SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q SB
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended: March 31, 1996
|_| Transition report under Section 13 or 15(d) of the Exchange Act.
For the transition period from _________________ to _______________
Commission file number: 0-11370
Cerprobe Corporation
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer As Specified In Its Charter)
Delaware 86-0312814
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(State of Incorporation) (IRS Employee Identification Number)
600 South Rockford Drive, Tempe, Arizona 85281
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(Address of Principal Executive Offices) (Zip Code)
(602) 967-7885
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(Issuer's Telephone Number, Including Area Code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
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4,314,053 Shares of Common Stock issued and outstanding as of May 13, 1996
- --------------------------------------------------------------------------------
(Number of Shares of Common Stock Outstanding)
Traditional Small Business Disclosure Format (check one):
Yes No X
------
This Report Consists of 17 Pages
<PAGE>
CERPROBE CORPORATION
--------------------
(INDEX)
Page Number
-----------
Part I.
Financial Information
Condensed Consolidated Balance Sheets -
at March, 31 1996 and December 31, 1995 3
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1996 and March 31,1995 4
Condensed Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1996, and March 31, 1995 5
Notes To Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II
Other Information 16
2
<PAGE>
CERPROBE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31 December 31
ASSETS 1996 1995
------
----------------- -----------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $9,036,839 $263,681
Accounts receivable, net of allowances for
doubtful accounts (Notes B & F) 6,064,746 4,377,041
Inventories (Notes C & F) 3,161,909 2,802,081
Prepaid expenses 22,221 111,673
Income taxes receivable 163,464 163,464
Deferred income taxes 135,134 270,599
----------------- -----------------
TOTAL CURRENT ASSETS 18,584,313 7,988,539
----------------- -----------------
PROPERTY AND EQUIPMENT, net (Notes D and G) 5,890,909 4,667,786
GOODWILL, net of amortization 1,857,072 1,923,396
PATENTS AND TECHNOLOGY, net of amortization 68,405 74,013
OTHER ASSETS 183,169 313,716
----------------- -----------------
TOTAL ASSETS $26,583,868 $14,967,450
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $1,679,687 $1,499,853
Accrued expenses (Note E) 1,787,967 788,599
Convertible subordinated debentures 485,000 595,000
Current portion of notes payable (Note G) 118,725 123,743
Current portion of capital leases (Note G) 199,022 209,885
----------------- -----------------
TOTAL CURRENT LIABILITIES 4,270,401 3,217,080
----------------- -----------------
Notes payable, less current portion 377,354 408,376
Capital leases, less current portion 527,056 572,830
Deferred income taxes 66,123 66,123
Other liabilities 32,443 46,801
----------------- -----------------
TOTAL LIABILITIES 5,273,377 4,311,210
----------------- -----------------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.05 per share:
Authorized, 10,000,000 shares;
Issued and outstanding 9,780,000 shares at March 31, 1996 489,000 -
Common stock, par value $.05 per share:
Authorized, 10,000,000 shares;
Issued and outstanding 4,295,960 and 4,095,851 214,799 204,792
Additional paid-in-capital 16,377,387 7,239,410
Retained earnings 4,447,324 3,466,464
Unearned compensation (191,487) (241,872)
Foreign currency translation adjustment (26,532) (12,554)
----------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 21,310,491 10,656,240
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $26,583,868 $14,967,450
================= =================
</TABLE>
3
<PAGE>
CERPROBE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
NET SALES $9,699,939 $4,962,665
COST OF GOODS SOLD 5,172,951 2,690,801
---------------- ----------------
GROSS MARGIN 4,526,988 2,271,864
---------------- ----------------
EXPENSES:
Engineering and product development 102,684 121,137
Selling, general and administrative 2,607,938 1,149,423
---------------- ----------------
2,710,622 1,270,560
---------------- ----------------
OPERATING INCOME 1,816,366 1,001,304
---------------- ----------------
OTHER REVENUE AND (EXPENSES):
Interest expense (58,856) (36,468)
Other income 100,350 62,899
---------------- ----------------
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 1,857,860 1,027,735
MINORITY INTEREST 25,361 0
PROVISION FOR INCOME TAXES 877,000 463,000
---------------- ----------------
NET INCOME 1,006,221 564,735
================ ================
NET INCOME PER COMMON EQUIVALENT SHARE
PRIMARY:
NET INCOME PER SHARE $0.23 $0.16
================ ================
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 4,461,734 3,446,342
================ ================
FULLY DILUTED:
NET INCOME PER SHARE $0.18 $0.14
================ ================
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 5,645,349 4,041,342
================ ================
</TABLE>
4
<PAGE>
CERPROBE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31
-------------------------------------
1996 1995
---------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income before minority interest $1,006,221 $564,735
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 404,138 149,485
Tax benefit from stock options exercised 0 6,500
Deferred income taxes 135,465 24,680
Provision for losses on accounts receivable 3,000 3,000
Provision for obsolete inventory 10,000 7,000
Compensation expense 32,753 0
Loss applicable to minority interest (25,361) 0
Changes in operating assets and liabilities:
Accounts receivable (1,690,705) (269,939)
Inventories (369,828) (138,940)
Prepaid expenses and other assets 219,999 (436,297)
Accounts payable and other accrued expenses 437,666 342,035
Accrued income taxes 741,536 36,364
Other liabilities (14,358) 99,042
---------------- ----------------
Net cash provided by operating activities 890,526 387,665
---------------- ----------------
INVESTING ACTIVITIES:
Capital expenditures (1,555,329) (159,599)
---------------- ----------------
FINANCING ACTIVITIES:
Principal payments on notes payable and capital leases (92,677) (24,959)
Net proceeds from issuance of preferred stock 9,400,000 0
Net proceeds from issuance of common stock 144,616 0
---------------- ----------------
Net cash provided by (used in) financing activities 9,451,939 (24,959)
---------------- ----------------
EFFECT OF EXCHANGE RATES ON CASH (13,978) 2,092
NET INCREASE IN CASH AND CASH EQUIVALENTS 8,773,158 205,199
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 263,681 738,319
---------------- ----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $9,036,839 $943,518
================ ================
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Conversion of subordinated debentures to common stock $110,000 0
================ ================
================ ================
Conversion of preferred stock to common stock $11,000 0
================ ================
================ ================
Property acquired under capital leases and issuance of notes payable $0 $95,200
================ ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION :
Interest paid $33,617 $29,935
================ ================
Income taxes paid $0 $395,456
================ ================
</TABLE>
5
<PAGE>
CERPROBE CORPORATION
--------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
MARCH 31, 1996
--------------
A. NOTE TO FINANCIAL STATEMENTS (UNAUDITED)
----------------------------------------
The balance sheet as of March 31, 1996, the statements of operations
for the three month periods ended March 31, 1996 and March 31, 1995,
and the statements of cash flows for the three month periods ended
March 31, 1996 and March 31, 1995 have been prepared by the Company
without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows for all
periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's 1995
10KSB. The results of operations of the interim periods are not
necessarily indicative of the results to be obtained for the entire
year.
On April 25, 1996, the Company opened a full-service manufacturing
plant in Singapore which operates under the name Cerprobe Singapore
PTE. LTD. The Company holds a majority interest in Cerprobe Asia PTE.
LTD., which is a joint venture with several Asian investors.
B. ALLOWANCE FOR DOUBTFUL ACCOUNTS
-------------------------------
The allowance for doubtful accounts at March 31, 1996 and December 31,
1995 was $176,000 and $173,000, respectively.
C. INVENTORIES
-----------
Inventories are stated at the lower of cost (determined on the
first-in, first-out method) or market and consist of the following:
March 31, December 31,
1996 1995
Raw Materials $2,125,563 $1,655,974
Work-In-Process 1,129,346 $1,229,107
Reserve for Obsolete Inventory (93,000) (83,000)
---------- ----------
Total $3,161,909 $2,802,081
========== ==========
6
<PAGE>
D. PROPERTY AND EQUIPMENT
----------------------
<TABLE>
<CAPTION>
Property and Equipment consist of the following:
March 31, December 31,
1996 1995
--------------------- -----------------------
<S> <C> <C>
Manufacturing tools and equipment $ 5,723,942 $ 4,825,724
Office furniture and equipment 2,077,609 1,722,312
Leasehold improvements 830,549 759,843
Construction in progress 619,803 398,838
Computer software 39,775 39,775
Accumulated depreciation and amortization (3,400,769) (3,078,706)
-------------------- ----------------------
$ 5,890,909 $ 4,667,786
==================== ======================
E. ACCRUED EXPENSES
----------------
Accrued expenses consist of the following:
March 31, December 31,
1996 1995
-------------------- ---------------------
Accrued payroll and related taxes $ 834,796 $ 482,866
Accrued income taxes 741,536 -
Other accrued expenses 211,635 305,733
-------------------- --------------------
$ 1,787,967 $ 788,599
==================== ====================
</TABLE>
F. NOTES PAYABLE
-------------
On April 30, 1996, Cerprobe Corporation (the "Company") signed a Loan
Agreement with First Interstate Bank. The Loan Agreement provides up to
$3,000,000 in revolving credit for accounts receivable financing and
inventory.
The revolving credit agreement expires April 28, 1997. The revolving
credit agreement has a negative pledge agreement on all accounts
receivable, inventories, unpledged equipment, and real estate. The
non-use fee under the line of credit is .125% of the unused portion,
calculated per annum. At March 31, 1996, there was no amount
outstanding under this agreement.
The interest rate under the revolving credit agreement will be the
lower of First Interstate Bank's prime rate, which was 8.25% at March
31, 1996, or LIBOR (London Interbank Rate). The LIBOR rate was 8.00% at
March 31, 1996.
On April 3, 1995, due to the acquisition of Fresh Test Technology
Corporation ("Fresh Test"), the Company acquired three notes payable.
One note is for an exclusive license for probe card technology which
provides for monthly payments of $2,500 per month. This note was paid
in full on March 14, 1996. The other notes were payable to a former
officer and director of Fresh Test. These two notes were paid in full
on July 17, 1995.
7
<PAGE>
G. LONG-TERM DEBT AND COMMITMENTS
------------------------------
In March and April 1991, the Company issued $1,000,000 in aggregate
principal amount of Convertible Subordinated Debentures. The Debentures
are convertible into shares of the Company's Common Stock at a
conversion price equal to $1.00 per share, subject to adjustment. To
assist the Company in meeting the minimum stockholders' equity
requirement for listing on Nasdaq, certain holders of the Debentures
agreed to convert $360,000 in principal amount of the Debentures into
360,000 shares of the Company's Common Stock in October 1992. On
September 3, 1993, $5,000 in principal amount of the Debentures was
converted into 5,000 shares of the Company's Common Stock. On September
21, 1994, an additional $40,000 in principal amount of the Debentures
was converted into 40,000 shares of the Company's Common Stock. On
February 23, 1996, an additional $10,000 in principal amount of the
Debentures was converted into 10,000 shares of the Company's Common
Stock. On March 29, 1996, an additional $100,000 in principal amount of
the Debentures was converted into 100,000 shares of the Company's
Common Stock. Accordingly, $485,000 in principal amount of the
Debentures was outstanding at March 31, 1996, all of which is due in
December 1996 ($480,000 of which bears interest at 12 1/2% and $5,000
of which bears interest at 25%, payable semi-annually in June and
December of each year). The proceeds from the sale of the Debentures
were used by the Company to refinance $440,000 of short term
indebtedness, purchase capital equipment, and provide additional
working capital.
In June 1994, the Company signed a Lease Agreement with First
Interstate Bank of Arizona ("First Interstate"). The agreement provides
up to $2,000,000 on open credit for a term of 11 months for equipment
leasing. In accordance with this agreement, on March 15, 1995, the
Company leased various manufacturing equipment with an aggregate cost
of $95,200 from First Interstate. The interest rate for this lease is
9.18%. On March 31, 1996, the long term portion of this lease was
$61,789. In addition, on April 11, 1995, the Company leased additional
manufacturing equipment with an aggregate cost of $171,255 from First
Interstate purchased under a second lease. The interest rate for the
second lease is 8.96%. The long term portion of the second lease was
$113,982 on March 31, 1996.
In June 1995, the Company renewed the Lease Agreement with First
Interstate. The new agreement provides up to $1,000,000 on open credit
for a term of 11 months for equipment leasing. In accordance with this
agreement, on July 24, 1995, the Company leased various equipment with
an aggregate cost of $281,157 from First Interstate. The interest rate
on this lease is 7.54%. On March 31, 1996, the long term portion of
this lease was $200,207.
In August 1994, the Company signed a Lease Agreement with PFC, Inc. The
agreement provides up to $1,000,000 on open credit for a term of 11
months for equipment leasing. The interest rate is 8.777%. In
accordance with this agreement, on August 9, 1994, the Company leased
various manufacturing equipment with an aggregate cost of $190,233 from
PFC, Inc. On March 31, 1996, the long term portion of the PFC, Inc.
lease was $100,198.
8
<PAGE>
On December 27, 1995, the Company signed an agreement with Zions Credit
Corporation to finance various manufacturing equipment with an
aggregate cost of $533,823. On March 31, 1996, the long term portion of
this note was $375,803.
On September 17, 1995 the Company signed a sublease for a portion of
the Santa Clara, California facility to Advanced Point Corporation. The
sublease is for four years and nine months commencing October 1, 1995
and ending July 31, 2002. On September 19, 1995, the Company signed a
sublease for the remaining portion of the Santa Clara facility to
Silicon Electronics Inc. The sublease is for two years and one month
commencing on October 1, 1995 and ending November 30, 1997.
On July 18, 1995, the Company signed a new building lease for the San
Jose, California facility for seven years and one month commencing on
August 1, 1995, and ending on August 30, 2002. The Company moved the
Santa Clara facility to San Jose, California in September of 1995.
On June 30, 1995, the Company signed a new building lease for the
Westboro, Massachusetts facility for five years commencing on July 1,
1995 and ending June 30, 2000.
On June 29, 1995, the Company signed a month-to-month lease for the
Colorado customer service office. The lease provides that either the
landlord or the tenant, without cause or approval of the other party,
may terminate this lease upon 30 days written notice. This lease was
terminated on April 30, 1996.
On June 23, 1995, the Company signed a letter of intent to lease the
building for the Singapore facility for three years commencing on
September 3, 1995 and ending on September 2, 1998.
On April 15, 1996, the Company signed a month to month lease on the
Oregon customer service office. The lease provides that either the
landlord or the tenant, without cause or approval of the other party,
may terminate this lease upon 30 days written notice.
Pursuant to the acquisition of Fresh Test Technology on April 3, 1995,
the Company acquired a building lease for the Chandler, Arizona
facility for two years commencing on November 1, 1993 and ending
October 31, 1995. This lease was subsequently amended for an additional
one year and two months commencing on November 1, 1995 and ending
December 31, 1996. The Company leased additional building space for the
Chandler, Arizona facility for five years commencing on December 1,
1993 and ending on November 30, 1998.
9
<PAGE>
Convertible Preferred Stock
On January 18, 1996, the Company issued 10,000,000 shares of
Convertible Preferred Stock for $10,000,000. Net proceeds from the
private placement, after deducting expenses, were $9,400,000. The
Preferred Stock is convertible into Common Stock at the option of the
holder in increments of 25% of the shares held by the holder beginning
March 3, 1996 through June 1, 1996. Automatic conversion occurs at the
end of two years. The Preferred Stock converts at the lesser of 110% of
the fixed strike price of $16.55 or 90% of the average five day closing
price prior to the conversion date. The Company may call the 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.
Additionally, the Company issued 52,000 Common Stock warrants on
January 18,1996, which are exercisable at the fixed strike price of
$16.55 and expire in four years.
During March 1996, 220,000 shares of Preferred Stock were converted
into 17,655 shares of Common Stock. During April 1996, 380,000 shares
of Preferred Stock were converted into 28,876 shares of Common Stock.
On May 2, 1996, 120,000 shares of Preferred Stock were converted into
9,097 shares of Common Stock. Accordingly, 9,280,000 shares of
Preferred Stock were outstanding at May 10, 1996.
Acquisition
On January 23, 1996, the Company signed a letter of intent to acquire
the stock of CompuRoute, Inc., a manufacturer of printed circuit
boards, and its affiliates. As consideration for the acquisition, the
Company plans to issue 995,000 shares of Common Stock. The Company
anticipates recording the acquisition under the pooling-of-interests
method of accounting. This transaction is subject to a number of
conditions, however, including approval by the stockholders of both
companies, and there can be no assurance that it will be completed.
H. PRO FORMA DATA - FRESH TEST TECHNOLOGY ACQUISITION
--------------------------------------------------
Three Months Ended March 31
---------------------------
1995
----
Net sales 6,465,823
Net income 706,178
Primary earnings per share .17
Fully diluted earnings per share .15
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
GENERAL
Cerprobe Corporation designs, manufactures, and markets high performance probing
and interface products used in electronic screening and verification of
integrated circuits (IC) and hybrid substrates (MCM) for the semiconductor
industry. Cerprobe's probe cards generally range from $500 to $10,000, 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.
Cerprobe was founded in 1976. Following a change in the Company's management
team in 1990, the Company has experienced significant internal expansion, with
revenues exceeding $26 million in 1995. Cerprobe has doubled its share of the
domestic probe card market during the past five years to become a major supplier
of probe cards in the United States and on a worldwide basis. The Company took
steps in 1994 to expand its presence in the international market by opening a
full service manufacturing and repair facility in Scotland to serve Europe. The
Scotland facility is now fully operational. In 1995, the Company continued this
expansion by opening an office in Singapore pursuant to a joint venture
agreement. Management believes that the fastest growing region for the
semiconductor industry is Southeast Asia, and plans to continue expanding into
this area during 1996.
The Company operates manufacturing 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. Product sales are made both by Company employed sales personnel and
independent distributors.
On April 3, 1995, the Company completed the acquisition of Fresh Test Technology
Corporation ("Fresh Test"). In connection with the acquisition, Cerprobe issued
712,500 shares of its Common Stock to the shareholders of Fresh Test. Fresh
Test, based in Chandler, Arizona, was founded in 1987 and specializes in the
design and manufacturing of controlled impedance, high frequency, ATE interface
boards and systems for testing digital, mixed signals and analog integrated
circuits. The Company believes that this acquisition allowed the combination of
product lines and the consolidation of engineering expertise.
11
<PAGE>
In order to continue to broaden the Company's product line, the Company has
entered into a letter of intent to acquire CompuRoute, Inc. (and certain
affiliated companies) ("CompuRoute") located in Richardson, Texas for
approximately 920,000 shares of the Company's Common Stock. The letter of intent
also provides for the issuance of 75,000 shares of the Company's Common Stock to
CompuRoute's largest stockholder in exchange for certain real estate associated
with CompuRoute's operations. CompuRoute is a leading designer and fabricator of
printed circuit boards and assemblies used in the testing of semiconductors. If
completed, the acquisition of CompuRoute would expand the Company's current
product line both internally and externally, and increase the Company's
distribution network. This transaction is subject to a number of conditions,
however, including approval by the stockholders of both companies, and there can
be no assurance that it will be completed.
FIRST QUARTER OF 1996 AND 1995 COMPARISONS
- - RESULTS OF OPERATIONS
Net sales for the first quarter of 1996 were $9,699,939, an increase of 95% over
net sales for the first quarter of 1995 of $4,962,665. The increase in net sales
reflects a continuation of higher order rates for the Company's probe card
products and the contribution from the acquisition of Fresh Test.
Gross margin for the first quarter of 1996 was 47% of sales compared to 46% of
sales for the comparable period in 1995. The increase in gross margin is
primarily a result of the increase in net sales and the positive effect of fixed
manufacturing costs being spread over a larger revenue base.
Engineering and product development expenses decreased 15% for the first quarter
of 1996 over the first quarter of 1995. This decrease 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 (SG&A) expenses for the first quarter of
1996 were $2,607,938, an increase of 127% compared with $1,149,423 for the
comparable period in 1995. The increase in total SG&A expenses resulted
primarily from the increase in fixed general and administrative costs due to the
Company's continued facility expansion and the acquisition of Fresh Test.
Operating income for the first quarter of 1996 was $1,816,366, an increase of
81% compared to $1,001,304 for the first quarter of 1995. The increase in
operating income resulted primarily from the increase in net sales and an
increase in the gross margin.
Interest expense for the first quarter of 1996 was $58,856, an increase of 61%
over the comparable period in 1995. The increase in interest expense is
primarily attributable to the increase in lease equipment financing and the
additional debt financing.
12
<PAGE>
Other income for the first quarter of 1996 was $100,350, an increase of 60% over
the comparable period in 1995. This increase was primarily due to the interest
income earned on cash from a private placement of Preferred Stock that occured
in the first quarter of 1996, and also the Company's ability to maximize
available vendor discounts.
Income before income taxes and minority interest for the first quarter of 1996
was $1,857,860, an increase of 81% over the comparable period in 1995. Net
income for the first quarter of 1996 was $1,006,221, an increase of 78% over the
comparable period in 1995. Once again, the increase is primarily due to the
increase in net sales and the increase in gross margin.
Cerprobe Singapore PTE. LTD. is in the process of set up, training and the build
up of inventory in the first quarter of 1996. Minority interest Cerprobe Asia
PTE. LTD. for the first quarter of 1996 was $25,361, which resulted from the
loss due to facility start up costs.
The Company has used all of its available loss carryforwards and has begun to
feel the full impact of income tax rates. The current estimated income tax rate
in the U.S. is 42%; on a consolidated basis, however, it is 47% due to the
nondeductible tax loss from the Scotland subsidiary.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased from $4,771,459 at December 31, 1995 to $14,313,912 at
March 31, 1996. The current ratio increased from 2.5 to 1 at December 31, 1995
to 4.3 to 1 at March 31, 1996, primarily as a result of an increase in accounts
payable and other accrued expenses and the cash received from the private
placement of Preferred Stock.
On April 30, 1996, the Company renewed a Loan Agreement with First Interstate
Bank of Arizona. First Interstate's Loan Agreement provides up to $3,000,000 in
revolving credit for accounts receivable financing. The interest rate on the
revolving credit agreement is equal to the lower of First Interstate's prime
rate or LIBOR.
The Company entered into an equipment financing arrangement with Norwest
Equipment Finance in May 1993. The Company has leased equipment valued at
$160,798 for a term of 36 months. The interest rate is 7.785%. At the end of the
lease term, the Company may purchase the equipment for $1.00.
The Company entered into an equipment financing arrangement with First
Interstate in June 1994. On March 15, 1995, the Company leased equipment valued
at $95,200 for a term of 60 months. The interest rate is 9.18%. At the end of
the lease term, the Company may purchase the equipment for $1.00. On June 12,
1995, the Company renewed the Lease Agreement with First Interstate. The Company
leased additional equipment valued at $281,158 for a term of 60 months, with an
interest rate of 7.54%. At the end of the lease term, the Company may purchase
the equipment for $1.00.
The Company entered into an equipment financing arrangement with PFC, Inc. in
August 1994. The Company leased equipment valued at $190,233 for a term of 60
months. The interest rate is 8.777%. At the end of the lease term, the Company
may purchase the equipment for $1.00.
On July 7, 1994, Cerprobe Europe Ltd. signed a month-to-month building lease for
the East Kilbride, Scotland facility. In November 1994, the Company approved a
formal lease for five years commencing on August 28, 1994 and ending August 27,
1999. The lease provides that unless the tenant gives a six week notice prior to
the end of the term, the lease will continue to run year to year.
In 1994, the Company received a grant from Locate in Scotland, an economic
development agency of the British government. The Company has already met 2 of
the 3 tiers with respect to the grant and has received pound 70,000
(approximately $107,000 at the exchange rate in effect on March 31, 1996). The
receipt of the funds pursuant to the grant has helped the Company defray
start-up expenses in connection with establishing this facility.
On June 23, 1995, the Company signed a letter of intent to lease the building
for its Singapore facility for three years commencing on September 3, 1995 and
ending on September 2, 1998.
14
<PAGE>
The Company operates a manufacturing, repair and sales facility at its Singapore
location. The Company estimates that up to $400,000 will be used to acquire
necessary equipment and to modify the facility to meet the Company's
specifications.
The coverage ratio of total debt to net worth was .40 at December 31, 1995
compared to .25 at March 31, 1996. This decrease indicates longer term financial
security and a greater flexibility to borrow in the future. The Company believes
that its existing line of credit and lease line combined with cash generated
from operations will be sufficient to meet the Company's currently anticipated
cash requirements for at least the next twelve months.
15
<PAGE>
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
a. None
Item 2 Changes in Securities
a. None
Item 3 Defaults on Senior Securities
a. None
Item 4 Submission of Matters to Vote of Security Holders
a. None
Item 5 Other Information
a. On March 31, 1996, Robert Bench tendered his
resignation as Chief Financial Officer.
Item 6 Exhibits and Reports on Form 8K
a. Exhibits required by Item 601 of Regulation S-B
10(a) Loan Agreement between the Company and First
Interstate Bank of Arizona, NA dated April
27, 1996 and related Promissory Note.
10(b) Lease Agreement between the Company and
Shared Secretarial Service Inc. dated April
19, 1996.
27 Financial Data Schedule.
b. Reports on Form 8-K
5 Form 8K, filed on January 18, 1996, to
report the placement of $10 million in
convertible preferred stock to a group of
institutional investors.
16
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CERPROBE CORPORATION
/s/ C. Zane Close
---------------------------------
C. Zane Close
President, Chief Executive Officer
May 13, 1996
- --------------------------------------------------------------------------------
PROMISSORY NOTE
- --------------------------------------------------------------------------------
BORROWER:
CERPROBE CORPORTATION
600 South Rockford Drive
Tempe, AZ 85281
LENDER:
First Interstate Bank of Arizona, N.A.
Commercial Banking Division
100 W. Washington
P.O. Box 53456, Dept. #813
Phoenix, AZ 85072-3456
================================================================================
PRINCIPAL AMOUNT: $3,000,000.00 INITIAL RATE: 8.250%
DATE OF NOTICE: APRIL 27, 1996
PROMISE TO PAY. CERPROBE CORPORATION ('Borrower') promises to pay to First
Interstate Bank of Arizona, N. A. ('Lender'), or order, in lawful money of the
United States of America, the principal amount of Three Million & 00/100 Dollars
($3,000,000.00) or so much as may be outstanding, together with interest on the
unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on April 28, 1997. In addition, Borrower will
pay regular monthly payments of accrued unpaid interest beginning May 31, 1996,
and all subsequent interest payments are due on the last day of each month after
that. Interest on this Note is computed on a 365/360 simple interest basis; that
is, by applying the ratio of the annual interest rate of a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied in any order at Lender's sole discretion.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the First Interstate Bank of
Arizona, N.A. Prime Rate, which is an index Lender announces from time to time
for pricing certain loans (the 'Index'). The Index is not necessarily the lowest
rate charged by Lender on its loans and is set by Lender in its sole discretion.
If the Index becomes unavailable during the term of this loan, Lender may
designate a substitute index after notifying Borrower. Lender will tell Borrower
the current Index rate upon Borrower's request. Borrower understands that
<PAGE>
Lender may make loans based on other rates as well. The interest rate change
will not occur more often than each day. The Index currently is 8.250% per
annum. The interest rate to be applied to the unpaid principal balance of this
Note will be at a rate equal to the Index, resulting in an initial rate of
8.250% per annum. NOTICE: Under no circumstances will the interest rate on this
Note be more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c)Borrower defaults under any loan, extent of credit, security
agreement, purchase or sales agreement, or any other agreement, in favor of any
other creditor or person that may materially affect any of Borrower's property
or Borrower's ability to repay this Note or perform Borrower's obligations under
this Note or any of the Related Documents. (d) Any representation or statement
made or furnished to Lender by Borrower or on Borrower's behalf is false or
misleading in any material respect either now or at the time made or furnished.
(e) Borrower becomes insolvent, a receiver is appointed for any part of
Borrower's property, Borrower makes an assignment for the benefit of creditors,
or any proceeding is commenced either by Borrower or against Borrower under any
bankruptcy or insolvency laws. (f) Any creditor tries to take any of Borrower's
property on or in which Lender has a lien or security interest. This includes a
garnishment of any of Borrower's accounts with Lender. (g) Any of the events
described in this default section occurs with respect to any guarantor of this
Note. (h) A material adverse change occurs in Borrower's financial condition, or
Lender believes the prospect of payment of performance of the indebtedness is
impaired. (I) Lender in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if permitted under
applicable law, increase the variable interest rate on this Note to 4.000
percentage points over the Index. The interest rate will not exceed the maximum
rate permitted by applicable law. Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender
<PAGE>
that amount. This includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses whether or not there is a lawsuit,
including attorney's fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of Arizona. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of the
courts of Maricopa County, the State of Arizona Subject to the provisions on
arbitration, this Note shall be governed by and construed in accordance with the
laws of the State of Arizona.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all sums owing on this Note against any and all such
accounts, and, at Lender's option, to administratively freeze all such accounts
to allow Lender to protect Lender's charge and setoff rights provided on this
paragraph.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note, as well as directions for payment from Borrower's accounts, may be
requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing. The
following party or parties are authorized to request advances under the line of
credit until Lender receives from Borrower at Lender's address shown above
written notice of revocation of their authority: Zane Close, President & CEO;
Roseann Tavarozzi, Vice President of Finance; and Pauline Hostetler, Controller.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender. The unpaid principal balance owing on this Note
at any time may be evidenced by endorsements on this Note or by Lender's
internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note if: (a) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (b) Borrower or any guarantor ceases doing business or is
insolvent; (c)any guarantor seeks, claims or otherwise attempts to limit, modify
or revoke such guarantor's guarantee of this Note or any other loan with Lender;
(d) Borrower has applied funds provided pursuant to this Note for purposes other
than
<PAGE>
those authorized by Lender; or (e) Lender in good faith deems itself insecure
under this Note or any other agreement between Lender and Borrower.
PRIOR NOTE. That certain promissory note executed by Borrower on April 30, 1995
in the original amount of $750,000.00, as it may have been amended or renewed
from time to time (the 'Note').
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
EFFECTIVE RATE. Borrower agrees to an effective rate of interest that is the
rate specified in this Note plus any additional rate resulting from any other
charges in the nature of interest paid or to be paid in connection with this
Note.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
CERPROBE CORPORATION
/s/ Roseann Tavarozzi
- ---------------------
Authorized Officer
<PAGE>
BUSINESS LOAN AGREEMENT
Borrower: CERPROBE CORPORATION
600 South Rockford Drive
Tempe, AZ 85281
Lender: First Interstate Bank of Arizona, N.A.
Commercial Banking Division
100 W. Washington
P.O. Box 53456, Dept. #813
Phoenix, AZ 85072-3456
================================================================================
THIS BUSINESS LOAN AGREEMENT between CERPROBE CORPORATION ('Borrower') and First
Interstate Bank of Arizona, N.A. ('Lender') is made and executed on the
following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the 'Loan'
and collectively as the 'Loans.' Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (C) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of April 27, 1996, and shall continue
thereafter until all Indebtedness of Borrower to Lender has been performed in
full or until April 28, 1997, whichever is later.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meaning attributed to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the United States of
America.
Agreement. The word 'Agreement' means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this
Business Loan Agreement from time to time.
Borrower. The word 'Borrower' means CERPROBE CORPORATION. The word
'Borrower' also includes, as applicable, all
<PAGE>
subsidiaries and affiliates of Borrower as provided below in the
paragraph titled 'Subsidiaries and Affiliates.'
CERCLA. The word 'CERCLA' means the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended.
Cash Flow. The words 'Cash Flow' mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and
amortization.
Debt. The word 'Debt' means all of Borrower's liabilities excluding
Subordinated Debt.
ERISA. The word 'ERISA' means the Employee Retirement Income Security
Act of 1974, as amended.
Event of Default. The words 'Event of Default' mean and include without
limitation any of the Events of Default set forth below in the section
titled 'EVENTS OF DEFAULT.'
Grantor. The word 'Grantor' means and includes without limitation each
and all of the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all
Borrowers granting such a Security Interest.
Guarantor. The word 'Guarantor' means and includes without limitation
each and all of the guarantors, sureties, and accommodation parties in
connection with any indebtedness.
Indebtedness. The word 'Indebtedness' means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well
as all claims by Lender against Borrower, or any one or more of them;
whether now or hereafter existing, voluntary or involuntary, due or not
due, absolute or contingent, liquidated or unliquidated; whether
Borrower may be liable individually or jointly with others; whether
Borrower may be obligated as a guarantor, surety, or otherwise; whether
recovery upon such Indebtedness may be or hereafter may become barred
by any statute of limitations; and whether such Indebtedness may be or
hereafter may become otherwise unenforceable.
Lender. The word 'Lender' means First Interstate Bank of Arizona, N.A.,
its successors and assigns.
Liquid Assets. The words 'Liquid Assets' mean Borrower's cash on hand
plus Borrower's receivables.
Loan. The word 'Loan' or 'Loans' means and includes without limitation
any and all commercial loans and financial accommodations from Lender
to Borrower, whether now or
<PAGE>
hereafter existing, and however evidenced, including without limitation
those loans and financial accommodations described herein or described
on any exhibit or schedule attached to this Agreement from time to
time.
Note. The word 'Note' means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan
obligations in favor of Lender, as well as any substitute, replacement
or refinancing note or notes therefor.
Permitted Liens. The words 'Permitted Liens' mean: (a) liens and
security interests securing Indebtedness owed by Borrower to Lender;
(b) liens for taxes, assessments, or similar charges either not yet due
or being contested in good faith; (c) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary
course of business and securing obligations which are not yet
delinquent; (d) purchase money liens or purchase money security
interests upon or in any property acquired or held by Borrower in the
ordinary course of business to secure indebtedness outstanding on the
date of this Agreement or permitted to be incurred under the paragraph
of this Agreement titled 'Indebtedness and Liens'; (e) liens and
security interests which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (f) those liens
and security interests which in the aggregate constitute an immaterial
and insignificant monetary amount with respect to the net value of
Borrower's assets.
Related Documents. The words 'Related Documents' mean and include
without limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements,
mortgages, deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection
with the Indebtedness.
SARA. The word 'SARA' means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
Subordinated Debt. The words 'Subordinated Debt' mean indebtedness and
liabilities of Borrower which have been subordinated by written
agreement to indebtedness owed by Borrower to Lender in form and
substance acceptable to Lender.
Tangible Net Worth. The words 'Tangible Net Worth' mean Borrower's
total assets excluding all intangible assets (i.e., goodwill,
trademarks, patents, copyrights, organizational expenses, and similar
intangible items, but including leaseholds and leasehold improvements)
less
<PAGE>
total Debt.
Working Capital. The words 'Working Capital' mean Borrower's current
assets, excluding prepaid expenses less Borrower's current liabilities.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory
to Lender the following documents for the Loan: (a) the Note, (b)
evidence of insurance as required below, and, (c) any other documents
required under this Agreement or by Lender or its counsel.
Borrower's Authorization. Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and
the Related Documents, and such other authorizations and other
documents and instruments as Lender or its counsel, in their sole
discretion, may require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all
fees, charges, and other expenses which are then due and payable as
specified in this Agreement or any Related Documents.
Representations and Warranties. The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document
or certificate delivered to Lender under this Agreement are true and
correct.
No Event or Default. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this
Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of the Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized,
validly existing, and in good standing under the laws of the State of
Arizona and is validly existing and in good standing in all states in
which Borrower is doing business. Borrower has the full power and
authority to own its properties and to transact the businesses in which
it is presently engaged or presently proposes to engage. Borrower also
is duly qualified as a foreign corporation and is in good standing in
all states in which
<PAGE>
the failure to so qualify would have a material adverse effect on its
businesses or financial condition.
Authorization. The execution, delivery, and performance of this
Agreement and all Related Documents by Borrower, to the extent to be
executed, delivered or performed by Borrower, have been duly authorized
by all necessary action by Borrower; do not require the consent or
approval of any other person, regulatory authority or governmental
body; and do not conflict with, result in a violation of, or constitute
a default under (a) any provision of its articles of incorporation or
organization, or bylaws, or any agreement or other instrument binding
upon Borrower or (b) any law, governmental regulation, court decree, or
order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as
of the date of the statement, and there has been no material adverse
change in Borrower's financial condition subsequent to the date of the
most recent financial statement supplied to Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.
Legal Effect. This Agreement constitutes, and any instrument or
agreement required hereunder to be given by Borrower when delivered
will constitute, legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes
not presently due and payable, Borrower owns and has good title to all
of Borrower's properties free and clear of all Security Interests, and
has not executed any security documents or financing statements
relating to such properties. All of Borrower's properties are titled in
Borrower's legal name, and Borrower has not used, or filed a financing
statement under, any other name for at least the last five (5) years.
Hazardous Substances. The terms 'hazardous waste,' 'hazardous
substance,' 'disposal,' 'release,' and 'threatened release,' as used in
this Agreement, shall have the same meanings as set forth in the
'CERCLA,' 'SARA,' the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery Act, 49
U.S.C. Section 6901, et seq., or other applicable state or Federal
laws, rules or regulations adopted pursuant to any of the foregoing.
Except as disclosed to and approved by Lender in writing,
<PAGE>
Borrower represents and warrants that: (a) During the period of
Borrower's ownership of the properties, there has been no use,
generation, manufacture, storage, treatment, disposal, release or
threatened release of any hazardous waste or substance by any person
on, under, or about any of the properties. (b) Borrower has no
knowledge of, or reason to believe that there has been (i)any use,
generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance by any prior
owners or occupants of any of the properties, or (ii) any actual or
threatened litigation or claims of any kind by any person relating to
such matters. (c) Neither Borrower nor any tenant, contractor, agent or
other authorized user of any of the properties shall use, generate,
manufacture, store, treat, dispose of, or release any hazardous waste
or substance on, under, or about any of the properties; and any such
activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations, and ordinances, including without
limitation those laws, regulations and ordinances described above.
Borrower authorizes Lender and its agents to enter upon the properties
to make such inspections and tests as Lender may deem appropriate to
determine compliance of the properties with this section of the
Agreement. Any inspections or tests made by lender shall be at
Borrower's expense and for Lender's purposes only and shall not be
construed to create any responsibility or liability on the part of
Lender to Borrower or to any other person. The representations and
warranties contained herein are based on Borrower's due diligence in
investigating the properties for hazardous waste. Borrower hereby (a)
releases and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or other
costs under any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of
the Agreement or as a consequence of any use, generation, manufacture,
storage, disposal, release or threatened release occurring prior to
Borrower's ownership or interest in the properties, whether or not the
same was or should have been known to Borrower. The provisions of this
section of the Agreement, including the obligation to indemnify, shall
survive the payment of the Indebtedness and the termination or
expiration of this Agreement and shall not be affected by Lender's
acquisition of any interest in any of the properties, whether by
foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation,
administrative proceeding or similar action (including those for unpaid
taxes) against Borrower is pending or
<PAGE>
threatened, and no other event has occurred which may materially
adversely affect Borrower's financial condition or properties, other
than litigation, claims, or other events, if any, that have been
disclosed to and approved by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports
of Borrower that are or were required to be filed, have been filed, and
all taxes, assessments and other governmental charges have been paid in
full, except those presently being or to be contested by Borrower in
good faith in the ordinary course of business and for which adequate
reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in
writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security
Interests on or affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that would be prior or
that may in any way be superior to Lender's Security Interests and
rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note
and all of the Related Documents are binding upon Borrower as well as
upon Borrower's successors, representatives and assigns, and are
legally enforceable in accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely
for business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower
may have any liability complies in all material respects with all
applicable requirements of law and regulations, and (i) no Reportable
Event nor Prohibited Transaction (as defined in ERISA) has occurred
with respect to any such plan, (ii) Borrower has not withdrawn from any
such plan or initiated steps to do so, and (iii) no steps have been
taken to terminate any such plan.
Investment Company Act. Borrower is not an 'investment company' or a
company 'controlled' by an 'investment company', within the meaning of
the Investment Company Act of 1940, as amended.
Public Utility Holding Company Act. Borrower is not a 'holding
company', or a 'subsidiary company' of a 'holding company', or an
'affiliate' of a 'holding company' or of a 'subsidiary company' of a
'holding company', within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
<PAGE>
Regulations G, T and U. Borrower is not engaged principally, or as one
of its important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning
of Regulations G, T and U of the Board of Governors of the Federal
Reserve System).
Location of Borrower's Offices and Records. Borrower's place of
business, or Borrower's Chief executive office, if Borrower has more
than one place of business, is located at 600 South Rockford Drive,
Tempe, AZ 85281. Unless Borrower has designated otherwise in writing
this location is also the office or offices where Borrower keeps its
records concerning the Collateral.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender
will be, true and accurate in every material respect on the date as of
which such information is dated or certified; and none of such
information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading.
Claims and Defenses. There are no defenses or counterclaims, offsets or
other adverse claims, demands or actions of any kind, personal or
otherwise, that Borrower, Grantor, or any Guarantor could assert with
respect to the Note, Loan, Indebtedness, this Agreement, or the Related
Documents.
Survival of Representations and Warranties. Borrower understands and
agrees that Lender, without independent investigation, is relying upon
the above representations and warranties in extending Loan Advances to
Borrower. Borrower further agrees that the foregoing representations
and warranties shall be continuing in nature and shall remain in full
force and effect until such time as Borrower's Indebtedness shall be
paid in full, or until this Agreement shall be terminated in the manner
provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender
that, while this Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material
adverse changes in Borrower's financial condition, and (b) all existing
and all threatened litigation, claims, investigations, administrative
proceedings or similar actions affecting Borrower or any Guarantor
which could materially affect the financial condition of Borrower or
the financial condition of any Guarantor.
<PAGE>
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent
basis, and permit Lender to examine and audit Borrower's books and
records at all reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but in
no event later than one hundred twenty (120) days after the end of each
fiscal year, Borrower's balance sheet and income statement for the year
ended, audited by a certified public accountant satisfactory to Lender,
and, as soon as available, but in no event later than forty five (45)
days after the end of each fiscal quarter, Borrower's balance sheet and
profit and loss statement for the period ended, prepared and certified
as correct to the best knowledge and belief by Borrower's chief
financial officer or other officer or person acceptable to Lender. All
financial reports required to be provided under this Agreement shall be
prepared in accordance with generally accepted accounting principles,
applied on a consistent basis, and certified by Borrower as being true
and correct.
Additional Information. Furnish such additional information and
statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and
other reports with respect to Borrower's financial condition and
business operations as Lender may request from time to time.
Financial Covenants and Ratios. Comply with the following covenants and
ratios:
Quick Ratio. Maintain a ratio of Liquid Assets to Current
Liabilities in excess of 1.00 to 1.00. Except as provided
above, all computations made to determine compliance with the
requirements contained in this paragraph shall be made in
accordance with generally accepted accounting principles,
applied on a consistent basis, and certified by Borrower as
being true and correct.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect
to Borrower's properties and operations, in form, amounts, coverages
and with insurance companies reasonably acceptable to Lender. Borrower,
upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender,
including stipulations that coverages will not be canceled or
diminished without at least ten (10) days' prior written notice to
Lender. Each insurance policy also shall include an endorsement
providing that coverage in favor of Lender will not be impaired in any
way by any act, omission or default of
<PAGE>
Borrower or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest for the
Loans, Borrower will provide Lender with such loss payable or other
endorsements as Lender may require.
Insurance Reports. Furnish to lender, upon request of Lender, reports
on each existing insurance policy showing such information as Lender
may reasonably request, including without limitation the following: (a)
the name of the insurer; (b) the risks insured; (c)the amount of the
policy; (d) the properties insured; (e) the then current property
values on the basis of which insurance has been obtained, and the
manner of determining those values; and (f) the expiration date of the
policy. In addition, upon request of Lender (however not more often
than annually), Borrower will have an independent appraiser
satisfactory to Lender determine, as applicable, the actual cash value
or replacement cost of any Collateral. The cost of such appraisal shall
be paid by Borrower.
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every
kind and nature, imposed upon Borrower or its properties, income, or
profits, prior to the date on which penalties would attach, and all
lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower's properties, income, or profits. Provided however,
Borrower will not be required to pay and discharge any such assessment,
tax, charge, levy, lien or claim so long as (a) the legality of the
same shall be contested in good faith by appropriate proceedings, and
(b) Borrower shall have established on its books adequate reserves with
respect to such contested assessment, tax, charge, levy, lien, or claim
in accordance with generally accepted accounting practices. Borrower,
upon demand of Lender, will furnish to Lender evidence of payment of
the assessments, taxes, charges, levies, liens and claims and will
authorize the appropriate governmental official to deliver to Lender at
any time a written statement of any assessments, taxes, charges,
levies, liens, and claims against Borrower's properties, income, or
<PAGE>
profits.
Performance. Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in the Related Documents in
a timely manner, and promptly notify Lender if Borrower learns of the
occurrence of any event which constitutes an Event of Default under
this Agreement or under any of the Related Documents.
Operations. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to Lender of
any change in executive and management personnel; conduct its business
affairs in a reasonable and prudent manner and in compliance with all
applicable federal, state and municipal laws, ordinances, rules and
regulations respecting its properties, charters, businesses and
operations, including without limitation, compliance with the Americans
with Disabilities Act and with all minimum funding standards and other
requirements of ERISA and other laws applicable to Borrower's employee
benefit plans.
Environmental Studies. Promptly conduct and complete, at Borrower's
expense, all such investigations, studies, samplings and testings as
may be requested by Lender or any governmental authority relative to
any substance defined as toxic or a hazardous substance under any
applicable federal, state, or local law, rule, regulation, order or
directive, or any waste or by-product thereof, at or affecting any
property or any facility owned, leased or used by Borrower.
Inspection. Permit employees or agents of Lender at any reasonable time
to inspect any and all Collateral for the Loan or Loans and Borrower's
other properties and to examine or audit Borrower's books, accounts,
and records and to make copies and memoranda of Borrower's books,
accounts, and records. If Borrower now or at any time hereafter
maintains any records (including without limitation computer generated
records and computer software programs for the generation of such
records) in the possession of a third party, Borrower, upon request of
Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of
any records it may request, all at Borrower's expense.
Environmental Compliance and Reports. Borrower shall comply in all
respects with all environmental protection federal, state and local
laws, statues, regulations and ordinances; not cause or permit to
exist, as a result of an intentional or unintentional action or
omission on its part or on the part of any third party, on property
owned
<PAGE>
and/or occupied by Borrower, any environmental activity where damage
may result to the environment, unless such environmental activity is
pursuant to and in compliance with the conditions of a permit issued by
the appropriate federal, state or local governmental authorities; shall
furnish to Lender promptly and in any event within thirty (30) days
after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency
or instrumentality concerning any intentional or unintentional action
or omission on Borrower's part in connection with any environmental
activity whether or not there is damage to the environment and/or other
natural resources.
Additional Assurances Make, execute and deliver to Lender such
information, documents and other agreements and take such other actions
as Lender may reasonably request to accomplish and evidence the
purposes of the Loans and the Related Documents
RECOVERY OF ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except U.S. federal, state or local income or franchise
taxes imposed on Lender), reserve requirements, capital adequacy requirements or
other obligations which would (a) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (b) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(c) reduce the rate of return on Lender's capital as a consequence of Lender's
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefor, within five (5) days after lender's written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.
NEGATIVE COVENANTS. Borrower covenants and agrees with lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated by
this Agreement, create, incur or assume indebtedness for borrowed
money, including capital leases, (b) except as allowed as a Permitted
Lien, sell, transfer, mortgage, assign, pledge, lease, grant a security
interest in, or encumber any of Borrower's assets, or (c)sell with
recourse any of Borrower's accounts, except to
<PAGE>
Lender.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change ownership, change its name,
dissolve or transfer or sell Collateral out of the ordinary course of
business, (c) pay any dividends on Borrower's stock (other than
dividends payable in its stock), provided, however that notwithstanding
the foregoing, but only so long as no Event of Default has occurred and
is continuing or would result from the payment of dividends, if
Borrower is a 'Subchapter S Corporation' (as defined in the Internal
Revenue Code of 1986, as amended), Borrower may pay cash dividends on
its stock to its shareholders from time to time in amounts necessary to
enable the shareholders to pay income taxes and make estimated income
tax payments to satisfy their liabilities under federal and state law
which arise solely from their status as Shareholders of a Subchapter S
Corporation because of their ownership of shares of stock of Borrower,
or (d) to purchase or retire any of the Borrower's outstanding shares
or alter or amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance
money or assets, (b) purchase, create or acquire any interest in any
other enterprise or entity, or (c)incur any obligation as surety or
guarantor other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender, or the occurrence of any event or condition which
after notice or the passage of time would constitute an Event of Default; (b)
Borrower or any Guarantor becomes insolvent, files a petition in bankruptcy or
similar proceedings, or is adjudged a bankrupt; (c)there occurs a material
adverse change in Borrower's financial condition, in the financial condition of
any Guarantor, in the value of any Collateral securing any Loan; (d) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor's guaranty of the Loan or any other loan with Lender; or (e) Lender in
good faith deems itself insecure, even through no Event of Default shall have
occurred.
FACILITY CHARGE. Borrower recognizes that Lender has incurred and will continue
to incur certain costs and expenses in connection with establishing,
maintaining, servicing, and
<PAGE>
administering the credit facility. To ensure that Lender is able to recover such
costs and expenses, Borrower agrees that, notwithstanding any other provision of
this Agreement, the promissory note for the Line of Credit, or the Related
Documents, Lender shall be entitled to collect the following facility charge,
which Borrower hereby promises and agrees to pay: So long as Lender shall have
any obligation to extend or continue credit to Borrower in any form, Borrower
shall pay to Lender on the last day of each and every calendar quarter a
non-refundable commitment fee in the amount of 1/8 of 1% (percent) of the unused
balance of the Loan during the preceding calendar quarter.
ADDITIONAL DEFINITIONS.
DEBT SERVICE COVERAGE RATIO. The words 'Debt Service Coverage Ratio'
mean the sum the quantity of earnings before interest plus taxes plus
depreciation and amortization expense divided by the quantity of prior
period current maturities of long term debt plus interest, all as
determined for the relevant period in accordant with generally accepted
accounting principles and on a basis consistent with prior periods.
MAXIMUM FUNDED DEBT. The words 'Maximum Funded Debt' mean long term
debt due after one (1) year, including long term notes and subordinated
debt.
ADDITIONAL AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender
that, while this Agreement is in effect, Borrower will comply with the following
covenants and ratios:
DEBT SERVICE COVERAGE RATIO. Maintain a Debt Service
Coverage Ratio of not less than 1.50 to 1.00.
MINIMUM TANGIBLE NET WORTH. Borrower shall maintain a Tangible Net Worth of
not less than $18,000,000.00, which shall be increased by 50% of net
income plus 90% of any future increase in stockholder's equity by
reasons of issuance and sale of capital stock.
PROFITABILITY. Borrower shall maintain profitability on an
annual basis.
MAXIMUM FUNDED DEBT TO TANGIBLE NET WORTH. Borrower shall
maintain a Maximum Funded Debt to Tangible Net Worth ratio
of not more than 1.00 to 1.00.
SECURITIES AND EXCHANGE COMMISSION INFORMATION. Borrower will furnish
Lender with, as soon as available, but in no event later than
one-hundred and twenty (120) days after the end of each fiscal year,
Borrower's 10 K report for the year ended, and, as soon as available,
but in no event later than forty five (45) days after the end of each
fiscal quarter, Borrower's 10 Q report for the period ended, prepared
and certified as correct to the best knowledge and belief by Borrower's
chief financial officer or other
<PAGE>
officer or person acceptable to Lender. All financial reports required
to be provided under this Agreement shall be prepared in accordance
with generally accepted accounting principles, applied on a consistent
basis, and certified by Borrower as being true and correct.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide
Lender on a quarterly basis, within 45 days after quarter end, a
certificate executed by Borrower's chief financial officer, or other
officer or person acceptable to Lender, certifying to financial
covenants and that the representations and warranties set forth in this
Agreement are true and correct as of the date of the certificate and
further certifying that, as of the date of the certificate, no Event of
Default, or event or condition which after the lapsed time or notice
could result in an Event of Default, exists under this Agreement.
ADDITIONAL NEGATIVE COVENANTS. Borrower covenants and agrees that until the full
and final payment of all indebtedness owed to Lender, Borrower will not, without
Lender's written consent:
LOSSES. Incur two or more consecutive quarterly losses.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts. Borrower authorizes Lender, to the extent permitted by applicable law,
to charge or setoff all sums owing on the Indebtedness against any and all such
accounts, and, at Lender's option, to administratively freeze all such accounts
to allow Lender to protect Lender's charge and setoff rights provided on this
paragraph.
EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default under this Agreement:
Default on Indebtedness. Failure of Borrower to make any
payment when due on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related Documents, or
failure of Borrower to comply with or to perform any other term,
obligation, covenant or condition contained in any other agreement
between Lender and Borrower.
Default in Favor of Third Parties. Should Borrower or any
<PAGE>
Grantor default under any loan, extension of credit, security
agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's or any Grantor's ability to repay the
Loans or perform their respective obligations under this Agreement or
any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under
this Agreement or the Related Documents is false or misleading in any
material respect at the time made or furnished, or becomes false or
misleading at any time thereafter.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure of
any Security Agreement to create a valid and perfected Security
Interest) at any time and for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a
going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower's property, any assignment for the
benefit of creditors, any type of creditor workout, or the commencement
of any proceeding under any bankruptcy or insolvency laws by or against
Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
Indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any Guarantor
dies or becomes incompetent, or revokes or disputes the validity of, or
liability under, any Guaranty of the Indebtedness.
Change of Ownership. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment of
performance of the Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
<PAGE>
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make
Loan Advances or disbursements), and, at Lender's option, all Indebtedness
immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the 'Insolvency' subsection above, such acceleration shall be automatic and
not optional. In addition, Lender shall have all the rights and remedies
provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's rights and
remedies shall be cumulative and may be exercised singularly or concurrently.
Election by Lender to pursue any remedy shall not exclude pursuit of any other
remedy, and an election to make expenditures or to take action to perform an
obligation of Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are a part of this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
Applicable Law. This Agreement has been delivered to Lender and
accepted by Lender in the State of Arizona. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of
the courts of Maricopa County, the State of Arizona Subject to the
provisions on arbritration, this Agreement shall be governed by and
construed in accordance with the laws of the State of Arizona.
Arbitration.
Binding Arbitration. Upon the demand of any party ('Party/Parties'), to
a Document (as defined below), whether made before the institution of
any judicial proceeding or not more than 60 days after service of a
complaint, third party complaint, cross-claim or counterclaim or any
answer thereto or any amendment to any of the above, any Dispute (As
defined below) shall be resolved by binding arbitration in accordance
with the terms of this Arbitration Program. A 'Dispute' shall include
any action, dispute, claim or controversy of any kind, whether founded
in contract, tort, statutory or common law, equity, or otherwise, now
existing or hereafter arising between any of the Parties arising out
<PAGE>
of, pertinent to or in connection with any agreement, document or
instrument to which this Arbitration Program is attached or in which it
appears or is referenced or any related agreements, documents, or
instruments ('Documents'). Any Party who fails to submit to binding
arbitration following a lawful demand by another Party shall bear all
costs and expenses, including reasonable attorney's fees, (including
those incurred in any trial, bankruptcy proceeding or on appeal)
incurred by the other Party in obtaining a stay of any pending judicial
proceeding and compelling arbitration of any Dispute. The parties agree
that any agreement, document or instrument which includes, attaches to
or incorporates this Arbitration Program represents a transaction
involving commerce as that term is used in the Federal Arbitration Act,
('FAA') Title 9 United States Code. THE PARTIES UNDERSTAND THAT BY THIS
AGREEMENT THEY HAVE DECIDED THAT THEIR DISPUTES SHALL BE RESOLVED BY
BINDING ARBITRATION RATHER THAN IN COURT, AND ONCE DECIDED BY
ARBITRATION NO DISPUTE CAN LATER BE BROUGHT, FILED OR PURSUED IN COURT.
Governing Rules. Arbitrations conducted pursuant to this Arbitration
Program shall be administered by the American Arbitration Association
('AAA'), or other mutually agreeable administrator ('Administrator') in
accordance with the terms of this Arbitration Program and the
Commercial Arbitration Rules of the AAA. Proceedings hereunder shall be
governed by the provisions of the Federal Arbitration Act (Title 9 of
the United States Code). The arbitrator(s) shall resolve all Disputes
in accordance with the applicable substantive law designated in the
Documents. Judgment upon any award rendered hereunder may be entered in
any court having jurisdiction; provided, however that nothing herein
shall be construed to be a waiver by any party that is a bank of the
protections afforded pursuant to 12 U.S.C. 91 or any similar applicable
state law.
Preservation of Remedies. No provision of, nor the exercise of any
rights under, this arbitration clause shall limit the right of any
Party to: (a) foreclose against any real or personal property
collateral or other security, or obtain a personal or deficiency award;
(b) exercise self- help remedies (including repossession and setoff
rights); or (c)obtain provisional or ancillary remedies such as
injunctive relief, sequestration, attachment, replevin, garnishment, or
the appointment of a receiver from a court having jurisdiction. Such
rights can be exercised at any time except to the extent such action is
contrary to a final award or decision in any arbitration proceeding.
The institution and maintenance of an action as described above shall
not constitute a waiver of the right of any Party to submit the Dispute
to arbitration, nor render inapplicable
<PAGE>
the compulsory arbitration provisions hereof. Any claim or Dispute
related to exercise of any self-help, auxiliary or other rights under
this paragraph shall be a Dispute hereunder.
Arbitrator Powers and Qualifications; Awards. The Parties agree to
select a neutral 'qualified' arbitrator or a panel of three 'qualified'
arbitrators to resolve any Dispute hereunder. 'Qualified' means a
practicing attorney, with not less than 10 years practice in commercial
law, licensed to practice in the state of the applicable substantive
law designated in the Documents. A Dispute in which the claims or
amounts in controversy do not exceed $1,000,000.00 shall be decided by
a single arbitrator. A single arbitrator shall have authority to render
an award up to but not to exceed $1,000,000.00 including all damages of
any kind whatsoever, costs, fees, attorneys' fees and expenses.
Submission to a single arbitrator shall be a waiver of all Parties'
claims to recover more than $1,000,000.00. A Dispute involving claims
or amounts in controversy exceeding $1,000,000.00 shall be decided by a
majority vote of a panel of three qualified arbitrators. An arbitration
panel shall be composed of one arbitrator who would be qualified to sit
as a single arbitrator hereunder, one who has at least ten years
experience in commercial lending and one who has at least ten years
experience in the Borrower's industry. The arbitrator(s) shall be
empowered to, at the written request of any Party in any Dispute, (a)
to consolidate in a single proceeding any multiple party claims that
are substantially identical or based upon the same underlying
transaction; (b) to consolidate any claims and Disputes between other
Parties which arise out of or relate to the subject matter hereof,
including all claims by or against borrowers, guarantors, sureties and
or owners of collateral; and (c)to administer multiple arbitration
claims as class actions in accordance with Rule 23 of the Federal Rules
of Civil Procedure. In any consolidated proceeding the first
arbitrator(s) selected in any proceeding shall conduct the consolidated
proceeding unless disqualified due to conflict of interest. The
arbitrator(s) shall be empowered to resolve any dispute regarding the
terms of this arbitration clause, including questions about the
arbitrability of any Dispute, but shall have no power to change or
alter the terms of this Arbitration Program. The prevailing Party in
any Dispute shall be entitled to recover its reasonable attorneys' fees
in any arbitration, and the arbitrator(s) shall have the power to award
such fees. The award of the arbitrator(s) shall be in writing and shall
set forth the factual and legal basis for the award.
Miscellaneous. All statues of limitation applicable to any Dispute
shall apply to any proceeding in accordance
<PAGE>
with this arbitration clause. The Parties agree, to the maximum extent
practicable, to take any action necessary to conclude an arbitration
hereunder within 180 days of the filing of a Dispute with the
Administrator. The arbitrator(s) shall be empowered to impose sanctions
for any Party's failure to proceed within the times established herein.
Arbitrations shall be conducted in the state of the applicable
substantive law designated in the Documents. The provisions of this
Arbitration program shall survive any termination, amendment, or
expiration hereof or of the Documents unless the Parties otherwise
expressly agree in writing. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures
of information required in the ordinary course of business of the
Parties or as required by applicable law or regulation. If any
provision of this Arbitration Program is declared invalid by any court,
the remaining provisions shall not be affected thereby and shall remain
fully enforceable.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower
under this Agreement shall be joint and several, and all references to
Borrower shall mean each and every Borrower. This means that each of
the Borrowers signing below is responsible for all obligations in this
Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, potential purchasers, any
information or knowledge Lender may have about Borrower or about any
other matter relating to the Loan, and Borrower hereby waives any
rights to privacy it may have with respect to such matters. Borrower
additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such
participation interests. Borrower also agrees that the purchasers of
any such participation interests will be considered as the absolute
owners of such interests in the Loans and will have all the rights
granted under the participation agreement or agreements governing the
sale of such participation interests. Borrower further waives all
rights of offset or counterclaim that it may have now or later against
Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrower's obligation under the Loans irrespective of the failure or
<PAGE>
insolvency of any holder of any interest in the Loans. Borrower further
agrees that the purchaser of any such participation interests may
enforce its interests irrespective of any personal claims or defenses
that Borrower may have against Lender.
Borrower Information. Borrower consents to the release of information
on or about Borrower by Lender in accordance with any court order, law
or regulation and in response to credit inquiries concerning Borrower.
Non-Liability of Lender. The relationship between Borrower and Lender
is a debtor and creditor relationship and not fiduciary in nature, nor
is the relationship to be construed as creating any partnership or
joint venture between Lender and Borrower. Borrower is exercising its
own judgment with respect to Borrower's business. All information
supplied to Lender is for Lender's protection only and no other party
is entitled to rely on such information. There is no duty for Lender to
review, inspect, supervise, or inform Borrower of any matter with
respect to Borrower's business. Lender and Borrower intend that Lender
may reasonably rely on all information supplied by Borrower to Lender,
together with all representations and warranties given by Borrower to
Lender, without investigation or confirmation by Lender and that any
investigation or failure to investigate will not diminish Lender's
right to so rely.
Notice of Lender's Breach. Borrower must notify Lender in writing of
any breach of this Agreement or the Related Documents by Lender and any
other claim, cause of action or offset against Lender within thirty
(30) days after the occurrence of such breach or after the accrual of
such claim, cause of action or offset. Borrower waives any claim, cause
of action or offset for which notice is not given in accordance with
this paragraph. Lender is entitled to rely on any failure to give such
notice.
Borrower indemnification. Borrower shall indemnify and hold Lender
harmless from and against all claims, costs, expenses, losses, damages,
and liabilities of any kind, including but not limited to attorneys'
fees and expenses, arising out of any matter relating directly or
indirectly to the Indebtedness, whether resulting from internal
disputes between Borrower and any Guarantor, or whether involving any
third parties, or out of any other matter whatsoever related to this
Agreement or the Related Documents, but excluding any claim or
liability which arises as a direct result of Lender's gross negligence
or willful misconduct. This indemnity shall survive full repayment and
satisfaction of the Indebtedness and termination of this Agreement.
<PAGE>
Counterparts. This Agreement may be executed in multiple counterparts,
each of which, when so executed, shall be deemed an original, but all
such counterparts, taken together, shall constitute one and the same
Agreement.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's
allocated costs of in-house counsel and expenses, including without
limitation attorney's fees, incurred in connection with the
preparation, execution, enforcement, modification and collection of
this Agreement or in connection with the Loans made pursuant to this
Agreement. Lender may pay someone else to help collect the Loans and to
enforce this Agreement, and Borrower will pay that amount. This
includes, subject to any limits under applicable law, Lender's
attorneys' fees and Lender's legal expenses, whether or not there is a
lawsuit, including attorneys' fees for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to all
other sums provided by law.
Notices. All notices required to be given under this Agreement shall be
given in writing, may be sent by telefacsimilie, and shall be effective
when actually delivered or when deposited with a nationally recognized
overnight courier or deposited in the United States mail, first class,
postage prepaid, addressed to the party to whom the notice is to be
given at the address shown above. Any party may change its address for
notices under this Agreement by giving formal written notice to the
other parties, specifying that the purpose of the notice is to change
the party's address. To the extent permitted by applicable law, if
there is more than one Borrower, notice to any Borrower will constitute
notice to all Borrowers. For notice purposes, Borrower agrees to keep
Lender informed at all times of Borrower's current address(es).
Severability. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible,
any such offending provision shall be deemed to be modified to be
within the limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be stricken and all
other provisions of this Agreement in all other respects shall remain
valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of
any provisions of this Agreement makes it
<PAGE>
appropriate, including without limitation any representation, warranty
or covenant, the word 'Borrower' as used herein shall include all
subsidiaries and affiliates of Borrower. Notwithstanding the foregoing
however, under no circumstances shall this Agreement be construed to
require Lender to make any Loan or other financial accommodation to any
subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall
inure to the benefit of Lender, its successors and assigns. Borrower
shall not, however, have the right to assign its rights under this
Agreement or any interest therein, without the prior written consent of
Lender.
Survival. All warranties, representations, and covenants made by
Borrower in this agreement or in any certificate or other instrument
delivered by Borrower to Lender under this agreement shall be
considered to have been relied upon by Lender and will survive the
making of the Loan and delivery to Lender of the Related Documents,
regardless of any investigation made by Lender or on Lender's behalf.
Time Is of the Essence. Time is of the essence in the performance of this
Agreement.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No delay
or omission on the part of Lender in exercising any right shall operate as a
waiver of such right or any other right. A waiver by Lender of a provision of
this Agreement shall not prejudice or constitute a waiver of Lender's right
otherwise to demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of dealing between
Lender and Borrower, or between Lender and any Grantor, shall constitute a
waiver of any of Lender's rights or of any obligations of Borrower or of any
Grantor as to any future transactions. Whenever the consent of Lender is
required under this Agreement, the granting of such consent by Lender in any
instance shall not constitute continuing consent in subsequent instances where
such consent is required, and in all cases such consent may be granted or
withheld in the sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF APRIL
27, 1996.
BORROWER:
CERPROBE CORPORATION
<PAGE>
/s/ Roseann Tavarozzi
- -----------------------------------
Authorized Officer
LENDER:
First Interstate Bank of Arizona, N.A.
/s/ Brian K. Spencer
- ------------------------------------
Authorized Officer
Vice President
<PAGE>
ADDITIONAL INTEREST RATE OPTION AGREEMENT
Borrower: CERPROBE CORPORATION
600 South Rockford Drive
Tempe, AZ 85281
Lender: First Interstate Bank of Arizona, N.A.
Phoenix Commercial Banking
P.O. Box 53456, Dept #813
Phoenix, AZ 85072-3456
This Agreement is entered into on April 27, 1996, by and between CERPROBE
CORPORATION ('Borrower') and First Interstate Bank of Arizona, N.A. ('Lender')
and supplements the Promissory Note of Borrower dated April 27, 1996, ('Note').
In addition to the rate of interest provided for in the Note, the interest rate
option(s) set out below (individually and collectively, if more than one, the
'Alternate Rate') shall be available to Borrower on the terms set forth for
certain portions of the amounts outstanding under the Note ('Loans'). Each Loan
to which an Alternate Rate applies shall be referred to as an 'Alternate Rate
Advance'.
1. As used herein, the following terms shall have the meaning
set forth:
LENDER BUSINESS DAY
'Lender Business Day' means a day other than Saturday or Sunday on
which banks in Phoenix are open for business and Lender can conduct
business in appropriate markets for the Alternative Rates Offered.
LIBOR PROVISIONS
'LIBOR' means a per annum interest rate equal to two point twenty-five
percent (2.25%) per annum in excess of the prevailing London interbank
offered rate at which dollar deposits in the approximate amount of the
relevant LIBOR Advance for the relevant LIBOR Period are offered to
Lender at 11:00 a.m. London time on the day which is two (2) Bank
Business Days prior to the commencement of the relevant LIBOR Interest
Period.
'LIBOR Advance' means each Loan which bears interest at LIBOR. Each
LIBOR Advance shall be in an amount of Two Hundred and Fifty Thousand
Dollars ($250,000).
<PAGE>
'LIBOR Notice' means an irrevocable notice by Borrower to Lender
received by Lender at least three (3) Lender Business Days prior to the
Lender Business Day selected as the date upon which such Eurodollar
Advance shall be made stating that Borrower elects to pay interest on a
Loan at LIBOR, and specifying the amount of the LIBOR Advance, the
LIBOR Period for such LIBOR Advance, and the Lender Business Day upon
which the LIBOR Period is to begin. Such notice shall be in writing or,
if given orally or telephonically, shall be confirmed to Lender in
writing within one (1) business day of such oral or telephonic notice.
Lender's records shall control an difference between any LIBOR Notice
and/or confirmation thereof.
'LIBOR Period' means an interest period of one (1), two (2), or three
(3) months as selected, and commencing on a date specified by Borrower
in a LIBOR Notice and agreed to by Lender. If any LIBOR Period would
otherwise expire on a day that is not a Lender Business Day, the LIBOR
Period shall expire on the next succeeding Lender Business Day.
2. Provided that there is no default under this Agreement or the Note, nor
the existence of any event which, with the giving of notice or the
passage of time, or both, would constitute a default hereunder or
thereunder, and, provided further, that Lender has not demanded payment
in full of the obligations outstanding under the Note, Borrower may
elect with the consent of Lender obtained at the time of the request
for each Alternate Rate Advance, to have a portion of the Loan bear
interest at any Alternate Rate offered in accordance with the terms and
conditions set forth herein.
3. Borrower shall elect to use the Alternate Rate for such portion of the
Loan by providing to Lender the appropriate Alternate Rate notice.
Failure of Lender to receive a Alternate Rate notice or written
confirmation of such notice shall not affect Borrower's obligation to
repay a Alternate Rate advance and the interest thereon. Lender shall
not be obligated to offer any Alternate Rate if it reasonably believes
such Alternate Rate or applicable funding is not available to it or is
illegal. No Alternate Rate Period shall extend beyond the maturity date
of the Note.
4. Upon expiration of each Alternate Rate interest period, the interest
rate applicable to the Alternate Rate Advance shall thereafter be the
interest rate provided for in the Note.
5. Unless demand is made by Lender for payment in full, no Alternate Rate
Advance may be prepaid in whole or in part prior to the last day of its
applicable Alternate Rate interest period without the prior written
consent of Lender. If any prepayment is made for whatever reason,
<PAGE>
Borrower agrees to pay upon demand any loss or reduction in return
calculated by Lender in liquidating or reemploying deposits in the
market from which the interest rate applicable to such funds were
derived.
6. As to any matter arising from, related to or in connection With any
Alternate Rate Advance, Lender's records and calculations shall be
conclusive, absent manifest error.
7. Interest shall be computed and charged monthly and on the last day of
the applicable Alternate Rate interest period on the basis of the
actual number of days elapsed over a year of three hundred sixty (360)
days.
8. Borrower understands that an Alternate Rate notice is irrevocable and
that Borrower is therefore 'at-risk' to the extent that Borrower and
Lender will not know the rate Borrower must pay until Lender has
purchased its funds. Any quote provided by Lender prior to the actual
purchase is only an estimate of the probable rate and shall not be
binding as to actual rate.
9. In addition to all other sums due under the terms of the Note and this
Agreement, Borrower shall pay to Lender as additional interest, such
amounts, if any, as will compensate Lender for any increase in the cost
or reduction in the profitability to Lender of making or maintaining
any Alternate Rate Advance or any other portion of the Loan (determined
by Lender's use of any reasonable method for the allocation, averaging
and attribution of the aggregate of such increases or reductions) by
reason of a change in or establishment of or Lender's compliance with
(a) any reserve, special deposit or other requirement and with respect
to assets of, deposits with or for the account of, or credit extended
by Lender which are imposed on or deemed applicable by Lender under any
law, treaty, rule, regulation (including, without limitation,
Regulation D of the Board of Governors of the Federal Reserve System),
(b) any interpretation thereof by any governmental, fiscal, monetary or
other authority charged with the administration thereof or having
jurisdiction over Lender, (c)any requirement imposed by any such
authority, whether or not having the force of law, or (d) any
requirement, request, directive, standard or guideline regarding
capital adequacy (whether or not having the force of law). Such
additional amounts shall be payable to Lender on demand.
10. All payments of principal of and interest on any Alternate Rate Advance
shall be made without deduction of any present and future taxes,
levies, imposts, deductions, charges or withholdings, which amounts
shall be paid by Borrower. Borrower will pay the amounts necessary such
that the gross amount of the principal and interest
<PAGE>
received by Lender is not less than that required under this Agreement.
All stamp and documentary taxes shall be paid by Borrower.
Notwithstanding the foregoing, if Lender pays such taxes, Borrower will
reimburse Lender upon demand for the amount paid.
11. Any default under this Agreement shall constitute a default under the
provisions of the Note and no delay or omission by Lender in exercising
any right shall operate as a waiver of such right.
12. All terms and conditions of the Note shall remain in full force and
effect, including the prime rate based pricing applicable to (a) any
Loan not subject to an Alternate Rate or other rate agreed to in
writing by Borrower an Lender and (b) the Loan after notice for payment
in full has been given Borrower and Lender.
13. This Agreement shall be governed by and construed in
accordance with the laws applicable to the Note.
CERPROBE CORPORATION FIRST INTERSTATE BANK OF ARIZONA, N.A.
(BORROWER)
By: /s/ Roseann Tavarozzi By: /s/Brian K. Spencer
- ------------------------- ------------------------------
Title: VP FINANCE Title: VICE PRESIDENT
- ------------------------- ------------------------------
<PAGE>
CORPORATE RESOLUTION TO BORROW
Borrower: CERPROBE CORPORATION
600 South Rockford Drive
Tempe, AZ 85281
Lender: First Interstate Bank of Arizona, N.A.
Commercial Banking Division
100 W. Washington
P.O. Box 53456, Dept. #813
Phoenix, Arizona 85072-3456
I, the undersigned Secretary or Assistant Secretary of CERPROBE CORPORATION (the
'Corporation'), HEREBY CERTIFY that the Corporation is organized and existing
under and by virtue of the laws of the State of Arizona as a corporation for
profit, with its principal office at 600 South Rockford Drive, Tempe, AZ 85281,
and is duly authorized to transact business in the State of Arizona.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation (or by
other duly authorized corporate action in lieu of a meeting), duly called and
held on 3-22-92, at which quorum was present and voting, the following
resolutions were adopted:
BE IT RESOLVED, that any one (1) of the following named officers, employees, or
agents of this Corporation, whose actual signatures are shown below:
NAMES POSITIONS ACTUAL SIGNATURES
- ----- --------- -----------------
Zane Close President & CEO /s/Zane Close
---------------------
Roseann Tavarozzi Vice President Finance /s/Roseann Tavarozzi
---------------------
Pauline Hostetler Controller /s/Pauline Hostetler
----------------------
acting for and on behalf of this Corporation and as its act and deed be, and
they hereby are, authorized and empowered:
Borrow Money. To borrow from time to time from First Interstate Bank of
Arizona, N.A. ('Lender'), on such terms as may be agreed upon between
the officers, employees, or agents and Lender, such sum or sums of
money as in their judgment should be borrowed; however, not exceeding
at any one time the amount of Five Million One Hundred Thousand &
00/100 Dollars ($5,100,000.00), exclusive of interests, costs, and
expenses, in addition to such sum or sums of money as may be currently
borrowed by the Corporation from Lender.
<PAGE>
Execute Notes. To execute and deliver to Lender the promissory note or
notes, or other evidence of credit accommodations of the Corporation,
on Lender's forms, at such rates of interest and on such terms as may
be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of the Corporation to Lender, and also to execute and
deliver to lender one or more renewals, extensions, modifications,
refinancings, consolidations, or substitutions for one or more of the
notes, any portion of the notes, or any other evidence of credit
accommodations.
Grant Security. To mortgage, pledge, transfer, endorse, hypothecate, or
otherwise encumber and deliver to Lender, as security for the payment
of any loans or credit accommodations so obtained, any promissory notes
so executed (including any amendments to or modifications renewals, and
extensions of such promissory notes), or any other or further
indebtedness of the Corporation to Lender at any time owing, however
the same may be evidenced, any property now or hereafter belonging to
the Corporation or in which the Corporation now or hereafter may have
an interest, including without limitation all real property and all
personal property (tangible or intangible) of the Corporation. Such
property may be mortgaged, pledged, transferred, endorsed,
hypothecated, or encumbered at the time such loans are obtained or such
indebtedness is incurred, or at any other time or times, and may be
either in addition to or in lieu of any property heretofore mortgaged,
pledged, transferred, endorsed, hypothecated, or encumbered.
Execute Security Documents. To execute and deliver to Lender the forms
of mortgage, deed of trust, pledge agreement, hypothecation agreement,
and other security agreements and financing statements which may be
submitted by Lender, and which shall evidence the terms and conditions
under and pursuant to which such liens and encumbrances, or any of
them, or given; and also to execute and deliver to Lender any other
written instruments, any chattel paper, or any other collateral, of any
kind or nature, which they may in their discretion deem reasonably
necessary or proper in connection with or pertaining to the giving of
the liens and encumbrances. Notwithstanding the foregoing, any one of
the above authorized officers, employees, or agents may execute,
deliver, or record financing statements.
Deposit Accounts. To open one or more depository accounts in the
Corporation's name and sign and deliver all documents or items required
to fulfill the conditions of all banking business, including without
limitation the initiation of wire transfers, until authority is revoked
by action of the Corporation on written notice to Lender.
<PAGE>
Negotiate Items. To draw, endorse, and discount with Lender all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness
payable to or belonging to the Corporation or in which the Corporation
may have an interest, and either to receive cash for the same or to
cause such proceeds to be credited to the account of the Corporation
with Lender, or to cause such other disposition of the proceeds derived
therefrom as they may deem advisable.
Releases and Indemnities. To execute and deliver to Lender such forms
of releases from liability and indemnifications (including, without
limitation, indemnifications concerning environmental liability) as
Lender may require.
Derivative Products. To enter into and execute documents to evidence
such derivative interest rate agreement as they may agree to, including
without limitation, interest rate swaps, ceilings, floors and collars.
Further Acts. In the case of lines of credit, to designate additional
or alternate individuals as being authorized to request advances
thereunder, and in all cases, to do and perform such other acts and
things, to pay any and all fees and costs, and to execute and deliver
such other documents and agreements, including agreements requiring
disputes with Lender to be submitted to binding arbitration for final
resolution, as they may in their discretion deem reasonably necessary
or proper in order to carry into effect the provisions of these
Resolutions. The following person or persons are authorized to request
advances and authorize payments under the line of credit until Lender
receives written notice of revocations of their authority: Zane Close,
President & CEO; Roseann Tavarozzi, Vice President of Finance; and
Pauline Hostetler, Controller.
BE IT FURTHER RESOLVED that any and all acts that any person above named or any
person who is or was an officer of the Corporation has done in any way relating
to or arising from the aforesaid documents or any and all acts authorized
pursuant to these resolutions and performed prior to the passage of these
resolution are hereby ratified and approved.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Lender may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Lender. Any such notice
shall not affect any of the Corporation's agreements
<PAGE>
04-27-1996 CORPORATE RESOLUTION TO BORROW Page 2
(Continued)
or commitments in effect at the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are duly
elected, appointed, or employed by or for the Corporation, as the case may be,
and occupy the positions set opposite their respective names; that the foregoing
Resolutions now stand of record on the books of the Corporation; and that the
Resolutions are in full force and effect and have not been modified or revoked
in any manner whatsoever. The Corporation has no corporate seal, and therefore,
no seal is affixed to this certificate.
IN TESTIMONY WHEREOF, I have hereunto set my hand on April 27, 1996 and attest
that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
/S/ROSEANN TAVAROZZI
--------------------------------
Secretary or Assistant Secretary
/s/ZANE CLOSE
--------------------------------
*NOTE:In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, it is advisable to have
this certificate signed by a second Officer or Director of the Corporation.
<PAGE>
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: CERPROBE CORPORATION
600 South Rockford Drive
Tempe, AZ 85281
Lender: First Interstate Bank of Arizona, N.A.
Commercial Banking Division
100 West Washington
P.O. Box 53456, Dept. #813
Phoenix, AZ 85072-3456
LOAN TYPE. This is a Variable Rate (at First Interstate Bank of Arizona, N.A.
Prime Rate, which is an index Lender announces from time to time for pricing
certain loans, making an initial rate of 8.250%), Revolving Line of Credit Loan
to a Corporation for $3,000,000.00 due on April 28, 1997. This is an unsecured
renewal of the following described indebtedness: That certain promissory note
executed by Borrower on April 30, 1995 in the original amount of $750,000.00, as
it may have been amended or renewed from time to time (the 'Note').
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is
for:
[ ] Personal, Family, or Household Purposes or Personal
Investment.
[x] Business (including Real Estate Investment).
SPECIFIC PURPOSE. The specific purpose of this loan is: working
capital.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $3,000,000.00 as follows:
Undisbursed Funds: $3,000,000.00
-------------
Note Principal: $3,000,000.00
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO MATERIAL ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED APRIL 27, 1996.
BORROWER:
CERPROBE CORPORATION
/s/Roseann Tavarozzi
- --------------------
RENTAL AGREEMENT
1. This constitutes a month-to-month rental agreement between Shared
Secretarial Service, Inc., (Lessor) and Cerprobe (Lessee) for office
space at 15455 N.W. Greenbrier Parkway, Suite 210 (Suite 50) Beaverton,
Oregon 97006. It is specifically understood that the Lessee is
responsible for the care of their section of the building. This
agreement shall be effective April 19, 1996 and shall continue on a
month-to- month basis. The rental rate of this space is made in
consideration of $297.00 per month. Lessor shall not be liable to
Lessee in any respect whatsoever except for providing the space
described herein and providing normal office service.
2. It is further understood that either party must notify the other 30
days in advance of intent to vacate the premises. Termination must
occur at the end of any calendar month. Upon vacating the premises,
tenant hereby agrees to return same in good repair.
3 Rent is payable on the first of the month for the following month. Rent
will be delinquent after the 5th of the month and is subject to a $25
late charge or termination of this agreement at the discretion of
Shared Secretarial Service, Inc.
4. You will receive a key to the main entry to the building, Suite 210,
and to your individual office (Suite 50). The building will be open
from 5:30 a.m. - 11:00 p.m. Monday through Thursday, 5:30 a.m. to 10:00
p.m., Friday's, and 8:00 a.m. - 6:00 p.m., Saturday's. When entering or
leaving the building at times other than those stated above, please be
sure to lock the doors and turn out the lights. It is your
responsibility to lock up after you enter or leave the building. Any
keys issued are to be returned at the end of your rental period. There
will be a $100.00 replacement charge if the primae security key is not
returned.
5. The lobby directory is available should you wish to have your name
and/or company listed. There is a set-up charge of $40.00.
6. Secretarial work done in the Executive Suites is to be done only by the
secretarial services. Work will be done as quickly as possible on a
first come, first serve basis.
7. Tenant will not use or permit in office space anything that will
increase the rate of fire insurance thereon or maintain anything that
may be dangerous to life or limb; or in any manner deface or injure
said building or any portion thereof; or overload the floors, or permit
any objectionable noise or odor to escape or to be emitted for said
premises; or permit anything to be done upon premises in any way
tending to injure the reputation of the building; or for any immoral or
illegal
<PAGE>
purposes; and that the tenant will comply at tenant's own cost of any
municipality, state or other governmental authority respecting the use
of the premises.
8. Lessee shall be responsible for all phone cost.
9 The individual executing this lease personally guarantees payment due
on this lease in the event of default.
10. Lessee has deposited with Lessor a Security Deposit in the amount of
the Monthly Rent. The Security Deposit constitutes security for the
faithful performance by Lessee of all the terms, covenants and
conditions of this Rental Agreement. If Lessee defaults with respect to
any provision of this Lease, including, but not limited to, the
provisions relating to the payment of rents, Lessor may use, apply or
retain all or any part of the Security Deposit for the payment of any
rent of any other sum in default, or for the payment of any other
amount which Lessor may spend or become obligated to spend by reason of
Lessee's default. If any portion of the Security Deposit is so used or
applied Lessee shall, upon demand thereof, deposit cash with Lessor in
an amount sufficient to restore the Security Deposit to its original
amount, and Lessee's failure to do shall be a material breach of the
Rental Agreement. Lessor shall not be required to keep the Security
Deposit separate from its general funds, and shall not be entitled to
interest on the Security Deposit, the amount of the Security Deposit
and other provisions of this Rental Agreement having been established
and negotiated in contemplation of the foregoing. If Lessee shall fully
perform every provision of the Lease to be performed by it, the
Security Deposit or any balance thereof shall be returned to Lessee or
to any assignee to Lessee at the expiration of the Lease Term and upon
surrender of the premises. In no event shall Lessee have the right to
apply any part of the Security Deposit to rent due hereunder. Security
deposit will be held until property management assesses any damages to
the office and repairs are made (i.e. carpets cleaned, and office
painted, etc.).
11. In the event a suit, action or other proceeding of any nature is
instituted to interpret or enforce any provision of this Agreement or
with respect to any dispute relating to this Agreement, the prevailing
party shall be entitled to recover from the losing party its attorneys'
fees and all other fees, costs, and expenses actually incurred and
reasonable necessary in connection therewith. In the event of suit,
action, or other proceeding, the amount thereof shall be determined by
the judge, shall include fees and expenses incurred on any appeal or
review, and shall be in addition to all other amounts provided by law.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Rental
Agreement as of the day and year first above written.
<PAGE>
Individuals signing on behalf of a principal warrant that they have the
authority to bind their principals.
LESSOR: Shared Secretarial Service, Inc.
-----------------------------------------
Date:____________________________________
LESSEE: Cerprobe
J. Segnar
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial
information extracted from the Condensed
Consolidated Balance Sheet at March 31, 1996 and
the Condensed Consolidated Statements of
Operations and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 9,036,839
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 3,161,909
<CURRENT-ASSETS> 18,584,313
<PP&E> 5,890,909
<DEPRECIATION> 3,400,769
<TOTAL-ASSETS> 26,583,868
<CURRENT-LIABILITIES> 4,270,401
<BONDS> 1,389,410
489,000
0
<COMMON> 214,799
<OTHER-SE> 20,606,692
<TOTAL-LIABILITY-AND-EQUITY> 26,583,868
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