either semi-annually or quarterly. Of the $1,000,000
debentures sold, $510,000 were acquired by officers and directors of the
Company or by investment groups controlled by directors of the Company.
The Company reserved 1,000,000 shares of its common stock for possible
conversion of the debentures. In connection with the conversion of a
portion of the debentures in 1993, the interest rate on $115,000 of the
remaining debentures increased to 25%.
In October 1992, September 1993 and September 1994, $360,000, $5,000 and
$40,000, respectively, in principal amount of the Company's convertible
subordinated debentures were converted to common stock.
The Company had a bank line of credit available at the lesser of 80% of
eligible receivables, as defined, or $750,000 until April 30, 1996.
Interest on outstanding balances was at prime plus .75%, and the line of
credit was collateralized by accounts receivable, inventory and
equipment. The non-use fee under the line of credit was .00375%. At
December 31, 1995, no amounts were outstanding under the line of credit
and $750,000 was available.
F-12
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
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 Offering Rate), plus 2.25%, which was 7.684% at
September 30, 1996. There was no amount outstanding under this agreement
at September 30, 1996.
The Company has a note payable for the purchase of equipment which
accrues interest at 9.4%. Monthly payments of $13,185 including interest
are due through December 1999. At September 30, 1996, $437,354 was
outstanding under the note.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, September 30,
-------------------------------------- -----------------
1994 1995 1996
----------------- ----------------- -----------------
(Unaudited)
<S> <C> <C> <C>
Convertible subordinated
debentures $ 595,000 595,000 485,000
Note payable -- 532,119 437,354
----------------- ----------------- -----------------
595,000 1,127,119 922,354
Less current maturities -- 718,743 609,770
----------------- ----------------- -----------------
Long-term debt $ 595,000 408,376 312,584
================= ================= =================
</TABLE>
Annual maturities of long-term debt at December 31, 1995 are as follows:
1996 $ 718,743
1997 127,650
1998 140,177
1999 140,549
------------------
$ 1,127,119
==================
(6) Stockholders' Equity
The Company has an incentive stock option plan, a nonqualified stock
option plan, and a combination stock option plan. In accordance with the
plans, options are to be granted at no less than 100% of the fair market
value of the shares at the date of grant. The options become exercisable
on a basis as established by the Company's Compensation Advisory
Committee and are exercisable for a period of 5 to 10 years.
A total of 500,000, 685,000 and 500,000 shares of the Company's common
stock are reserved for issuance under the incentive stock option plan,
the nonqualified stock option plan, and the combination stock plan,
respectively.
F-13
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
On January 18, 1996, the Company issued 1,000 shares of Series A
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, based on the
original Series A Convertible Preferred Stock issue price plus a 6% per
annum premium, at the lesser 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 beginning July 18, 1996 or upon a merger,
buyout or acquisition. Holders of shares of Series A preferred stock are
entitled to a liquidation preference of $10,000 for each share
outstanding plus an amount equal to 6% of the original Series A issue
price per annum for the period that has passed since the date of issuance
by the Company. There are no dividends on the Series A Convertible
Preferred Stock.
Additionally, the Company issued 39,275 common stock warrants on January
18, 1996 to the placement agent for the Series A Convertible Preferred
Stock, which are exercisable at the fixed strike price of $16.55 and
expire in four years.
During the nine months ended September 30, 1996, 477 shares of Series A
Convertible Preferred Stock were converted into 538,726 shares of Common
Stock. Accordingly, 523 shares of Convertible Preferred Stock were
outstanding at September 30, 1996.
Changes in options are summarized as follows:
<TABLE>
<CAPTION>
Option Price Available
Per Share Outstanding Exercisable for Grant
---------------------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
At January 1, 1993 $ 0.500 -- 2.060 835,000 607,334 350,000
Granted 6.750 30,500 (30,500)
Became exercisable 0.563 -- 6.750 165,115
Exercised 0.500 -- 1.000 (351,500) (351,500)
Canceled 0.563 (1,000) (1,000) 1,000
------------------------- ---------------- -------------- ----------------
At December 31, 1993 0.500 -- 6.750 513,000 419,949 320,500
Granted 5.750 260,000 (260,000)
Became exercisable 0.938 -- 6.750 194,505
Exercised 0.563 -- 1.000 (207,333) (207,333)
Canceled 0.938 (3,334) (3,334) 3,334
------------------------- ---------------- -------------- ----------------
At December 31, 1994 0.500 -- 6.750 562,333 403,787 63,834
Combination stock option
plan 500,000
Granted 5.500-- 12.875 206,000 (206,000)
Became exercisable 5.500-- 12.875 139,103
Exercised 0.500-- 5.500 (160,000) (160,000)
Canceled 6.750 (10,000) (10,000) 10,000
------------------------- ---------------- -------------- ----------------
At December 31, 1995 $ 0.500-- 12.875 598,333 372,890 367,834
========================= ================ ============== ================
</TABLE>
F-14
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The Company extended the exercise date on 72,000 options issued under the
nonqualified stock option plan. As a result, compensation expense of
$387,000 will be recognized over the revised period of the options
through July 1997. Compensation expense related to these options was
$145,128 during the year ended December 31, 1995 and $49,383 for the nine
months ended September 30, 1996.
(7) Income Taxes
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------------------ ------------------ ------------------
<S> <C> <C> <C>
Federal $ 43,000 495,000 1,391,499
State 47,000 215,521 420,228
------------------ ------------------ ------------------
$ 90,000 710,521 1,811,727
================== ================== ==================
Current $ 90,000 804,495 1,922,229
Deferred -- (93,974) (110,502)
------------------ ------------------ ------------------
$ 90,000 710,521 1,811,727
================== ================== ==================
</TABLE>
A reconciliation of the difference between the provision for income taxes
and the income taxes at the statutory United States federal income tax rate is
as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------------------ -------------------- -----------------
<S> <C> <C> <C>
Computed expected provision $ 541,400 654,000 1,433,000
Change in beginning of the year
valuation allowance -- (258,000) (36,000)
State income taxes, net 107,000 142,000 253,000
Foreign losses not benefited -- 149,000 199,000
Benefit of loss carryforward (566,000) -- --
Other 7,600 23,521 (37,273)
------------------ ------------------ ------------------
$ 90,000 710,521 1,811,727
================== ================== ==================
</TABLE>
F-15
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The components of the Company's deferred tax asset and deferred tax
liability are as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1994 1995
------------------ ------------------
<S> <C> <C>
Deferred tax assets:
Foreign loss carryforwards $ 149,000 348,000
Reserves and accruals not currently deductible 93,974 270,598
Deferred compensation 74,000 48,785
------------------ ------------------
Total gross deferred tax assets 316,974 667,383
Less valuation allowance (185,000) (348,000)
------------------ ------------------
Net deferred tax asset 131,974 319,383
Deferred tax liabilities:
Difference between book and tax basis of
property 38,000 114,907
------------------ ------------------
Net deferred tax asset $ 93,974 204,476
================== ==================
</TABLE>
The valuation allowance at December 31, 1994 and 1995 is primarily
related to foreign losses for which there is no assurance of realizing a
tax benefit. A valuation allowance has not been provided for the other
deferred tax assets since realization of the deferred tax assets is
considered more likely than not.
During 1994 and 1995, tax benefits were recorded for the exercise of
stock options under the nonqualified stock option plan. The benefits of
approximately $482,000 and $340,000 were recorded directly to additional
paid-in capital.
(8) Research and Development Arrangements
The Company has been awarded two research and development contracts by
Sematech, the consortium of U.S. semiconductor manufacturers and the
government. Pursuant to the contracts, Sematech will reimburse the
Company 50% and 20% of the costs incurred under the first and second
project, respectively, up to a fixed amount. The remaining costs will be
charged to research and development by the Company. The contracts allow
the sharing of proprietary technology upon completion. For the year ended
December 31, 1995, the Company had incurred costs of $273,249 and was
reimbursed by Sematech for $74,196.
F-16
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Related Party Transactions
Effective May 1, 1991, the Company entered into an agreement with a
former director and officer of the Company, whereby this officer left the
employ of the Company and agreed not to compete with the Company for a
two-year period. The agreement required the Company to pay $3,125 a month
from May 1, 1991 through April 30, 1993 and to provide certain other
benefits to this individual. This agreement was extended for an
additional year, through April 30, 1994, and is presently on a
month-to-month basis.
(10) Commitments
The Company leases certain equipment under capital leases. These assets
have been capitalized at the present value of the future minimum lease
payments and are included with manufacturing tools, office furniture and
equipment at a cost of $485,983 and $1,043,082 with related accumulated
amortization of $177,183 and $266,014 at December 31, 1994 and 1995,
respectively. In addition, the Company is obligated under certain
noncancelable operating leases for the Company's manufacturing and office
space. Certain operating lease agreements provide for annual rent
escalations and renewal options.
The following is a schedule of the minimum future lease payments for the
years ending December 31:
<TABLE>
<CAPTION>
Rentals
receivable
Capital Operating under
leases leases subleases
----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
1996 $ 269,967 1,047,776 116,100
1997 224,954 804,993 115,700
1998 204,691 799,707 75,300
1999 162,406 665,585 78,900
2000 61,160 528,705 47,600
Thereafter -- 542,944 --
----------------- ----------------- -----------------
Total minimum future lease
payments 923,178 $ 4,389,710 433,600
================= =================
Less amounts representing interest
(at rates ranging from 7.5% to 10%) 140,463
-----------------
Present value of net minimum
future lease payments $ 782,715
=================
</TABLE>
Amortization expense applicable to assets under capital leases is charged
to depreciation and amortization expense.
F-17
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Rental expense for the years ended December 31, 1993, 1994 and 1995 was
$361,871, $446,422 and $723,396, respectively.
The Company has a bank lease line of credit for $1,000,000 for equipment
leasing. The non-use fee under the lease line is .0075%. At December 31,
1995, $497,835 was outstanding under the lease line and $502,165 was
available.
(11) Business Segment
The Company is engaged in one business segment, the development,
manufacturing and marketing for industrial use of equipment to test
integrated and hybrid circuits. For the years ended December 31, 1993,
1994 and 1995, 6%, 5% and 11%, respectively, of the Company's sales were
outside of the United States. At December 31, 1994 and 1995, the Company
had approximately $568,000 and $1,855,000, respectively, of assets
located outside of the United States. One customer accounted for 16.0%
and 18.8% of net sales for the years ended December 31, 1994 and 1995,
respectively. Another customer accounted for 11.6% and 11.4% of net sales
for the years ended December 31, 1993 and 1994, respectively.
(12) Acquisition
On April 3, 1995, the Company acquired all of the outstanding stock of
Fresh Test Technology Corporation (Fresh Test), a probe card
manufacturer, for 712,500 shares of the Company's common stock. The
acquisition has been accounted for by the purchase method of accounting
and, accordingly, the purchase price has been allocated to the assets
purchased and the liabilities assumed based upon the fair values at the
date of acquisition. The excess of the purchase price over the fair
values of the net assets acquired was $2,120,505 and has been recorded as
goodwill, which is being amortized on a straight-line basis over eight
years. The purchase price of $2,662,969 plus acquisition costs of
$402,865 was allocated as follows:
Working capital $ 460,515
Property and equipment 462,611
Other assets 43,311
Patents and technology 90,840
Goodwill 2,120,505
Other liabilities 111,948
F-18
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The operating results of Fresh Test have been included in the
consolidated statement of income from the date of acquisition. The
following summary, prepared on a pro forma basis, presents the results of
operations as if the acquisition had occurred January 1, 1994:
<TABLE>
<CAPTION>
Nine months
ended
Year ended December 31, September 30,
-------------------------------------- -----------------
1994 1995 1995
----------------- ----------------- -----------------
(unaudited) (unaudited)
<S> <C> <C> <C>
Net sales $ 18,712,171 $ 27,601,795 19,446,606
Net income 998,856 2,543,690 1,871,418
Primary net income per share 0.24 0.62 0.46
Fully diluted net income per share
0.21 0.52 0.40
</TABLE>
The pro forma results are not necessarily indicative of what the actual
consolidated results of operations might have been if the acquisition had
been effective at the beginning of 1994 or a projection of future
results.
(13) 401(k) Plan
On April 1, 1993, the Company established the Cerprobe Corporation 401(k)
Plan (the Plan). Employees who have reached 18 years of age and who have
completed one year of service for the Company are eligible to participate
in the Plan. Participants may elect to defer up to 15% of their salary.
Any contribution by the Company is at its discretion. In 1993 and 1995
the Company accrued 25% of the participants' contributions or
approximately $28,000 and $90,000, respectively, as contributions to the
Plan. No matching Company contribution was made for 1994. The
participants are fully vested in their contributions and become fully
vested in the Company's contributions after three years of service.
(14) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires that the Company disclose
estimated fair values for its financial instruments. The following
summary presents a description of the methodologies and assumptions used
to determine such amounts.
The carrying amount of cash and cash equivalents approximates fair value
because their maturity is generally less than three months. The carrying
amount of marketable securities classified as available-for-sale
approximates fair value based on quoted market prices. The carrying
amount of accounts receivable, accounts payable and accrued expenses
approximates fair value as they are expected to be collected or paid
within 90 days of period-end. The fair value of notes payable, capital
lease obligations and other long-term obligations approximate the terms
in the marketplace at which they could be replaced. Therefore, the fair
value approximates the carrying value of these financial instruments.
F-19
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Supplemental Financial Information
A summary of additions and deductions related to the allowances for
accounts receivable and inventories for the years ended December 31, 1993, 1994
and 1995 follows:
<TABLE>
<CAPTION>
Balance at Balance at
beginning end of
of year Additions Deductions year
----------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1993 $ 20,000 (8,373) (1,627) 10,000
Year ended December 31, 1994 $ 10,000 24,000 (11,000) 23,000
Year ended December 31, 1995 $ 23,000 151,094 (1,094) 173,000
Allowance for obsolescence of
inventories:
Year ended December 31, 1993 $ 67,600 30,000 (49,100) 48,500
Year ended December 31, 1994 $ 48,500 67,200 (63,700) 52,000
Year ended December 31, 1995 $ 52,000 110,600 (79,600) 83,000
</TABLE>
(16) Quarterly Data (Unaudited)
The following table presents selected unaudited quarterly operating
results for the eight quarters ended December 31, 1995. The Company
believes that all necessary adjustments have been included in the amounts
stated below to present fairly the related quarterly results.
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------------------
1994 December 31 September 30 June 30 March 31
---- ----------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 4,140,349 3,376,850 3,395,927 3,338,359
Gross margin 2,090,645 1,010,416 1,497,706 1,438,752
Net income 421,032 45,958 373,429 372,404
Primary net income per share 0.12 0.01 0.11 0.11
Weighted average number of
common equivalent shares
outstanding 3,411,984 3,377,319 3,373,325 3,379,923
Fully diluted net income per
share $ 0.11 0.01 0.09 0.09
Weighted average number of
common equivalent shares
outstanding 4,001,907 4,006,327 3,992,620 4,006,032
</TABLE>
F-20
<PAGE>
CERPROBE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------------------
1995 December 31 September 30 June 30 March 31
---- ----------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net sales $ 8,130,183 6,834,260 6,171,529 4,962,665
Gross margin 3,814,490 3,282,633 3,023,215 2,271,864
Net income 710,705 512,158 614,649 564,735
Primary net income per share 0.16 0.12 0.15 0.16
Weighted average number of
common equivalent shares
outstanding 4,365,151 4,405,372 4,194,089 3,446,342
Fully diluted net income per
share $ 0.14 0.10 0.13 0.14
Weighted average number of
common equivalent shares
outstanding 5,004,326 4,992,874 4,858,662 4,041,342
</TABLE>
(17) Subsequent Event
On October 25, 1996, the Company entered into a definitive agreement to
purchase 100% of the outstanding common stock of C-Route, Inc. in
exchange for $4,600,000 in cash and 400,000 shares of the Company's
common stock. The merger is expected to be accounted for using the
purchase method of accounting. The merger does not require a vote by the
stockholders of the Company; however, the merger does require C-Route
shareholder approval. It is anticipated that the merger will be
consummated in the fourth quarter of 1996.
In connection with the merger, the Company entered into a real estate
purchase agreement with the principal shareholder of C-Route. Pursuant to
the terms of the agreement, the Company will purchase the land and
building owned by the principal shareholder and currently used by C-Route
for a total of $2,240,000, consisting of $1,200,000 in cash and the
assumption of a promissory note with a remaining principal balance of
$1,040,000.
F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
CROUTE, Inc.:
We have audited the accompanying consolidated balance sheets of CROUTE, Inc. and
subsidiaries as of December 31, 1994 and 1995, and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for each
of the years in the three-year period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CROUTE, Inc. and
subsidiaries as of December 31, 1994 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Dallas, Texas
February 16, 1996
<PAGE>
CROUTE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
----------------------- September 30,
Assets 1994 1995 1996
------ ---- ---- ----
(unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 347,799 523,620 339,467
Accounts receivable, net of allowance for doubtful
accounts of $24,056 in 1994, $31,426 in 1995
and $40,426 in 1996 663,094 1,123,109 1,086,576
Inventories (note 2) 213,645 232,869 324,664
Deferred income taxes (note 3) 5,633 - -
Other 3,739 28,922 134,288
----------- --------- ---------
Total current assets 1,233,910 1,908,520 1,884,995
Property and equipment, net (note 4) 768,036 1,819,637 2,111,824
Receivables from affiliate (note 5) 254,250 233,375 236,075
Other assets 30,019 37,620 39,433
----------- --------- ---------
$ 2,286,215 3,999,152 4,272,327
=========== ========= =========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 458,342 698,395 281,944
Accrued compensation and benefits 230,157 308,881 285,727
Income taxes payable (note 3) - 130,347 -
Other accrued expenses 140,403 327,430 110,189
Lease obligation, current portion (note 10) 33,965 183,287 357,804
Notes payable (note 6) 20,000 24,000 -
Notes payable to affiliates, current portion (note 5) 98,774 145,667 94,881
----------- --------- ---------
Total current liabilities 981,641 1,818,007 1,130,545
Lease obligation, net of current portion (note 10) 134,418 407,683 749,592
Notes payable to affiliates, net of current portion
(note 5) 217,602 159,582 97,989
Deferred income taxes (note 3) 147,279 - -
Deferred compensation and retirement plans
(notes 13 (b) and (c)) 55,431 67,803 33,593
Minority interest (note 7) 812,384 143,069 216,060
Commitments (note 10) Stockholders' equity (deficit):
Common stock, $.01 par value; 20,000,000 shares
authorized; shares issued and outstanding:
8,152,440 in 1994, 8,598,187 in 1995 and
8,599,888 in 1996 81,524 85,982 85,999
Additional paid-in capital 941,466 1,682,495 1,682,478
Retained earnings (accumulated deficit) (1,085,530) (365,469) 276,071
----------- --------- ---------
Total stockholders' equity (deficit) (62,540) 1,403,008 2,044,548
----------- --------- ---------
$ 2,286,215 3,999,152 4,272,327
=========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-23
<PAGE>
CROUTE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Nine months ended
Years ended December 31 September 30
------------------------------------ ------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues $ 6,586,064 5,957,369 8,694,282 6,308,892 7,872,191
Cost of sales 4,167,250 4,110,747 6,063,313 4,350,853 5,518,121
----------- --------- --------- --------- ---------
Gross profit 2,418,814 1,846,622 2,630,969 1,958,039 2,354,070
Selling and administrative expenses 1,521,470 1,329,371 1,604,245 1,092,281 1,506,293
----------- --------- --------- --------- ---------
Operating income 897,344 517,251 1,026,724 865,758 847,777
----------- --------- --------- --------- ---------
Other:
Interest expense (332,378) (77,978) (110,944) (55,965) (99,230)
Other income (expenses) - net (445) 6,567 26,876 59,827 16,689
----------- --------- --------- --------- ---------
(332,823) (71,411) (84,068) 3,862 (82,541)
----------- --------- --------- --------- ---------
Income before income taxes, minority
interest and extraordinary items 564,521 445,840 942,656 869,620 765,236
Income tax expense (note 3) 4,988 169,483 103,643 103,643 50,755
----------- --------- --------- --------- ---------
Income before minority interest
and extraordinary items 559,533 276,357 839,013 765,977 714,481
Minority interest in earnings of subsidiary (note 7) 143,558 297,722 118,952 126,835 72,941
----------- --------- --------- --------- ---------
Income (loss) before extraordinary
items 415,975 (21,365) 720,061 639,142 641,540
Extraordinary items - gain on restructuring
of debt (note 9) 304,000 2,908,043 - - -
----------- --------- --------- --------- ---------
Net income $ 719,975 2,886,678 720,061 639,142 641,540
=========== ========= ========= ========= =========
Earnings per common share:
Before extraordinary items .05 - .08 .07 .07
Extraordinary items .03 .34 - - -
--- --- --- --- ---
Earnings per common share .08 .34 .08 .07 .07
=== === === === ===
</TABLE>
See accompanying notes to consolidated financial statements.
F-24
<PAGE>
CROUTE, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Years ended December 31, 1993, 1994 and 1995 and the nine months ended September 30, 1996 (unaudited)
Retained Total
Common stock Additiona earnings stockholders'
------------ Treasury paid-in (accumulated equity
Shares Amount stock capital deficit) (deficit)
------ ------ ----- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992 5,887,593 $ 390,902 (154,922) - (4,532,183) (4,296,203)
Issuance of common stock as compensation
(note 13(d)) 42,500 - - - - -
Contribution from majority shareholder (note 9) - - - 36,000 - 36,000
Distribution to majority shareholder (note 11) - - - - (160,000) (160,000)
Net income - - - - 719,975 719,975
--------- --------- -------- --------- ---------- ----------
Balances at December 31, 1993 5,930,093 390,902 (154,922) 36,000 (3,972,208) (3,700,228)
Issuance of common stock as compensation
(note 13(d)) 40,000 - - - - -
Stock options exercised (note 12) 3,000,400 10 - - - 10
Cancellation of subsidiary preferred stock
(note 9) - - - 750,000 - 750,000
Formation of CROUTE, Inc. and issuance of
common stock in exchange for contribution
of CompuRoute and EMI common stock
(notes 1 and 8) (818,053) (309,388) 154,922 155,466 - 1,000
Net income - - - - 2,886,678 2,886,678
--------- --------- ------- --------- ---------- ---------
Balances at December 31, 1994 8,152,440 81,524 - 941,466 (1,085,530) (62,540)
Issuance of common stock in exchange for
contributed stock of EMI (note 8) 445,747 4,458 - (4,458) - -
Elimination of minority interest resulting from
dissolution of EMI (note 7) - - - 745,487 - 745,487
Net income - - - - 720,061 720,061
Balances at December 31, 1995 8,598,187 85,982 - 1,682,495 (365,469) 1,403,008
Issuance of common stock in exchange for
contributed stock of EMI (note 8) (unaudited) 1,701 17 - (17) - -
Net income (unaudited) - - - - 641,540 641,540
--------- --------- ------- --------- ------- ---------
Balances at September 30, 1996 (unaudited) 8,599,888 $ 85,999 - 1,682,478 276,071 2,044,548
========= ========= ======= ========= ======= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-25
<PAGE>
CROUTE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31 Nine months ended
-------------------------------------- September 30
------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operations:
Net income $ 719,975 2,886,678 720,061 639,142 641,540
Adjustments to reconcile net income to cash
flows provided from operations:
Depreciation and amortization 209,810 222,134 323,458 218,759 459,649
Loss on disposal of property and equipment 79,362 3,618 16,777 5,774 16,478
Gain on debt restructuring (note 7) (304,000) (2,908,043) - - -
Deferred income taxes - 141,646 (141,646) (127,855) -
Minority interest 143,558 297,722 118,952 126,835 72,941
Changes in assets and liabilities:
Accounts receivable, net (52,292) (149,440) (460,015) (515,901) 36,533
Inventories 30,657 14,709 (19,224) (796) (91,795)
Receivables from affiliate (236,028) (20,750) 20,875 20,875 (2,700)
Accounts payable (178,997) 36,099 240,053 82,761 (82,451)
Accrued expenses and other 221,951 54,611 278,123 (46,517) (274,555)
Income taxes (26,885) (4,988) 130,347 130,347 (130,347)
Other 38,110 (1,034) (32,564) (49,671) (107,179)
-------- -------- --------- -------- --------
Cash flows provided from operations 645,221 572,962 1,195,197 483,753 538,114
-------- -------- --------- -------- --------
Cash flows used by investing activities - purchases of
property and equipment (169,038) (113,922) (875,620) (373,090) (359,475)
-------- -------- --------- -------- --------
</TABLE>
(Continued)
F-26
<PAGE>
CROUTE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
Years ended December 31 Nine months ended
----------------------------------- September 30
------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Borrowings from affiliate $ - 24,000 105,000 55,000 -
Repayments to affiliates (227,500) (80,027) (106,322) (89,141) (112,379)
Borrowings from third parties 9,000 - - 13,000 -
Payments under capital leases and bank notes (183,866) (79,472) (142,434) (50,982) (250,413)
Issuance of common stock - 1,010 - - -
Payment of bank overdraft (50,569) - - - -
--------- ------ ------- ------ --------
Cash flows used by
financing activities (452,935) (134,489) (143,756) (72,123) (362,792)
--------- ------ ------- ------ --------
Net increase (decrease) in cash and cash equivalents 23,248 324,551 175,821 38,540 (184,153)
Cash and cash equivalents at beginning of year - 23,248 347,799 347,799 523,620
--------- ------ ------- ------ --------
Cash and cash equivalents at end of period 23,248 347,799 523,620 386,339 339,467
========= ======= ======= ======= =======
Supplemental cash flow information - interest paid 50,109 65,443 73,836 52,860 98,145
========= ======= ======= ======= =======
Noncash transactions:
Equipment purchased on capital leases 74,383 179,402 516,216 137,815 742,839
========= ======= ======= ======= =======
Bank debt repayment financed by majority
shareholder $ 142,598 - - - -
========= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-27
<PAGE>
CROUTE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994 and 1995
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) Description of Business
-----------------------
CROUTE, Inc. and subsidiaries (collectively, the "Company") design
and manufacture printed circuit boards ("PCB's") with emphasis on
prototype and low volume production products. The Company
specializes in providing high-performance device-under-test boards
for the U.S. semiconductor industry. The range of services offered
includes custom design, fabrication and assembly of PCB's.
(b) Principles of Consolidation and Basis of Presentation
-----------------------------------------------------
The consolidated financial statements include the accounts of
CROUTE, Inc. and its subsidiaries, CompuRoute, Incorporated
("CompuRoute") and Electronic Modules, Inc. ("EMI"). CROUTE, Inc.
was incorporated on November 21, 1994 by the majority shareholder
of CompuRoute and EMI. Subsequent to the formation of CROUTE,
Inc., the majority shareholder and certain of the minority
shareholders contributed their shares of CompuRoute and EMI common
stock to CROUTE, Inc. in exchange for shares of its common stock.
For periods prior to the incorporation of CROUTE, Inc., the
accompanying financial statements present the combined accounts of
CompuRoute and EMI at their carrying values. Subsequent to that
date, the financial statements present the consolidated balances
of CROUTE, Inc. and its subsidiaries. In all cases, intercompany
balances and intercompany transactions have been eliminated in
consolidation and combination.
(c) Financial Instruments
---------------------
Following are the carrying amounts and fair values of certain of
the Company's financial instruments as defined under SFAS No. 107,
Disclosures About Fair Values of Financial Instruments, at
December 31, 1994 and 1995:
<TABLE>
<CAPTION>
December 31, 1994 December 31, 1995
----------------- -----------------
Carrying Fair Carrying Fair
amount value amount value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Cash equivalents $ 266,764 266,764 478,840 478,840
Receivables from affiliate 254,250 See note 5 233,375 See note 5
Notes payable to affiliates
(note 5) 316,376 339,318 305,249 321,756
Note payable (note 6) - - 24,000 23,000
</TABLE>
The fair value of cash equivalents is based on quoted market
prices. The carrying values of other financial instruments such as
trade accounts receivable and trade accounts payable approximate
their fair values.
F-28 (Continued)
<PAGE>
CROUTE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994 and 1995
(d) Income Taxes
------------
The Company follows Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes. Under the asset and
liability method of Statement 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date.
(e) Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include highly liquid investments with
an original maturity of three months or less. Cash equivalents at
December 31, 1994 and 1995 consist of a money market account with
a commercial bank.
(f) Software Development Costs
--------------------------
The Company develops software for use in its manufacturing
process. The cost of developing the software, primarily a
programmer's salary, is capitalized in property and equipment and
amortized over five years, its estimated useful life. Software
development cost capitalized in 1994 and 1995 amounted to $34,205
and $10,875, respectively.
(g) Earnings Per Share
------------------
In view of the incorporation of CROUTE, Inc. and the ensuing
reorganization of the Company, the computation of earnings per
share in each period is based on the number of outstanding
C-Route, Inc. common shares at December 31, 1995.
(h) Revenue Recognition
-------------------
Product revenues are recognized upon shipment. Design services are
performed under short-term contracts; related revenues are
recognized upon completion of the design and acceptance by the
customer.
(i) Use of Estimates
----------------
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities
and the disclosure of contingent assets and liabilities to prepare
these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those
estimates.
F-29 (Continued)
<PAGE>
CROUTE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994 and 1995
(j) Interim Financial Information
-----------------------------
In the opinion of management, the unaudited interim consolidated
financial information of the Company contains all adjustments,
consisting only of those of a normal recurring nature, necessary
to present fairly the Company's financial position as of September
30, 1996 and the results of its operations and cash flows for the
nine months ended September 30, 1996 and 1995, and changes in
stockholders' equity (deficit) for the nine months ended September
30, 1996. The results of operations for the nine months ended
September 30, 1996 are not necessarily indicative of the results
to be expected for the full year.
(2) Inventories
-----------
Inventories are stated at the lower of average cost or market.
Inventories are summarized as follows:
December 31
---------------------
1994 1995
---- ----
Raw materials and supplies $ 124,476 144,510
Work in process 43,640 33,981
Finished goods 45,529 54,378
--------- -------
$ 213,645 232,869
========= =======
(3) Income Taxes
------------
Prior to the incorporation of CROUTE, Inc. in November 1994, EMI and
CompuRoute were separate taxpaying entities, although both were under the
control of CROUTE's principal shareholder. Subsequent to that date, EMI
and CompuRoute became subsidiaries of CROUTE, Inc. and joined in the
filing of a consolidated income tax return. In July 1995, CompuRoute
obtained the right to utilize EMI's net operating loss carryforwards to
offset future taxable income.
Income tax expense (benefit) is comprised of the following:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 4,988 25,580 403,257
State - 2,257 37,758
------- ------- -------
4,988 27,837 441,015
------- ------- -------
Deferred:
Federal - 130,161 (310,017)
State - 11,485 (27,355)
------- ------- -------
- 141,646 (337,372)
------- ------- -------
Total income tax expense $ 4,988 169,483 103,643
======= ======= =======
</TABLE>
F-30 (Continued)
<PAGE>
CROUTE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994 and 1995
Total income tax expense differed from the amounts computed by applying
the U.S. federal income tax rate of 34 percent to income before income
taxes, minority interest and extraordinary items as a result of the
following:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Computed "expected" tax
expense $ 191,937 151,586 320,503
State income taxes, net of
federal tax impact - 14,412 27,341
Realization of benefits of
operating loss carryforwards (192,981) (11,205) (279,023)
Alternative minimum taxes 4,988 - -
Other 1,044 14,690 34,822
--------- ------- -------
$ 4,988 169,483 103,643
========= ======= =======
</TABLE>
The Company's federal income tax liability was offset by operating loss
carryforwards of $577,761 in 1993, $3,280,664 in 1994 and $254,753 in
1995. Current tax expense in 1993 relates only to alternative minimum
taxes. The Company paid income taxes of $4,988 in 1994 and $106,949 in
1995. None were paid in 1993.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
December 31
-----------
1994 1995
---- ----
<S> <C> <C>
Deferred tax assets:
Accounts receivable, principally
due to allowance for doubtful accounts $ 5,633 11,627
Accrued vacation - 37,154
Deferred compensation 18,847 25,087
Operating loss carryforwards 503,532 265,714
-------- --------
Total gross deferred tax assets 528,012 339,582
Less valuation allowance (503,532) (176,585)
-------- --------
Net deferred tax assets 24,480 162,997
-------- --------
Deferred tax liabilities:
Property and equipment, due to
differences in depreciation 100,856 94,746
Software development costs, due to
differences in amortization 22,770 22,001
Other amounts not currently deductible 42,500 46,250
--------- -------
Total gross deferred tax liabilities 166,126 162,997
--------- -------
Net deferred tax liability $ 141,646 -
========= =======
</TABLE>
The Company has operating loss carryforwards of approximately $718,000 at
December 31, 1995 available to offset future taxable income, if any. The
carryforwards expire in 2008 through 2010.
F-31 (Continued)
<PAGE>
CROUTE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994 and 1995
(4) Property and Equipment
----------------------
Property and equipment are stated at cost and consist of the following:
December 31
-----------
1994 1995
---- ----
Production equipment $ 1,140,419 2,072,549
Leasehold improvements - 71,354
Software 162,256 322,857
Furniture, fixtures and equipment 282,737 321,099
1,585,412 2,787,859
----------- ---------
Less accumulated depreciation and amortization 817,376 968,222
----------- ---------
$ 768,036 1,819,637
=========== =========
Depreciation is calculated using the straight-line method over the
estimated useful life of the asset (5 years). Included in property and
equipment are $210,105 and $713,095 at December 31, 1994 and 1995,
respectively, of equipment under capital lease. Depreciation of these
assets is included in depreciation and amortization expense.
(5) Receivable from/Payable to Affiliates
-------------------------------------
The receivable from affiliate represents noninterest bearing amounts due
from an entity owned by the Company's majority stockholder. The
receivable has no specified due date and has been classified as a
noncurrent asset in the accompanying consolidated balance sheets because
it is not expected to be paid within the next year. Because the
instrument has no specified due date, its fair value cannot be
determined.
Following is a summary of amounts payable to affiliates (all unsecured):
<TABLE>
<CAPTION>
December 31
-----------
1994 1995
---- ----
<S> <C> <C>
Notepayable to majority stockholder for refinancing
of bank debt; interest at 15%; principal and
interest due in monthly installments of $5,000
(note 9) $ 101,218 53,189
Notepayable to entity owned by majority
stockholder for purchase of equipment; interest at
15%; principal and interest due in 60 monthly
installments (note 11) 196,602 157,835
Notes payable to affiliate; interest at 12%; principal
and interest due in monthly installments 18,556 94,225
--------- -------
316,376 305,249
Less current portion 98,774 145,667
--------- -------
$ 217,602 159,582
========= =======
</TABLE>
For purposes of determining their fair value, the notes have been
discounted at a market rate. The aggregate maturities of amounts payable
to affiliates is as follows: 1996, $145,667; 1997, $78,178; and 1998,
$81,404.
F-32 (Continued)
<PAGE>
CROUTE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994 and 1995
(6) Notes Payable
-------------
In July 1995, the Company purchased 301,418 shares of CompuRoute, Inc.
common stock from an individual for $4,000 in cash and a promissory note
for $39,000. The note is noninterest bearing and is due in 13 equal
monthly installments beginning in August 1995. At December 31, 1995, the
balance of the note was $24,000. For purposes of determining the note's
fair value, the cash flows have been discounted at a market rate.
During 1993, the Company's majority shareholder repaid a bank loan
amounting to $142,598 on behalf of the Company. The Company substituted
indebtedness to the majority shareholder for the bank debt.
(7) Minority Interest
-----------------
Minority interest includes the shares of common stock of CompuRoute and
EMI not contributed to CROUTE, Inc. for shares of CROUTE, Inc. common
stock. For CompuRoute, these interests amounted to approximately 19% in
1993 and 1994, and 16% in 1995. For EMI, these interests amounted to
approximately 8% in 1993, 1994 and 1995.
The balance of minority interest at December 31, 1994 includes the class
A preferred shares of EMI held by minority shareholders and the minority
interest in the net income of CompuRoute and EMI. In conjunction with the
winding down of EMI in 1995, the minority interests in the assets of EMI
were transferred to additional paid-in capital as reflected on the
consolidated statement of stockholders' equity (deficit). As a result,
the balance of minority interest at December 31, 1995 includes only the
minority interest in the net income of CompuRoute.
(8) Capitalization of CROUTE, Inc.
------------------------------
In December 1994, subsequent to the incorporation of CROUTE, Inc., the
majority shareholder of CompuRoute and EMI purchased 100,000 shares of
CROUTE, Inc. common stock for $1,000 and contributed his shares of
CompuRoute and EMI common and preferred stock to CROUTE, Inc. in exchange
for 8,052,440 shares of CROUTE, Inc. common stock.
During 1995 and 1996, certain other EMI shareholders contributed their
shares of EMI common and preferred stock to CROUTE, Inc. in exchange for
445,747 and 1,701 shares, respectively, of CROUTE, Inc. common stock.
(9) Restructured and Cancelled Debt and Subsidiary Preferred Stock
--------------------------------------------------------------
As of January 1, 1993, CompuRoute was in default on two promissory notes
to a financial institution aggregating $277,600 of principal and $22,080
of accrued interest. In August 1993, CompuRoute completed a restructuring
of the debt. The restructuring resulted in (a) the renewal of the
promissory notes with a total principal amount of $277,600, (b) the
creation of an interest note of $34,411 for accrued and unpaid interest,
and (c) the granting of an option to CompuRoute to repay 80% of the
principal amount and 100% of the accrued interest due under the
promissory notes by December 15, 1993 in exchange for forgiveness of the
remaining principal due on the promissory notes and forgiveness of the
interest note. CompuRoute elected to exercise this option, resulting in
an extraordinary
F-33 (Continued)
<PAGE>
CROUTE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994 and 1995
gain on debt restructuring of $86,750 in 1993. The payment to the
financial institution was financed with a loan from CompuRoute's majority
stockholder.
During 1991, CompuRoute borrowed $200,000 from a former officer in the
form of a promissory note bearing interest at 10.5%. No principal
payments were made on the promissory note. To enable CompuRoute to repay
a bank loan, the promissory note and related accrued interest were
forgiven in May 1993. As a result of this debt restructuring, the Company
recognized an extraordinary gain of $217,250 in 1993.
In 1993, EMI's majority shareholder forgave a promissory note issued by
EMI. The forgiveness was treated as a $36,000 contribution of capital
from the shareholder.
EMI issued 500,000 shares of class B preferred stock in 1990 in exchange
for cash of $750,000. Holders of this stock were not entitled to receive
dividends. The stock was convertible, at the option of the holder, into
common stock at a calculated ratio and the stock had a mandatory
redemption feature whereby EMI was obligated to redeem all outstanding
shares by 1995 at $1.50 per share.
In 1994, EMI entered into an agreement with the holders of its
convertible debentures and convertible class B preferred stock (the
"Investors"). Under the agreement, the Investors cancelled all amounts
and rights due to them under the convertible debentures, and cancelled
the 500,000 shares of EMI class B preferred stock which they held. The
Investors received a nominal sum and the right to collect royalties from
the future sale of certain EMI products. The debentures had a face value
of $2,000,000 and accrued interest of $888,043. The forgiveness of these
amounts was recorded as an extraordinary gain. The cancellation of the
preferred stock resulted in an increase in additional paid-in capital of
$750,000 as reflected on the consolidated statement of stockholders'
equity (deficit). No royalties have been paid under the agreement.
In 1994, EMI entered into an agreement with the holder of an EMI note
whereby the note was cancelled, resulting in a $20,000 gain reflected as
an extraordinary item in the consolidated statement of operations.
F-34 (Continued)
<PAGE>
CROUTE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994 and 1995
(10) Leases
------
The Company leases certain manufacturing equipment under capital leases
and noncancellable operating leases. In addition, the Company leases its
corporate and manufacturing facilities from its majority shareholder on a
month-to-month basis for $18,300 per month. Future minimum lease payments
under all such leases as of December 31, 1995 are as follows:
Capital Operating
leases leases
------ ------
1996 $ 229,391 103,348
1997 229,391 53,936
1998 185,522 20,451
1999 30,150 -
---- ------ -------
Total minimum lease payments 674,454 177,735
Less imputed interest 83,484 ========
---------
Capital lease obligation $ 590,970
=========
Rental expense on operating leases was $220,817 in 1993, $195,025 in 1994
and $169,554 in 1995.
(11) Other Related Party Transactions
--------------------------------
On December 31, 1993, the Company purchased manufacturing equipment from
an entity owned by the Company's majority stockholder for $230,000, which
purchase was financed by a promissory note. The equipment was recorded at
$70,000, the seller's historical cost net of accumulated depreciation,
and the remaining $160,000 was treated as a distribution to the majority
stockholder. The Company recognized $29,734 of interest expense on the
note during 1994 and $28,987 in 1995.
(12) Stock Options
-------------
During 1992, an option was granted to the majority shareholder for the
purchase of 3,000,000 shares of CompuRoute common stock for a total
exercise price of $10. This option was exercised in 1994.
CompuRoute's board of directors has also granted options to purchase
shares of CompuRoute common stock to certain employees. The board
determined the terms of each option, including exercise price, number of
shares and the rate at which each option is exercisable. At December 31,
1992, employees held 24,200 of such options. These options have an
exercise price equal to the fair market value of the shares on the date
granted ($.05 per share) and are exercisable upon the first anniversary
of the date of grant. 4,400 of these options were exercised in 1995, 400
in 1994 and none in 1993, leaving 19,400 of such options outstanding at
December 31, 1995.
F-35 (Continued)
<PAGE>
CROUTE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994 and 1995
(13) Employee Benefit Plans
----------------------
(a) Savings Plan
------------
CompuRoute implemented a contributory 401(k) plan (the "Plan") in
1994. CompuRoute makes a matching contribution equal to 25% of
employees' eligible contributions. Eligible contributions are
limited to 6% of an employee's compensation. Matching
contributions to the Plan by the Company were approximately
$19,000 in 1994 and $27,000 in 1995. In addition, discretionary
contributions of $20,000 in 1994 and $27,000 in 1995 were made to
the Plan by CompuRoute.
(b) Retirement Plan Obligation
--------------------------
CompuRoute implemented a nonqualified defined contribution
retirement plan for certain key employees in 1993. Under the terms
of the plan, CompuRoute may, at its discretion, allocate amounts
to the plan for grants made as bonuses and for other discretionary
grants. The plan is unfunded and the Company accrues interest on
the liability at a rate comparable to that being paid by local
banking institutions. Employees are eligible for distributions
after reaching age 65, retiring at age 62, or upon permanent
disability or death. Contributions to the plan by CompuRoute
amounted to $5,655 in 1993, $8,302 in 1994 and $10,709 in 1995.
(c) Deferred Compensation
---------------------
During 1993, the Company charged to expense $40,000 of deferred
compensation to the majority shareholder. The compensation remains
unpaid as of December 31, 1995 and the Company accrues interest on
the obligation at a rate comparable to that being paid by local
banking institutions.
(d) Stock Grants
------------
The Company issued at no cost 42,500 and 40,000 shares of
CompuRoute common stock to certain employees during 1993 and 1994,
respectively. Under the terms of the grants, the shares may only
be sold to the Company. If the employee desires to sell the
shares, the Company may, at its option, buy the shares at the
lesser of book value or market value. If the shareholder's
employment is terminated for any reason, the Company has the right
to repurchase the shares at book value. Compensation expense
associated with the grants was insignificant.
(14) Significant Customers
---------------------
One customer, a computer product manufacturer, accounted for
approximately 31%, 45% and 51% of the Company's revenues in 1993, 1994
and 1995, respectively.
F-36 (Continued)
<PAGE>
Appendix A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
by and among
C-ROUTE ACQUISITION, INC.,
a Delaware corporation
("Acquisition")
CERPROBE CORPORATION,
a Delaware corporation
("Cerprobe")
CROUTE, INC.,
a Texas corporation
("Company")
COMPUROUTE, INCORPORATED,
a Texas corporation
("CompuRoute")
and
SOUAD SHRIME
("Shrime")
Dated: October 25, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
The Mergers
-----------
<S> <C> <C>
1.1 Merger of CompuRoute and Company................................................................2
1.2 Merger of Company and Acquisition............................................................. 2
1.3 The Surviving Corporation..................................................................... 2
1.4 Effective Date................................................................................ 2
1.5 Approval of Merger............................................................................ 2
ARTICLE II
Effect of Merger on Existence, Assets and
Liabilities
2.1 Corporate Existence........................................................................... 2
2.2 Bylaws........................................................................................ 3
2.3 Certificate of Incorporation.................................................................. 3
2.4 Directors and Officers........................................................................ 3
2.5 Assets and Liabilities........................................................................ 3
2.6 Service of Process............................................................................ 3
2.7 Accounting Records............................................................................ 4
ARTICLE III
Exchange of the Company Stock
3.1 Company Stock................................................................................. 4
3.2 Exchange of the Company Stock and Issuance of the Cerprobe Stock.............................. 4
(a) Exchange............................................................................. 4
(b) Unsurrendered Certificates........................................................... 4
(c) Cerprobe Stock and Cash.............................................................. 5
(d) Adjustment to Cash Payment........................................................... 5
3.3 Stockholders After the Merger................................................................. 5
3.4 Rights of Dissenting Shareholders............................................................. 6
(a) CompuRoute.............................................................................6
(b) Company................................................................................6
3.5 Company Warrants and Options.................................................................. 6
3.6 Treasury Stock of Company..................................................................... 6
3.7 Fractional Shares............................................................................. 7
3.8 Cerprobe Common Stock and Cash................................................................ 7
ARTICLE IV
Shareholder Approval
4.1 Vote by Shareholders.......................................................................... 7
4.2 Payment of Expenses........................................................................... 8
4.3 Registration Statement........................................................................ 8
(a) Preparation.......................................................................... 8
(b) Amendments to Registration Statement................................................. 8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE V
Representations and Warranties
5.1 General Statement............................................................................. 8
5.2 Representations and Warranties of Cerprobe and Acquisition.................................... 8
(a) Organization.......................................................................... 9
(b) Power and Authority................................................................... 9
(c) Enforceability........................................................................ 9
(d) Cerprobe Stock........................................................................ 9
(e) Financial Statements of Cerprobe...................................................... 9
(f) Absence of Changes.................................................................... 9
(g) Absence of Conflicting Agreements; Requirements of Law............................... 10
(h) Accuracy of Documents, Representations and Warranties................................ 10
5.3 Representations and Warranties of Company and Shrime.......................................... 10
(a) Ownership of Stock................................................................... 11
(b) Power and Authority.................................................................. 11
(c) Enforceability....................................................................... 11
(d) Conflicts; Consents.................................................................. 11
(e) Capital Stock........................................................................ 12
(f) Subsidiaries and Shareholder Affiliates.............................................. 12
(g) Organization......................................................................... 12
(h) Qualification........................................................................ 13
(i) Assets............................................................................... 13
(j) Bank Accounts........................................................................ 13
(k) Ability to Conduct Business.......................................................... 14
(l) Real Property; Leases................................................................ 14
(m) Contracts............................................................................ 14
(n) Insurance............................................................................ 15
(o) Intellectual Property................................................................ 15
(p) Licenses and Permits................................................................. 16
(q) Taxes................................................................................ 16
(r) Labor Disputes; Unfair Labor Practices............................................... 16
(s) Financial Statements................................................................. 17
(t) Books and Records.................................................................... 17
(u) Liabilities.......................................................................... 18
(v) Subsequent Events.................................................................... 18
(w) No Material Changes.................................................................. 20
(x) ERISA................................................................................ 20
(y) Employees and Consultants............................................................ 21
(z) Litigation........................................................................... 21
(aa) Unasserted Claims.................................................................... 21
(ab) Absence of Product or Service Warranties............................................. 21
(ac) Absence of Judicial Orders........................................................... 22
(ad) Compliance with Law.................................................................. 22
(ae) Hazardous Materials.................................................................. 22
(af) Net Worth............................................................................ 22
(ag) Current Ratio........................................................................ 23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(ah) Accuracy of Documents, Representations and Warranties................................ 23
ARTICLE VI
Conduct Prior to the Closing
6.1 General........................................................................................23
6.2 Conduct by Shrime and Company................................................................. 23
(a) Access to Records.................................................................... 23
(b) Business in Ordinary Course.......................................................... 23
(c) Business............................................................................. 25
(d) Exclusivity.......................................................................... 25
(e) Equitable Relief..................................................................... 25
(f) Consents............................................................................. 26
(g) Vote for Merger...................................................................... 26
(h) Closing Financial Statements......................................................... 26
6.3 Joint Obligations of Cerprobe, Acquisition, Shrime and Company................................ 26
(a) Notice............................................................................... 26
(b) Performance.......................................................................... 27
(c) Approval of Merger................................................................... 27
(d) Confidentiality and Non-Solicitation................................................. 27
(e) Severability......................................................................... 27
6.4 Intercompany Obligations.......................................................................27
ARTICLE VII
Conditions Precedent to Closing
7.1 Conditions Precedent to Shrime's and Company's Obligations.................................... 28
(a) Representations and Warranties....................................................... 28
(b) Release of Guaranties................................................................ 28
(c) Cerprobe's and Acquisition's Obligations Performed................................... 28
(d) Cerprobe's and Acquisition's Closing Certificate..................................... 28
(e) Registration Statement............................................................... 28
(f) Real Estate.......................................................................... 28
(g) Lock-Up and Registration Agreement................................................... 28
(h) Approvals of Merger.................................................................. 29
(i) Merger Documents..................................................................... 29
(j) Legal Opinion........................................................................ 29
(k) Closing Price of Cerprobe Stock...................................................... 29
(l) No Suit, Proceeding or Investigation................................................. 29
7.2 Conditions Precedent to Cerprobe's and Acquisition's Obligations.............................. 29
(a) Representations and Warranties....................................................... 29
(b) Shrime's and Company's Obligations Performed......................................... 29
(c) Approvals and Consents............................................................... 29
(d) Registration Statement............................................................... 30
(e) Closing Certificate of Shrime........................................................ 30
(f) Lock-Up and Registration Agreement................................................... 30
(g) Environmental Reports................................................................ 30
(h) National Property.................................................................... 30
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(i) Real Estate.......................................................................... 30
(j) Escrow and Security Agreement........................................................ 30
(k) General Release...................................................................... 30
(l) Employments Agreements............................................................... 31
(m) Material Customer Contracts.......................................................... 31
(n) Company Options and Warrants......................................................... 31
(o) Approvals of Merger.................................................................. 31
(p) Dissenters........................................................................... 31
(q) Merger Documents..................................................................... 31
(r) Disclosure Schedules................................................................. 31
(s) Legal Opinion........................................................................ 31
(t) Restrictive Covenant Agreement....................................................... 31
(u) Indemnification Agreement............................................................ 31
(v) The CompuRoute Merger................................................................ 32
ARTICLE VIII
Closing
8.1 Time and Place of Closing..................................................................... 32
8.2 Form of Documents............................................................................. 32
ARTICLE IX
Post Effective Date Obligations
9.1 Further Acts.................................................................................. 32
9.2 Exchange...................................................................................... 32
ARTICLE X
Indemnification
10.1 Indemnification by Shrime..................................................................... 32
(a) General.............................................................................. 32
(b) Environmental........................................................................ 34
10.2 Indemnification by Cerprobe and Surviving Corporation......................................... 35
10.3 Notice and Right to Defend Third-Party Claims................................................. 35
10.4 Survival of Representations and Warranties.................................................... 36
ARTICLE XI
Termination
11.1 Right to Terminate............................................................................ 37
11.2 Remedies...................................................................................... 37
(a) Proceed.............................................................................. 37
(b) Decline to Proceed................................................................... 37
11.3 Right to Damages.............................................................................. 37
ARTICLE XII
Miscellaneous
12.1 Disclosure Schedules.......................................................................... 38
12.2 Fees.......................................................................................... 38
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12.3 No Employment Agreements...................................................................... 39
12.4 Notices....................................................................................... 39
12.5 Entire Agreement.............................................................................. 40
12.6 Waivers....................................................................................... 40
12.7 Severability.................................................................................. 41
12.8 Applicable Law................................................................................ 41
12.9 Construction.................................................................................. 41
12.10 Counterparts.................................................................................. 41
</TABLE>
<PAGE>
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION
----------------------------------------------
THIS AGREEMENT OF MERGER AND PLAN OF REORGANIZATION (this
"Agreement") is made and entered into this 25th day of October, 1996, by and
among C-ROUTE ACQUISITION, INC., a Delaware corporation ("Acquisition"),
CERPROBE CORPORATION, a Delaware corporation ("Cerprobe"), CROUTE, INC., a Texas
corporation ("Company"), COMPUROUTE, INCORPORATED, a Texas corporation
("CompuRoute"), and SOUAD SHRIME ("Shrime").
RECITALS
--------
A. CompuRoute is engaged in the design, manufacture and sale
of printed circuit boards ("PCB") for use in the semiconductor industry and for
semiconductor testing, and is also in the business of the design, manufacture
and sale of PCB-related designs used by the semiconductor industry (the "PCB
Business").
B. Company owns approximately eighty-nine percent (89%) of the
issued and outstanding capital stock of CompuRoute.
C. Acquisition is a newly formed wholly-owned subsidiary of
Cerprobe.
D. As of the date hereof, Shrime owns, either individually or
as the Independent Executrix for and the sole beneficiary of the estate of
George P. Shrime, approximately ninety-three percent (93%) of the issued and
outstanding capital stock of Company.
E. The Board of Directors of each of CompuRoute and Company
deems it advisable and in the best interests of CompuRoute, Company and their
respective shareholders that CompuRoute merge with and into Company pursuant to
the applicable provisions of the laws of the State of Texas immediately prior to
the proposed merger of Company with and into Acquisition as described in Recital
F herein.
F. The Board of Directors of each of Cerprobe, Acquisition,
and Company each deem it advisable and in the best interests of their respective
corporations and shareholders that Company merge with and into Acquisition
pursuant to the terms and conditions of this Agreement, and applicable
provisions of the laws of the State of Delaware and the State of Texas.
G. Shrime and the Board of Directors of each of Cerprobe,
Acquisition and Company have approved and adopted this Agreement as a plan of
reorganization within the provisions in Section 368(a)(1)(A) and Section
368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code").
<PAGE>
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing recitals and
the mutual covenants contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
The Mergers
-----------
1.1 Merger of CompuRoute and Company. Immediately prior to the
Merger (as hereinafter defined), CompuRoute shall be merged with and into
Company (the "CompuRoute Merger") and Company shall be the surviving
corporation.
1.2 Merger of Company and Acquisition. Company and Acquisition
each shall effect the merger of Company with and into Acquisition (the "Merger")
herein provided for, subject to the terms and conditions contained in this
Agreement.
1.3 The Surviving Corporation. Upon the Effective Date, as
hereinafter defined, Company shall be merged with and into Acquisition, and
Acquisition shall be the surviving corporation (hereinafter sometimes referred
to as the "Surviving Corporation").
1.4 Effective Date. The Merger shall become effective at (and
the term "Effective Date" shall mean) the time when the requisite Merger
Documents (as hereinafter defined) shall have been fully executed and filed
pursuant to the laws of the State of Delaware and the State of Texas, and all
other conditions precedent hereinafter enumerated having been satisfied or
waived.
1.5 Approval of Merger. The parties hereto shall take all
necessary actions to file the Merger Documents with, and obtain the approval for
such filing by, the respective Secretary of State for the State of Delaware and
the State of Texas.
ARTICLE II
Effect of Merger on Existence, Assets and
-----------------------------------------
Liabilities
-----------
2.1 Corporate Existence. The corporate identity, existence,
purposes, powers, franchises, rights, licenses, permits, authorities, privileges
and immunities of Acquisition, shall continue unaffected and unimpaired by the
Merger, and the corporate identity, existence, purposes, powers, franchises,
rights, licenses, permits, authorities, privileges and immunities of Company
shall be merged with and into Acquisition, and the Surviving Corporation shall
be fully vested therewith. The separate corporate existence of Company shall
cease upon the Effective Date. A Certificate of Merger will be filed in the
State of Delaware, and Articles of Merger will be filed in the State of Texas,
as are prescribed to effect the Merger in the States of Delaware and Texas (the
"Merger Documents").
2
<PAGE>
2.2 Bylaws. The Bylaws of Acquisition as in existence prior to
the Merger shall be and constitute the Bylaws of the Surviving Corporation, and
the same may thereafter be altered, amended or repealed in accordance with the
General Corporation Law of the State of Delaware, the Certificate of
Incorporation of the Surviving Corporation and the Bylaws of the Surviving
Corporation.
2.3 Certificate of Incorporation. Except for the name of the
Surviving Corporation which shall be changed to "CompuRoute, Inc.", the
Certificate of Incorporation of Acquisition as in existence prior to the Merger
shall be and constitute the Certificate of Incorporation of the Surviving
Corporation, and the same may thereafter be altered, amended or repealed in
accordance with the General Corporation Law of the State of Delaware, the
Certificate of Incorporation and the Bylaws of Acquisition.
2.4 Directors and Officers. The directors and officers of
Acquisition prior to the Merger shall be the directors and officers of the
Surviving Corporation after the Merger, and each shall hold office until his or
her successor is elected and qualified or until his or her earlier resignation
or removal. If on the Effective Date of the Merger a vacancy shall exist on the
Board of Directors or in any of the offices of the Surviving Corporation as the
same are specified above, such vacancy may thereafter be filled in the manner
provided by the Bylaws of the Surviving Corporation.
2.5 Assets and Liabilities. Upon the Effective Date, all
rights, privileges, powers, licenses, permits, authorities, franchises and
interests of each of Acquisition and Company, both of a public and private
nature, all of its or their property, real, personal and mixed, all debts due on
whatever accounts and property of every description and every interest therein
belonging to each of Acquisition and Company or due to each of Acquisition and
Company shall thereafter be deemed to be the rights, privileges, powers,
licenses, permits, authorities, franchises and interests of, and shall be vested
in, the Surviving Corporation without further act or deed as effectively as they
were theretofore vested in Acquisition or Company as the applicable case may be;
title to any real estate, or any interest therein, vested in each of Acquisition
and Company by deed or otherwise, shall not revert or in any way be impaired by
reason of the Merger, all of the rights of creditors of each of Acquisition and
Company shall be preserved unimpaired by the Merger, and all liens upon the
property of each of Acquisition and Company shall be preserved and unimpaired by
the Merger, limited to the property affected by such liens immediately prior to
the Effective Date; and all debts, liabilities and duties of each of Acquisition
and Company shall attach to the Surviving Corporation and may be enforced
against it to the same extent as if said debts, liabilities and duties had been
incurred or contracted by it. Any existing claim, action or proceeding pending
by or against Acquisition or Company may be prosecuted as if the Merger had not
taken place, or the Surviving Corporation may be substituted in its place.
Nothing herein is intended to or shall extend or enlarge the lien of any
indenture, agreement or other instrument executed or assumed by either
Acquisition or Company.
2.6 Service of Process. From and after the Effective Date, the
Surviving Corporation may be served with process in the State of Texas and the
Texas Secretary of State shall be the designated agent for service of process in
any proceeding for enforcement
3
<PAGE>
of any obligation of Company, as well as for enforcement of any obligation of
the Surviving Corporation arising from the Merger, including any suit or any
other proceeding to enforce the rights, if any, of a dissenting shareholder as
determined in an appraisal proceeding as allowed by law and pursuant to the
provisions of Section 3.4 of this Agreement.
2.7 Accounting Records. Upon the Effective Date, the assets,
liabilities, reserves and accounts of each of Acquisition and Company shall be
taken up on the books of the Surviving Corporation at the amounts at which they
respectively were carried on the books of Acquisition and Company, subject to
such adjustments as may be appropriate in giving effect to the Merger.
ARTICLE III
Exchange of the Company Stock
-----------------------------
3.1 Company Stock. All of the issued and outstanding capital
stock of Company as of the date of this Agreement and as of the Effective Date
shall hereinafter be referred to as the "Company Stock".
3.2 Exchange of the Company Stock and Issuance of the Cerprobe
Stock.
(a) Exchange. Each share of the Company Stock issued and
outstanding immediately subsequent to the CompuRoute Merger and prior to the
Effective Date shall upon the Effective Date, be surrendered to the Surviving
Corporation and exchanged for shares of the Cerprobe Stock and cash as
hereinafter provided. Each outstanding certificate evidencing the Company Stock
not surrendered on the Effective Date to the Surviving Corporation, which prior
to the Effective Date represented shares of the Company Stock, shall as of the
Effective Date be deemed for all purposes (other than the payment of dividends
or other distributions, if any, in respect of Cerprobe Common Stock) to be
cancelled and no longer represent shares of Company, but instead to represent
the right to receive that number of whole shares of the Cerprobe Stock and cash
into or for which the shares of the Company Stock shall have been exchanged
pursuant to this Section 3.2.
(b) Unsurrendered Certificates. Shares of the Company Stock
not surrendered upon the Effective Date are hereinafter referred to as the
"Unsurrendered Certificates." No interest shall be paid, and no dividend or
other distribution, if any, payable to the holders of shares of the Cerprobe
Stock shall be paid, to the holders of Unsurrendered Certificates; provided,
however, that upon surrender and exchange of such Unsurrendered Certificates
there shall be paid to the record holders of the stock certificate or
certificates issued in exchange for the Unsurrendered Certificates, the amount,
without interest thereon, of dividends and other distributions, if any, which
theretofore but subsequent to the Effective Date have been declared and become
payable with respect to the number of whole shares of the Cerprobe Stock into
which the Unsurrendered Certificates shall have been converted.
4
<PAGE>
(c) Cerprobe Stock and Cash. Upon the Effective Date, all of
the shares of the Company Stock shall be exchanged for a total of Four Million
Six Hundred Thousand Dollars ($4,600,000), subject to adjustment as provided in
Section 3.2(d) (the "Cash Payment"), and a total of 400,000 shares of Cerprobe's
Common Stock, par value $.05 per share (the "Cerprobe Stock"), on a pro-rata
basis taking into account costs attributable to the exercise of options to
acquire shares of Company Stock pursuant to Section 3.5 hereof. The shares of
the Cerprobe Stock shall have been registered under the Securities Act of 1933,
as amended (the "1933 Act"), and which for all Affiliates, as that term is
defined under the 1933 Act, shall be subject to Rule 145 promulgated under the
1993 Act. Each share of the Cerprobe Stock issued pursuant to Section 3.2 hereof
shall be fully paid and non-assessable. Appendix A-1 attached hereto sets forth
as of the date hereof the name of each shareholder of Company along with the
number and class of shares owned, directly and beneficially of record, by each
of the shareholders of Company. Appendix A-2 attached hereto sets forth as of
the Effective Date the following information: (i) the name of each shareholder
of Company; (ii) the number and class of shares owned, directly and beneficially
of record, by each shareholder, and (iii) the portion of the Cash Payment and
number of shares of the Cerprobe Stock that each of the shareholders of Company
will receive in exchange for all of their shares of the Company Stock, based
upon the following assumptions: (w) the CompuRoute Merger is consummated prior
to the Effective Date without the exercise of dissenter's rights of appraisal by
any shareholder and accordingly, the shareholders of CompuRoute become
shareholders of Company; (x) there is no change in ownership of either
CompuRoute or Company between the date hereof and the Effective Date except as a
result of the CompuRoute Merger or pursuant to the acceleration of options to
acquire Company Stock; (y) there is no adjustment to the Cash Payment pursuant
to Section 3.2(d); and (z) the consummation of the Merger pursuant to this
Agreement.
(d) Adjustment to Cash Payment. The Cash Payment shall be
reduced by Twenty-Five Thousand Dollars ($25,000) for each $0.0625 by which the
closing price per share of Cerprobe common stock on the Nasdaq National Market
on the trading day immediately preceding the Closing is greater than $10.125;
provided, however, that in no event shall the Cash Payment be reduced by more
than One Hundred Thousand Dollars ($100,000), and in no event shall the Cash
Payment be increased as a result of any decline in the price per share of
Cerprobe common stock.
3.3 Stockholders After the Merger. Immediately after the
Merger, Cerprobe will continue as the sole stockholder of Acquisition and the
shareholders of Company will, subject to the rights of dissenting shareholders
and the terms and conditions of this Agreement, be stockholders of Cerprobe.
5
<PAGE>
3.4 Rights of Dissenting Shareholders.
(a) CompuRoute. Notwithstanding anything in this Agreement to
the contrary, shares of CompuRoute stock that are issued and outstanding
immediately prior to the CompuRoute Merger and that are held by shareholders who
have not voted such shares in favor of the CompuRoute Merger and who shall have
delivered a written demand for appraisal and payment of the fair value of the
shareholders' shares in the manner provided in the Texas Business Corporation
Act (the "CompuRoute Dissenting Shares"), shall not be exchangeable for any
shares of the Cerprobe Stock or any portion of the Cash Payment as provided in
Section 3.2 hereof, unless and until such holder shall have failed to perfect or
shall have effectively withdrawn or lost his/her right to appraisal and payment
under the Texas Business Corporation Act. If such holder shall have so failed to
perfect or shall have effectively withdrawn or lost such right, his/her shares
shall thereupon be deemed to have been exchanged into and to have become an
equal number of shares of Company exchangeable for, upon the Effective Date, the
right to receive the number of shares of the Cerprobe Stock and portion of the
Cash Payment as provided by Section 3.2 hereof, without interest thereon and
subject to the other provisions of Section 3.2 hereof.
(b) Company. Notwithstanding anything in this Agreement to the
contrary, shares of the Company Stock that are issued and outstanding
immediately prior to the Effective Date and that are held by shareholders who
have not voted such shares in favor of the Merger and who shall have delivered a
written demand for appraisal and payment of the fair value of the shareholders'
shares in the manner provided in the Texas Business Corporation Act (the
"Dissenting Shares"), shall not be exchangeable for any shares of the Cerprobe
Stock or any portion of the Cash Payment as provided in Section 3.2 hereof,
unless and until such holder shall have failed to perfect or shall have
effectively withdrawn or lost his/her right to appraisal and payment under the
Texas Business Corporation Act. If such holder shall have so failed to perfect
or shall have effectively withdrawn or lost such right, his/her shares shall
thereupon be deemed to have been exchanged into and to have become exchangeable
for, upon the Effective Date, the right to receive the number of shares of the
Cerprobe Stock and portion of the Cash Payment as provided by Section 3.2
hereof, without interest thereon and subject to the other provisions of Section
3.2 hereof.
3.5 Company Warrants and Options. No Cerprobe Stock or any
other securities of Cerprobe of any nature and type whatsoever, including any
options or warrants to acquire the Cerprobe Stock or other securities of
Cerprobe shall be issued upon the effectiveness of the Merger. Prior to the
Closing, Company shall cause all options, warrants, or other rights to acquire
any of the Company Stock or to acquire any securities of Company to have become
fully vested, to have been exercised, and to be of no further force or effect.
3.6 Treasury Stock of Company. All shares of the Company Stock
owned directly or indirectly by Company as treasury stock, shall, upon the
Merger, be cancelled and all rights with respect thereto shall cease to exist,
and no shares of the Cerprobe Stock shall be issued or exchanged therefor.
6
<PAGE>
3.7 Fractional Shares. No fractional shares of the Cerprobe
Stock or any scrip shall be distributed upon the exchange of the Company Stock
for the Cerprobe Stock, but, in lieu thereof, all such fractional interests, if
any, shall be converted into the nearest whole share (half shares being rounded
down).
3.8 Cerprobe Common Stock and Cash. Subject to the other terms
and conditions contained in this Agreement, including but not limited to Section
3.2 hereof, on the Effective Date or as soon thereafter as practicable, but in
no event more than thirty (30) days after the effective tender of certificates
evidencing the Company Stock for exchange into the Cerprobe Stock and Cash
Payment, each of the shareholders of Company shall receive a stock certificate
evidencing the appropriate number of shares of the Cerprobe Stock and applicable
portion of the Cash Payment. The Cerprobe Stock to be issued pursuant to Section
3.2 hereof, will have been registered under the 1933 Act, and shall be subject
to Rule 145 promulgated under the 1933 Act for all Affiliates as defined in Rule
145. The certificates representing the Cerprobe Stock to be issued to all
Affiliates will bear the following legend (and stop transfer orders will be
placed against the transfer, hypothecation or other disposition thereof with
Cerprobe's transfer agent), along with such other legends as Cerprobe deems
reasonably appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED
PURSUANT TO A TRANSACTION SUBJECT TO RULE 145 OF THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND PURSUANT TO
EXEMPTIONS FROM REGISTRATION UNDER STATE SECURITIES LAWS. THE
SHARES MAY NOT BE OFFERED, SOLD, TRANSFERRED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT, (ii) PURSUANT TO THE PROVISIONS OF
RULE 145 UNDER THE ACT, OR (iii) PURSUANT TO OTHER EXEMPTIONS
FROM REGISTRATION UNDER THE ACT OR ANY APPLICABLE STATE
SECURITIES LAWS, WHICH, IN THE OPINION OF COUNSEL SATISFACTORY
TO THE CORPORATION, ARE AVAILABLE.
ARTICLE IV
Shareholder Approval
--------------------
4.1 Vote by Shareholders. To the extent required by applicable
law, Company, Acquisition and Cerprobe shall each (a) submit this Agreement to
their respective shareholders for approval at meetings called and held on such
date as is fixed by their respective Board of Directors or by written consent
action in lieu of such meetings, but in any event not later than December 31,
1996, and (b) use their respective reasonable best efforts to obtain the
affirmative vote or unanimous consent to the Merger, of all shareholders of
Company and Acquisition.
7
<PAGE>
4.2 Payment of Expenses. Cerprobe and Acquisition shall each
bear its own costs and expenses separately incurred in connection with the
approval and authorization of the Merger. Subject to the provisions of Section
12.2 hereof, all cost and expenses incurred by Company and CompuRoute in
connection with this Agreement and the CompuRoute Merger shall be borne by
Company or CompuRoute.
4.3 Registration Statement.
(a) Preparation. As soon as practicable Cerprobe
shall prepare and file with the Securities and Exchange Commission (the "SEC") a
Registration Statement on Form S-4 ("Registration Statement") with respect to
the Cerprobe Stock, and shall use its reasonable efforts to have the
Registration Statement declared effective by the SEC as soon as practicable.
Cerprobe shall also take such actions required to be taken under applicable blue
sky or securities laws in connection with the Cerprobe Stock prior to the
Effective Date. Each of Company and CompuRoute shall furnish Cerprobe, and
Shrime shall cause each of Company and CompuRoute to furnish Cerprobe, with all
information concerning Company and CompuRoute required for use in the
Registration Statement. Each of Company and CompuRoute shall take, and Shrime
shall cause each of Company and CompuRoute to take, such other actions as
Cerprobe may reasonably request in connection with the preparation of such
Registration Statement. None of the information furnished by or on behalf of
Company and CompuRoute for use in the Registration Statement shall contain any
material misstatement of fact or omit to state a material fact or any fact
necessary to make the statements contained therein not misleading.
(b) Amendments to Registration Statement. If, at any
time prior to the meeting of the shareholders of Company, it shall be necessary
to amend or supplement the Registration Statement to correct any statement or
omission with respect to Company or CompuRoute in order to comply with any
applicable legal requirements, Company or CompuRoute shall supply, and Shrime
shall cause Company or CompuRoute to supply, the necessary information to
Cerprobe.
ARTICLE V
Representations and Warranties
------------------------------
5.1 General Statement. The parties make the representations
and warranties to each other which are set forth in this Article V. No specific
representation or warranty shall limit the generality or applicability of a more
general representation or warranty. Representations and warranties of the
parties are initially made as of the date hereof and shall be true and correct
as of the Effective Date.
5.2 Representations and Warranties of Cerprobe and
Acquisition. To induce Company, CompuRoute and Shrime to enter into this
Agreement and to perform their respective obligations hereunder, and with full
knowledge that Company, CompuRoute and Shrime will rely thereon, Cerprobe and
Acquisition represent and warrant the truth, accuracy, and completeness of the
following:
8
<PAGE>
(a) Organization. Cerprobe and Acquisition are each
corporations duly formed, validly existing and in good standing under the laws
of the State of Delaware.
(b) Power and Authority. Each of Cerprobe and
Acquisition has full corporate power and authority to execute and deliver this
Agreement and the other agreements referenced herein to which Cerprobe or
Acquisition is a party, and to consummate the Merger and the other transactions
contemplated hereby. The execution and delivery by Cerprobe and Acquisition of
this Agreement and the other agreements referenced herein to which Cerprobe and
Acquisition are parties, and the consummation of the Merger and the other
transactions contemplated hereby and thereby, have been duly authorized and
approved by Cerprobe's and Acquisition's Board of Directors, as applicable, and,
except for the approval of the Merger by the shareholder of Acquisition as
provided in Section 4.1 hereof, no other corporate actions on the part of
Cerprobe or Acquisition are required to authorize the execution and delivery of
this Agreement, the other agreements referenced herein to which Cerprobe and
Acquisition are parties, or the consummation of the Merger or other transactions
contemplated hereby or thereby.
(c) Enforceability. This Agreement and the other
agreements referenced herein to which Cerprobe or Acquisition is a party have
been duly executed and delivered by Cerprobe or Acquisition, as applicable, and
constitute legal, valid and binding obligations of Cerprobe and/or Acquisition,
enforceable against Cerprobe or Acquisition, as applicable, in accordance with
their respective terms.
(d) Cerprobe Stock. The Cerprobe Stock, when issued
pursuant to Section 3.2 hereof, will be duly authorized, validly issued, fully
paid and non-assessable.
(e) Financial Statements of Cerprobe. Cerprobe has
previously delivered to Company true, complete and correct copies of the
following financial statements of Cerprobe and its subsidiaries (the "Cerprobe
Financial Statements"): (i) audited consolidated operating statement for the
twelve (12) month period ended December 31, 1995, and related notes thereto (the
"Audited Cerprobe P&L"); (ii) audited consolidated balance sheet as of December
31, 1995, and related notes thereto (the "Audited Cerprobe Balance Sheet");
(iii) unaudited consolidated operating statement for the nine (9) month period
ended September 30, 1996 (the "Unaudited Cerprobe P&L"); and (iv) unaudited
consolidated balance sheet as of September 30, 1996 (the "Unaudited Cerprobe
Balance Sheet"). The Cerprobe Financial Statements have been prepared from the
books and records of Cerprobe and its subsidiaries in accordance with generally
accepted accounting principles, applied on a basis consistent with prior
periods. Each of the Audited Cerprobe Balance Sheet and Unaudited Cerprobe
Balance Sheet fairly presents the financial condition of Cerprobe and its
subsidiaries, on a consolidated basis, as of the respective dates thereof. Each
of the Audited Cerprobe P&L and Unaudited Cerprobe P&L fairly presents the
results of the operations of Cerprobe and its subsidiaries, on a consolidated
basis, for the respective periods then ended. The Cerprobe Financial Statements
are attached to Schedule 5.2 (e) hereto.
(f) Absence of Changes. Since September 30, 1996,
except as disclosed in any reports filed with the SEC pursuant to the Securities
Exchange Act of 1934,
9
<PAGE>
as amended, there has not been any material adverse change in the financial
condition or results of operations of Cerprobe and its subsidiaries, considered
on a consolidated basis.
(g) Absence of Conflicting Agreements; Requirements
of Law. Neither the execution and delivery by Cerprobe or Acquisition of this
Agreement or any of the other agreements referenced herein to which Cerprobe or
Acquisition is a party, nor the consummation of the transactions contemplated
hereby or thereby, nor the issuance and delivery of the Cerprobe Stock, will
conflict with, violate or result in a breach of or default under (with or
without the giving of notice or the passage of time, or both) (i) any
organizational document, license, instrument, contract or agreement to which
Cerprobe or Acquisition is a party or by which Cerprobe or Acquisition or any of
their assets is bound; or (ii) any law, order, rule, regulation, unit,
injunction or decree that is applicable to Cerprobe or Acquisition, or any of
their assets. Neither the execution and delivery by Cerprobe or Acquisition of
this Agreement or the other agreements referenced herein to which Cerprobe or
Acquisition is a party, nor the consummation of the transactions contemplated
hereby or thereby, will require any consent, permit, license or approval of
(other than as provided in Section 4.1), or any filing with, any governmental or
private entity, body, or other person, firm or other entity, except for (A) the
filing with the Secretary of State of Texas and the Secretary of State of
Delaware of the applicable Merger Documents; (B) the filing of the Registration
Statement and applicable amendments thereto with the SEC; (C) the filing of
applicable blue sky documents; and (D) the eligibility of the Cerprobe Stock for
quotation on the Nasdaq National Market.
(h) Accuracy of Documents, Representations and
Warranties. The copies of all documents furnished to Company or Shrime and their
representatives by or on behalf of Cerprobe or Acquisition and its or their
representatives are true, complete and correct. No representation or warranty of
Cerprobe or Acquisition contained in this Agreement or the other agreements
referenced herein to which Cerprobe or Acquisition is a party, and no statement
contained in the exhibits, the schedules or the other documents delivered by or
on behalf of Cerprobe, Acquisition or its or their representatives pursuant to
or in connection with this Agreement or any of the transactions contemplated
hereby contains any untrue statement of a material fact, or omits to state any
material fact required to be stated herein or therein in order to make the
statements contained herein or therein not misleading.
5.3 Representations and Warranties of Company and Shrime. To
induce Cerprobe and Acquisition to enter into this Agreement and to perform
their respective obligations hereunder, and with full knowledge that Cerprobe
and Acquisition will rely thereon, Company, CompuRoute and Shrime, jointly and
severally, represent and warrant the truth, accuracy and completeness of the
following, subject only to the exceptions expressly and specifically set forth
in the schedules designated in this Section 5.3, which schedules are either
attached hereto or shall be delivered to Cerprobe on or before ten (10) business
days following the date hereof (collectively, the "Disclosure Schedules").
Except as otherwise specifically provided herein, for purposes of this Section
5.3 Company means both CROUTE, Inc. and CompuRoute:
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(a) Ownership of Stock. Appendix A-1 hereto sets
forth the name and address of each of the shareholders of record of the Company
Stock, as of the date hereof, along with the number and class of shares owned,
directly and beneficially of record, by each such shareholder, which shares in
the aggregate constitute all of the issued and outstanding shares of CROUTE,
Inc. and all of the Company Stock. Shrime has good and marketable title to, and
rightful possession of all of the issued and outstanding shares of the Company
Stock set forth next to her name on Appendix A-1 hereto. Each and all of the
shares of the Company Stock owned, directly and beneficially of record, by
Shrime are, and upon the exchange thereof for shares of Cerprobe Stock and cash
shall be, free and clear of all liens, claims, rights, charges, encumbrances,
and security interests of whatsoever nature or type.
(b) Power and Authority. Shrime has the full right,
power, authority, and capacity, for herself, and for and on behalf of Company,
to execute and deliver this Agreement and the other agreements referenced herein
to which Shrime or Company is or will be a party, and to cause Company to
consummate the CompuRoute Merger and the Merger, respectively, and the other
transactions contemplated hereby and thereby. Company has the full right, power
and authority to execute and deliver this Agreement and the other agreements
referenced herein to which Company is or will be a party, and to consummate the
CompuRoute Merger and the Merger as applicable and the other transactions
contemplated hereby and thereby, and such actions have been duly and validly
authorized and approved by Company's Board of Directors, and, except for the
approval of the CompuRoute Merger and the Merger by the shareholders of Company,
no other corporate actions on the part of Company are required to authorize the
execution and delivery of this Agreement, the other agreements referenced herein
to which Company is a party, or the consummation of the Merger, the CompuRoute
Merger or the other transactions contemplated hereby or thereby.
(c) Enforceability. This Agreement and each of the
other agreements referenced herein to which Shrime, Company, or any one of them,
is a party have been duly executed and delivered by Shrime and/or Company, as
applicable, and constitute legal, valid and binding obligations of Shrime and
Company, enforceable against Shrime and Company, as applicable, in accordance
with their respective terms.
(d) Conflicts; Consents. Except as set forth in
Schedule 5.3(d) hereof, neither the execution and delivery by Shrime or Company
of this Agreement or any of the other agreements referenced herein to which
Shrime or Company is a party, nor the consummation of the transactions
contemplated hereby or thereby, will conflict with, violate or result in a
breach of or default under (with or without the giving of notice or the passage
of time, or both): (i) the Articles of Incorporation or the Bylaws, and any
amendments thereto, of Company; (ii) any license, instrument, contract or
agreement to which Shrime or Company is a party or by which Shrime or Company or
any of the assets of Company is bound; or (iii) any law, order, rule,
regulation, writ, injunction or decree that is applicable to Shrime or Company
or any of the assets of Company. Neither the execution and delivery by Shrime or
Company of this Agreement or any of the other agreements referenced herein to
which Shrime or Company is a party, nor the consummation of the transactions
contemplated
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hereby or thereby, will result in the creation of any lien, claim, right,
charge, encumbrance or security interest of any nature or type whatsoever with
respect to any of the Company Stock or any of the assets of Company. Neither the
execution and delivery by Shrime or Company of this Agreement or the other
agreements referenced herein to which Shrime or Company is a party, nor the
consummation of the transactions contemplated hereby or thereby, will require
any consent, permit, license or approval of (other than approval by shareholders
of Company), or any filing with, any governmental or private entity, body, or
other person, firm or other entity, except for the filing with the Secretary of
State of Texas and the Secretary of State of Delaware of the applicable Merger
Documents.
(e) Capital Stock. CROUTE, Inc. has authorized
capital stock consisting of Twenty Million (20,000,000) shares of common stock,
$.01 par value per share, of which Eight Million Five Hundred Ninety-Nine
Thousand Eight Hundred Eighty-Eight (8,599,888) shares are presently issued and
outstanding and owned, directly and beneficially of record, by the shareholders
set forth on Appendix A-1. Each share of the Company Stock has been validly
authorized and issued, is fully paid and nonassessable, and is free of
preemptive rights of every nature and type. Except for the Company Stock, there
are no other authorized or outstanding securities of CROUTE, Inc. of any class,
kind or character whatsoever. Except for shares of capital stock to be issued in
connection with the CompuRoute Merger, there are no outstanding subscriptions,
options, warrants or other rights, agreements or commitments obligating CROUTE,
Inc. to issue any additional shares of capital stock, or any options or rights
with respect thereto, or any securities convertible into or exchangeable for any
shares of capital stock. There are no outstanding obligations of Company,
contractual or otherwise, to repurchase, redeem or otherwise acquire any
outstanding shares of the capital stock of Company.
(f) Subsidiaries and Shareholder Affiliates. Except
as disclosed in Schedule 5.3(f) hereto, Company does not have any subsidiaries
or any other equity investment in any entity. Except as disclosed in Schedule
5.3(f) hereto, neither Shrime nor any of the shareholders of Company who are
employees of Company, and to the knowledge and belief of Company and Shrime,
none of the shareholders of Company who are not employees of Company, has any
equity investments in any "Shareholder
Affiliates." For purposes of this Agreement, the term "Shareholder Affiliates"
shall mean all entities in which a shareholder of Company is an officer or
director, or in which a shareholder of Company, directly or indirectly, owns or
controls ten percent (10%) or more of the equity securities of the entity, and
which entity is engaged in any aspect of the PCB Business.
(g) Organization. Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas. The copies of the Articles of Incorporation and Bylaws of Company, and
all amendments thereto which are attached to Schedule 5.3(g) hereto, are true,
complete and correct copies of such documents, as presently in effect. The
minutes of, or the unanimous consents in lieu of, the meetings of the
shareholders and/or board of directors of Company that have been delivered to
Cerprobe or Acquisition are true, complete and correct copies of such minutes
and unanimous consents, and to the knowledge and belief of Shrime after due
inquiry, reflect the events that took place at or in lieu of such meetings.
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(h) Qualification. Company has qualified as a foreign
corporation, and is in good standing, under the laws of all jurisdictions where
the nature of its business or the nature or location of its assets requires such
qualification (all of such jurisdictions are referred to herein collectively as
the "Foreign Jurisdictions") or if not so qualified, the failure to be so
qualified will not result in a material adverse effect on its financial
condition, business, operations or prospects. Schedule 5.3(h) hereto, contains a
list of the Foreign Jurisdictions and a list of all addresses at which Company
conducts business or owns or holds assets.
(i) Assets.
(i) Company has good and marketable title
to and rightful possession of all of the assets reflected in the 1996 Balance
Sheet (as hereinafter defined) delivered to Cerprobe or Acquisition and attached
Schedule 5.3(s) hereto, and to all of the assets acquired since the date of the
1996 Balance Sheet (other than those assets disposed of after the date of the
1996 Balance Sheet only in the ordinary course of business and not in violation
of this Agreement), free and clear of any and all mortgages, liens, pledges,
privileges, claims, rights, charges, encumbrances and security interests of
whatsoever type or nature, except: (A) liens for current taxes not yet
delinquent; and (B) liens and liabilities disclosed in Schedule 5.3(i) hereto.
(ii) The inventories of Company reflected
in the 1996 Balance Sheet and those items of inventory acquired after the date
of the 1996 Balance Sheet until the Effective Date are carried on the books of
account of Company and are stated at not more than the lower of cost or market,
with adequate adjustments for obsolete or otherwise not readily marketable
items. The inventories of Company are in good and merchantable condition. Since
the date of the 1996 Balance Sheet, there have been no write-downs in the value
of the inventories or write-offs with respect to the inventories.
(iii) The accounts receivable existing on
the books of Company as of the date hereof is One Million One Hundred Fourteen
Thousand Five Hundred Fifty-One Dollars and Eighty-Seven Cents ($1,114,551.87)
(the "Existing Accounts Receivable"). The Existing Accounts Receivable together
with the Accounts Receivable incurred after the date hereof are good and
collectible within one hundred eighty (180) days following the Effective Date
and none of the accounts receivable are subject to the return of the merchandise
or other property, the selling price of which is represented thereby, or to
offsets or counterclaims, the extent of which is in excess of an allowance for
doubtful accounts of Forty Thousand Four Hundred Twenty-Six Dollars ($40,426).
(iv) The furniture, fixtures and equipment
of Company reflected in the 1996 Balance Sheet and items of furniture, fixtures
and equipment acquired since the date of the 1996 Balance Sheet to the Effective
Date are in good working condition.
(j) Bank Accounts. Schedule 5.3(j) hereto, sets forth
the name and location of each bank in which Company has an account, lock box or
safe deposit box, the number of each such account or box, a description of the
contents of each box, the names
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of all signatories to any account or box and the persons authorized to draw
thereon or have access thereto. No power of attorney exists from Company.
(k) Ability to Conduct Business. The assets reflected
in the 1996 Balance Sheet and those acquired since the date thereof to the
Effective Date, constitute all of the assets and properties of Company, and
constitute all of the assets and properties that are necessary to permit
Surviving Corporation to continue to conduct its business after the Effective
Date in the manner in which its business is presently being conducted by
Company.
(l) Real Property; Leases. A true, complete and
correct list of all real property of every kind, and all interests in real
property, which is owned, leased, occupied, or used by Company is disclosed in
Schedule 5.3(l) hereto.
(m) Contracts. Disclosed in Schedule 5.3(m) hereto,
is a true, complete and correct list of every (written or oral): (i) union,
collective bargaining or similar agreement, together with all amendments thereto
or interpretations thereof, such as arbitration decisions and the like; (ii)
profit sharing, deferred compensation, bonus, stock option, stock purchase,
pension, retainer, consulting, retirement, welfare (including, without
limitation, retiree welfare benefit) or incentive plan or agreement maintained
or sponsored by Company, or to which Company contributes; (iii) plan of Company
providing for "fringe benefits" to its employees or former employees, including,
but not limited to, vacation, sick leave, severance pay, medical,
hospitalization, life insurance and other plans, or related benefits; (iv)
employment agreement that is not terminable at will and without penalty on
thirty (30) days or less prior written notice or that provides for payments upon
or after termination; (v) agency, sales, brokerage, wholesaling, franchise,
distributorship or similar agreement or contract; (vi) loan agreement or letter
of credit; (vii) personal property lease; (viii) security or pledge agreement;
(ix) mortgage or deed of trust; (x) purchase commitment to, or contract or
agreement with, any supplier; (xi) contract or agreement relating to research
and development; (xii) license, authority or permit granted by Company to any
person or entity; (xiii) contract or agreement to which Company is a party or by
which Company or any of its assets is bound, which reasonably may be expected to
involve future obligations or benefits in excess of $12,000 in any one calendar
year; (xiv) contract or agreement to which Company is a party or by which
Company or any of its assets is bound, which is either individually or
collectively, material to the financial condition, assets, business or future
prospects of Company; (xv) contract or agreement to which Company is a party, or
by which Company or any of its assets is bound, regarding or pertaining to the
manufacture or supply of any products or services to any customer of Company,
whether an individual, corporation or other business entity; and (xvi) contract
or agreement to which Company and any of its customers is a party, which is
either individually or collectively, material to the financial condition,
assets, business or future prospects of Company (the "Material Customer
Contracts"). All of the foregoing are referred to in this Agreement individually
as a "Contract" and collectively as the "Contracts." Except where the lack of
effectiveness or enforceability would not result in a material adverse effect on
the financial condition or results of operations of Company, each of the
Contracts is in full force and effect and enforceable in accordance with its
respective terms and conditions, and will continue as such following the
Effective Date and the other transactions contemplated in this
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Agreement. Except where such default, termination or waiver would not result in
a material adverse effect on the financial condition or results of operations of
Company: (w) there is not existing any default, or event or condition which,
with or without the giving of notice or the passage of time, or both, would
constitute an event of default, by Company or any other party thereto under any
of the Contracts; (x) no party to any of the Contracts has a legal obligation
(statutory or contractual) to renegotiate the Contract; (y) no party to any of
the Contracts has given any notice of default or termination, nor does Shrime or
Company have any reason to believe that such notice will be given; and (z)
Company has not waived any material right under or with respect to any of the
Contracts. Neither Company nor Shrime believes, nor has any reason to believe,
that there is a likelihood that any of the customers of or suppliers to Company
will terminate its or their business relationship with Company for any reason
whatsoever, including, without limitation, by reason of the CompuRoute Merger,
the Merger and/or any change in ownership of Company. Except as specifically
disclosed on Schedule 5.3(m) hereto, there is not pending or contemplated, any
transactions between Company and any of its shareholders, or between Company
and/or any of the Shareholder Affiliates.
(n) Insurance. Schedule 5.3(n) hereto, contains a
description (identifying insurer, coverage, premiums, named insured, deductibles
and expiration date) of all policies of fire, liability and other forms of
insurance that currently are, or at any time within the past five (5) years have
been, maintained in force by or for the account of Company with respect to its
business and assets (such policies are hereinafter referred to as the
"Policies"). Company has been continuously, and is presently, insured by
insurers unaffiliated with Company with respect to its property and the conduct
of its business in such amounts and against such risks as are adequate to
protect its businesses and assets, including, without limitation, liability
insurance. Except as disclosed in Schedule 5.3(n), the insurance coverage
provided by the Policies presently in force will not in any material respect be
affected by, and will not terminate or lapse by reason of, the transactions
contemplated hereby. At no time subsequent to January 1, 1991 has Company been
denied insurance or indemnity bond coverage. At no time subsequent to January 1,
1991 has any insurance carrier cancelled or reduced any insurance coverage for
Company or given any notice or other indication of its intention to cancel or
reduce any such coverage.
(o) Intellectual Property. Company owns or holds all
of the rights to use all trademarks, trade names, fictitious names, service
marks, patents and copyrights that are used in the conduct of its business.
Disclosed in Schedule 5.3(o) hereto, is a true, complete and correct list of all
trademarks, trade names, fictitious names, service marks, patents, copyrights
and all registrations or applications with respect thereto, and all licenses or
rights under the same which are presently or which have been, during the past
two (2) years, owned or used by Company (collectively, the "Trademarks"). To the
knowledge and belief of Shrime and Company, none of the matters covered by the
Trademarks, nor any of the products or services sold or provided by Company, nor
any of the processes used or the business practices followed by Company,
infringes or has infringed upon any trademark, trade name, fictitious name,
service mark, patent or copyright owned by any person or entity (or any
application with respect thereto), or constitutes unfair competition. Except as
disclosed in Schedule 5.3(o) hereto,
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Company is not obligated to pay any royalty or other payment with respect to any
Trademark. To the knowledge and belief of Shrime and Company after due inquiry,
no person or entity is producing, providing, selling or using products or
services which would constitute an infringement of any of the Trademarks.
(p) Licenses and Permits. Schedule 5.3(p) hereto,
contains a true, correct and complete list of all licenses, permits, franchises,
certificates, consents, approvals, and authorizations (collectively "Licenses")
applied for, issued to, or owned, held or used by Company. Company has all
Licenses necessary for the conduct of its business and the ownership and use of
its assets, properties, the premises occupied by it and the conduct of its
business plans as presently contemplated, except where the failure to have any
such Licenses would not result in a material adverse effect on the financial
condition or results of operations of Company.
(q) Taxes. All federal, state, county, local,
foreign, and other taxes, including without limitation, income, excise, payroll,
sales, use, unemployment, social security, occupation, franchise, property, and
other taxes, duties or charges (collectively, "Taxes") levied, assessed, or
imposed upon Company or its business, assets or properties have been duly and
fully paid or have been adequately provided for on the Financial Statements (as
hereinafter defined). In addition, all filings, returns, and reports with
respect to Taxes required by any foreign or domestic law or regulation to be
filed by Company on or prior to the date hereof have been duly and timely filed.
There are no agreements, waivers or other arrangements (oral or written)
providing for extensions of time with respect to the assessment or collection of
unpaid Taxes, nor are there any actions, suits, proceedings, inquiries,
investigations or claims of any nature or kind whatsoever now pending or to the
knowledge and belief of Shrime and Company after due inquiry threatened, against
Company with respect to any such returns or reports, or any such Taxes, or,
except for the filing dated June 28, 1996 made by the Company with the Internal
Revenue Service requesting a change in accounting method, a copy of which
application is attached to Schedule 5.3(q) hereto, any matters under discussion
with any federal, state, county, local or other authority relating to Taxes.
(r) Labor Disputes; Unfair Labor Practices. Except as
disclosed in Schedule 5.3(r) hereto, there is no pending or to the knowledge and
belief of Shrime and Company after due inquiry, threatened labor dispute,
grievance, strike or work stoppage involving any of the employees of Company
which affects or which may affect the financial condition or results of
operations, assets or prospects of Company. There is no pending or to the
knowledge and belief of Shrime and Company after due inquiry, threatened charge
or complaint against or involving Company or any of its officers or employees,
by the National Labor Relations Board, the Occupational Health and Safety
Administration, the Department of Labor, or any similar federal, state or local
board or agency, or any representative thereof. There are no unfair employment
or labor practice charges or complaints presently pending or to the knowledge
and belief of Shrime and Company after due inquiry, threatened, by or on behalf
of any employee of Company.
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(s) Financial Statements.
(i) Company has previously delivered to
Cerprobe and/or Acquisition true, complete and correct copies of the following
financial statements of Company (collectively the "Financial Statements"): (a)
audited consolidated operating statement for the twelve (12) month period ended
December 31, 1993 (the "1993 P&L"); (b) audited consolidated balance sheet as of
December 31, 1994 (the "1994 Balance Sheet"), and operating statement for the
twelve (12) month period then ended (the "1994 P&L"); (c) audited consolidated
balance sheet as of December 31, 1995 (the "1995 Balance Sheet"), and operating
statement for the twelve (12) month period then ended (the "1995 P&L"); (d)
unaudited balance sheet as of June 30, 1996 (the "1996 Balance Sheet"), and
unaudited operating statement for the six (6) month period then ended (the "1996
P&L"); and (e) unaudited consolidated balance sheet as of June 30, 1996 (the
"1996 Consolidated Balance Sheet"), and unaudited consolidated operating
statement for the six (6) month period then ended (the "1996 Consolidated
Operating Statement"). The Financial Statements have been prepared from the
books and records of Company in accordance with generally accepted accounting
principles, applied on a basis consistent with prior periods. Each of the 1994
Balance Sheet, 1995 Balance Sheet and 1996 Balance Sheet fairly presents the
financial condition of Company as of the respective dates thereof. Each of the
1993 P&L, 1994 P&L and 1995 P&L fairly presents the results of the operations of
Company for the respective periods then ended. The 1996 Consolidated Balance
Sheet fairly presents the financial condition of Company, on a consolidated
basis, as of June 30, 1996. The 1996 Consolidated Operating Statement fairly
presents the results of the operations of Company, on a consolidated basis, for
the six (6) month period ended June 30, 1996. The Financial Statements are
attached to Schedule 5.3(s) hereto.
(ii) The Closing Financial Statements (as
hereinafter defined) to be delivered to Cerprobe pursuant to Section 6.2(h)
hereof, shall be prepared from the books and records of Company, in accordance
with generally accepted accounting principles, applied on a basis consistent
with prior periods. The Closing Balance Sheet (as hereinafter defined) will
present fairly the financial position of Company as of the date thereof. The
Closing P&L (as hereinafter defined) will present fairly the results of the
operations of Company for the period then ended. The Consolidated Closing
Balance Sheet (as hereinafter defined) will present fairly the financial
position of Company, on a consolidated basis, as of the date thereof. The
Consolidated Closing P&L will present fairly the results of the operations of
Company, on a consolidated basis, for the period then ended.
(t) Books and Records. The books and records of
Company with respect to its assets, businesses, operations, properties and
prospects have been maintained in accordance with generally accepted accounting
principles and in the usual, regular and ordinary manner, and all entries with
respect thereto have been made and all transactions have been properly accounted
for. All applicable corporate and other laws relating to the maintenance of such
books and records have been complied with by Company, except where the failure
to comply with such laws would not result in a material adverse effect on the
financial condition or results of operations of Company.
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(u) Liabilities. Except as either fully disclosed in
Schedule 5.3(u) hereto, or fully and properly reflected on or reserved for in
the 1996 Balance Sheet or incurred by Company after the date of the 1996 Balance
Sheet only in the ordinary course of business, and not in violation of this
Agreement, none of which are either individually or collectively material, and
none of which would require accrual or disclosure under generally accepted
accounting principles, Company has no: (i) debts, liabilities or obligations of
a nature required to be reflected or disclosed in financial statements prepared
in accordance with generally accepted accounting principles; or (ii) other
debts, liabilities or obligations, whether accrued, absolute, contingent or
otherwise, whether due or to become due, relating to or arising out of any act,
transaction, circumstance or state of facts which occurred or existed on or
before June 30, 1996. Except as disclosed on Scheduled 5.3(u) hereto, since June
30, 1996, Company has not incurred any debts, liabilities or obligations,
whether accrued, absolute, contingent or otherwise, whether due or to become
due, other than debts, liabilities and obligations incurred in the ordinary
course of business of Company, none of which are either individually or
collectively material or incurred in violation of this Agreement and none of
which would require accrual or disclosure under generally accepted accounting
principles. Schedule 5.3(u) hereto, contains a true, complete and correct list
of all contracts and agreements pursuant to which Company has guaranteed or
indemnified any debt, liability and obligation of any other person or entity,
including, without limitation, the shareholders of Company (including, without
limitation, the execution of any document obligating Company with respect to any
performance or other bond), or pursuant to which Company has pledged or
otherwise encumbered any of its assets (including, without limitation, any
document obligating Company with respect to any performance or other bond).
Except as disclosed in Schedule 5.3(u) hereto, Company is not indebted to any of
its shareholders, nor are any of its shareholders indebted to Company in any
amount for any purpose.
(v) Subsequent Events. Except as set forth on
Schedule 5.3(v) hereto, since June 30, 1996, Company has not:
(i) created or suffered to exist any
material liens or encumbrances with respect to any of its assets which have not
been discharged, other than liens for nondelinquent taxes;
(ii) sold or transferred any of its assets
or property (including sales and transfers to any of its shareholders), other
than (A) the sale of inventories of products of Company sold in the ordinary
course of the business of Company, and (B) the office furniture of George Shrime
which will belong to and may be removed by Shrime;
(iii) suffered any material loss, or
material interruption in use, of any of its assets or properties (whether or not
covered by insurance), on account of fire, flood, riot, strike or other hazard
or Act of God;
(iv) suffered any material and adverse
change in its business, business activities, business prospects, or financial
condition;
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(v) written off any equipment as unusable
or obsolete or for any other reason;
(vi) waived any material rights;
(vii) paid any shareholder of Company or
any Shareholder Affiliate except for wages paid to shareholders of Company who
are also employees of Company, or been charged by any shareholder of Company or
any Shareholder Affiliate for goods sold or services rendered, or paid any
shareholder of Company or any Shareholder Affiliate or been charged by any
shareholder of Company or any Shareholder Affiliate for corporate overhead
expenses, management fees, legal or accounting fees, capital charges, or similar
charges or expenses;
(viii) paid, declared or set aside any
dividends or other distributions on its securities of any class, or purchased,
exchanged or redeemed any of its securities of any class;
(ix) incurred or committed to incur any
individual capital expenditures in excess of $10,000 or in the aggregate in
excess of $25,000;
(x) incurred any indebtedness for borrowed
money, except as incurred as a result of the equipment lease transaction between
Company and First Union as previously disclosed by Company to Cerprobe;
(xi) paid any compensation or bonus to any
shareholder except in the ordinary course of business or increased the
compensation payable to any employee except in the ordinary course of business;
(xii) except for fees paid to or incurred
with (A) KPMG Peat Marwick Main & Co., (B) Jones, Day, Reavis & Pogue ("Jones
Day") equal to or less than Fifty Thousand Dollars ($50,000), (C) Caldwell
Engineering, Inc. and (D) American Safety & Personnel, paid or incurred any
management or consulting fees, including, without limitation, fees paid to or
incurred with Southwest Securities, Inc. ("Southwest Securities");
(xiii) hired any employee for an annual
salary in excess of $35,000 other than employees identified on Schedule 5.3(y)
hereto;
(xiv) made any change in its Articles of
Incorporation or Bylaws;
(xv) merged or consolidated or agreed to
merge or consolidate with or into any corporation or other entity, other than
the CompuRoute Merger and the Merger; and
(xvi) without limitation by the enumeration
of any of the foregoing, entered into any material transaction other than in the
usual and ordinary course of
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business (the foregoing representation and warranty shall not be deemed to be
breached by virtue of the entry by Shrime and/or Company into this Agreement or
Shrime and Company consummating the CompuRoute Merger, the Merger or the other
transactions contemplated hereby).
(w) No Material Changes. Except as set forth on
Schedule 5.3(w) hereto, since June 30, 1996, Company has not suffered, or to
Company's and Shrime's knowledge and belief after due inquiry, been threatened
with, any material adverse change in its business or financial condition,
business activities, or business prospects, including, the existence or threat
of any labor dispute, or any material adverse change in, or loss of, any
material relationship between Company and any of its customers, suppliers or key
employees.
(x) ERISA.
(i) Except as disclosed in Schedule 5.3(x)
hereto, Company does not maintain, administer or contribute to, and did not at
any time during the past three (3) years, maintain, administer or contribute to,
any (A) employee pension benefit plan (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), whether
or not excluded from coverage under specific Titles or Subtitles of ERISA) (the
employee pension benefit plans disclosed in Schedule 5.3(x) hereto, are
hereinafter referred to as the "Pension Plans"); (B) employee welfare benefit
plan (as defined in Section 3(1) of ERISA, whether or not excluded from coverage
under specific Titles or Subtitles of ERISA) (the employee welfare benefit plans
disclosed in Schedule 5.3(x) hereto, are hereinafter referred to as the "Welfare
Plans"); or (C) bonus, deferred compensation, stock purchase, stock option,
severance plan, insurance or similar arrangement (the plans, insurance or
similar arrangements so disclosed in Schedule 5.3(x) hereto, are hereinafter
referred to as the "Employee Benefit Plans").
(ii) All Pension Plans, Welfare Plans and
Employee Benefit Plans and any related trust agreements or annuity contracts (or
any related trust instruments) are in substantial compliance and have been
operated in all material respects in accordance with ERISA, the Code, other
federal statutes, state law and the regulations and rules promulgated pursuant
hereto. A favorable determination as to the qualification under the Code of each
of the Pension Plans intended to be qualified under Section 401(a) of the Code
and each amendment thereto has been made by the Internal Revenue Service, and
all of the Pension Plans remain qualified under the Code.
(iii) To the knowledge and belief of Shrime
and Company after due inquiry, no Pension Plan, Welfare Plan, "disqualified
person" (as such term is used in Section 4975(c)(1) of the Code), nor any of the
shareholders of Company, including Shrime, has engaged in any transaction in
violation of Section 406 of ERISA or any "prohibited transaction" (as defined in
Section 4975(c)(1) of the Code) other than any such transaction which is exempt
under Section 408 of ERISA or Section 4975(d) of the Code.
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(iv) Company has not incurred any liability
to the Pension Benefit Guaranty Corporation ("PBGC") as a result of the
voluntary or involuntary termination of any Pension Plan subject to Title IV of
ERISA; there is currently no active filing by Company with the PBGC (and no
proceeding has been commenced by the PBGC) to terminate any Pension Plan subject
to Title IV of ERISA that is maintained or funded, in whole or in part, by
Company, and Company has not made a complete or partial withdrawal from a
multi-employer plan, as such term is defined in Section 3(37) of ERISA,
resulting in "withdrawal liability," as such term is defined in Section 4201 of
ERISA (without regard to subsequent reduction or waiver of such liability under
either Section 4207 or 4208 of ERISA).
(y) Employees and Consultants. Schedule 5.3(y)
hereto, contains a true and complete list of all of the employees of Company and
such list correctly reflects their salaries, hourly wages, other compensation
(other than benefits under Employee Benefit Plans, Pension Plans, or Welfare
Plans), dates of employment and titles. Except as disclosed in Schedule 5.3(y)
hereto, there are no oral or written agreements or other arrangements with
respect to employees or consultants to which Company is a party or by which
Company is bound. Except for claims that may arise pursuant to any law, order,
rule, regulation, writ, injunction or decree relating to discrimination on the
basis of age, sex, race, disability or religion, the employment of each employee
of Company is terminable at will, without cost to Company. Except as disclosed
in Schedule 5.3(y) hereto, Company does not owe any past or present employee any
sum other than for accrued wages or salaries for the current payroll period,
reimbursable expenses, accrued vacation and holiday pay and sick leave rights.
(z) Litigation. Except as disclosed in Schedule
5.3(z) hereto, there is no litigation or proceeding, in law or in equity, and
there are no proceedings or investigations or inquiries before any commission or
other governmental or administrative authority, pending or, to the knowledge and
belief of Company and Shrime after due inquiry, threatened, against Company with
respect to or affecting the business or financial condition of Company, or the
consummation of the CompuRoute Merger, the Merger or the other transactions
contemplated herein, or with respect to or affecting the Pension Plans, Welfare
Plans or Employee Benefit Plans of Company, or the use of the assets of Company
(whether by Cerprobe or the Surviving Corporation after the Effective Date or by
Company prior thereto).
(aa) Unasserted Claims. To the knowledge and belief
of Company and Shrime after due inquiry, there are no facts which, if known by a
potential claimant or governmental authority, would give rise to a claim or
proceeding which, if asserted or conducted with results unfavorable to Company,
would have a material adverse effect on the business, business prospects, or
financial condition of Company, the consummation of the CompuRoute Merger, the
Merger or the other transactions contemplated herein, or the use of the assets
or properties of Company after the Effective Date.
(ab) Absence of Product or Service Warranties. Except
as disclosed in Schedule 5.3(ab) hereto, or included in Schedule 5.3(m) hereto,
neither Company nor any officer, director, employee or agent of Company has made
any written, or
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to Company's and Shrime's knowledge and belief after due inquiry, any oral,
warranties with respect to the quality or absence of defects of the products or
services of Company that Company has sold or performed and which are in force as
of the date hereof. There are no material claims pending or anticipated or
threatened against Company with respect to the quality of or absence of defects
in such products or services. Company has not been required to pay direct,
incidental, or consequential damages to any person in connection with any of
such products or services at any time during the five (5) year period preceding
the date hereof.
(ac) Absence of Judicial Orders. Company is not a
party to any decree, order or arbitration award (or agreement entered into in
any administrative, judicial or arbitration proceeding with any governmental
authority) with respect to or affecting its properties, assets, personnel,
business activities, or business prospects.
(ad) Compliance with Law. Company is not in violation
of, or delinquent in respect to, any decree, order or arbitration award or law
or regulation of or agreement with, or any license or permit from, any
governmental authority to which any of its properties, assets, personnel or
business activities are subject, including, without limitation, laws and
regulations and the common law relating to occupational health and safety, equal
employment opportunities, fair employment practices, and sex, race, religion and
age discrimination, and the environment, the delinquency or violation of which
would have a material adverse effect on the financial condition or results of
operations of Company. Company has not received notice of any violation of a
type referred to in any portion of this Section 5.3(ad).
(ae) Hazardous Materials. Except as disclosed in
Schedule 5.3(ae), there has been no storage, treatment, generation, discharge,
transportation or disposal of medical, industrial, toxic or hazardous substances
or solid or hazardous waste (hereinafter, collectively "Hazardous Substances")
by or on behalf of Company, in violation of any foreign, Federal, state or local
law, statute, rule or regulation or the common law or any decree, order,
arbitration award or agreement with or any license or permit from any foreign,
Federal, state or local governmental authority. Except as disclosed in Schedule
5.3(ae), there has been no spill, discharge, leak, emission, injection, escape,
dumping, or release (hereinafter, collectively "Release") of any kind by, on
behalf of or attributable to Company into the environment (including, without
limitation, into air, soil, water or ground water) of any materials including,
without limitation, Hazardous Substances, as defined under any foreign, Federal,
state or local law, statute, rule or regulation other than those Releases
permissible under such law, statute, rule or regulation or allowable under
applicable permits. Schedule 5.3(ae) hereto, sets forth a complete list of all
aboveground and underground storage tanks, vessels, and related equipment and
containers that are subject to foreign, Federal, state or local laws, statutes,
rules or regulations, and sets forth their present contents, what the contents
have been at any time in the past, and what program of remediation, if any, is
contemplated or has been accomplished with respect thereto.
(af) Net Worth. As of the date hereof, and on the
Effective Date, the net worth (total assets less total liabilities)of Company on
a consolidated basis, is not less
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than One Million Eight Hundred Fifty-Six Thousand Four Hundred Ninety- Seven
Dollars ($1,856,497); provided, however, that the fees incurred by Company
Southwest Securities shall not be deducted in determining the net worth of
Company.
(ag) Current Ratio. As of the date hereof, and as of
the Effective Date, the current ratio (current assets to current liabilities) of
Company on a consolidated basis, is equal to or better than 1.7 to 1; provided,
however, that the fees incurred by Company with Southwest Securities shall not
be included in the calculation of current ratio.
(ah) Accuracy of Documents, Representations and
Warranties. The copies of all documents furnished to Cerprobe, Acquisition, or
any of its or their representatives by or on behalf of Company, Shrime or any of
her, its or their representatives, are true, complete and correct. No
representation or warranty of Company or Shrime contained in this Agreement or
the other agreements to be executed
by Company or Shrime pursuant hereto, and no statement contained in the
exhibits, the schedules or the other documents delivered by or on behalf of
Company or Shrime, or her, its or their representatives pursuant to or in
connection with this Agreement or the other agreements to be executed by Shrime
or Company pursuant hereto, or any of the transactions contemplated hereby or
thereby, contains any untrue statement of a material fact, or omits to state any
material fact required to be stated herein or therein in order to make the
statements contained herein or therein not misleading.
ARTICLE VI
Conduct Prior to the Closing
----------------------------
6.1 General. Except as otherwise specifically provided herein,
for purposes of this Article VI, Company means both CROUTE, Inc. and CompuRoute.
6.2 Conduct by Shrime and Company. Between the date hereof and
the Effective Date:
(a) Access to Records. Shrime shall cause Company to,
and Company and its employees, officers, agents, representatives and accountants
shall (i) fully cooperate with Cerprobe and Acquisition in the conduct by
Cerprobe and Acquisition of their due diligence review of Company, (ii) allow
the officers, employees, attorneys, consultants and accountants of Cerprobe and
Acquisition access during normal business hours to all of the properties, books,
contracts, documents and records of Company, and (iii) furnish to Cerprobe and
Acquisition such information as they may at any time and from time to time
reasonably request.
(b) Business in Ordinary Course. Shrime shall cause
Company, and Company shall, carry on its business and affairs as heretofore
carried on, and except in the usual and ordinary course of its business in
accordance with the past practices of Company, Shrime shall not permit Company
to and Company shall not, order, purchase or lease any products, inventory,
equipment, personalty or other items, or dispose of any of Company's assets or
leased property, or prepay any of its material obligations, incur any
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liabilities or obligations, hire or discharge any employee or officer or,
without limitation by specific enumeration of the foregoing, enter into any
other transaction. Without limiting the generality of the foregoing, Shrime
shall not permit Company to, and Company shall not itself, without the prior
written notice to Cerprobe with respect to all of the items below, and the prior
written consent of Cerprobe with respect to items (i), (xii) and (xiv) below:
(i) create or suffer to exist any liens or
encumbrances with respect to any of the assets or properties of Company which
shall not be discharged prior to the Effective Date, other than liens for
nondelinquent taxes or liens that may be incurred in connection with the
equipment lease transaction between Company and First Union as previously
disclosed by Company to Cerprobe;
(ii) incur any indebtedness for borrowed
money, except as incurred as a result of the equipment lease transaction between
Company and First Union as previously disclosed by Company to Cerprobe;
(iii) sell or transfer any material assets
or properties (including sales and transfers to any of the shareholders of
Company), except for (A) sales of inventories of products of Company which sales
shall only be made in the ordinary course of the business of Company and (B) the
transfer of the office furniture of George Shrime to Shrime;
(iv) acquire or enter into any agreement or
understanding (oral or written) to acquire the stock or assets of any other
person, firm, corporation or other entity;
(v) make any material change in the conduct
or nature of any aspect of the business of Company, whether in the ordinary
course of business or not, or whether or not the change has or will have a
material adverse affect on the business activities, financial condition, or
business prospects of Company;
(vi) waive any material rights;
(vii) pay any shareholder of Company or any
Shareholder Affiliate except for wages paid to any shareholder of Company who is
also an employee of Company, or be charged by any shareholder of Company or any
Shareholder Affiliate for goods sold or services rendered, or be charged by any
shareholder of Company or any Shareholder Affiliate for corporate overhead
expenses, management fees, legal or accounting fees, capital charges, or similar
charges or expenses;
(viii) incur or commit to incur any
individual capital expenditures in excess of $10,000, or in the aggregate in
excess of $25,000;
(ix) amend employment contracts or the
terms and conditions of employment of any officer, director or employee earning
total annual compensation in excess of $50,000, other than normal merit and cost
of living increases to employees
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in accordance with the general prevailing practices of Company existing prior to
the date of this Agreement;
(x) except for fees paid to or incurred
with (A) KPMG Peat Marwick Main & Co., (B) Jones Day equal to or less than Fifty
Thousand Dollars ($50,000), (C) Caldwell Engineering, Inc., and (D) American
Safety & Personnel, pay or incur any management or consulting fees, including,
without limitation, fees paid to or incurred with Southwest Securities, Inc.
("Southwest Securities");
(xi) hire any employee who shall have an
annual salary in excess of $35,000;
(xii) make any change in the Articles of
Incorporation or Bylaws of Company;
(xiii) merge or consolidate or agree to
merge or consolidate with or into any corporation or other entity, other than
the CompuRoute Merger or the Merger;
(xiv) make or permit Company to make any
distribution to any of its shareholders with respect to the Company Stock or
other securities, if any, of Company; or
(xv) enter into any transaction other than
in the usual and ordinary course of business, except as is associated with the
CompuRoute Merger or the Merger as contemplated herein.
(c) Business. Company shall retain, and Shrime shall
use her reasonable best efforts to cause Company to retain the business of
Company intact.
(d) Exclusivity. Shrime will not negotiate the
acquisition of Company and/or the Sanden Property (as hereinafter defined) with
any other person, firm or entity, other than Cerprobe and Acquisition, and will
not herself, nor permit Company to, directly or indirectly, enter into any
discussion with, or disclose any information in relation to, the Sanden Property
or the capital stock or assets of Company to any other person, firm, or other
entity prior to December 31, 1996, with a view to the sale or exchange of the
Sanden Property or the assets or capital stock of Company, including, without
limitation, the Company Stock or any portion thereof.
(e) Equitable Relief. Shrime and Company acknowledge
that the covenants contained in paragraph (d) of this Section 6.2 are a material
inducement for Cerprobe and Acquisition to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. Accordingly, Shrime and
Company acknowledge that the restrictions contained in paragraph (d) of this
Section 6.2 are reasonable and necessary for the protection of the business of
Cerprobe, Acquisition, Company, and the future business of the Surviving
Corporation, and that a breach of any such restriction could not adequately be
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compensated by damages in an action at law. In the event of a breach or
threatened breach by Shrime or Company of any of the provisions of paragraph (d)
of this Section 6.2, Cerprobe and/or Acquisition shall be entitled to obtain,
without the necessity of posting bond therefor, an injunction (preliminary or
permanent, or a temporary restraining order) restraining Shrime and/or Company
from the activity or threatened activity constituting or which would constitute
a breach, as well as damages and an equitable accounting of all earnings,
profits and other benefits arising from a violation, which right shall be
cumulative and in addition to any other rights or remedies to which Cerprobe
and/or Acquisition may be entitled.
(f) Consents. Company and Shrime shall use their
commercially reasonable best efforts and make every good faith attempt to obtain
any and all consents and estoppel letters reasonably requested by Cerprobe or
Acquisition to or in connection with the assignment of, or alternate
arrangements satisfactory to Cerprobe and Acquisition with respect to, any
contract, lease, license, permit, agreement, or other instrument, which is to be
an asset of the Surviving Corporation, or which may be necessary, appropriate,
or required in order to permit the conduct of the business and operations of the
Surviving Corporation after the Effective Date to be in all respects the same as
the conduct of the operations of Company prior to the Effective Date.
(g) Vote for Merger. Shrime shall vote all of her
shares of the Company Stock in favor of the Merger, and CRoute, Inc. will, and
Shrime will cause CRoute, Inc. to, vote all of its stock of CompuRoute in favor
of the CompuRoute Merger.
(h) Closing Financial Statements. Prior to the
Closing, Company shall deliver to Cerprobe the following financial statements
(collectively, the "Closing Financial Statements"): (i) unaudited balance sheet
of Company as of the month-end immediately preceding the date of the Closing
(the "Closing Balance Sheet"); (ii) unaudited operating statement of Company,
for the year-to-date period ending as of the month-end immediately preceding the
date of the Closing (the "Closing P&L"); (iii) unaudited consolidated balance
sheet of Company and CompuRoute dated as of the month-end immediately preceding
the date of the Closing (the "Consolidated Closing Balance Sheet"); and (iv)
unaudited consolidated operating statement of Company and CompuRoute for the
year-to-date period ending as of the month-end immediately preceding the date of
the Closing (the "Consolidated Closing P&L").
6.3 Joint Obligations of Cerprobe, Acquisition, Shrime and
Company. Between the date hereof and the Effective Date:
(a) Notice. Each party shall promptly give the other
party written notice of the existence or occurrence of any condition which
would make any representation or warranty of the notifying party untrue or which
might reasonably be expected to prevent the consummation of the CompuRoute
Merger, the Merger or the other transactions contemplated herein.
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(b) Performance. No party shall intentionally perform
or omit to perform any act which, if performed or omitted, would prevent or
excuse the performance of this Agreement by any party hereto or which would
result in any representation or warranty contained herein of that party being
untrue in any material respect as of the date hereof and as if originally made
on and as of the Effective Date.
(c) Approval of Merger. The parties hereto shall take
all actions necessary to cause the Boards of Directors of each of Acquisition
and Company to approve the Merger and the CompuRoute Merger, as applicable, and
to submit the issue of the Merger or the CompuRoute Merger, as applicable, to
their respective shareholders.
(d) Confidentiality and Non-Solicitation. If the
Merger is not consummated for any reason whatsoever, (i) the parties shall
return all written material obtained in connection with the proposed Merger to
the party from whom such information was obtained, and shall keep confidential
any confidential information that was acquired in connection with the proposed
Merger and shall not use such confidential information to unfairly compete with
the other parties for a period of two (2) years following the date of this
Agreement; and (ii) neither party shall directly or indirectly solicit for
employment any individual currently employed by another party for a period of
two (2) years following the date of this Agreement. If the Merger is
consummated, Shrime and the shareholders, officers, directors, agents and
representatives of Company shall keep confidential any confidential information
with respect to Company, Cerprobe and Acquisition and shall not use such
confidential information to unfairly compete with Cerprobe or the Surviving
Corporation.
(e) Severability. Each and every provision set forth
in each of Sections 6.2(d) and 6.3(d) is independent and severable from the
others, and no provision shall 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. The parties hereto agree that if any provision of each of Sections
6.2(d) and 6.3(d) shall be declared by a court of competent jurisdiction to be
unenforceable for any reason whatsoever, the court may appropriately limit or
modify such provision, and such provision shall be given effect to the maximum
extent permitted by applicable law.
6.4 Intercompany Obligations. Immediately prior to the
Effective Date, (a) all Intercompany Obligations (as hereinafter defined) shall
be deemed to have been paid in full and there shall be no further obligation or
liability with respect to any Intercompany Obligations existing as of the
Effective Date, and (b) Shrime and Company shall obtain the release of any lien
securing any Intercompany Obligation. For purposes of this Agreement,
"Intercompany Obligations" means all intercompany notes, cash advances,
payables, and accrued benefits between Shrime and any affiliate of Shrime,
including but not limited to, Micro Star, Inc., on the one hand, and Company or
any affiliate of Company, on the other hand.
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ARTICLE VII
Conditions Precedent to Closing
-------------------------------
7.1 Conditions Precedent to Shrime's and Company's
Obligations. The obligation of Shrime and Company to consummate the Merger and
other transactions contemplated herein is subject to fulfillment by Cerprobe or
Acquisition, or written waiver by Shrime and Company, of each of the following
conditions precedent on or prior to the Effective Date:
(a) Representations and Warranties. Each and every
representation and warranty made by Cerprobe and Acquisition shall have been
true and correct in all material respects when made and shall be true and
correct in all material respects as if originally made on and as of the
Effective Date.
(b) Release of Guaranties. Acquisition shall have
secured the release from liability for any personal guaranty issued by George P.
Shrime, Shrime or any of the other shareholders of Company with respect to any
liability of Company or CompuRoute for borrowed money. In addition, as to any
personal guaranty issued by George P. Shrime, Shrime or any of the other
shareholders of Company with respect to any liability of Company or CompuRoute
for matters other than borrowed money shall have been released, or Company shall
deliver an Agreement of Indemnification, in form and content mutually
satisfactory to Company and the party to be indemnified, pursuant to which,
Company will agree to indemnify such person from liability for any such personal
guaranty issued by them as a shareholder of Company.
(c) Cerprobe's and Acquisition's Obligations
Performed. All obligations of Cerprobe and Acquisition to be performed
hereunder, through and including the Effective Date, shall have been performed
in all material respects.
(d) Cerprobe's and Acquisition's Closing Certificate.
Cerprobe and Acquisition shall have executed a closing certificate, dated as of
the Effective Date, in form and content substantially similar to Exhibit A
attached hereto (the "Cerprobe Closing Certificate").
(e) Registration Statement. The Registration
Statement shall have become effective under the 1933 Act and shall not be the
subject of any stop order or proceedings seeking a stop order.
(f) Real Estate. Cerprobe shall have purchased from
Shrime, and Shrime shall have sold to Cerprobe, the land and buildings located
at 10365 Sanden Drive, Dallas, Texas (the "Sanden Property").
(g) Lock-Up and Registration Agreement. With respect
to Shrime's shares of the Cerprobe Stock, Cerprobe shall have executed and
delivered to Shrime a Lock-Up and Registration Agreement, in form and content
substantially similar to Exhibit B attached hereto (the "Lock-Up and
Registration Agreement").
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(h) Approvals of Merger. The sole shareholder of
Acquisition shall have taken all necessary actions to approve the Merger.
(i) Merger Documents. The Merger Documents shall have
been filed with and accepted for filing by, the Secretary of State for each of
the States of Texas and Delaware.
(j) Legal Opinion. Shrime and Company shall have
received an opinion of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears,
P.A., counsel for Cerprobe and Acquisition, dated as of the Effective Date, in
form and content substantially similar to Exhibit C attached hereto (the
"Cerprobe Legal Opinion").
(k) Closing Price of Cerprobe Stock. The closing
price of Cerprobe common stock on the Nasdaq National Market on the trading day
immediately preceding the Closing shall not be less than Seven Dollars ($7.00)
per share.
(l) No Suit, Proceeding or Investigation. No suit,
proceeding, inquiry or investigation shall have been commenced or threatened by
any governmental authority or private person on any grounds to restrain, enjoin
or hinder, or to seek damages on account of, the consummation of the CompuRoute
Merger, the Merger or any other transactions contemplated herein.
7.2 Conditions Precedent to Cerprobe's and Acquisition's
Obligations. Except as otherwise specifically provided herein, for purposes of
this Section 7.2, Company means both CROUTE, Inc. and CompuRoute. The obligation
of Cerprobe and Acquisition to consummate the transactions contemplated hereby
are subject to the fulfillment by Shrime and Company, or written waiver by
Cerprobe and Acquisition, of each of the following conditions precedent on or
prior to the Effective Date:
(a) Representations and Warranties. Each and every
representation and warranty made by Shrime and/or Company shall be true and
correct in all material respects when made and shall be true and correct in all
material respects as if originally made on and as of the Effective Date.
(b) Shrime's and Company's Obligations Performed. All
obligations of Shrime and Company to be performed hereunder through and
including the Effective Date shall have been performed in all material respects.
(c) Approvals and Consents. All of the consents,
approvals and estoppel letters referred to in Section 6.2(f) shall have been
obtained and, to the extent licenses, authorities or permits held by Company
will not be legally effective after the Effective Date, Cerprobe or Acquisition
shall have either obtained licenses, authorities and permits for Company on
substantially the same terms as such licenses, authorities and permits were
originally issued to Company, or shall have obtained binding commitments from
the applicable authorities to issue such licenses, authorities and permits to
the Surviving Corporation following the Effective Date. Cerprobe and Acquisition
shall have received all
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necessary consents to the Merger as deemed by either of them, their consultants
or lawyers, to be reasonably necessary or appropriate with respect to the Merger
or the business or assets of Company.
(d) Registration Statement. The Registration
Statement shall have become effective under the 1933 Act and shall not be the
subject of any stop order or proceedings seeking a stop order.
(e) Closing Certificate of Shrime. Shrime shall have
each executed a closing certificate, dated the Effective Date, in form and
content substantially similar to Exhibit D attached hereto ("Closing Certificate
of Shrime").
(f) Lock-Up and Registration Agreement. Shrime shall
have executed and delivered to Cerprobe the Lock-Up and Registration Agreement.
(g) Environmental Reports. Cerprobe and Acquisition
shall have received reports, in form and content satisfactory to Cerprobe and
Acquisition, in the exercise of Cerprobe's and Acquisition's sole discretion,
from Cerprobe's and Acquisition's independent environmental consultants and its
legal counsel, concerning the properties presently used by Company, including,
without limitation, the properties located at 1041 Jupiter Street, Garland,
Texas, the Sanden Property, and the property formerly used by CompuRoute located
at 2511 National Drive, Garland, Texas (the "National Property"), which reports
shall be based in part on the results of a Phase I and, with respect to the
National Property, a Phase II environmental site assessment which Company, shall
cause to be completed prior to the date of the Closing.
(h) National Property. As of the Closing, Company
shall not have any liabilities or obligations, including, without limitation,
any liability or obligation with respect to the environment, with respect to the
real property and buildings located at the National Property. As of the Closing,
Company shall have completed the Phase II environmental site assessment and all
necessary remediation with respect to the National Property.
(i) Real Estate. Cerprobe shall have purchased from
Shrime, and Shrime shall have sold to Cerprobe, the Sanden Property.
(j) Escrow and Security Agreement. Shrime shall have
executed an Escrow and Security Agreement, in form and content substantially
similar to Exhibit E attached hereto (the "Escrow and Security Agreement").
(k) General Release. Shrime shall have executed a
General Release, in form and content substantially similar to Exhibit F attached
hereto (the "General Release").
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(l) Employment Agreements. Acquisition shall have
entered into Employment Agreements with Gary Fuller, Tom McMinn, Terry Ritz and
Phil Walden on terms and conditions satisfactory to Acquisition and such
individuals.
(m) Material Customer Contracts. All Material
Customer Contracts, if any, of Company in effect as of the date of this
Agreement shall be in effect as of the Effective Date, and Company shall have
obtained all necessary consents and approvals of the change of control and
ownership of Company from applicable customers.
(n) Company Options and Warrants. There shall not
exist any outstanding subscriptions, options, warrants or other rights,
agreements or commitments obligating Company to issue any additional shares of
the capital stock, or any options or rights with respect thereto, or any
securities convertible into or exchangeable for any shares of the capital stock
or other securities of Company.
(o) Approvals of Merger. The shareholders of CROUTE,
Inc., by a vote of such shareholders holding of record not less than ninety
percent (90%) of the Company Stock, shall have taken all actions reasonably
deemed appropriate and necessary to approve the Merger.
(p) Dissenters. Dissenters Rights under the Texas
Business Corporation Act shall not have been effectively preserved as of the
Effective Date by holders of more than five percent (5%) of Company Stock.
(q) Merger Documents. The Merger Documents shall have
been filed with, and accepted for filing by, the Secretary of State for each of
the States of Texas and Delaware.
(r) Disclosure Schedules. Cerprobe and Acquisition
shall have received from Shrime and Company the Disclosure Schedules referred to
in Section 5.3 hereof and all amendments and modifications thereto delivered
pursuant to Section 12.1, and Cerprobe and Acquisition shall, in the exercise of
their sole discretion, be satisfied with the nature and extent of the
disclosures made therein and the representations and warranties of Shrime as
modified by the disclosures contained in the Disclosure Schedules.
(s) Legal Opinion. Cerprobe and Acquisition shall
have received an opinion of Jones Day, counsel for Shrime and Company, dated as
of the Effective Date, in form and content substantially similar to Exhibit G
attached hereto (the "Company Legal Opinion").
(t) Restrictive Covenant Agreement. Shrime shall have
executed a Restrictive Covenant Agreement, in form and content substantially
similar to Exhibit H attached hereto (the "Restrictive Covenant Agreement").
(u) Indemnification Agreement. Shrime shall have
executed an Indemnification Agreement, in form and content substantially similar
to Exhibit I attached hereto.
31
<PAGE>
(v) The CompuRoute Merger. Immediately prior to the
Closing, the CompuRoute Merger shall have been consummated pursuant to which (i)
shareholders of CompuRoute shall have received one share of CROUTE, Inc. for
each share of CompuRoute without regard to any restrictions thereon; (ii) all
options to acquire shares of CompuRoute shall have been converted to options to
acquire an equal number of CROUTE, Inc. shares at the same exercise price; and
(iii) all shares of CompuRoute stock owned by CROUTE, Inc. shall have been
cancelled.
ARTICLE VIII
Closing
-------
8.1 Time and Place of Closing. The closing of the Merger (the
"Closing") shall take place on or before December 31, 1996, at 10:00 a.m., local
time, at the offices of Jones Day, 2300 Trammel Crow Center, 2001 Ross Avenue,
Dallas, Texas, or such other date, or at such other place, as shall mutually be
agreed upon by the parties hereto.
8.2 Form of Documents. At the Closing, all documents which
Shrime and Company shall deliver shall be in form and content reasonably
satisfactory to Cerprobe and Acquisition and their legal counsel, and all
documents which Cerprobe and Acquisition shall deliver shall be in form and
content reasonably satisfactory to Shrime and Company and their legal counsel.
ARTICLE IX
Post Effective Date Obligations
-------------------------------
9.1 Further Acts. The parties shall execute such further
documents, and perform such further acts, as may be necessary to consummate the
CompuRoute Merger, the Merger, and the other transactions contemplated herein on
the terms herein contained, and to otherwise comply with the terms of this
Agreement.
9.2 Exchange. Within thirty (30) days of the Effective Date,
Cerprobe shall deliver to each of the shareholders of Company for execution,
documents for the exchange of their shares of the Company Stock for their
respective portion of the Cerprobe Stock and Cash Payment.
ARTICLE X
Indemnification
---------------
10.1 Indemnification by Shrime.
(a) General. Except as otherwise specifically
provided herein, for purposes of this Article X, Company means both CROUTE, Inc.
and CompuRoute.
32
<PAGE>
(i) Subject to Sections 10.3, 10.4 and 10.5
hereof and to the following Subsections (ii) and (iii), Shrime shall defend,
indemnify and hold Cerprobe, Surviving Corporation, and their officers,
directors and shareholders harmless for, from and against any and all damages,
losses, liabilities (absolute and contingent), fines, penalties, costs and
expenses (including, without limitation, reasonable counsel fees and costs and
expenses incurred in the investigation, defense or settlement of any claim
covered by this indemnity) ("Losses") with respect to or arising out of any
demand, claim, inquiry, investigation, proceeding, action or cause of action
("Claim") which Cerprobe, Surviving Corporation, or their officers, directors
and shareholders may suffer or incur by reason of: (a) the inaccuracy of any of
the representations or warranties of Shrime and/or Company contained in this
Agreement, or any of the agreements, certificates, documents, exhibits or
schedules delivered in connection with this Agreement; (b) the failure to comply
with, or the breach or default by Shrime or Company of any of the covenants,
warranties or agreements made by Shrime and/or the Company contained in this
Agreement, or any of the agreements, certificates, documents, exhibits or
schedules delivered in connection with this Agreement; (c) any untrue or alleged
untrue statement of material fact contained in any information furnished to
Cerprobe by Shrime or Company for use in the Registration Statement, or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances in which
made, not misleading; and (d) the failure to deliver to the shareholders of
Company a copy of the prospectus portion of the Registration Statement and any
amendments thereto after Cerprobe has furnished Company with copies thereof.
(ii) Notwithstanding the foregoing
Subsection (i), Shrime's indemnification obligations shall be limited as set
forth in this Subsection (ii) and Subsection (iii). At the Effective Date, an
escrow ("Escrow") shall be established with a bank or trust company (the "Escrow
Agent") mutually agreeable to Cerprobe and Shrime on the terms established in
the Escrow and Security Agreement, for one hundred fifty thousand (150,000)
shares of the Cerprobe Stock (the "Escrow Shares"). At the Effective Date,
Shrime shall deliver to the Escrow Agent a certificate or certificates for the
Escrow Shares, together with assignments separate from the certificate or
certificates executed in blank. Subject to the terms and conditions of the
Escrow and Security Agreement, upon the first anniversary of the Effective Date
the number of Escrow Shares shall be reduced to one hundred thousand (100,000)
shares, and fifty thousand (50,000) shares shall be delivered to Shrime by the
Escrow Agent as soon as practicable, and upon the second anniversary of the
Effective Date, the remaining Escrow Shares shall be delivered to Shrime by the
Escrow Agent as soon as practicable. The shares so delivered to the Escrow Agent
are herein referred to as the "Escrow Fund". Except for liabilities or
inaccuracies in representations and warranties relating to: (1) ownership and
title to any of the assets of Company; (2) ownership and title to the capital
stock of Company; (3) competency to execute and deliver documents to effect the
transactions contemplated in this Agreement, and the legal, binding and
enforceable nature hereof and thereof; (4) taxes; and (5) the environment, the
Escrow Fund shall constitute the sole source of relief for any breach of the
representations and warranties made in this Agreement, and any of Shrime's
indemnification obligations hereunder.
33
<PAGE>
(iii) Not withstanding the foregoing
Subsections (i) and (ii), Shrime's indemnification obligations shall be limited
to and shall not exceed $7,171,800.
(b) Environmental. Shrime shall defend, indemnify and
hold harmless Cerprobe, the Surviving Corporation, and their officers, directors
and shareholders for, from and against any and all Losses with respect to or
arising out of any Claim which Cerprobe, the Surviving Corporation, or their
officers, directors and shareholders may suffer or incur by reason of:
(i) any generation, transportation,
storage, treatment or disposal of Hazardous Substances (as defined in 5.3 (ae))
by or on behalf of Company occurring on or prior to the Effective Date
including, without limitation, any waste or other disposal activities or
discharges which occurred at a facility on which a portion of Company's (or its
predecessors') business was conducted, any waste or other disposal activities or
discharges which occurred off of any such facility with regard to wastes and
other substances generated on such facility, and any waste or other disposal
activities or discharges which occurred on real estate at any time whether or
not Company (or its predecessors) owned or leased such real estate at the time
such waste or other disposal activities or discharges were engaged in, and
whether or not Company performed such waste or other disposal activities or
discharges;
(ii) any Releases (as defined in 5.3 (ae))
or threatened Releases as defined now or in the future under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, P.L. 96-510, as
amended or reauthorized from time to time, or any other similar Federal, state
or local laws, statutes, rules or regulations occurring on or prior to the
Effective Date, including, but not limited to, both those releases or of
Hazardous Substances incidents involving potential or actual environmental
contamination which required notification or reporting to appropriate Federal,
state or local officials or agencies, or clean-up or remedial activities and
those releases or incidents which occurred prior to the Effective Date, of any
requirements imposing such notification or reporting obligations or clean-up or
remedial activities, but which would have been subject to such obligations if
they had occurred subsequent to the effective date of such requirements;
(iii) any discharges by or on behalf of
Company or as a result of any activities by or on behalf of Company to surface
waters or groundwaters occurring on or prior to the Effective Date;
(iv) any air emissions of Company occurring
on or prior to the Effective Date;
(v) the exposure of and resulting
consequences to any persons, including, but not limited to, past or present
employees of Company or the Surviving Corporation, to any mineral, chemical or
industrial product, raw material intermediate, by-product or medical or other
waste, or substance created, generated, processed, handled or originating at a
facility at which Company (or any of its predecessors)
34
<PAGE>
conducted business on or prior to the Effective Date or otherwise used by
Company (or any of its or their predecessors) in the conduct of its business;
(vi) any violations by or on behalf of
Company or any other activity by or on behalf of Company occurring on or prior
to the Effective Date of Federal, state or local (A) environmental laws, or (B)
occupational or employee health and safety laws;
(vii) any and all actions, failures to act
and negligence by or on behalf of Company in monitoring, maintaining and upkeep
of on-site storage, treatment and disposal facilities on or prior to the
Effective Date;
(viii) any use, removal, maintenance or
monitoring by or on behalf of Company or any other activity by or on behalf of
Company of storage tanks on or prior to the Effective Date; and
(ix) any violations, fees, obligations or
failures by Company or any other activity by or on behalf of Company to comply
with any and all permit requirements on or prior to the Effective Date.
10.2 Indemnification by Cerprobe and Surviving Corporation.
Subject to the provisions of Sections 10.3, 10.4 and 10.5 hereof, Cerprobe and
the Surviving Corporation shall defend, indemnify and hold harmless Shrime for,
from and against any and all Losses with respect to or arising out of any Claim
which Shrime may suffer or incur by reason of: (a) the inaccuracy of any of the
representations or warranties of Cerprobe or Acquisition contained in this
Agreement, or any of the agreements, certificates, documents, exhibits or
schedules delivered in connection with this Agreement; (b) the failure to comply
with, the breach or the default by Cerprobe or Acquisition of any of the
covenants, warranties or agreements made by Cerprobe or Acquisition in this
Agreement, or any of the agreements, certificates, documents, exhibits or
schedules delivered in connection with this Agreement; and (c) any untrue or
alleged untrue statement of material fact contained in the Registration
Statement, or any amendment thereof, or any omission or alleged omission of a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made not misleading,
except insofar as the same are caused by or contained in any information
furnished or that should have been furnished to Cerprobe by Shrime or Company
for use therein.
10.3 Notice and Right to Defend Third-Party Claims. Promptly
upon receipt of notice of any claim, demand or assessment or the commencement of
any suit, action or proceeding with respect to which indemnity may be sought
pursuant to this Agreement, the party seeking to be indemnified or held harmless
(the "Indemnitee") shall notify in writing, if possible, within sufficient time
to respond to such claim or answer or otherwise plead in such action (but in any
event within thirty (30) days), the party from whom indemnification is sought
(the "Indemnitor"). In case any claim, demand or assessment shall be asserted,
or suit, action or proceeding commenced against the Indemnitee, the Indemnitor
shall be entitled, at the Indemnitor's expense, to participate
35
<PAGE>
therein, and, to the extent that it may wish, to assume the defense, conduct or
settlement thereof, at its own expense, with counsel satisfactory to the
Indemnitee, whose consent to the selection of counsel shall not be unreasonably
withheld or delayed, provided that the Indemnitor confirms to the Indemnitee
that it is a claim to which its rights of indemnification apply. The Indemnitor
shall have the right to settle or compromise monetary claims; however, as to any
other claim, the Indemnitor shall first obtain the prior written consent from
the Indemnitee, which consent shall be exercised in the sole discretion of the
Indemnitee. After notice from the Indemnitor to the Indemnitee of Indemnitor's
intent so to assume the defense, conduct, settlement or compromise of such
action, the Indemnitor shall not be liable to the Indemnitee for any legal or
other expenses (including, without limitation, settlement costs) subsequently
incurred by the Indemnitee in connection with the defense, conduct or settlement
of such action while the Indemnitor is diligently defending, conducting,
settling or compromising such action. The Indemnitor shall keep the Indemnitee
apprised of the status of the suit, action or proceeding and shall make
Indemnitor's counsel available to the Indemnitee, at the Indemnitor's expense,
upon the request of the Indemnitee. The Indemnitee shall cooperate with the
Indemnitor in connection with any such claim and shall make personnel, books and
records and other information relevant to the claim available to the Indemnitor
to the extent that such personnel, books and records and other information are
in the possession and/or control of the Indemnitee. If the Indemnitor decides
not to participate, the Indemnitee shall be entitled, at the Indemnitor's
expense, to defend, conduct, settle or compromise such matter with counsel
satisfactory to the Indemnitor, whose consent to the selection of counsel shall
not be unreasonably withheld or delayed.
10.4 Survival of Representations and Warranties. Except for
the representations and warranties made in the Purchase and Sale Agreement with
respect to the Sanden Property, dated the date hereof, by and between Shrime and
Cerprobe (the "Real Estate Agreement"), which representations and warranties
shall survive for the period of time set forth in the Real Estate Agreement, the
representations and warranties made in this Agreement and in the other
documents, schedules and certificates delivered in connection with this
Agreement relating to: (a) ownership and title to any of the assets of Company;
(b) ownership and title to the capital stock of Company; (c) competency to
execute and deliver documents to effect the transactions contemplated in this
Agreement, and the legal, binding and enforceable nature thereof; (d) taxes; and
(e) the environment, shall survive the Closing for such period of time as is
permitted by the applicable statute of limitations and all other representations
and warranties made in this Agreement and in the other documents, schedules and
certificates delivered in connection with this Agreement shall survive for a
period of time that is two years after the Effective Date. Notwithstanding
anything to the contrary, all representations and warranties with respect to
which a Claim has been made shall survive to the extent of such Claim until such
Claim is finally determined and paid. In addition, nothing contained in this
Section 10.4 shall in any manner constitute or be deemed to limit any Claim by
Shrime, Cerprobe or Acquisition arising out of a claim of fraud, regardless of
the nature of the representations or warranties forming the basis of such claim.
36
<PAGE>
ARTICLE XI
Termination
-----------
11.1 Right to Terminate. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing: (a) by
the mutual written consent duly authorized by the Board of Directors of each of
Company, Cerprobe and Acquisition; (b) by Company if there has been a breach by
Cerprobe or Acquisition of any of their representations, warranties, covenants
or agreements contained in this Agreement, or any such representation or
warranty shall have become untrue in any material respect, such that the
conditions set forth in Section 7.2 are incapable of being satisfied on or
before December 31, 1996; (c) by Cerprobe if there has been a breach by Company,
CompuRoute or Shrime of any of their representations, warranties, covenants or
agreements contained in this Agreement, or any such representation or warranty
shall have become untrue in any material respect, such that the conditions set
forth in Section 7.1 are incapable of being satisfied on or before December 31,
1996; (d) by either Cerprobe, Company or Shrime if any decree, permanent
injunction, order or other action by any court of competent jurisdiction or any
governmental entity preventing or prohibiting consummation of the CompuRoute
Merger or the Merger shall have become final and nonappealable; (e) by either
Cerprobe, Company or Shrime if the Effective Date shall not have occurred on or
before December 31, 1996, provided, however, that the right to terminate this
Agreement under this Section 11.1 shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Date to occur on or before December
31, 1996.
11.2 Remedies. No party shall be limited to the termination
right granted in Section 11.1 hereof, by reason of the nonfulfillment of any
condition precedent to such party's closing obligations or a breach of another
party's representations and warranties, but may, in the alternative, elect to do
one of the following:
(a) Proceed. Proceed to consummate the Merger despite
the nonfulfillment of any condition precedent to its obligation to proceed to
Closing, it being understood that consummation of the transactions contemplated
herein shall not be deemed a waiver of a breach of any representation, warranty
or covenant or of any party's rights and remedies with respect thereto.
(b) Decline to Proceed. Decline to consummate the
Merger, terminate this Agreement as provided in Section 11.1 hereof, and
thereafter seek damages if, and to the extent permitted in Section 11.3 hereof.
11.3 Right to Damages. If this Agreement is terminated, no
party hereto shall have any liability or obligation to the others; provided,
however, that each party hereto shall remain liable for any breach of any of
that party's representations and warranties or the terms of this Agreement, or
any willful failure by the party to perform any of its obligations or agreements
contained in this Agreement, in which case that party shall be liable for all of
the other parties' out-of-pocket costs and expenses incurred in connection with
the negotiations, due diligence reviews, and preparation of the Letter of Intent
dated January 23,
37
<PAGE>
1996, by and among Cerprobe, George P. Shrime, Company, CompuRoute and
Electronic Modules, Inc. ("EMI") (the "First Letter of Intent"), Amendment No. 1
to the Letter of Intent dated March 15, 1996 ("Amendment No. 1 to Letter of
Intent"), the Letter of Intent dated August 15, 1996, by and among Cerprobe,
Shrime, Company, CompuRoute and EMI (the "Last Letter of Intent"), this
Agreement, and all of the other documents related to this transaction, and those
costs and expenses which are incurred by the other party in pursuing such rights
and remedies (including reasonable attorneys' fees).
ARTICLE XII
Miscellaneous
-------------
12.1 Disclosure Schedules. The Disclosure Schedules referred
to in Section 5.3 of this Agreement reflect information supplied to Cerprobe and
Acquisition in the course of their investigation of Company and CompuRoute.
Company and Shrime may supplement or amend any Disclosure Schedule from time to
time prior to or at the Closing, by notice in accordance with the terms of this
Agreement, including by delivering one or more supplements or amendments to
correct any matter which would constitute a breach of any representation or
warranty contained herein. No such supplement or amended Schedule shall be
deemed to cure any breach for purposes of Section 7.2; however, any such
supplement or amendment will be effective to cure and correct for all other
purposes any breach of any representation or warranty which would have existed
but for such supplement or amendment, and all references to any Disclosure
Schedule hereto which is supplemented or amended as provided in this Section
12.1 shall, for all purposes, whether or not the Merger occurs, be deemed to be
a reference to such Disclosure Schedule as so supplemented or amended.
12.2 Fees. The parties hereto each represent and warrant to
the other that, except for the costs, expenses and fees for the investment
banking and financial advisory services of Southwest Securities, the respective
warrantor has not dealt with and is not aware of any dealings with any person,
firm or corporation who is or may be entitled to a broker's commission, finder's
fee, investment banker's fee or similar payment from the other party for
arranging these transactions or introducing the parties to each other. All
costs, expenses and fees (including without limitation those for legal and
accounting services, but excluding those for investment banking and financial
advisory services of Southwest Securities) of Company and CompuRoute incurred in
connection with this Agreement and the CompuRoute Merger shall be borne by
Company or CompuRoute; provided, however, that to the extent that legal fees and
legal costs exceed in the aggregate Fifty Thousand Dollars ($50,000), any such
excess shall be paid by Shrime. The costs, expenses and fees for investment
banking and financial advisory services of Southwest Securities shall be borne
by Company and CompuRoute only to the extent that (a) they do not exceed the
amounts set forth in the fee schedule enumerated in that certain Letter
Agreement, dated November 7, 1995, as amended by a subsequent Letter Agreement,
dated January 22, 1996, each of which is by and between Southwest Securities and
CompuRoute and attached hereto as Exhibit J, and (b) the calculation of such
fees and the obligations of Company and CompuRoute to pay such fees, shall be
based solely on the Cerprobe Stock (Four Hundred Thousand (400,000) shares of
common stock of Cerprobe) and the Cash Payment (Four Million Six Hundred
Thousand Dollars ($4,600,000), subject to adjustment as provided in this
Agreement), to be exchanged
38
<PAGE>
for all of the stock of Company, and shall not include the purchase price for
the Sanden Property. All of the costs and expenses, and fees of Cerprobe,
including legal and accounting services, incurred in connection with the herein
proposed Merger, shall be borne by Cerprobe.
12.3 No Employment Agreements. Neither Cerprobe nor the
Surviving Corporation shall have any obligation to enter into any employment
agreement with any employees of Company or CompuRoute prior to the Closing or
thereafter.
12.4 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:
If to Shrime or Company prior to the Closing:
---------------------------------------------
CROUTE, Inc.
10365 Sanden Drive
Dallas, Texas 75238
Attn: Souad Shrime
FAX: 214/342-1989
With a copy to:
Kathleen R. McLaurin, Esq.
Jones, Day, Reavis & Pogue
2300 Trammel Crow Center
2001 Ross Avenue
Dallas, Texas 75201
FAX: 214/969-5100
If to Shrime After the Closing:
-------------------------------
Mrs. Souad Shrime
9611 Milltrail
Dallas, Texas 75238
FAX: 214/340-2240
39
<PAGE>
With a copy to:
Kathleen R. McLaurin, Esq.
Jones, Day, Reavis & Pogue
2300 Trammel Crow Center
2001 Ross Avenue
Dallas, Texas 75201
FAX: 214/969-5100
If to Cerprobe, Acquisition, or Company (after the Closing):
------------------------------------------------------------
Cerprobe Corporation
600 South Rockford Drive
Tempe, Arizona 85281
Attention: C. Zane Close
FAX: 602/967-4636
With a copy to:
O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears, P.A.
One East Camelback Road
Phoenix, Arizona 85012-1656
Attention: John B. Furman, Esq.
FAX: 602/263-2900
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section.
12.5 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the Merger and shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, successors and permitted assigns. Each appendix, exhibit and
schedule to this Agreement, shall be considered incorporated herein. This
Agreement supersedes all prior written or oral agreements between the parties
hereto and thereto, including, but not limited to the First Letter of Intent,
Amendment No. 1 to the Letter of Intent and the Last Letter of Intent.
12.6 Waivers. 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 conferred in this Agreement
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.
40
<PAGE>
12.7 Severability. The invalidity of any provision of this
Agreement or portion of a provision shall not affect the validity of any other
provision of this Agreement or the remaining portion of the applicable
provision.
12.8 Applicable Law. This agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Texas without regard to the conflicts of laws principles of such state.
12.9 Construction. Each party has participated in the drafting
of this Agreement and this document has been reviewed by the respective legal
counsel for the parties hereto. 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.
12.10 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, and all such
counterparts shall constitute but one instrument.
41
<PAGE>
IN WITNESS WHEREOF, the individuals signing below on behalf of
Acquisition, Cerprobe, CompuRoute and Company are signing in the capacities
indicated below, and Souad Shrime is signing for and on behalf of Shrime in the
capacities indicated above, all as of the date first above written.
ACQUISITION:
C-ROUTE ACQUISITION, INC., a Delaware
corporation
By: /s/ C. Zane Close
------------------------------------------
Its: President
------------------------------------------
CERPROBE:
CERPROBE CORPORATION, a Delaware
corporation
By: /s/ C. Zane Close
------------------------------------------
Its: President
------------------------------------------
SHRIME:
/s/ Souad Shrime
----------------------------------------------
Souad Shrime
COMPANY:
CROUTE, Inc., a Texas corporation
By: /s/ Souad Shrime
------------------------------------------
Its: President
------------------------------------------
COMPUROUTE:
COMPUROUTE, INCORPORATED, a Texas
corporation
By: /s/ Souad Shrime
------------------------------------------
Its: President
------------------------------------------
42
<PAGE>
EXHIBITS
--------
Exhibit A - Cerprobe Closing Certificate
- ---------
Exhibit B - Lock-Up and Registration Agreement
- ---------
Exhibit C - Cerprobe Legal Opinion
- ---------
Exhibit D - Closing Certificate of Shrime
- ---------
Exhibit E - Escrow and Security Agreement
- ---------
Exhibit F - General Release
- ---------
Exhibit G - Company Legal Opinion
- ---------
Exhibit H - Non-Competition Agreement
- ---------
Exhibit I - Indemnification Agreement
- ---------
Exhibit J - Letter Agreements with Southwest Securities
- ---------
APPENDICES
----------
Appendix A-1 - Shareholders of Company as of the date hereof
- ------------
Appendix A-2 - Shareholders of Company as of the Effective Date
- ------------
<PAGE>
Appendix A-1
CRoute Shareholders
Shareholder Common Shares
Abbott, Jerome 15,000
Alvarez, Ignacio 6,953
Ballard, Terry 5,500
Bersalona, Fernando 5,000
Bickhart, Lori 67
Bohn, Gary 1283
Brinkerhoff, W. Joris 15000
Crow, Steven 15000
Erwin, James Jr. 5000
Erwin-Shaw, Elaine 5000
Erwin-Wilgus, Sarah 5000
Fitch, Bob 5600
Fuller, Gary 29354
Fuller, Gary, Custodian for Hannah M. Fuller 10000
Hamati, Sharbil 1667
Hamm, Ralph 15000
Hunter, Harold 15000
Jellad, Samir 41967
Kallas, Roger or Farid* 100000
Kamar, Jacques 7500
Kryda, Michael 5000
Kuhne, Robert 50000
Lyell, James 1667
Mangelsdorf, T.V. 35000
McCurdy, Michael 7500
Metni, Fouad 25000
Moore, Lynn 2543
Morris, Jo Earl 15000
O'Bierne, Robert 15000
Omanson, Lyle 167
Pittman, Pendall 15000
Reyes, Karen 5000
Saunders, Clyde 15000
Shrime, Maria 10000
Shrime, Mark 10000
Shrime, Ryan 10000
Shrime, Souad 8001419
Unis, Thomas 50000
Wampler, Dan 1701
Wickham, Kenneth 20000
8,599,888
* The shares are held jointly.
<PAGE>
<TABLE>
<CAPTION>
Appendix A-2
CRoute Projected Shareholders and Optionholders as of Effective Date (& following the CompuRoute Merger)
Shares
restricted & Common 1992 Options (1) 1995 Options (2)
Shareholder unrestricted Cash Stock Options Cash Stock Options Cash Stock
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Abbott, Jerome 15,000 $7,152.73 614
- ----------------------------------------------------------------------------------------------------------------------------------
Adams, Linda 2,900 $1,382.86 119
- ----------------------------------------------------------------------------------------------------------------------------------
Adams, Woody 2,400 $1,144.44 98 400 $170.74 16
- ----------------------------------------------------------------------------------------------------------------------------------
Alvarez, Ignacio 6,953 $3,315.53 285
- ----------------------------------------------------------------------------------------------------------------------------------
Andres, Del 400 $190.74 16
- ----------------------------------------------------------------------------------------------------------------------------------
Ballard, Terry 5,500 $2,622.67 225
- ----------------------------------------------------------------------------------------------------------------------------------
Baumann, Mitch 4,376 $2,086.69 179 1,000 $426.85 41
- ----------------------------------------------------------------------------------------------------------------------------------
Beasley, James 400 $190.74 16
- ----------------------------------------------------------------------------------------------------------------------------------
Beasley, Ken 4,400 $2,098.14 180
- ----------------------------------------------------------------------------------------------------------------------------------
Berkeley, Marvin 5,000 $2,384.24 205
- ----------------------------------------------------------------------------------------------------------------------------------
Bersalona, Fernando 5,000 $2,384.24 205
- ----------------------------------------------------------------------------------------------------------------------------------
Bickhart, Lorti 67 $31.95 3
- ----------------------------------------------------------------------------------------------------------------------------------
Bohn, Gary 1,283 $611.80 53
- ----------------------------------------------------------------------------------------------------------------------------------
Bouril, Mark 4,000 $1,907.40 164 3,000 $1,280.55 123
- ----------------------------------------------------------------------------------------------------------------------------------
Brinkerhoff, W. Joris 15,000 $7,152.73 614
- ----------------------------------------------------------------------------------------------------------------------------------
Brown, D. Juane 600 $286.11 25
- ----------------------------------------------------------------------------------------------------------------------------------
Bryan, John 15,000 $7,152.73 614
- ----------------------------------------------------------------------------------------------------------------------------------
Butler, Jesse 400 $190.74 16
- ----------------------------------------------------------------------------------------------------------------------------------
Castillo, Johnny 2,518 $1,200.71 103
- ----------------------------------------------------------------------------------------------------------------------------------
Charland, Tom 470 $224.12 19
- ----------------------------------------------------------------------------------------------------------------------------------
Clark, R. Scott 40,000 $19,073.95 1,638
- ----------------------------------------------------------------------------------------------------------------------------------
Cox, Doug 640 $305.18 26
- ----------------------------------------------------------------------------------------------------------------------------------
Craig, Phil 600 $286.11 25
- ----------------------------------------------------------------------------------------------------------------------------------
Crow, Steven 15,000 $7,152.73 614
- ----------------------------------------------------------------------------------------------------------------------------------
Delgado, Minerva 550 $262.27 23
- ----------------------------------------------------------------------------------------------------------------------------------
Dietrich, David 828 $394.83 34
- ----------------------------------------------------------------------------------------------------------------------------------
Dolinar, Larry 400 $190.74 16 1,000 $426.85 41
- ----------------------------------------------------------------------------------------------------------------------------------
Durham, David 640 $305.18 26
- ----------------------------------------------------------------------------------------------------------------------------------
Durham, Don 2,220 $1,058.60 91
- ----------------------------------------------------------------------------------------------------------------------------------
Engelke, Jack 2,000 $953.70 82
- ----------------------------------------------------------------------------------------------------------------------------------
Erwin, James Jr. 5,000 $2,384.24 205
- ----------------------------------------------------------------------------------------------------------------------------------
Erwin-Shaw, Elaine 5,000 $2,384.24 205
- ----------------------------------------------------------------------------------------------------------------------------------
Erwin-Wilgus, Sarah 5,000 $2,384.24 205
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-2-1
<PAGE>
<TABLE>
<CAPTION>
Appendix A-2
CRoute Projected Shareholders and Optionholders as of Effective Date (& following the CompuRoute Merger)
Shares
restricted & Common 1992 Options (1) 1995 Options (2)
Shareholder unrestricted Cash Stock Options Cash Stock Options Cash Stock
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Eskew, Judy 200 $95.37 8
- ----------------------------------------------------------------------------------------------------------------------------------
Evans, Pam 1,800 $858.33 74
- ----------------------------------------------------------------------------------------------------------------------------------
Fairman, Bobby 3,402 $1,622.24 139
- ----------------------------------------------------------------------------------------------------------------------------------
Fitch, Bob 12,867 $6,135.61 527
- ----------------------------------------------------------------------------------------------------------------------------------
Fuller, Gary 64,354 $30,687.13 2,635 2,500 $42.12 102
- ----------------------------------------------------------------------------------------------------------------------------------
Fuller, Gary, Custodian for
- ----------------------------------------------------------------------------------------------------------------------------------
Hannah M. Fuller 10,000 $4,768.49 409
- ----------------------------------------------------------------------------------------------------------------------------------
Garcia, Louis 3,770 $1,797.72 154 1,000 $426.85 41
- ----------------------------------------------------------------------------------------------------------------------------------
Green, J.R. 2,000 $953.70 82 600 $256.11 25
- ----------------------------------------------------------------------------------------------------------------------------------
Griffith, Tom 400 $190.74 16
- ----------------------------------------------------------------------------------------------------------------------------------
Hahnke, Bob 3,000 $1,430.55 123
- ----------------------------------------------------------------------------------------------------------------------------------
Ha, Ho Van 600 $286.11 25
- ----------------------------------------------------------------------------------------------------------------------------------
Hamati, George 2,100 $1,001.38 86
- ----------------------------------------------------------------------------------------------------------------------------------
Hamati, Sharbil 1,667 $794.91 68
- ----------------------------------------------------------------------------------------------------------------------------------
Hamm, Ralph 28,333 $13,510.56 1,160
- ----------------------------------------------------------------------------------------------------------------------------------
Heard, Al 6,907 $3,293.60 283
- ----------------------------------------------------------------------------------------------------------------------------------
Herbst, Kim 100 $47.68 4
- ----------------------------------------------------------------------------------------------------------------------------------
Hogland, Mark 100 $47.68 4
- ----------------------------------------------------------------------------------------------------------------------------------
Holleman, Lee 600 $286.11 25
- ----------------------------------------------------------------------------------------------------------------------------------
Hoover, Robert 65,000 $30,995.18 2,661
- ----------------------------------------------------------------------------------------------------------------------------------
Hunter, Harold 15,000 $7,152.73 614
- ----------------------------------------------------------------------------------------------------------------------------------
Hurley, Pat Jr. 2,000 $953.70 82 400 $170.74 16
- ----------------------------------------------------------------------------------------------------------------------------------
Hurley, Pat Sr. 183,066 $87,294.82 7,495 1,000 $426.85 41
- ----------------------------------------------------------------------------------------------------------------------------------
Jackson, Don 400 $190.74 16
- ----------------------------------------------------------------------------------------------------------------------------------
Jellad, Samir 41,967 $20,011.92 1,718
- ----------------------------------------------------------------------------------------------------------------------------------
Jiminez, John 400 $190.74 16
- ----------------------------------------------------------------------------------------------------------------------------------
Jiminez, Kwi 800 $381.48 33
- ----------------------------------------------------------------------------------------------------------------------------------
Jones, Charles 200 $95.37 8
- ----------------------------------------------------------------------------------------------------------------------------------
Kallas, Roger or Farid* 100,000 $47,684.89 4,094
- ----------------------------------------------------------------------------------------------------------------------------------
Kamar, Jacques 7,500 $3,576.37 307
- ----------------------------------------------------------------------------------------------------------------------------------
Kendall, Jerry A. 10,000 $4,768.49 409
- ----------------------------------------------------------------------------------------------------------------------------------
King, Gayle 400 $190.74 16
- ----------------------------------------------------------------------------------------------------------------------------------
Kingrey, Todd 400 $190.74 16
- ----------------------------------------------------------------------------------------------------------------------------------
Kryda, Michael 5,000 $2,384.24 205
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-2-2
<PAGE>
<TABLE>
<CAPTION>
Appendix A-2
CRoute Projected Shareholders and Optionholders as of Effective Date (& following the CompuRoute Merger)
Shares
restricted & Common 1992 Options (1) 1995 Options (2)
Shareholder unrestricted Cash Stock Options Cash Stock Options Cash Stock
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Kuhne, Robert 50,000 $23,842.44 2,047
- ----------------------------------------------------------------------------------------------------------------------------------
Lyell, James 1,667 $794.91 68
- ----------------------------------------------------------------------------------------------------------------------------------
Mangelsdorf, T.V. 35,000 $16,689.71 1,433
- ----------------------------------------------------------------------------------------------------------------------------------
Manjikian, Zaven 46,667 $22,253.11 1,911
- ----------------------------------------------------------------------------------------------------------------------------------
McCain, Richard 2,000 $953.70 82
- ----------------------------------------------------------------------------------------------------------------------------------
McCurdy, Meghan 2,500 $1,192.12 102
- ----------------------------------------------------------------------------------------------------------------------------------
McCurdy, Michael Jr. 2,500 $1,192.12 102
- ----------------------------------------------------------------------------------------------------------------------------------
McCurdy, Michael 201,981 $96,314.41 8,269
- ----------------------------------------------------------------------------------------------------------------------------------
McMinn, Tom 40,000 $19,073.95 1,638
- ----------------------------------------------------------------------------------------------------------------------------------
Mead, Bart 5,164 $2,462.45 211
- ----------------------------------------------------------------------------------------------------------------------------------
Metni, Fouad 25,000 $11,921.22 1,024
- ----------------------------------------------------------------------------------------------------------------------------------
Moore, Lynn 2,543 $1,212.63 104
- ----------------------------------------------------------------------------------------------------------------------------------
Morris, Jo Earl 15,000 $7,152.73 614
- ----------------------------------------------------------------------------------------------------------------------------------
N.T.S.U. 7,000 $3,337.94 287
- ----------------------------------------------------------------------------------------------------------------------------------
O'Bierne, Robert 15,000 $7,152.73 614
- ----------------------------------------------------------------------------------------------------------------------------------
Omanson, Lyle 167 $79.63 7
- ----------------------------------------------------------------------------------------------------------------------------------
Pittman, Pendall 15,000 $7,152.73 614
- ----------------------------------------------------------------------------------------------------------------------------------
Reid, Melba 600 $286.11 25
- ----------------------------------------------------------------------------------------------------------------------------------
Rendick, James 208 $99.18 9
- ----------------------------------------------------------------------------------------------------------------------------------
Reyes, Karen 5,000 $2,384.24 205
- ----------------------------------------------------------------------------------------------------------------------------------
Ritz, Terry 28,000 $13,351.77 1,146 1,474 $24.84 60
- ----------------------------------------------------------------------------------------------------------------------------------
Riviera, Luis 5,000 $2,384.24 205 3,000 $1,280.55 123
- ----------------------------------------------------------------------------------------------------------------------------------
Saunders, Clyde 15,000 $7,152.73 614
- ----------------------------------------------------------------------------------------------------------------------------------
Shipp, Carla 100 $47.68 4
- ----------------------------------------------------------------------------------------------------------------------------------
Shirey, Steve 600 $286.11 25
- ----------------------------------------------------------------------------------------------------------------------------------
Shrime, Maria 10,000 $4,768.49 409
- ----------------------------------------------------------------------------------------------------------------------------------
Shrime, Mark 10,000 $4,768.49 409
- ----------------------------------------------------------------------------------------------------------------------------------
Shrime, Ryan 10,000 $4,768.49 409
- ----------------------------------------------------------------------------------------------------------------------------------
Shrime, Souad 8,031,419 $3,829,773.11 328,807 30,000 $505.47 1,228
- ----------------------------------------------------------------------------------------------------------------------------------
Sims, Kendall 600 $286.11 25
- ----------------------------------------------------------------------------------------------------------------------------------
Sorenson, Dana 2,000 $953.70 82 400 $170.74 16
- ----------------------------------------------------------------------------------------------------------------------------------
Thomas, Vicki 600 $286.11 25
- ----------------------------------------------------------------------------------------------------------------------------------
Tome, Mel 4,952 $2,361.36 203
- ----------------------------------------------------------------------------------------------------------------------------------
Tran, Thong 600 $286.11 25
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
A-2-3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Appendix A-2
CRoute Projected Shareholders and Optionholders as of Effective Date (& following the CompuRoute Merger)
Shares
restricted & Common 1992 Options (1) 1995 Options (2)
Shareholder unrestricted Cash Stock Options Cash Stock Options Cash Stock
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unis, Thomas 50,000 $23,842.44 2,047
- ----------------------------------------------------------------------------------------------------------------------------------
Vandertholen, Ev 1,200 $572.22 49
- ----------------------------------------------------------------------------------------------------------------------------------
Walden, Phil 86,000 $41,009.00 3,521 1,000 $426.85 41 20,000 $336.98 819
- ----------------------------------------------------------------------------------------------------------------------------------
Wampler, Dan 1,701 $811.12 70
- ----------------------------------------------------------------------------------------------------------------------------------
West, Don 1,000 $476.85 41
- ----------------------------------------------------------------------------------------------------------------------------------
Wickham, Kenneth 20,000 $9,536.98 819
- ----------------------------------------------------------------------------------------------------------------------------------
Wood, Jack K. 144,966 $69,126.87 5,935 1,000 $426.85 41
==================================================================================================================================
9,640,613 $4,597,115.45 394,687 13,800 $5,890.51 565 53,974 $909.40 2,210
==================================================================================================================================
</TABLE>
A-2-4
<PAGE>
<TABLE>
<CAPTION>
Appendix A-2
CRoute Projected Shareholders and Optionholders as of Effective Date (& following the CompuRoute Merger)
1996 Options (3) Total Due
Shareholder Options Cash Stock Cash Stock
====================================================================================================
<S> <C> <C> <C> <C> <C>
Abbott, Jerome $7,152.73 614
- -------------------------------------------------------------------------------------------------
Adams, Linda $1,382.86 119
- -------------------------------------------------------------------------------------------------
Adams, Woody $1,315.18 115
- -------------------------------------------------------------------------------------------------
Alvarez, Ignacio $3,315.53 285
- -------------------------------------------------------------------------------------------------
Andres, Del $190.74 16
- -------------------------------------------------------------------------------------------------
Ballard, Terry $2,622.67 225
- -------------------------------------------------------------------------------------------------
Baumann, Mitch $2,513.54 220
- -------------------------------------------------------------------------------------------------
Beasley, James $190.74 16
- -------------------------------------------------------------------------------------------------
Beasley, Ken 1,000 ($63.15) 41 $2,034.98 221
- -------------------------------------------------------------------------------------------------
Berkeley, Marvin $2,384.24 205
- -------------------------------------------------------------------------------------------------
Bersalona, Fernando $2,384.24 205
- -------------------------------------------------------------------------------------------------
Bickhart, Lorti $31.95 3
- -------------------------------------------------------------------------------------------------
Bohn, Gary $611.80 53
- -------------------------------------------------------------------------------------------------
Bouril, Mark $3,187.94 287
- -------------------------------------------------------------------------------------------------
Brinkerhoff, W. Joris $7,152.73 614
- -------------------------------------------------------------------------------------------------
Brown, D. Juane $286.11 25
- -------------------------------------------------------------------------------------------------
Bryan, John $7,152.73 614
- -------------------------------------------------------------------------------------------------
Butler, Jesse $190.74 16
- -------------------------------------------------------------------------------------------------
Castillo, Johnny $1,200.71 103
- -------------------------------------------------------------------------------------------------
Charland, Tom $224.12 19
- -------------------------------------------------------------------------------------------------
Clark, R. Scott $19,073.95 1,638
- -------------------------------------------------------------------------------------------------
Cox, Doug $305.18 26
- -------------------------------------------------------------------------------------------------
Craig, Phil $286.11 25
- -------------------------------------------------------------------------------------------------
Crow, Steven $7,152.73 614
- -------------------------------------------------------------------------------------------------
Delgado, Minerva $262.27 23
- -------------------------------------------------------------------------------------------------
Dietrich, David $394.83 34
- -------------------------------------------------------------------------------------------------
Dolinar, Larry $617.59 57
- -------------------------------------------------------------------------------------------------
Durham, David $305.18 26
- -------------------------------------------------------------------------------------------------
Durham, Don $1,058.60 91
- -------------------------------------------------------------------------------------------------
Engelke, Jack 1,000 ($63.15) 41 $890.55 123
- -------------------------------------------------------------------------------------------------
Erwin, James Jr. $2,384.24 205
- -------------------------------------------------------------------------------------------------
Erwin-Shaw, Elaine $2,384.24 205
- -------------------------------------------------------------------------------------------------
</TABLE>
A-2-1
<PAGE>
<TABLE>
<CAPTION>
Appendix A-2
CRoute Projected Shareholders and Optionholders as of Effective Date (& following the CompuRoute Merger)
1996 Options (3) Total Due
Shareholder Options Cash Stock Cash Stock
====================================================================================================
<S> <C> <C> <C> <C> <C>
Erwin-Wilgus, Sarah $2,384.24 205
- -------------------------------------------------------------------------------------------------
Eskew, Judy $95.37 8
- -------------------------------------------------------------------------------------------------
Evans, Pam $858.33 74
- -------------------------------------------------------------------------------------------------
Fairman, Bobby $1,622.24 139
- -------------------------------------------------------------------------------------------------
Fitch, Bob $6,135.61 527
- -------------------------------------------------------------------------------------------------
Fuller, Gary 30,000 ($1,894.53) 1,228 $28,834.72 3,965
- -------------------------------------------------------------------------------------------------
Fuller, Gary, Custodian for
- -------------------------------------------------------------------------------------------------
Hannah M. Fuller $4,768.49 409
- -------------------------------------------------------------------------------------------------
Garcia, Louis $2,224.57 195
- -------------------------------------------------------------------------------------------------
Green, J.R. $1,209.81 106
- -------------------------------------------------------------------------------------------------
Griffith, Tom $190.74 16
- -------------------------------------------------------------------------------------------------
Hahnke, Bob $1,430.55 123
- -------------------------------------------------------------------------------------------------
Ha, Ho Van $286.11 25
- -------------------------------------------------------------------------------------------------
Hamati, George $1,001.38 86
- -------------------------------------------------------------------------------------------------
Hamati, Sharbil $794.91 68
- -------------------------------------------------------------------------------------------------
Hamm, Ralph $13,510.56 1,160
- -------------------------------------------------------------------------------------------------
Heard, Al $3,293.60 283
- -------------------------------------------------------------------------------------------------
Herbst, Kim $47.68 4
- -------------------------------------------------------------------------------------------------
Hogland, Mark $47.68 4
- -------------------------------------------------------------------------------------------------
Holleman, Lee $286.11 25
- -------------------------------------------------------------------------------------------------
Hoover, Robert $30,995.18 2,661
- -------------------------------------------------------------------------------------------------
Hunter, Harold $7,152.73 614
- -------------------------------------------------------------------------------------------------
Hurley, Pat Jr. $1,124.44 98
- -------------------------------------------------------------------------------------------------
Hurley, Pat Sr. $87,721.66 7,536
- -------------------------------------------------------------------------------------------------
Jackson, Don $190.74 16
- -------------------------------------------------------------------------------------------------
Jellad, Samir $20,011.92 1,718
- -------------------------------------------------------------------------------------------------
Jiminez, John $190.74 16
- -------------------------------------------------------------------------------------------------
Jiminez, Kwi $381.48 33
- -------------------------------------------------------------------------------------------------
Jones, Charles $95.37 8
- -------------------------------------------------------------------------------------------------
Kallas, Roger or Farid* $47,684.89 4,094
- -------------------------------------------------------------------------------------------------
Kamar, Jacques $3,576.37 307
- -------------------------------------------------------------------------------------------------
Kendall, Jerry A. $4,768.49 409
- -------------------------------------------------------------------------------------------------
King, Gayle $190.74 16
- -------------------------------------------------------------------------------------------------
Kingrey, Todd $190.74 16
- -------------------------------------------------------------------------------------------------
Kryda, Michael $2,384.24 205
- -------------------------------------------------------------------------------------------------
</TABLE>
A-2-2
<PAGE>
<TABLE>
<CAPTION>
Appendix A-2
CRoute Projected Shareholders and Optionholders as of Effective Date (& following the CompuRoute Merger)
1996 Options (3) Total Due
Shareholder Options Cash Stock Cash Stock
====================================================================================================
<S> <C> <C> <C> <C> <C>
Kuhne, Robert $23,842.44 2,047
- -------------------------------------------------------------------------------------------------
Lyell, James $794.91 68
- -------------------------------------------------------------------------------------------------
Mangelsdorf, T.V. $16,689.71 1,433
- -------------------------------------------------------------------------------------------------
Manjikian, Zaven $22,253.11 1,911
- -------------------------------------------------------------------------------------------------
McCain, Richard $953.70 82
- -------------------------------------------------------------------------------------------------
McCurdy, Meghan $1,192.12 102
- -------------------------------------------------------------------------------------------------
McCurdy, Michael Jr. $1,192.12 102
- -------------------------------------------------------------------------------------------------
McCurdy, Michael $96,314.41 8,269
- -------------------------------------------------------------------------------------------------
McMinn, Tom 10,000 ($631.51) 409 $18,442.44 2,047
- -------------------------------------------------------------------------------------------------
Mead, Bart $2,462.45 211
- -------------------------------------------------------------------------------------------------
Metni, Fouad $11,921.22 1,024
- -------------------------------------------------------------------------------------------------
Moore, Lynn $1,212.63 104
- -------------------------------------------------------------------------------------------------
Morris, Jo Earl $7,152.73 614
- -------------------------------------------------------------------------------------------------
N.T.S.U. $3,337.94 287
- -------------------------------------------------------------------------------------------------
O'Bierne, Robert $7,152.73 614
- -------------------------------------------------------------------------------------------------
Omanson, Lyle $79.63 7
- -------------------------------------------------------------------------------------------------
Pittman, Pendall $7,152.73 614
- -------------------------------------------------------------------------------------------------
Reid, Melba $286.11 25
- -------------------------------------------------------------------------------------------------
Rendick, James $99.18 9
- -------------------------------------------------------------------------------------------------
Reyes, Karen $2,384.24 205
- -------------------------------------------------------------------------------------------------
Ritz, Terry $13,376.60 1,207
- -------------------------------------------------------------------------------------------------
Riviera, Luis $3,664.79 328
- -------------------------------------------------------------------------------------------------
Saunders, Clyde $7,152.73 614
- -------------------------------------------------------------------------------------------------
Shipp, Carla $47.68 4
- -------------------------------------------------------------------------------------------------
Shirey, Steve $286.11 25
- -------------------------------------------------------------------------------------------------
Shrime, Maria $4,768.49 409
- -------------------------------------------------------------------------------------------------
Shrime, Mark $4,768.49 409
- -------------------------------------------------------------------------------------------------
Shrime, Ryan $4,768.49 409
- -------------------------------------------------------------------------------------------------
Shrime, Souad $3,830,278.57 330,035
- -------------------------------------------------------------------------------------------------
Sims, Kendall $286.11 25
- -------------------------------------------------------------------------------------------------
Sorenson, Dana $1,124.44 98
- -------------------------------------------------------------------------------------------------
Thomas, Vicki $286.11 25
- -------------------------------------------------------------------------------------------------
Tome, Mel $2,361.36 203
- -------------------------------------------------------------------------------------------------
Tran, Thong $286.11 25
- -------------------------------------------------------------------------------------------------
</TABLE>
A-2-3
<PAGE>
<TABLE>
<CAPTION>
Appendix A-2
CRoute Projected Shareholders and Optionholders as of Effective Date (& following the CompuRoute Merger)
1996 Options (3) Total Due
Shareholder Options Cash Stock Cash Stock
====================================================================================================
<S> <C> <C> <C> <C> <C>
Unis, Thomas $23,842.44 2,047
- -------------------------------------------------------------------------------------------------
Vandertholen, Ev $572.22 49
- -------------------------------------------------------------------------------------------------
Walden, Phil 20,000 ($1,263.02) 819 $40,509.81 5,199
- -------------------------------------------------------------------------------------------------
Wampler, Dan $811.12 70
- -------------------------------------------------------------------------------------------------
West, Don $476.85 41
- -------------------------------------------------------------------------------------------------
Wickham, Kenneth $9,536.98 819
- -------------------------------------------------------------------------------------------------
Wood, Jack K. $69,553.72 5,976
=================================================================================================
62,000 ($3,915.37) 2,538 $4,600,000.00 400,000
=================================================================================================
</TABLE>
A-2-4
* The shares are held jointly.
1. 1992 options exercise price is $.05 per share, amount shown is net of
exercise price.
2. 1995 options exercise price is $.46 per share, amount shown is net of
exercise price.
3. 1996 options exercise price is $.54 per share, amount shown is net of
exercise price.
<PAGE>
Appendix B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and between
CROUTE, INC.,
a Texas corporation
("Company")
and
COMPUROUTE, INCORPORATED,
a Texas corporation
("CompuRoute")
Dated: October 25, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT OF MERGER AND PLAN OF MERGER
--------------------------------------
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made
and entered into this 25th day of October, 1996, by and between CROUTE, INC., a
Texas corporation ("Company"), and COMPUROUTE, INCORPORATED, a Texas corporation
("CompuRoute").
RECITALS
--------
A. CompuRoute is engaged in the design, manufacture and sale
of printed circuit boards ("PCB") for use in the semiconductor industry and for
semiconductor testing, and is also in the business of the design, manufacture
and sale of PCB-related designs used by the semiconductor industry (the "PCB
Business").
B. Company owns approximately eighty-nine percent (89%) of the
issued and outstanding capital stock of CompuRoute.
C. The Board of Directors of each of CompuRoute and Company
deems it advisable and in the best interests of CompuRoute, Company and their
respective shareholders that CompuRoute merge with and into Company pursuant to
the applicable provisions of the laws of the State of Texas.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing recitals and
the mutual covenants contained herein, the parties hereto hereby agree as
follows:
ARTICLE I
The Merger
----------
1.1 Merger of CompuRoute and Company. Upon the Effective Date,
as hereinafter defined, CompuRoute shall be merged with and into Company (the
"Merger") and Company shall be the surviving corporation (hereinafter sometimes
referred to as the "Surviving Corporation"), pursuant to the provisions of, and
with the effect provided in the Texas Business Corporation Act (the "TBCA").
1.2 Effective Date. The Merger shall become effective at (and
the term "Effective Date" shall mean) the time when the Secretary of State of
the State of Texas issues the certificate of merger in accordance with the
provisions of Article 5.05 of the TBCA.
1.3 Approval of Merger. The parties hereto shall take all
necessary actions to file the Merger Documents with, and obtain the approval for
such filing by, the Secretary of State of the State of Texas.
<PAGE>
ARTICLE II
Effect of Merger on Existence, Assets and
-----------------------------------------
Liabilities
-----------
2.1 Corporate Existence. The corporate identity, existence,
purposes, powers, franchises, rights, licenses, permits, authorities, privileges
and immunities of Company, shall continue unaffected and unimpaired by the
Merger, and the corporate identity, existence, purposes, powers, franchises,
rights, licenses, permits, authorities, privileges and immunities of CompuRoute
shall be merged with and into Company, and the Surviving Corporation shall be
fully vested therewith. The separate corporate existence of CompuRoute shall
cease upon the Effective Date.
2.2 Bylaws. The Bylaws of Company as in existence prior to the
Merger shall be and constitute the Bylaws of the Surviving Corporation, and the
same may thereafter be altered, amended or repealed in accordance with the TBCA,
the Certificate of Incorporation of the Surviving Corporation and the Bylaws of
the Surviving Corporation.
2.3 Certificate of Incorporation. The Certificate of
Incorporation of Company as in existence prior to the Merger shall be and
constitute the Certificate of Incorporation of the Surviving Corporation, and
the same may thereafter be altered, amended or repealed in accordance with the
TBCA, the Certificate of Incorporation and the Bylaws of Company.
2.4 Directors and Officers. The directors and officers of
Company prior to the Merger shall be the directors and officers of the Surviving
Corporation after the Merger, and each shall hold office until his or her
successor is elected and qualified or until his or her earlier resignation or
removal. If on the Effective Date of the Merger a vacancy shall exist on the
Board of Directors or in any of the offices of the Surviving Corporation as the
same are specified above, such vacancy may thereafter be filled in the manner
provided by the Bylaws of the Surviving Corporation.
2.5 Assets and Liabilities. Upon the Effective Date, all
rights, privileges, powers, licenses, permits, authorities, franchises and
interests of each of Company and CompuRoute, both of a public and private
nature, all of its or their property, real, personal and mixed, all debts due on
whatever accounts and property of every description and every interest therein
belonging to each of Company and CompuRoute or due to each of Company and
CompuRoute shall thereafter be deemed to be the rights, privileges, powers,
licenses, permits, authorities, franchises and interests of, and shall be vested
in, the Surviving Corporation without further act or deed as effectively as they
were theretofore vested in Company or CompuRoute as the applicable case may be;
title to any real estate, or any interest therein, vested in each of Company and
CompuRoute by deed or otherwise, shall not revert or in any way be impaired by
reason of the Merger, all of the rights of creditors of each of Company and
CompuRoute shall be preserved unimpaired by the Merger, and all liens upon the
property of each of Company and CompuRoute shall be preserved and unimpaired by
the Merger, limited to
2
<PAGE>
the property affected by such liens immediately prior to the Effective Date; and
all debts, liabilities and duties of each of Company and CompuRoute shall attach
to the Surviving Corporation and may be enforced against it to the same extent
as if said debts, liabilities and duties had been incurred or contracted by it.
Any existing claim, action or proceeding pending by or against Company or
CompuRoute may be prosecuted as if the Merger had not taken place, or the
Surviving Corporation may be substituted in its place. Nothing herein is
intended to or shall extend or enlarge the lien of any indenture, agreement or
other instrument executed or assumed by either Company or CompuRoute.
ARTICLE III
Exchange of the Company Stock
-----------------------------
3.1 CompuRoute Stock. All of the issued and outstanding
capital stock of CompuRoute as of the date of this Agreement and as of the
Effective Date shall hereinafter be referred to as "CompuRoute Stock".
3.2 Exchange of the CompuRoute Stock and Issuance of the
Company Stock. At the Effective Date, each share of CompuRoute Stock issued and
outstanding immediately prior to the Effective Date (other than shares held by
holders (each, a "Dissenting Shareholder") who perfect their rights to dissent
under applicable TBCA (the "Dissenters' Shares")) will be converted into the
right to receive one share of the Company Stock (the "Merger Consideration").
Upon payment by the Surviving Corporation of the "fair value" of any Dissenters'
Shares in accordance with the TBCA, such Dissenters' Shares shall be cancelled
and retired and shall cease to exist, and no exchange shall be made with respect
thereto.
3.3 Stockholders After the Merger. Immediately after the
Merger, the shareholders of CompuRoute will, subject to the rights of dissenting
shareholders and the terms and conditions of this Agreement, be shareholders of
Company.
3.4 Rights of Dissenting Shareholders. Any Dissenting
Shareholder who shall be entitled to be paid the "fair value" of his or her
Dissenters' Shares, as provided in Article 5.12 of the TBCA, shall not be
entitled to the Merger Consideration, as provided in Section 3.2 hereof, unless
and until such Dissenting Shareholder shall have failed to perfect or shall have
effectively withdrawn or lost such Dissenting Shareholder's right to dissent
from the Merger under the TBCA, and shall be entitled to receive only the
payment provided for by Article 5.12 of the TBCA with respect to such
Dissenters' Shares. If any Dissenting Shareholder shall fail to perfect or shall
have effectively withdrawn or lost such right to dissent, the Dissenters' Shares
held by such Dissenting Shareholder shall thereupon be treated as though such
Dissenters' Shares had been converted into the right to receive the Merger
Consideration pursuant to Section 3.2 hereof.
3
<PAGE>
3.5 Exchange Procedures.
(a) At and after the Effective Date, each certificate
theretofore representing shares of the CompuRoute Common Stock (each, a
"Certificate") shall represent only the right to receive the Merger
Consideration pursuant to Section 3.2 hereof.
(b) As soon as practicable after the Effective Date,
Company shall mail to each holder of record of a Certificate or Certificates the
following: (i) a letter of transmittal specifying that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to Company, which shall be in a form and contain
any other customary provisions as Company may determine; and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for the
Company Stock. Upon the proper surrender of a Certificate to Company, together
with a properly completed and duly executed letter of transmittal, the holder of
such Certificate shall be entitled to receive in exchange therefor the number of
whole shares of the Company Stock which such holder has the right to receive in
respect of the Certificate surrendered pursuant to the provisions hereof, and
the Certificate so surrendered shall forthwith be cancelled. In the event of a
transfer of ownership of any shares of the CompuRoute Stock not registered in
the transfer records of CompuRoute, the Merger Consideration may be issued if
the Certificate representing such CompuRoute Stock is presented to Company,
accompanied by documents sufficient, in the discretion of Company, (i) to
evidence and effect such transfer and (ii) to evidence that all applicable stock
transfer taxes have been paid.
3.6 Company Warrants and Options. At the Effective Date, each
option to acquire shares of CompuRoute issued and outstanding immediately prior
to the Effective Date, if any, will be converted into one option to acquire an
equal number of the Company Stock shares upon the same terms and conditions.
3.7 Treasury Stock of Company. All shares of the CompuRoute
Stock owned directly or indirectly by Company as treasury stock, shall, upon the
Merger, be cancelled and all rights with respect thereto shall cease to exist,
and no shares of the Company Stock shall be issued or exchanged therefor.
ARTICLE IV
Shareholder Approval
--------------------
4.1 Vote by Shareholders. Pursuant to Article 5.03 of the
TBCA, CompuRoute shall submit this Agreement to its shareholders for approval at
the meeting called and held on such date as is fixed by its Board of Directors.
4
<PAGE>
ARTICLE V
Miscellaneous
-------------
5.1 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:
If to CompuRoute (before Closing):
----------------------------------
COMPUROUTE, INCORPORATED
10365 Sanden Drive
Dallas, Texas 75238
Attn: Souad Shrime
FAX: 214/342-1989
If to Company or CompuRoute (after the Closing):
------------------------------------------------
CROUTE, Inc.
10365 Sanden Drive
Dallas, Texas 75238
Attn: Souad Shrime
FAX: 214/342-1989
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section.
5.2 Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the Merger and shall be binding
upon and inure to the benefit of the parties hereto and their respective legal
representatives, successors and permitted assigns.
5.3 Waivers. 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 conferred in this Agreement
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.
5.4 Severability. The invalidity of any provision of this
Agreement or portion of a provision shall not affect the validity of any other
provision of this Agreement or the remaining portion of the applicable
provision.
5
<PAGE>
5.5 Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Texas without regard to the conflicts of laws principles of such state.
5.6 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, and all such
counterparts shall constitute but one instrument.
IN WITNESS WHEREOF, the individuals signing below on behalf of
CompuRoute and Company are signing in the capacities indicated below, all as of
the date first above written.
COMPANY:
CROUTE, Inc., a Texas corporation
By: [Souad Shrime]
-------------------------------
Its: Chief Executive Officer
-------------------------------
COMPUROUTE:
COMPUROUTE, INCORPORATED, a Texas
corporation
By: [Souad Shrime]
-------------------------------
Its: Chief Executive Officer
-------------------------------
6
<PAGE>
5.7 Applicable Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Texas without regard to the conflicts of laws principles of such state.
5.8 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original, and all such
counterparts shall constitute but one instrument.
IN WITNESS WHEREOF, the individuals signing below on behalf of
CompuRoute and Company are signing in the capacities indicated below, all as of
the date first above written.
COMPANY:
CROUTE, Inc., a Texas corporation
By:
-------------------------------
Its:
-------------------------------
COMPUROUTE:
COMPUROUTE, INCORPORATED, a Texas
corporation
By:
-------------------------------
Its:
-------------------------------
6
<PAGE>
APPENDIX C
TEXAS Business Corporation Act
5.12 PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE ACTION.
A. Any shareholder of any domestic corporation who has the right
to dissent from any of the corporate actions referred to in Article 5.11 of this
Act may exercise that right to dissent only by complying with the following
procedures:
(1) (a) With respect to proposed corporate action that is
submitted to a vote of shareholders at a meeting, the shareholder shall file
with the corporation, prior to the meeting, a written objection to the action,
setting out that the shareholder's right to dissent will be exercised if the
action is effective and giving the shareholder's address, to which notice
thereof shall be delivered or mailed in that event. If the action is effected
and the shareholder shall not have voted in favor of the action, the
corporation, in the case of action other than a merger, or the surviving or new
corporation (foreign or domestic) or other entity that is liable to discharge
the shareholder's right of dissent, in the case of a merger, shall, within ten
(10) days after the action is effected, deliver or mail to the shareholder
written notice that the action has been effected, and the shareholder may,
within ten (10) days from the delivery or mailing of the notice, make written
demand on the existing, surviving, or new corporation (foreign or domestic) or
other entity, as the case may be, for payment of the fair value of the
shareholder's shares. The fair value of the shares shall be the value thereof as
of the day immmediately preceding the meeting, excluding any appreciation or
depreciation in anticipation of the proposed action. The demand shall state the
number and class of the shares owned by the shareholder and the fair value of
the shares as estimated by the shareholder. Any shareholder failing to make
demand within the ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in the case
of action other than a merger, and the surviving or new corporation (foreign or
domestic) or other entity that is liable to discharge the shareholder's right of
dissent, in the case of a merger, shall, within ten (10) days after the date the
action is effected, mail to each shareholder of record as of the effective date
of the action notice of the fact and date of the action and that the shareholder
may exercise the shareholder's right to dissent from the action. The notice
shall be accompanied by a copy of this Article and any articles or documents
filed by the corporation with the Secretary of State to effect the action. If
the shareholder shall not have consented to the taking of the action, the
shareholder may, within twenty (20) days after the mailing of the notice, make
written demand on the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, for payment of the fair value of
the shareholder's shares. The fair value of the shares shall be the value
thereof as of the date the written consent authorizing the action was delivered
to the corporation pursuant to Section A of Article 9.10 of this Act, excluding
any appreciation or depreciation in anticipation of the 1action. The demand
shall state the number and class of shares owned by the dissenting shareholder
and the fair value of the shares as estimated by the shareholder. Any
shareholder failing to make demand within the twenty (20) day period shall be
bound by the action.
(2) Within twenty (20) days after receipt by the existing,
surviving, or new corporation (foreign or domestic) or other entity, as the case
may be, of a demand for payment made by a dissenting shareholder in accordance
with Subsection (1) of this Section, the corporation (foreign or domestic) or
other entity shall deliver or mail to the shareholder a written notice that
shall either set out that the corporation (foreign or domestic) or other entity
accepts the amount claimed in the demand and agrees to pay that amount within
ninety (90) days after the date on which the action was effected, and, in the
case of shares represented by certificates, upon the surrender of the
certificates duly endorsed, or shall contain an estimate by the corporation
(foreign or domestic) or other entity of the fair value of the shares, together
with an offer to pay the amount of that estimate within ninety (90) days after
the date on which the action was effected, upon receipt of notice within sixty
(60) days after that date from the shareholder that the shareholder agrees to
accept that amount and, in the case of shares represented by certificates, upon
the surrender of the certificates duly endorsed.
<PAGE>
(3) If, within sixty (60) days after the date on which the
corporate action was effected, the value of the shares is agreed upon between
the shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall be
made within ninety (90) days after the date on which the action was effected
and, in the case of shares represented by certificates, upon surrender of the
certificates duly endorsed. Upon payment of the agreed value, the shareholder
shall cease to have any interest in the shares or in the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The appraisers
shall have power to examine any of the books and records of the corporation the
shares of which they are charged with the duty of valuing, and they shall make a
determination of the fair value of the shares upon such investigation as to them
may seem proper. The appraisers shall also afford a reasonable opportunity to
the parties interested to submit to them pertinent evidence as to the value of
the shares. The appraisers shall also have such power and authority as may be
conferred on Masters in Chancery by the Rules of Civil Procedure or by the order
of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to dissent was
effected to the date of such judgment, to the shareholders entitled to payment.
The judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of shares represented by certificates only upon,
and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee as court
costs, and all court costs, shall be allotted between the parties in the manner
that the court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation
(foreign or domestic) or other entity, as the case may be, pursuant to the
payment of the agreed value of the shares or pursuant to payment of the judgment
entered for the value of the shares, as in this Article provided, shall, in the
case of a merger, be treated as provided
<PAGE>
in the plan of merger and, in all other cases, may be held and disposed of by
the corporation as in the case of other treasury shares.
F. The provisions of this Article shall not apply to a merger if, on
the date of the filing of the articles of merger, the surviving corporation is
the owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by
this Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action. If
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action. (Last amended by Ch. 215,
L. '93, eff. 9-1-93.)
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
The Registrant's Certificate of Incorporation provides for
indemnification of directors and officers of the Registrant to the fullest
extent permitted by Delaware law.
Under Article VI of the Registrant's Certificate of Incorporation (the
"Certificate"), the Registrant shall indemnify and advance expenses, to the
fullest extent permitted by the Delaware General Corporation Law, to each person
who is or was a director, officer or employee of the Registrant, or who serves
or served any other enterprise or organization at the request of the Registrant
(an "Indemnitee").
An Indemnitee also may be indemnified under Delaware law against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement if he or she acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the Registrant, and,
with respect to any criminal action, had no reasonable cause to believe his or
her conduct was unlawful.
An Indemnitee also may be indemnified under Delaware law against
expenses (including attorney's fees) actually and reasonably incurred in the
defense or settlement of a suit by or in the right of the Registrant if he or
she acted in good faith and in a manner he or she reasonably believed to be in,
or not opposed to, the best interests of the Registrant, except that no
indemnification may be made if the Indemnitee is adjudged to be liable to the
Registrant, unless a court determines that such Indemnitee is entitled to
indemnification for such expenses which the court deems proper.
Also under Delaware law, expenses incurred by an officer or director in
defending a civil or criminal action, suit or proceeding may be paid by the
Registrant in advance of the final disposition of the suit, action or proceeding
upon receipt of an undertaking by or on behalf of the officer or director to
repay such amount if it is ultimately determined that he or she is not entitled
to be indemnified by the Registrant. The Registrant may also advance expenses
incurred by other employees and agents of the Registrant upon such terms and
conditions, if any, that the board of directors of the Registrant deems
appropriate.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit No. Description of Exhibit
- ----------- ----------------------
2(a) Agreement of Merger and Plan of Reorganization dated February 21,
1995, as amended by that certain Amendment of Agreement of Merger and
Plan of Reorganization dated March 31, 1995, by and among Fresh Test
Acquisition, Inc., the Registrant, Fresh Technology Corporation, and
William A. Fresh, Robert K. Bench, Harold D. Higgins, WAF Investment
Company and Orem Tek Development Corp. filed as Exhibit 2 to the
Registrant's Current Report on Form 8-K filed with the Commission on
or about April 4, 1995 and incorporated herein by reference.
3(a) Certificate of Incorporation of the Registrant dated March 14, 1987,
as filed with the Secretary of State of Delaware and filed as Exhibit
4(a) to the Registrant's Form 10-Q for the period ended June 30, 1987
and incorporated herein by reference.
85
<PAGE>
3(b) Bylaws of the Registrant dated March 14, 1987, filed as Exhibit 4(b)
to the Registrant's Form 10-Q for the period ended June 30, 1987 and
incorporated herein by reference.
4(a) Specimen Stock Certificate filed as Exhibit 4(c) to the Registrant's
Form S-18 Registration Statement (No. 2-85679) and incorporated
herein by reference.
4(b) Specimen Convertible Subordinated Debenture filed as Exhibit 4(b) to
the Registrant's Form 10-K for the year ended December 31, 1990 and
incorporated herein by reference.
4(c) Specimen Series A Preferred Stock Certificate filed as Exhibit 4(c)
to the Registrant's Form 10- KSB for the year ended December 31, 1995
and incorporated herein by reference.
4(d) Certificate of Designations of Series A Preferred Stock dated January
11, 1996, as filed with the Secretary of State of Delaware filed as
Exhibit 4(d) to the Registrant's Form 10-KSB for the year ended
December 31, 1995 and incorporated herein by reference.
5 Opinion of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears,
P.A.
8 Opinion of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears,
P.A.
10(a) Non-Qualified Stock Option Plan adopted by the Registrant's Board of
Directors on June 25, 1983, as amended, and Form of Qualified Stock
Option Agreement filed as Exhibits 4(a) and 4(c) to the Registrant's
Form S-8 Registration Statement (No. 33-65200) and incorporated
herein by reference.
10(b) Incentive Stock Option Plan adopted by the Registrant's Board of
Directors on April 3, 1989, filed as Exhibit 10(k) to the
Registrant's Form 10-K for the year ended December 31, 1989 and
incorporated herein by reference and Form of Incentive Stock Option
Agreement filed as Exhibit 4(d) to the Registrant's Form S-8
Registration Statement (No. 33-65200) and incorporated herein by
reference.
10(c) Lease Agreement between the Registrant and Jerome A. Reynolds dated
July 4, 1991 filed as Exhibit 10(b) to the Registrant's Form 10-K for
the year ended December 31, 1991 and incorporated herein by
reference.
10(d) Lease Agreement between the Registrant and Kou-ping Cheng dated June
11, 1993 filed as Exhibit 10(u) to the Registrant's Form 10-KSB for
the year ended December 31, 1993 and incorporated herein by
reference.
10(e) Lease Agreement between the Registrant and NPF Management, Inc. dated
March 15, 1993 filed as Exhibit 10(p) to the Registrant's Form 10-K
for the year ended December 31, 1992 and incorporated herein by
reference.
10(f) Lease Modification between the Registrant and PDJ Corporation dated
February 10, 1994 to Lease Agreement between the Registrant and NPF
Management, Inc. dated March 15, 1993 filed as Exhibit 10(v) to the
Registrant's Form 10-KSB for the year ended December 31, 1993 and
incorporated herein by reference.
10(g) Lease Agreement between the Registrant and John J. Hollowell dated
October 30, 1990 filed as Exhibit 10(m) to the Registrant's Form 10-K
for the year ended December 31, 1990 and incorporated herein by
reference.
86
<PAGE>
10(h) Office Lease Agreement between the Registrant and Robert B. Hopgood,
Jr. dated November 13, 1990 filed as Exhibit 10(n) to the
Registrant's Form 10-K for the year ended December 31, 1990 and
incorporated herein by reference.
10(i) Addendum dated March 1, 1992 between the Registrant and Robert B.
Hopgood, Jr. to Office Lease Agreement between the Registrant and
Robert B. Hopgood, Jr. dated November 13, 1990 filed as Exhibit 10(j)
to the Registrant's Form 10-K for the year ended December 31, 1991
and incorporated herein by reference.
10(j) Second Addendum dated January 1, 1994 between the Registrant and
Robert B. Hopgood, Jr. to Office Lease Agreement between the
Registrant and Robert B. Hopgood, Jr. dated November 13, 1990 filed
as Exhibit 10(j) to the Registrant's Form 10-K for the year ended
December 31, 1991 and incorporated herein by reference.
10(k) Lease Agreement between the Registrant and Renner Plaza Properties
dated September 8, 1993 filed as Exhibit 10(w) to the Registrant's
Form 10-KSB for the year ended December 31, 1993 and incorporated
herein by reference.
10(l) Lease Agreement between the Registrant and Aetna Life Insurance
Company dated December 30, 1994 filed as Exhibit 10(l) to the
Registrant's Form 10-KSB for the year ended December 31, 1994 and
incorporated herein by reference.
10(m) Lease between Scottish Enterprise and Cerprobe Europe Limited dated
November 4, 1994 filed as Exhibit 10(m) to the Registrant's Form
10-KSB for the year ended December 31, 1994 and incorporated herein
by reference.
10(n) Rental Agreement between the Registrant and Gentra Capital
Corporation dated as of July 6, 1994 filed as Exhibit 10(n) to the
Registrant's Form 10-KSB for the year ended December 31, 1994 and
incorporated herein by reference.
10(o) Agreement dated May 2, 1991 between the Registrant and John W.
Tarzwell and Margaret L. Tarzwell filed as Exhibit 10(d) to the
Registrant's Form 10-K for the year ended December 31, 1991 and
incorporated herein by reference.
10(p) Amendment No. 1 dated March 8, 1993 to Agreement dated May 2, 1991
between the Registrant and John W. Tarzwell and Margaret L. Tarzwell
filed as Exhibit 10(s) to the Registrant's Form 10-KSB for the year
ended December 31, 1993 and incorporated herein by reference.
10(q) Asset Purchase Agreement dated July 10, 1991 between the Registrant
and Alpha Test Corporation filed as Exhibit 10(c) to the Registrant's
Form 10-K for the year ended December 31, 1991 and incorporated
herein by reference.
10(r) Employment Contract dated July 16, 1990 between the Registrant and
Carl Zane Close filed as Exhibit 10(p) to the Registrant's Form 10-K
for the year ended December 31, 1990 and incorporated herein by
reference.
10(s) Employment Contract dated July 17, 1990 between the Registrant and
Michael K. Bonham filed as Exhibit 10(q) to the Registrant's Form
10-K for the year ended December 31, 1990 and incorporated herein by
reference.
87
<PAGE>
10(t) Employment Contract dated July 16, 1990 between the Registrant and
Eswar Subramanian filed as Exhibit 10(r) to the Registrant's Form
10-K for the year ended December 31, 1990 and incorporated herein by
reference.
10(u) Employment Contract dated July 16, 1990 between the Registrant and
Henry Wong filed as Exhibit 10(s) to the Registrant's Form 10-K for
the year ended December 31, 1990 and incorporated herein by
reference.
10(v) Manufacturing Licensing Agreement between the Registrant and
Intertrade Scientific, Inc. dated August 30, 1993 filed as Exhibit
10(x) to the Registrant's Form 10-KSB for the year ended December 31,
1993 and incorporated herein by reference.
10(w) Manufacturing Licensing Agreement between the Registrant and ESJ
Corporation dated January 21, 1994 filed as Exhibit 10(y) to the
Registrant's Form 10-KSB for the year ended December 31, 1993 and
incorporated herein by reference.
10(x) Loan Agreement between the Registrant and First Interstate Bank of
Arizona, N.A. dated June 6, 1994 and related Promissory Note filed as
Exhibit 10(x) to the Registrant's Form 10-KSB for the year ended
December 31, 1994 and incorporated herein by reference.
10(y) Master Lease Agreement between the Registrant and First Interstate
Bank of Arizona, N.A. dated as of June 6, 1994 filed as Exhibit 10(y)
to the Registrant's Form 10-KSB for the year ended December 31, 1994
and incorporated herein by reference.
10(z) Master Lease Agreement between the Registrant and PFC, Inc. dated
August 9, 1994 filed as Exhibit 10(z) to the Registrant's Form 10-KSB
for the year ended December 31, 1994 and incorporated herein by
reference.
10(aa) Commitment of Norwest Equipment Finance, Inc. to the Registrant dated
December 14, 1994 filed as Exhibit 10(aa) to the Registrant's Form
10-KSB for the year ended December 31, 1994 and incorporated herein
by reference.
10(bb) Agreement between Cerprobe Europe, Limited and Lanarkshire
Development Agency dated August 15, 1994, as amended, filed as
Exhibit 10(bb) to the Registrant's Form 10-KSB for the year ended
December 31, 1994 and incorporated herein by reference.
10(cc) Lease Agreement between the Registrant and Realtec Properties I, L.P.
dated July 17, 1995 filed as Exhibit 1 to the Registrant's Form
10-QSB for the quarter ended June 30, 1995 and incorporated herein by
reference.
10(dd) Lease Agreement between the Registrant and East Point Realty Trust
dated June 30, 1995 filed as Exhibit 2 to the Registrant's Form
10-QSB for the quarter ended June 30, 1995 and incorporated herein by
reference.
10(ee) Amendment to Loan Agreement between the Registrant and First
Interstate Bank of Arizona, N.A. dated April 30, 1995 and related
Promissory Note filed as Exhibit 3 to the Registrant's Form 10-QSB
for the quarter ended June 30, 1995 and incorporated herein by
reference.
10(ff) Amendment to Master Lease Agreement between the Registrant and First
Interstate Bank of Arizona, N.A. dated April 30, 1995 filed as
Exhibit 4 to the Registrant's Form 10-QSB for the quarter ended June
30, 1995 and incorporated herein by reference.
88
<PAGE>
10(gg) Letter of Intent between the Registrant and Technology Parks PTE LTD
dated June 23, 1995 filed as Exhibit 5 to the Registrant's Form
10-QSB for the quarter ended June 30, 1995 and incorporated herein by
reference.
10(hh) Employment Agreement between the Registrant and Robert K. Bench dated
March 31, 1995 filed as Exhibit 10(hh) to the Registrant's Form
10-KSB for the year ended December 31, 1995 and incorporated herein
by reference.
10(ii) Security Agreement between the Registrant and Zions Credit
Corporation dated December 27, 1995 filed as Exhibit 10(ii) to the
Registrant's Form 10-KSB for the year ended December 31, 1995 and
incorporated herein by reference.
10(jj) Assignment of Lease between Fresh Test Technology, Inc. and the
Registrant dated August 31, 1995 filed as Exhibit 10(jj) to the
Registrant's Form 10-KSB for the year ended December 31, 1995 and
incorporated herein by reference.
10(kk) Lease Agreement between Fresh Test Technology, Inc. and Mission West
Properties dated September 21, 1993 filed as Exhibit 10(kk) to the
Registrant's Form 10-KSB for the year ended December 31, 1995 and
incorporated herein by reference.
10(ll) The Registrant's 1995 Stock Option Plan filed as Exhibit 10(ll) to
the Registrant's Form 10-KSB for the year ended December 31, 1995 and
incorporated herein by reference.
10(mm) Capital Lease Agreement between the Registrant and Wells Fargo
Leasing Corporation dated October 10, 1996 filed as an Exhibit to the
Registrant's Form 10-QSB for the quarter ended September 30, 1996 and
incorporated herein by reference.
10(nn) Capital Lease Agreement between the Registrant and Wells Fargo
Leasing Corporation dated September 9, 1996 filed as an Exhibit to
the Registrant's Form 10-QSB for the quarter ended September 30, 1996
and incorporated herein by reference.
10(oo) Memorandum of Lease with respect to the Lease Agreement between the
Registrant and CRPB Investors, L.L.C. dated August 21, 1996, and the
Addendum to the Lease Agreement filed as an Exhibit to the
Registrant's Form 10-QSB for the quarter ended September 30, 1996 and
incorporated herein by reference.
10(pp) Employment Agreement between the Registrant and Randal L. Buness
dated June 26, 1996 filed as an Exhibit to the Registrant's Form
10-QSB for the quarter ended September 30, 1996 and incorporated
herein by reference.
10(qq) Operating Agreement between the Registrant and CRPB Investors, L.L.C.
dated September 18, 1996 filed as an Exhibit to the Registrant's Form
10-QSB for the quarter ended September 30, 1996 and incorporated
herein by reference.
10(rr) Agreement of Merger and Plan of Reorganization, dated as of October
25, 1996, by and among the Registrant, C-Route Acquisition, Inc.,
CROUTE, Inc., COMPUROUTE, INCORPORATED, and Souad Shrime.*
10(ss) Agreement and Plan of Merger, dated as of October 25, 1996, by
and between COMPUROUTE, INCORPORATED, and CROUTE, Inc.*
89
<PAGE>
10(tt) Purchase and Sale Agreement dated as of October 25, 1996, by and
between Souad Shrime and the Registrant.*
10(uu) Indemnification Agreement by Souad Shrime in favor of and for the
benefit of the Registrant and C-Route Acquisition, Inc.*
11 Schedule of Computation of Net Income per Share.*
21 List of Subsidiaries filed as Exhibit 21 to the Registrant's Form
10-KSB for the year ended December 31, 1994 and incorporated herein
by reference.
23.1 Consent of Counsel (included in Exhibits 5 and 8)
23.2 Independent Auditors' Consent (Cerprobe Corporation).
23.3 Independent Auditors' Consent (CROUTE, Inc.)
27 Financial Data Schedule filed as an Exhibit to the Registrant's Form
10-QSB for the quarter ended September 30, 1996 and incorporated
herein by reference.
(b) Financial Statement Schedules.
None.
* Previously filed.
90
<PAGE>
Item 22. Undertakings
(a) (1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant, in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(c) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents filed subsequent
to the effective date of the registration statement through the date of
responding to the request.
(d) The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
91
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Phoenix, State of Arizona, on December 6, 1996.
CERPROBE CORPORATION
By /s/ Randal L. Buness
Vice President, Chief
Financial Officer,
Secretary, and Treasurer
Pursuant to the requirements of the Securities Act of 1933,
this Amendment No. 1 to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
By: *
------------------------- Chairman of the Board of December 6, 1996
Ross J. Mangano Directors and Director
By: *
------------------------- President, Chief Executive December 6, 1996
C. Zane Close Officer, and Director
(Principal Executive
Officer)
/s/ Randal L. Buness Vice President, Chief December 6, 1996
- ------------------------------ Financial Officer,
Randal L. Buness Secretary, and Treasurer
(Principal Financial and
Accounting Officer)
By: * Director
-------------------------
December 6, 1996
Kenneth W. Miller
By: * Director December 6, 1996
-------------------------
Donald F. Walter
By: * Director December 6, 1996
-------------------------
William A. Fresh
*By: /s/ Randal L. Buness
------------------------
Randal L. Buness
(Attorney-in-fact)
</TABLE>
92
[O'CONNOR CAVANAGH LETTERHEAD]
December 5, 1996
Cerprobe Corporation
600 South Rockford Drive
Tempe, Arizona 85281
Re: Registration Statement on Form S-4
Cerprobe Corporation
Gentlemen:
As legal counsel to Cerprobe Corporation, a Delaware
corporation (the "Company") we have assisted in the preparation of the Company's
Registration Statement on Form S-4 (the "Registration Statement"), to be filed
with the Securities and Exchange Commission in connection with the registration
under the Securities Act of 1933, as amended, of 400,000 shares of Common Stock,
par value $0.05 per share, of the Company (the "Shares") issuable in connection
with the merger of CROUTE, Inc., a Texas corporation ("C-Route"), with and into
C-Route Acquisition, Inc., a Delaware corporation and a wholly-owned subsidiary
of the Company (the "Merger"). The facts, as we understand them, are set forth
in the Registration Statement.
With respect to the opinion set forth below, we have examined
originals, certified copies, or copies otherwise identified to our satisfaction
as being true copies, only of the following:
A. The Certificate of Incorporation of the Company, as amended
through the date hereof;
B. The Bylaws of the Company, as amended through the date
hereof;
C. Resolutions of the Board of Directors of the Company dated
October 24, 1996 authorizing the Merger;
D. The Registration Statement.
Subject to the assumptions that (i) the documents and
signatures examined by us are genuine and authentic and (ii) the persons
executing the documents examined by us have the legal capacity to execute such
documents, and subject to the further limitations and qualifications set forth
below, it is our opinion that the Shares, when issued and exchanged for shares
of C-
<PAGE>
Cerprobe Corporation
December 5, 1996
Page 2
Route common stock in accordance with the terms of the Merger, will be validly
issued, fully paid and nonassessable.
Please be advised that we are members of the State Bar of
Arizona, and our opinion is limited to the legality of matters under the laws of
the State of Arizona and the General Corporation Laws of the State of Delaware.
Further, our opinion is based solely upon existing laws, rules and regulations,
and we undertake no obligation to advise you of any changes that may be brought
to our attention after the date hereof.
We hereby expressly consent to any reference to our firm in
the Registration Statement, inclusion of this Opinion as an exhibit to the
Registration Statement, and to the filing of this Opinion with any other
appropriate governmental agency.
Very truly yours,
/s/ O'Connor, Cavanagh, Anderson, Killingsworth
& Beshears
[O'CONNOR CAVANAGH LETTERHEAD]
File No.: 22064-44
December 6, 1996
Cerprobe Corporation
600 South Rockford Drive
Tempe, Arizona 85281
Re: Acquisition of C-Route and CompuRoute
Gentlemen:
We have acted as legal counsel to Cerprobe Corporation ("Cerprobe") in
connection with Cerprobe's Registration Statement on Form S-4 (File No.
333-15785) to which this opinion appears as an exhibit (the "Registration
Statement"), which includes the Prospectus of Cerprobe (the "Prospectus").
Unless otherwise indicated, any defined term used herein has the same meaning as
in the Prospectus. We hereby confirm that, in our opinion, the discussion in the
Prospectus under the heading "The Merger - Certain Federal Income Tax
Consequences" is accurate in all material respects.
We hereby consent to the filing with the Securities and Exchange
Commission of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ O'Connor, Cavanagh, Anderson,
Killingsworth & Beshears
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Cerprobe Corporation:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Phoenix, Arizona
December 6, 1996
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
CROUTE, Inc.
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Dallas, Texas
December 6, 1996
