<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CERPROBE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 86-0312814
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
------------------------
1150 NORTH FIESTA BOULEVARD
GILBERT, ARIZONA 85233-2237
(602) 333-1500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
C. ZANE CLOSE
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
1150 NORTH FIESTA BOULEVARD
GILBERT, ARIZONA 85233-2237
(602) 333-1500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
<TABLE>
<S> <C>
COPIES TO: COPIES TO:
JEAN E. HARRIS, ESQ. D. BRADLEY PECK, ESQ.
MICHAEL L. KAPLAN, ESQ. LANCE W. BRIDGES, ESQ.
O'CONNOR, CAVANAGH, ANDERSON, COOLEY GODWARD LLP
KILLINGSWORTH & BESHEARS, P.A. 4365 EXECUTIVE DRIVE
ONE EAST CAMELBACK ROAD SUITE 1100
PHOENIX, ARIZONA 85012 SAN DIEGO, CALIFORNIA 92121
(602) 263-2600 (619) 550-6000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practical after the
Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
- ---------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (2) PRICE REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.05 par value 2,300,000 shares $21.125 $48,587,500 $14,724
======================================================================================================================
</TABLE>
(1) Includes 300,000 shares that the Underwriters have the option to purchase to
cover over-allotments, if any.
(2) Calculated pursuant to Rule 457(c) under the Securities Act of 1933.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 28, 1997
2,000,000 SHARES
[CERPROBE LOGO]
COMMON STOCK
------------------------
Of the 2,000,000 shares of Common Stock offered hereby, 1,500,000 shares
are being sold by the Company and 500,000 shares are being sold by the Selling
Stockholders. See "Principal and Selling Stockholders." The Company will not
receive any of the proceeds from the sale of shares by the Selling Stockholders.
The Company's Common Stock is quoted on the Nasdaq National Market under the
symbol "CRPB." On August 26, 1997, the last reported sale price of the Common
Stock was $21 3/8 per share. See "Price Range of Common Stock."
SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=================================================================================================
PRICE UNDERWRITING PROCEEDS PROCEEDS
TO DISCOUNTS AND TO TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) STOCKHOLDERS
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Per Share.................... $ $ $ $
- -------------------------------------------------------------------------------------------------
Total (3).................... $ $ $ $
=================================================================================================
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 300,000 additional shares of Common Stock solely to cover
over-allotments, if any. If such option is exercised in full, the total
Price to Public, Underwriting Discounts and Commissions and Proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to receipt and acceptance by them and to their right to reject any order in
whole or in part. It is expected that delivery of the shares of Common Stock
will be made at the offices of Adams, Harkness & Hill, Inc., Boston,
Massachusetts, on or about , 1997.
ADAMS, HARKNESS & HILL, INC.
DAIN BOSWORTH INCORPORATED
The date of this Prospectus is , 1997.
<PAGE> 3
Inside Front Cover:
Picture of Wafer Prober test equipment and ATE test board, ATE interface
assembly, probe card, and wafer prober.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS OR THE IMPOSITION OF
PENALTY BIDS. FOR A DISCUSSION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M.
SEE "UNDERWRITING."
Cerprobe, the logo of the Company, and CerCard are trademarks of the
Company. All trademarks and trade names referred to in this Prospectus are the
property of their respective owners.
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. Investors should carefully consider the
risk factors related to the purchase of Common Stock of the Company. See "Risk
Factors."
THE COMPANY
Cerprobe offers comprehensive solutions for semiconductor test integration
and is a leading manufacturer of probe cards, ATE interface assemblies, and ATE
test boards. The Company believes it is the only company that designs,
manufactures, and assembles each of the electromechanical components that assure
the integrity of the electrical test signal that passes from the automatic test
equipment ("ATE") to the IC device under test. The Company also refurbishes,
reconfigures, and services wafer probers. The Company's products address
critical functions to assure IC quality, reduce manufacturing costs, improve the
accuracy of manufacturing yield data, and identify repairable memory ICs.
The Company has grown its business and expanded its product lines primarily
through internal product development. The development of the Company's CerCard
technology in 1990 served as the foundation for the growth of the Company's core
probe card business. The Company has also grown through strategic acquisitions
and joint ventures. The acquisition of Fresh Test Technology Corporation in
April 1995 enabled the Company to expand its product line to include ATE
interface assemblies. The acquisition of CompuRoute, Inc. in December 1996
enabled the Company to offer ATE test boards, the Company's first packaged IC
testing product. In January 1997, the Company acquired Silicon Valley Test &
Repair, Inc., which refurbishes, reconfigures, and services wafer prober
equipment. Recently, the Company entered into a strategic international joint
venture with Upsys for the assembly of a memory IC testing product, which the
Company will distribute in the United States and Asia. Upsys is a joint venture
between IBM and a French test and engineering company. In addition, the Company
established an international joint venture with Mitsubishi Materials to develop
next generation probe card technology.
According to independent semiconductor market research, worldwide
production of ICs increased from approximately 34 billion units in 1992 to in
excess of 49 billion units in 1996. Additionally, advances in semiconductor
technology have resulted in larger semiconductor wafers, higher IC processing
speeds, more varied configurations, and increasingly complex semiconductor
devices. In the semiconductor manufacturing process, probe cards, and to a
lesser extent ATE test boards, are consumable products rather than capital
equipment. Accordingly, the rapid unit growth of ICs and new IC designs coupled
with the trend toward shorter product life cycles and increased complexity of
ICs have accelerated demand for the Company's probe cards and ATE test boards.
Historically, each component of the testing system has been supplied by
different vendors. As a result, IC manufacturers frequently have been left with
the task of combining separate components from many small vendors into a single
integrated testing system. More recently, the Company's customers have
increasingly outsourced their test integration products and services to focus on
their core strengths, and have increasingly relied on the Company to overcome
complex design, manufacturing, and integration challenges. The Company believes
semiconductor manufacturers are seeking a single source provider capable of
supplying comprehensive solutions for the components necessary to assure a clean
test signal. The Company believes it is the only company that designs,
manufactures, and assembles each of the components in the critical path for the
test signal.
The Company maintains regional full service facilities in Arizona,
California, and Texas as well as sales offices in Colorado, Florida,
Massachusetts, and Oregon to serve the U.S. market for its products and
services. The Company also maintains a full service facility in Scotland to
serve the European market and full service facilities in Singapore and Taiwan to
serve the Southeast Asian market. Each of the Company's facilities is located in
proximity to major semiconductor manufacturing centers. The Company's focus on
high quality products and innovative technologies has enabled it to establish
strong relationships with leading worldwide semiconductor manufacturers. In
1996, the Company's top five customers were Intel, Motorola, LSI Logic, IBM, and
Hewlett-Packard.
The Company believes it is a leader in providing high quality semiconductor
testing products and services. The Company's goal is to enhance its leadership
position and increase its domestic and international market share. The Company's
strategy to achieve its goal includes the following key elements: (i) provide
comprehensive solutions for semiconductor test integration, (ii) continue to
maintain strong customer relationships, (iii) expand its global presence, (iv)
focus on technological innovation, and (v) provide quality products and
services.
3
<PAGE> 5
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by:
The Company.................................... 1,500,000 shares
The Selling Stockholders....................... 500,000 shares
Common Stock to be outstanding after the offering... 7,871,580 shares (1)
Use of proceeds..................................... For general corporate purposes,
including additional working capital.
The Company may use a portion of the
net proceeds to repay certain
indebtedness and for possible
acquisitions. See "Use of Proceeds."
Nasdaq National Market symbol....................... CRPB
</TABLE>
- ------------
(1) Excludes (i) 740,540 shares of Common Stock reserved for issuance upon
exercise of stock options and warrants outstanding as of August 1, 1997, and
(ii) 366,334 shares reserved for issuance upon the exercise of stock options
that may be granted in the future under the Company's 1995 Stock Option
Plan.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
-------------------------
SIX MONTHS ENDED SIX MONTHS
YEAR ENDED DECEMBER 31, JUNE 30, YEAR ENDED ENDED JUNE
------------------------------------------------- -------------------- DECEMBER 31, 30,
1992 1993 1994 1995 1996 (1) 1996 1997 (2) 1996 (3) 1997 (3)
------ ------- ------- ------- ---------- ------- ---------- ------------ ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.............. $8,060 $11,212 $14,251 $26,099 $ 37,308 $19,360 $ 34,583 $ 62,268 $ 34,636
Costs of goods sold.... 4,914 6,768 8,214 13,706 20,343 10,348 20,404 39,353 20,487
------ ------- ------- ------- ------- ------- ------- ------- -------
Gross profit........... 3,146 4,444 6,037 12,393 16,965 9,012 14,179 22,915 14,149
Expenses:
Selling, general and
administrative..... 1,827 2,398 3,693 7,503 10,725 5,275 9,127 16,063 9,241
Engineering and
product
development........ 246 336 417 707 903 378 618 1,452 655
Acquisition
related............ -- -- -- -- 4,584 -- 6,164 -- --
------ ------- ------- ------- ------- ------- ------- ------- -------
Total expenses..... 2,073 2,734 4,110 8,210 16,212 5,653 15,909 17,515 9,896
------ ------- ------- ------- ------- ------- ------- ------- -------
Operating income
(loss)............... 1,073 1,710 1,927 4,183 753 3,359 (1,730) 5,400 4,253
Net income (loss)...... $ 771 $ 1,502 $ 1,213 $ 2,402 $ (1,361) $ 1,867 $ (3,305) $ 2,916 $ 2,519
====== ======= ======= ======= ======= ======= ======= ======= =======
Net income (loss) per
common and common
equivalent share:
Primary.............. $ 0.31 $ 0.41 $ 0.36 $ 0.59 $ (0.30) $ 0.35 $ (0.52) $ 0.48 $ 0.38
====== ======= ======= ======= ======= ======= ======= ======= =======
Fully diluted........ $ 0.21 $ 0.35 $ 0.30 $ 0.49 $ (0.30) $ 0.32 $ (0.52) $ 0.45 $ 0.38
====== ======= ======= ======= ======= ======= ======= ======= =======
Weighted average number
of common and common
equivalent shares:
Primary.............. 2,502 3,688 3,387 4,071 4,580 5,262 6,321 6,028 6,545
Fully diluted........ 3,680 4,349 4,007 4,862 4,580 5,798 6,321 6,518 6,608
</TABLE>
4
<PAGE> 6
<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------
ACTUAL AS ADJUSTED (4)
------- ---------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................................ $ 1,482 $22,971
Working capital...................................................... 7,005 31,494
Total assets......................................................... 36,433 57,922
Long-term debt....................................................... 1,592 1,592
Stockholders' equity................................................. 22,789 47,278
</TABLE>
- ------------
(1) Includes a one-time write-off of purchased research and development costs of
$4.6 million in 1996, or $1.00 per share, related to the acquisition of
CompuRoute, Inc. ("CompuRoute").
(2) Includes the results of operations of SVTR since the date of acquisition of
January 15, 1997. Includes a one-time write-off of purchased research and
development costs of $5.7 million for the six months ended June 30, 1997, or
$0.90 per share, related to the acquisition of Silicon Valley Test & Repair,
Inc. ("SVTR"). In addition, an accrual was recorded in the same period for
the estimated costs to move SVTR's manufacturing operations from California
to Arizona during 1997 for $500,000, or $0.05 per share, net of taxes, for a
total of $0.95 per share. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Overview."
(3) The pro forma statement of operations data for the year ended December 31,
1996 and the six months ended June 30, 1997 present results for the Company
as if the acquisitions of CompuRoute and SVTR had occurred as of January 1,
1996. The pro forma statement of operations data does not reflect any cost
savings associated with the reduction of overhead or the elimination of
duplicate functions or consolidation of facilities. See "Unaudited Pro Forma
Combined Condensed Financial Information" for a discussion of pro forma
statement of operations adjustments.
(4) Adjusted to give effect to the sale by the Company of 1,500,000 shares of
Common Stock at the assumed public offering price of $21.375 per share and
the application of the estimated net proceeds therefrom. A portion of the
proceeds will be used for the repayment of advances outstanding on the
Company's line of credit of $7.3 million, including $5.3 million borrowed
after June 30, 1997 to redeem the remaining outstanding shares of Series A
Convertible Preferred Stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Subsequent Events."
------------------------
The Company was incorporated in California in 1976 and reincorporated in
Delaware in 1987. The Company maintains its principal executive offices at 1150
North Fiesta Boulevard, Gilbert, Arizona 85233, and its telephone number is
(602) 333-1500.
------------------------
Unless the context indicates otherwise, all references to "Cerprobe" or the
"Company" refer to Cerprobe Corporation and its subsidiaries. Except as
otherwise noted, all information in this Prospectus assumes no exercise of the
Underwriters' over-allotment option. See "Capitalization," "Description of
Securities," and "Underwriting."
5
<PAGE> 7
RISK FACTORS
The following risk factors should be considered carefully in addition to
the other information in this Prospectus before purchasing the Common Stock
offered by this Prospectus. Except for the historical information contained
herein, the discussion in this Prospectus contains certain forward-looking
statements that involve risks and uncertainties. When used in this Prospectus,
the words "believes," "expects," "anticipates," "intends," "estimates,"
"should," "will likely," and similar expressions are intended to identify such
forward-looking statements. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The Company's actual results could
differ materially from those discussed here. Important factors that could cause
or contribute to such differences include those discussed below, as well as
those discussed elsewhere herein.
Fluctuations in Operating Results. The Company's quarterly and annual
operating results will be affected by a wide variety of factors that could have
a material adverse effect on its net sales and profitability, many of which are
beyond its control, including factors pertaining to (i) customer demand for the
Company's products, such as the cyclical nature of the semiconductor industry,
market acceptance of the Company's products, changes in product mix, the level
of orders that are received and can be delivered in a quarter, and customer
order patterns; (ii) competition, such as competitive pressures on delivery
time, product performance and reliability, prices, the introduction or
announcement of new products by competitors, and intellectual property rights of
third parties; (iii) product development, such as the Company's ability to
introduce new product designs and innovations on a timely basis in response to
advances in IC technology; (iv) manufacturing and operations, such as the
availability and cost of raw materials, equipment and other supplies,
fluctuations in manufacturing yields, availability and cost of production
capacity, and concentration of suppliers; and (v) generally prevailing economic
conditions in the U.S. and worldwide markets served by the Company. Fluctuations
in operating results could materially and adversely affect the market price of
the Common Stock. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business."
Cyclicality of the Semiconductor Industry. The Company's business depends
substantially on both the volume of IC production by semiconductor manufacturers
as well as new IC designs, which in turn depend on the demand for ICs and
products utilizing ICs. The semiconductor industry is highly cyclical and
historically has experienced periods of oversupply, resulting in reduced demand
for IC testing products, including the products manufactured by the Company.
There can be no assurance that demand for ICs or products utilizing ICs will not
decline. Furthermore, there can be no assurance that demand for the Company's
products will continue at the current level. The Company anticipates that a
significant portion of new orders for its products will depend upon demand from
IC manufacturers building or expanding IC fabrication facilities or otherwise
increasing production capacity or shifting production to new IC designs, and
there can be no assurance that such demand will exist. Future downturns or
slowdowns in the IC market will have a material adverse effect on the Company's
business, financial condition, and operating results. Moreover, the Company's
need to invest in engineering and product development, marketing, and customer
service and support capabilities will limit its ability to reduce expenses in
response to such downturns or slowdowns. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business."
Risks Associated with Expansion Strategy. The Company intends to expand,
in part, through strategic acquisitions and joint ventures and by entering into
new geographic and product markets. The Company's ability to expand through
acquisitions will depend primarily on its ability to identify, acquire, and
operate other businesses that complement the Company's existing business. There
can be no assurance that any suitable acquisitions can be identified or
consummated or that the operations and product offerings of any businesses that
are acquired will be successfully integrated into the Company's operations and
product offerings. The Company anticipates that it will use cash, possibly
including the net proceeds from this offering, and/or its securities, including
Common Stock, as the primary consideration for any future acquisitions. The
size, timing, and integration of any future acquisitions could cause
6
<PAGE> 8
substantial fluctuations in operating results. The Company faces similar risks
and uncertainties with respect to joint ventures. The Company is not engaged in
any negotiations with any third parties and has no specific agreements or plans
with respect to any acquisitions or joint ventures, and there can be no
assurance the Company will consummate any acquisitions or joint ventures.
The Company believes that its future success will depend, in part, on its
ability to expand into new international markets, particularly Asia, and new
product markets. The Company believes that its Asian competitors have a
competitive advantage because of their dominance of the Asian market. There can
be no assurance that the Company will be able to establish a significant
presence in these international markets. There also can be no assurance that or
to what extent the Company will be able to gain market acceptance for any new
product. See "Business."
Management of Growth. The Company has undergone a period of rapid growth
and expansion of its worldwide organization. Continued expansion by the Company
may strain its management, manufacturing, and human resources and the ability of
materials suppliers and other third parties on which the Company is dependent.
The Company's operating results could be materially and adversely affected if it
is unable to maintain high levels of productivity and/or to maintain
satisfactory delivery schedules. Moreover, to manage its growth effectively, the
Company will be required to expand its existing operating and financial systems
and controls and to manage a substantial increase in its employee base. To the
extent that the Company's management is unable to assume or perform these
duties, the business of the Company could be materially and adversely affected.
There can be no assurance that the management systems and controls currently in
place or any steps taken to expand such management systems and controls will be
adequate in the future.
The CompuRoute, Inc. ("CompuRoute") and Silicon Valley Test & Repair, Inc.
("SVTR") acquisitions represent significant growth in the Company's operations.
Significant uncertainties accompany any business combination and its
implementation with respect to the ability of the Company to integrate
administrative functions, management resources, and sales and marketing
distribution systems. There can be no assurance that the Company will be able
successfully to integrate the operations of CompuRoute and SVTR. The Company
recently moved SVTR's operations from California to facilities in Arizona. The
move could be disruptive to the operations of SVTR and could have a material
adverse effect on the Company's business, financial condition, and operating
results. See "Business -- Manufacturing" and "Business -- Facilities."
Dependence on New Products and Technologies. The Company operates in an
industry subject to rapid change. The Company custom-designs or customizes its
products to a customer's particular IC design specifications. The Company's
inability to introduce new product designs and enhancements and to adapt its
manufacturing techniques in response to technological advances in IC and capital
equipment designs would have a material adverse effect on the Company's
business, financial condition, and operating results. There can be no assurance
that any new product designs or enhancements will receive or maintain
substantial market acceptance. Probe card technologies, other than those being
utilized by the Company, are being developed. To the extent that such other
probe card technologies gain market acceptance, the Company's probe card
products could lose market share and the Company's business, financial
condition, and operating results would be materially and adversely affected. If
the Company is unable to design, develop, and introduce competitive products on
a timely basis, its future operating results may be materially and adversely
affected. See "Business -- Products and Services."
Competition. The semiconductor testing products industry is highly
competitive. The Company faces substantial competition in each of the probe
card, ATE interface assembly, and ATE test board markets. In addition, the
Company anticipates that it may face substantial competition in the future from
new entrants in the Company's markets. The principal competitive factors in the
industry are product performance, service, delivery time, and price. Competition
in international markets is also significant, particularly in Asia where the
Company is expanding into new geographic markets while simultaneously addressing
the testing requirements of the memory IC market, a new product market for the
Company. Some of the Company's competitors, particularly in Asia, have
substantially greater financial, engineering,
7
<PAGE> 9
or manufacturing resources than the Company and larger sales and service
organizations. To compete successfully, the Company must make substantial
investments in its engineering and product development, marketing, and customer
service and support activities. There can be no assurance that competition in
the Company's markets will not intensify or that the Company's technological
advantages will not be reduced or lost as a result of technological advances by
competitors or customers.
Wafer prober manufacturers, such as Electroglas, Inc., Tokyo Electron Labs,
and Tokyo Semitsu, provide limited refurbishment services and offer new wafer
probers as an alternative. These wafer prober manufacturers have greater
financial, engineering, and manufacturing resources and larger service
organizations than the Company, as well as long-standing customer relationships.
There can be no assurance that levels of competition in the market for wafer
prober refurbishing and reconfiguration services will not intensify in the
future or that customers will not elect to purchase new wafer probers.
Reliance on Third Party Distribution Channels. The Company markets and
sells its products internationally primarily through a network of third party
foreign distributors that are not under the direct control of the Company. The
Company's international business represented approximately 16% of net sales for
the six months ended June 30, 1997. A reduction in the sales efforts by the
Company's foreign distributors or termination of their relationships with the
Company could materially and adversely affect the Company's international sales
and, as a result, its business, financial condition, and operating results. See
"Business -- Marketing, Sales, and Services."
Risks of International Operations. Given the Company's efforts in
establishing production and sales facilities in Scotland, Singapore, and Taiwan,
the Company anticipates that sales to international customers will increase in
the future. The foreign manufacture and sale of products and the purchase of raw
materials and equipment from foreign suppliers may be materially and adversely
affected by political and economic conditions abroad. Protectionist trade
legislation in either the United States or foreign countries, such as a change
in the current tariff structures, export compliance laws, or other trade
policies, as well as the Company's ability to form effective joint venture
alliances in order to compete in restrictive markets, could materially and
adversely affect the Company's ability to manufacture or sell products in
foreign markets and purchase materials or equipment from foreign suppliers. In
addition, the laws of certain foreign countries may not protect the Company's
intellectual property rights to the same extent as the laws of the United
States. See "Business."
Currency Exchange Fluctuations. A portion of the Company's foreign
transactions are denominated in currencies other than the U.S. dollar. Such
transactions expose the Company to exchange rate fluctuations for the period of
time from inception of the transaction until it is settled. The Company has not
engaged in transactions to hedge its currency risks, but may do so in the
future. The Company may purchase a portion of its raw materials and equipment
from foreign suppliers and will incur labor costs in a foreign currency. There
can be no assurance that fluctuations in the currency exchange rates in the
future will not have a material adverse effect on the Company's operating
results.
Dependence on Key Customers. Sales of the Company's products are
concentrated with a small number of customers. During 1996, sales to the
Company's two largest customers, Intel and Motorola, accounted for approximately
15% and 12% of net sales, respectively. The Company's top 15 customers in 1996
together accounted for approximately 63% of net sales. The Company expects that
sales of its products to relatively few customers will continue to account for a
high percentage of its net sales. None of the Company's customers has entered
into a long-term agreement requiring it to purchase the Company's products. The
loss of a significant customer or any reduction in orders from any significant
customer, including reductions due to changes in customer buying patterns,
market, economic, or competitive conditions in the IC industry or in the
industries that manufacture products utilizing ICs, would have a material
adverse effect on the Company's business, financial condition, and operating
results. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Customers."
Dependence on Key Suppliers. The Company relies on third party suppliers
in the production and shipment of its products. Although the Company believes
that all raw materials, component parts, and
8
<PAGE> 10
services are currently available in adequate amounts, there can be no assurance
that shortages will not develop in the future. Certain of the raw materials and
component parts for the Company's products are purchased from single or a
limited group of suppliers. The Company does not have long-term written
agreements with such suppliers. Termination or a significant disruption of any
of its key supplier arrangements could have a material adverse effect on the
Company's business, financial condition, and operating results. See
"Business -- Manufacturing."
Intellectual Property. While the Company currently holds certain patents,
the Company does not consider any single patent to be material to the conduct of
its business. The Company believes that its competitors have been and will be
able to continue to circumvent many of the Company's patents. To the extent the
Company wishes to assert its patent rights, there can be no assurance that any
patents issued to the Company will not be challenged, invalidated, or
circumvented, that any rights granted thereunder will provide adequate
protection to the Company, or that the Company will have sufficient resources to
prosecute its rights. The Company believes that its success will depend
primarily on the technological competence and creative skills of its personnel
rather than the protection of its existing patents or future patents. The
Company relies primarily on trade secret protection for its proprietary
information. There can be no assurance that the Company will be able to protect
its technology.
Although there are no pending lawsuits against the Company regarding
infringement of any existing patents or other intellectual property rights,
there can be no assurance that third parties will not assert intellectual
property infringement claims against the Company. See "Business -- Intellectual
Property."
Significant Capital Requirements. The probe card, ATE interface, ATE test
board, and wafer prober services industries are capital intensive. In order to
remain competitive, the Company must make significant investments in capital
equipment for engineering and product development. As a result of the increase
in fixed costs and operating expenses related to these capital expenditures, the
Company's operating results may be materially and adversely affected if net
sales do not increase sufficiently to offset the increased costs. The Company
may from time to time seek additional equity or debt financing to provide for
the capital expenditures required to maintain or expand its production
facilities and capital equipment. The timing and amount of any such capital
requirements cannot be predicted at this time and will depend on a number of
factors, including demand for the Company's products, product mix, changes in
industry conditions, and competitive factors. There can be no assurance that any
such financing will be available on acceptable terms, and that any additional
equity financing, if available, would not result in additional dilution to
existing investors. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Potential Liability for Failure to Comply with Environmental
Regulations. The Company is subject to a variety of federal, state, and local
governmental regulations related to the use, storage, discharge and disposal of
toxic, volatile, or otherwise hazardous chemicals used in its manufacturing
process. Although the Company believes that its activities are in substantial
compliance with presently applicable environmental regulations, the failure to
comply with present or future regulations could result in fines being imposed on
the Company, suspension of its production, or a cessation of its operations.
Such regulations could require the Company to acquire costly equipment or to
incur other significant expenses to comply with environmental regulations. Any
failure by the Company to control the use or adequately restrict the discharge
of hazardous substances could subject it to future liabilities. See
"Business -- Environmental Regulations."
Dependence on Management and Other Key Personnel. The Company's success
depends, in part, upon the retention of certain key personnel and the
recruitment and retention of additional key personnel, including technical and
engineering staff. The loss of existing key personnel or the failure to recruit
and retain necessary additional personnel by the Company could materially and
adversely affect its business, financial condition and results of operations.
There can be no assurance that the Company will be able to retain its current
personnel or attract and retain necessary additional personnel. Future growth
will further increase the demand on the Company's resources and require the
addition of new personnel and the development of additional expertise by
existing personnel. The failure of the Company to attract and retain
9
<PAGE> 11
personnel with the requisite expertise or to develop such expertise internally
could materially and adversely affect the prospects for its success.
Control by Current Stockholders. Stockholders of the Company have the
right to cumulate their votes for the election of directors. The directors and
executive officers of the Company and their affiliates currently own
beneficially approximately 22.8% of the Common Stock and after the offering will
own beneficially approximately 16% of the Common Stock. Accordingly, these
persons, if they act as a group, will be able to elect one or more members to
the Company's Board of Directors and may be able to exert significant influence
regarding the outcome of other matters requiring approval by the stockholders of
the Company.
Price Volatility of Common Stock. The market price of the Company's Common
Stock has experienced significant volatility during the past three years. See
"Price Range of Common Stock." The trading price of the Company's Common Stock
in the future could be subject to wide fluctuations in response to quarterly
variations in operating results of the Company and others in its industry,
actual or anticipated announcements concerning the Company or its competitors,
changes in analysts' estimates of the Company's financial performance, general
conditions in the semiconductor industry, general economic and financial
conditions, and other events or factors. In addition, the stock market has
experienced extreme price and volume fluctuations, which have adversely affected
the market prices for many companies involved in high technology manufacturing
and related industries and which often have been unrelated to the operating
performance of such companies. These broad market fluctuations and other factors
could have a material adverse effect on the market price of Common Stock.
Rights to Acquire Shares; Potential Issuance of Additional Shares. As of
August 1, 1997, options to acquire a total of 691,265 shares were outstanding
under the Company's stock option plans. An additional 366,334 shares of Common
Stock are reserved for issuance pursuant to the exercise of options that may be
granted in the future under the Company's stock option plans. The Company also
has granted non-employee options to purchase up to 10,000 shares of Common
Stock. The Company also has issued warrants to purchase up to 39,275 shares of
Common Stock in connection with the sale of the Series A Convertible Preferred
Stock. During the terms of such options and warrants, the holders thereof will
have the opportunity to profit from an increase in the market price of the
Common Stock with resulting dilution in the interests of holders of Common
Stock. The existence of such stock options and warrants could adversely affect
the terms on which the Company can obtain additional financing, and the holders
of such options and warrants can be expected to exercise such options and
warrants at a time when the Company, in all likelihood, would be able to obtain
additional capital by offering shares of its Common Stock on terms more
favorable to the Company than those provided by the exercise of such options and
warrants. The Company also has the authority to issue additional shares of
Common Stock and shares of one or more series of convertible preferred stock.
The issuance of such shares could result in the dilution of the voting power of
outstanding shares of Common Stock and could have a dilutive effect on earnings
per share. See "Description of Securities -- Shares Eligible for Future Sale."
Shares Eligible for Future Sale. Sales of substantial amounts of Common
Stock in the public market could adversely affect prevailing market prices. The
executive officers, directors, the Selling Stockholders, and certain other
stockholders have agreed not to sell or otherwise dispose of any shares of
Common Stock for a period of 90 days after the date of this Prospectus without
the prior written consent of Adams, Harkness & Hill, Inc. Of the 7,871,580
shares of Common Stock to be outstanding upon completion of this offering,
approximately 7,366,548 shares will be eligible for resale in the public market
without restriction or further registration, unless held by an "affiliate" of
the Company, as that term is defined under the Securities Act of 1933, as
amended (the "Securities Act"), or subject to the above lock-up agreement. In
addition, 330,032 shares held by the former principal stockholder of CompuRoute
are subject to Rule 145 of the Securities Act, which requires affiliates to sell
any stock acquired in the acquisition in accordance with the volume and manner
of sale restrictions under Rule 144 under the Securities Act. In addition, the
former principal stockholder of CompuRoute has agreed with the Company not to
sell, publicly or privately, any of the 330,032 shares acquired by her in
connection with the CompuRoute acquisition until December 27, 1997, and no more
than the greater of 1% of the outstanding shares of Common Stock, or
10
<PAGE> 12
50,000 shares, in any 90-day period during the succeeding 12-month period.
Subject to the terms of this agreement, this same stockholder will have certain
registration rights covering the resale of shares of Common Stock acquired by
her in the CompuRoute acquisition for as long as she is subject to the volume
limitations on resale under Rule 145. The former principal stockholder of SVTR
has agreed with the Company generally not to sell, publicly or privately, any of
the 175,000 shares acquired by him in connection with the SVTR acquisition until
January 15, 1998, on which date such shares will become eligible for resale
subject to the volume limitations and other requirements of Rule 144. The
Company has registered 1,057,599 shares of Common Stock reserved for issuance
pursuant to the exercise of options outstanding or to be granted under the
Company's stock option plans. Shares issued pursuant to such registration
statements upon the exercise of stock options generally will be eligible for
sale in the public market, subject to the lock-up agreements discussed above.
See "Management's Discussion and Analysis of Financial Conditions and Results of
Operations -- Subsequent Events" and "Description of Securities -- Shares
Eligible for Future Sale."
Change in Control Provisions. The Company's First Restated Certificate of
Incorporation (the "Restated Certificate") and the Delaware General Corporation
Law (the "Delaware GCL") contain provisions that may have the effect of making
more difficult or delaying attempts by others to obtain control of the Company,
even when these attempts may be in the best interest of stockholders. The
Restated Certificate also authorizes the Board of Directors, without stockholder
approval, to issue one or more series of preferred stock, which could have
voting and conversion rights that adversely affect the voting power of the
holders of the Company's Common Stock. The Delaware GCL also imposes conditions
on certain business combination transactions with "interested stockholders" (as
defined therein). See "Description of Securities -- Certain Charter Provisions
and Delaware General Corporation Law."
11
<PAGE> 13
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,500,000 shares of
Common Stock offered by the Company hereby, after deducting underwriting
discounts and commissions and estimated offering expenses payable by the
Company, are estimated to be $29.7 million ($35.8 million if the Underwriters'
over-allotment option is exercised in full), assuming a public offering price of
$21.375 per share. The Company will not receive any of the proceeds from the
sale of shares of Common Stock by the Selling Stockholders. See "Principal and
Selling Stockholders."
The Company intends to use the net proceeds of this offering for general
corporate purposes, including additional working capital, and may use a portion
to repay advances of $7.3 million on the Company's line of credit, which include
amounts borrowed to redeem outstanding shares of the Company's Series A
Convertible Preferred Stock. As of August 26, 1997, the weighted average
interest rate on amounts outstanding under the line of credit was 7.625%. The
Company also may use a portion of the net proceeds to pay the outstanding demand
note of $1.0 million assumed in connection with the acquisition of CompuRoute.
As of August 26, 1997, the interest rate on this note was 9.50%.
The Company also may use a portion of the net proceeds to acquire products
or businesses that it believes will broaden or enhance its current product
offerings or increase market share. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources." The amounts actually expended by the Company for general corporate
purposes may vary significantly depending upon a number of factors, including
future revenue and the amount of cash generated by the Company's operations. As
a result, the Company will retain broad discretion in the allocation of a
significant portion of the net proceeds from this offering. The Company is not
engaged in any negotiations with any third parties and has no specific
agreements or plans with respect to any acquisitions, and there can be no
assurance the Company will consummate any acquisitions. Pending the uses
described above, the net proceeds will be invested in interest-bearing,
investment-grade securities.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock began trading in the over-the-counter market on
the Nasdaq system on September 29, 1983 and commenced trading on the Nasdaq
National Market on August 10, 1995 under the symbol "CRPB." The table below sets
forth the high and low last closing prices of Common Stock for the periods
indicated as reported on the Nasdaq National Market, except that prior to August
10, 1995 prices represent high ask and low bid quotations on Nasdaq. Bid and ask
quotations represent interdealer quotations, which exclude retail markups or
mark-downs and commissions and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1995
First Quarter.................................................................. $ 6 1/2 $ 4 3/4
Second Quarter................................................................. 8 3/4 4 3/4
Third Quarter.................................................................. 10 3/4 8
Fourth Quarter................................................................. 17 3/8 9 1/4
1996
First Quarter.................................................................. 17 1/2 13
Second Quarter................................................................. 16 11 7/8
Third Quarter.................................................................. 12 1/8 7 7/8
Fourth Quarter................................................................. 14 3/8 9
1997
First Quarter.................................................................. 15 7/8 11 1/8
Second Quarter................................................................. 13 3/4 9 3/8
Third Quarter (through August 26, 1997)........................................ 22 12 3/4
</TABLE>
On August 26, 1997, the last reported closing price for the Common Stock on
the Nasdaq National Market was $21.375. As of August 1, 1997, there were
approximately 3,500 holders of record of Common Stock.
12
<PAGE> 14
DIVIDEND POLICY
The Company does not intend to pay any cash dividends in the future and
intends to retain any future earnings for reinvestment in its business. The
Company's revolving credit facility contains restrictions on the Company's
ability to pay cash dividends, and future borrowings may contain similar
restrictions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
CAPITALIZATION
The following table sets forth the actual capitalization of the Company as
of June 30, 1997, and as adjusted to reflect the sale of the 1,500,000 shares of
Common Stock offered hereby (at the assumed offering price of $21.375 per share)
and the application of the estimated net proceeds therefrom.
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------------
ACTUAL (1) AS ADJUSTED (1)(2)
---------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt................................................. $ 3,717 $ 717
======= =======
Long-term debt.................................................. $ 1,592 $ 1,592
Stockholders' equity:
Preferred stock, $.05 par value; 10,000,000 shares authorized;
330 shares of Series A Convertible Preferred Stock issued and
outstanding, liquidation preference of $10,875 per share...... 0 0
Common stock, $.05 par value; 10,000,000 shares authorized;
6,353,047 shares issued and outstanding, actual; 7,853,047
shares issued and outstanding, as adjusted.................... 318 393
Additional paid-in capital...................................... 23,655 48,069
Retained earnings (deficit)..................................... (1,200) (1,200)
Foreign currency translation adjustment......................... 16 16
------- -------
Total stockholders' equity............................ 22,789 47,278
------- -------
Total capitalization.................................. $ 24,381 $ 48,870
======= =======
</TABLE>
- ------------
(1) Excludes (i) 770,573 shares of Common Stock reserved for issuance upon
exercise of stock options and warrants outstanding as of June 30, 1997, and
(ii) 366,334 shares reserved for issuance upon the exercise of stock options
that may be granted in the future under the Company's 1995 Stock Option
Plan.
(2) Reflects the repayment of advances outstanding on the Company's line of
credit of $5.3 million borrowed after June 30, 1997 to redeem the remaining
outstanding shares of Series A Convertible Preferred Stock.
13
<PAGE> 15
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," which are included elsewhere in this Prospectus. The
consolidated statement of operations data for the years ended December 31, 1994,
1995, and 1996 and the consolidated balance sheet data as of December 31, 1995
and 1996 are derived from, and are qualified by reference to, the consolidated
financial statements included elsewhere in this Prospectus, which have been
audited by KPMG Peat Marwick LLP. The consolidated statement of operations data
for the years ended December 31, 1992 and 1993 and the consolidated balance
sheet data as of December 31, 1992, 1993, and 1994 are derived from audited
consolidated financial statements not included in this Prospectus. The
consolidated statement of operations data for the six months ended June 30, 1996
and 1997 and the consolidated balance sheet data as of June 30, 1997 are derived
from the unaudited consolidated financial statements included elsewhere in this
Prospectus that have been prepared on the same basis as the audited consolidated
financial statements and, in the opinion of management, contain all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the consolidated financial position and results of operations
for such periods. These historical results are not necessarily indicative of the
results to be expected in the future, and results for interim periods are not
necessarily indicative of results for the entire year.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED
---------------------------------------------- JUNE 30,
1996 ------------------
1992 1993 1994 1995 (1) 1996 1997 (2)
------ ------- ------- ------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................................... $8,060 $11,212 $14,251 $26,099 $37,308 $19,360 $34,583
Cost of goods sold................................. 4,914 6,768 8,214 13,706 20,343 10,348 20,404
------ ------- ------- ------- ------- ------- -------
Gross profit....................................... 3,146 4,444 6,037 12,393 16,965 9,012 14,179
Expenses:
Selling, general and administrative.............. 1,827 2,398 3,693 7,503 10,725 5,275 9,127
Engineering and product development.............. 246 336 417 707 903 378 618
Acquisition related expenses..................... -- -- -- -- 4,584 -- 6,164
------ ------- ------- ------- ------- ------- -------
Total expenses................................. 2,073 2,734 4,110 8,210 16,212 5,653 15,909
------ ------- ------- ------- ------- ------- -------
Operating income (loss)............................ 1,073 1,710 1,927 4,183 753 3,359 (1,730)
Other income (expense):
Interest income.................................. -- 1 19 45 467 168 68
Interest expense................................. (304) (132) (115) (154) (222) (116) (297)
Other income, net................................ 22 13 92 140 247 87 115
------ ------- ------- ------- ------- ------- -------
Total other income (expense)................... (282) (118) (4) 31 492 139 (114)
------ ------- ------- ------- ------- ------- -------
Income (loss) before income taxes, minority
interest, and extraordinary item................. 791 1,592 1,923 4,214 1,245 3,498 (1,844)
Provision for income taxes......................... (321) (90) (710) (1,812) (2,701) (1,693) (1,490)
Minority interest share of loss.................... -- -- -- -- 95 62 29
------ ------- ------- ------- ------- ------- -------
Net income (loss) before extraordinary item........ 470 1,502 1,213 2,402 (1,361) 1,867 (3,305)
Extraordinary item -- prior years' NOLs............ 301 -- -- -- -- -- --
------ ------- ------- ------- ------- ------- -------
Net income (loss).................................. $ 771 $ 1,502 $ 1,213 $ 2,402 $(1,361) $ 1,867 $(3,305)
====== ======= ======= ======= ======= ======= =======
Net income (loss) per common and common equivalent
share:
Primary.......................................... $ 0.31 $ 0.41 $ 0.36 $ 0.59 $ (0.30) $ 0.35 $ (0.52)
====== ======= ======= ======= ======= ======= =======
Fully diluted.................................... $ 0.21 $ 0.35 $ 0.30 $ 0.49 $ (0.30) $ 0.32 $ (0.52)
====== ======= ======= ======= ======= ======= =======
Weighted average number of common and common
equivalent shares:
Primary.......................................... 2,502 3,688 3,387 4,071 4,580 5,262 6,321
Fully diluted.................................... 3,680 4,349 4,007 4,862 4,580 5,798 6,321
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
1996 JUNE 30,
1992 1993 1994 1995 (1) 1997 (2)
------ ------- ------- ------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................................... $1,551 $ 2,777 $ 3,572 $ 4,772 $10,004 $ 7,005
Total assets....................................... 3,083 4,674 7,015 14,967 31,512 36,433
Long-term debt..................................... 859 748 791 981 1,742 1,592
Stockholders' equity............................... 1,304 3,063 4,923 10,656 23,130 22,789
</TABLE>
- ------------
(1) Includes a one-time write-off of purchased research and development costs of
$4.6 million in 1996, or $1.00 per share, related to the acquisition of
CompuRoute.
(2) Includes a one-time write-off of purchased research and development costs of
$5.7 million for the six months ended June 30, 1997, or $0.90 per share,
related to the acquisition of SVTR. In addition, an accrual was recorded in
the six months ended June 30, 1997 for the estimated costs to move SVTR's
manufacturing operations from California to Arizona during 1997 for
$500,000, or $0.05 per share, net of taxes, for a total of $0.95 per share.
14
<PAGE> 16
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The unaudited pro forma combined condensed statements of operations combine
Cerprobe's historical condensed consolidated statements of operations for the
year ended December 31, 1996 and the unaudited six months ended June 30, 1997,
with the corresponding CompuRoute and SVTR historical condensed consolidated
statements of operations for the year ended December 31, 1996 and the unaudited
six months ended June 30, 1997, respectively, giving effect to the acquisitions
as if they had occurred on January 1, 1996.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results that would have occurred
if the acquisitions had been consummated on January 1, 1996, nor is it
necessarily indicative of future operating results. The unaudited pro forma
combined condensed statements of operations do not incorporate any benefits from
cost savings or synergies of operations of the combined companies that may
occur. No pro forma combined balance sheet as of June 30, 1997 is presented as
the acquisitions have already been reflected in Cerprobe's historical June 30,
1997 balance sheet.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ADJUSTED
ACTUAL PRO FORMA PRO FORMA PRO FORMA
CERPROBE COMPUROUTE (1) SVTR (1) COMBINED ADJUSTMENTS COMBINED
-------- -------------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales................................ $37,308 $ 10,424 $14,617 $62,349 $ (81) (2) $62,268
Costs of goods sold...................... 20,343 7,550 11,541 39,434 (81) (2) 39,353
------- ------- ------- ------- ------- -------
Gross profit............................. 16,965 2,874 3,076 22,915 -- 22,915
Expenses:
Selling, general and administrative.... 10,725 2,278 2,939 15,942 121(3) 16,063
Engineering and product development.... 903 -- 549 1,452 -- 1,452
Acquisition related expenses........... 4,584 -- -- 4,584 (4,584) (3) --
------- ------- ------- ------- ------- -------
Total expenses.................. 16,212 2,278 3,488 21,978 (4,463) 17,515
------- ------- ------- ------- ------- -------
Operating income (loss).................. 753 596 (412) 937 4,463 5,400
Other income (expense):
Interest income........................ 467 30 -- 497 (408) (4) 89
Interest expense....................... (222) (143) (320) (685) -- (685)
Other income, net...................... 247 -- 13 260 -- 260
------- ------- ------- ------- ------- -------
Total other income (expense).... 492 (113) (307) 72 (408) (336)
------- ------- ------- ------- ------- -------
Income (loss) before income taxes and
minority interest...................... 1,245 483 (719) 1,009 4,055 5,064
Minority interest share of loss.......... 95 -- -- 95 -- 95
------- ------- ------- ------- ------- -------
Income (loss) before income taxes........ 1,340 483 (719) 1,104 4,055 5,159
Provision for income taxes............... (2,701) -- 295 (2,406) 163(5) (2,243)
------- ------- ------- ------- ------- -------
Net income (loss)........................ $(1,361) $ 483 $ (424) $(1,302) $ 4,218 $ 2,916
======= ======= ======= ======= ======= =======
Net income (loss) per common and common
equivalent share:
Primary.................................. $ (0.30) $ 0.48
======= =======
Fully diluted............................ $ (0.30) $ 0.45
======= =======
Weighted average number of common and
common equivalent shares outstanding:
Primary.................................. 4,580 6,028(6)
Fully diluted............................ 4,580 6,518(6)
</TABLE>
- ------------
(1) Reflects the historical operations of CompuRoute and SVTR for the year ended
December 31, 1996.
(2) Reflects the elimination of intercompany sales.
(3) Reflects the amortization of goodwill associated with the acquisition of
CompuRoute and the elimination of acquisition related expenses associated
with the acquisition of CompuRoute.
(4) Reflects the reduction of interest income associated with the Series A
Convertible Preferred Stock proceeds that were used in the acquisitions of
CompuRoute and SVTR.
(5) Reflects the statutory income tax rate applied to the taxable pro forma
adjustments.
(6) Reflects the issuance of 700,000 shares of Common Stock as a portion of the
consideration paid to the sellers of CompuRoute and SVTR and the dilutive
effect of outstanding stock options and warrants.
15
<PAGE> 17
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ADJUSTED
ACTUAL PRO FORMA PRO FORMA PRO FORMA
CERPROBE SVTR (1) COMBINED ADJUSTMENTS COMBINED
-------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales............................................... $34,583 $ 53 $34,636 $ -- $34,636
Costs of goods sold..................................... 20,404 83 20,487 -- 20,487
------- ----- ------- ------- -------
Gross profit............................................ 14,179 (30) 14,149 -- 14,149
Expenses:
Selling, general and administrative................... 9,127 114 9,241 -- 9,241
Engineering and product development................... 618 37 655 -- 655
Acquisition related expenses.......................... 6,164 -- 6,164 (6,164) (2) --
------- ----- ------- ------- -------
Total expenses................................. 15,909 151 16,060 (6,164) 9,896
------- ----- ------- ------- -------
Operating income (loss)................................. (1,730) (181) (1,911) 6,164 4,253
Other income (expense):
Interest income....................................... 68 -- 68 -- 68
Interest expense...................................... (297) -- (297) -- (297)
Other income, net..................................... 115 (14) 101 -- 101
------- ----- ------- ------- -------
Total other income (expense)................... (114) (14) (128) -- (128)
------- ----- ------- ------- -------
Income (loss) before income taxes and minority
interest.............................................. (1,844) (195) (2,039) 6,164 4,125
Minority interest share of loss......................... 29 -- 29 -- 29
------- ----- ------- ------- -------
Income (loss) before income taxes....................... (1,815) (195) (2,010) 6,164 4,154
Provision for income taxes.............................. (1,490) 55 (1,435) (200) (3) (1,635)
------- ----- ------- ------- -------
Net income (loss)....................................... $(3,305) $ (140) $(3,445) $ 5,964 $ 2,519
======= ===== ======= ======= =======
Net income (loss) per common and common equivalent
share:
Primary............................................... $ (0.52) $ 0.38
======= =======
Fully diluted......................................... $ (0.52) $ 0.38
======= =======
Weighted average number of common and common equivalent
shares outstanding:
Primary............................................... 6,321 6,545(4)
Fully diluted......................................... 6,321 6,608(4)
</TABLE>
- ------------
(1) Reflects the historical operations of SVTR from January 1, 1997 through the
acquisition date of January 15, 1997.
(2) Reflects the elimination of acquisition related expenses associated with the
acquisition of SVTR.
(3) Reflects the statutory income tax rate applied to the taxable pro forma
adjustments.
(4) Reflects the dilutive effect of outstanding stock options and warrants.
16
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Selected Consolidated Financial Data and the Consolidated Financial
Statements and related Notes thereto of the Company appearing elsewhere in this
Prospectus.
OVERVIEW
Cerprobe offers comprehensive solutions for semiconductor test integration
and is a leading manufacturer of probe cards, ATE interface assemblies, and ATE
test boards. The Company's products and services enable semiconductor
manufacturers to test ICs in wafer form and as packaged ICs.
The Company has grown substantially over the last five years as the Company
has increased its market share and has benefited from the substantial growth in
the worldwide demand for ICs. Net sales have increased from $8.1 million for
1992 to $37.3 million for 1996, representing an average annualized growth rate
of 46.5%. Similarly, the Company's net income has increased from $771,000 for
1992 to $3.2 million for 1996 (before a one-time charge for purchased research
and development of $4.6 million, resulting in a net loss of $1.4 million). Until
1995, substantially all of the Company's growth was from the existing probe card
product line.
Beginning with the April 1995 acquisition of Fresh Test Technology
Corporation ("Fresh Test"), acquisitions have contributed to the Company's
growth. Fresh Test, which expanded the Company's product line to include ATE
interface assemblies, contributed approximately $4 million to 1995 net sales and
approximately $7 million to 1996 net sales. The Company acquired CompuRoute in
December 1996, which enabled the Company to offer ATE test boards. CompuRoute's
net sales and net income for its fiscal year ended December 31, 1996 were $10.4
million and $500,000, respectively. The Company acquired SVTR in January 1997,
which added wafer prober refurbishing and upgrading services. SVTR's net sales
and net loss for its fiscal year ended December 31, 1996 were $14.6 million and
$400,000, respectively. Together, these acquisitions contributed approximately
$12.2 million to net sales for the first six months of 1997. In May 1997 the
Company entered into a joint venture with Upsys Reseau Erisys ("Upsys"), a
French company owned by IBM and GAME, a French test and engineering company. The
joint venture, called Upsys-Cerprobe, L.L.C., will assemble and repair the Cobra
probe card for distribution by the Company in the United States and Asia. The
Company believes the Cobra probe is well-suited for multiple-IC and memory IC
testing.
The Company believes that it is positioned to continue its growth as a
result of its strength in designing, producing, and delivering, on a timely and
cost-efficient basis, a broad range of custom or customized, high quality test
products and services for semiconductor manufacturers in the United States,
Europe, and Asia. There can be no assurance that the Company can continue its
growth. The Company maintains regional full service facilities in Arizona,
California, and Texas as well as sales offices in Colorado, Florida,
Massachusetts, and Oregon to service the U.S. market for its products and
services. The Company continues to expand into international markets, including
Europe and Asia. The Company maintains a full service facility in Scotland to
serve the European market and full service facilities in Singapore and Taiwan to
serve the Southeast Asia market. Each of the Company's facilities is located in
proximity to semiconductor manufacturing centers.
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<PAGE> 19
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of net sales of certain items in the Consolidated Statement of Operations of the
Company. The table and the discussion below should be read in conjunction with
the Consolidated Financial Statements and Notes thereto.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------- ------------------
1994 1995 1996 (1) 1996 1997 (2)
----- ----- -------- ----- --------
<S> <C> <C> <C> <C> <C>
Net sales...................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold............................. 57.6 52.5 54.5 53.5 59.0
----- ----- ----- ----- -----
Gross profit................................... 42.4 47.5 45.5 46.5 41.0
Expenses:
Selling, general and administrative.......... 25.9 28.8 28.7 27.2 26.4
Engineering and product development.......... 2.9 2.7 2.4 2.0 1.8
Acquisition related expenses................. -- -- 12.3 -- 17.8
----- ----- ----- ----- -----
Total expenses....................... 28.8 31.5 43.4 29.2 46.0
----- ----- ----- ----- -----
Operating income (loss)........................ 13.6 16.0 2.1 17.3 (5.0)
Other income (expense):
Interest income.............................. 0.1 0.2 1.3 0.9 0.2
Interest expense............................. (0.8) (0.6) (0.6) (0.6) (0.8)
Other income, net............................ 0.6 0.5 0.6 0.4 0.3
----- ----- ----- ----- -----
Total other income (expense)......... (0.1) 0.1 1.3 0.7 (0.3)
----- ----- ----- ----- -----
Income (loss) before income taxes and minority
interest..................................... 13.5 16.1 3.4 18.0 (5.3)
Provision for income taxes..................... (5.0) (6.9) (7.2) (8.7) (4.3)
Minority interest share of loss................ -- -- 0.2 0.3 0.0
----- ----- ----- ----- -----
Net income (loss).............................. 8.5% 9.2% (3.6)% 9.6% (9.6)%
===== ===== ===== ===== =====
</TABLE>
- ------------
(1) Includes a one-time write-off of purchased research and development costs of
$4.6 million in 1996 related to the acquisition of CompuRoute.
(2) Includes a one-time write-off of purchased research and development costs of
$5.7 million for the six months ended June 30, 1997 related to the
acquisition of SVTR and the estimated costs to move SVTR's manufacturing
operations from California to Arizona during 1997 for $500,000, net of
taxes.
SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
Net Sales. Net sales for the six months ended June 30, 1997 were $34.6
million, an increase of 78.4% over net sales of $19.4 million for the six months
ended June 30, 1996. This increase of $15.2 million in net sales was a result of
the Company's acquisition of its ATE test board and wafer prober products and
services business ($8.6 million), higher domestic order rates for the Company's
probe card and interface products ($5.4 million), and increased international
sales ($1.2 million).
Gross Profit. Gross profit for the six months ended June 30, 1997 was
$14.2 million, an increase of 57.8% over gross profit of $9.0 million for the
same period in 1996. Gross margin decreased from 46.5% for the six months ended
June 30, 1996 to 41.0% for the same period in 1997. The decrease in gross margin
was primarily a result of a change in product mix due to the two recent
acquisitions. Approximately 25% of net sales in the period were attributed to
ATE test boards and wafer prober products and services. Both product lines have
lower gross margins than the Company's core products of probe cards and ATE
interfaces.
18
<PAGE> 20
Selling, General and Administrative. Selling, general and administrative
expenses were $9.1 million, or 26.4% of net sales, for the six months ended June
30, 1997, compared to $5.3 million, or 27.2% of net sales, for the same period
in 1996, an increase of 71.6%. The increase in selling, general and
administrative expenses resulted primarily from the two recent acquisitions, the
start up of the joint venture with Upsys, and the continued domestic and
international expansion. Of the increase, $2.3 million, or 60.5%, was
attributable to the two recent acquisitions and the joint venture with Upsys.
Engineering and Product Development. Engineering and product development
expenses were $618,000, or 1.8% of net sales, for the six months ended June 30,
1997, compared to $378,000, or 2.0% of net sales, for the same period in 1996.
These increased expenses resulted from the Company's two recent acquisitions and
from the Company's continued emphasis on engineering and product development in
an effort to anticipate and address technological advances in semiconductor
testing. Total expenses were partially offset by increased project funding
receipts from collaboration on engineering and product development with certain
customers and the re-assignment of personnel and other resources to the joint
venture with Upsys.
Acquisition Related Expenses. Acquisition related expenses totaled $6.2
million and were related to the acquisition of SVTR. The acquisition was
accounted for using the purchase method. Accordingly, the purchase price was
allocated to the assets acquired and the liabilities assumed based upon their
estimated fair values. The value of the purchased research and development in
connection with the acquisition was $5.7 million. The state of the research and
development products/processes was not at a technologically feasible or
commercially viable stage. Therefore, consistent with generally accepted
accounting principles, the Company took a one-time charge for the full value of
the purchased research and development. The remaining $500,000 of acquisition
related costs was the estimated cost to move SVTR's manufacturing operations
from California to Arizona during 1997.
Interest Income. Interest income was $68,000 for the six months ended June
30, 1997, compared to $168,000 for the same period in 1996. The decrease was a
result of utilizing cash in the fourth quarter of 1996 and in the first quarter
of 1997 in the two recent acquisitions.
Interest Expense. Interest expense was $297,000 for the six months ended
June 30, 1997, compared to $116,000 for the same period in 1996. The majority of
the 1997 increase in interest expense was due to the debt acquired in the two
recent acquisitions.
Provision for Income Taxes. The provision for income taxes for the six
months ended June 30, 1997 was $1.5 million, which represented an effective tax
rate of 39.0% (excluding the nondeductible acquisition related expenses of $5.7
million), compared to $1.7 million, which represented an effective rate of 48.4%
for the same period of 1996. The decreased effective tax rate, as adjusted for
1997, was due to the benefit of CompuRoute's net operating loss carryforward and
partial use of net operating loss carryforwards from foreign subsidiaries.
Minority Interest Share of Loss. The minority interest share of loss of
$29,000 for the six months ended June 30, 1997 represented the combined total of
the Company's joint venture partners' $21,000 share of the income from the
Company's Asian operations and the Company's joint venture partner's $50,000
share of the loss from the joint venture with Upsys. For the six months ended
June 30, 1996, the minority interest share of loss of $62,000 represented the
Company's joint venture partners' share of the loss from the Company's Asian
operations.
Net Income (Loss). Net loss for the six months ended June 30, 1997 was
$3.3 million compared to net income of $1.9 million for the same period in 1996.
Excluding the acquisition related expenses, net income for the six months ended
June 30, 1997 would have been $2.7 million, or 7.8% of net sales, compared to
9.6% of net sales for the six months ended June 30, 1996.
YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
Net Sales. Net sales for 1996 were $37.3 million, an increase of 43.5%
over net sales of $26.0 million for 1995. The increase in net sales reflected a
continuation of higher order rates for the Company's probe
19
<PAGE> 21
card products and increased international sales. International net sales in 1996
were $7.3 million compared to $3.0 million in 1995, an increase of 147.0%,
primarily attributable to the international expansion in Scotland in 1995 and
Singapore in 1996.
Gross Profit. The gross profit for 1996 was $17.0 million, an increase of
37.1% from the gross profit of $12.4 million for 1995. Gross margin decreased
from 47.5% in 1995 to 45.5% in 1996. The decrease in gross margin was primarily
a result of a change in product mix, which included a higher ratio of lower
margin ATE interface product sales as well as higher fixed costs related to
increased manufacturing capacity to meet anticipated customer demand and
maintain satisfactory delivery schedules.
Selling, General and Administrative. Selling, general, and administrative
expenses were $10.7 million, or 28.7% of net sales, for 1996, compared to $7.5
million, or 28.8% of net sales, for 1995, an increase of 42.7%. The increase in
selling, general, and administrative expenses resulted primarily from the
increase in fixed general and administrative costs due to the Company's
continued domestic expansion and the start-up of Asian operations.
Engineering and Product Development. Engineering and product development
expenses were $903,000, or 2.4% of net sales, for 1996, an increase of 27.7%
over $707,000, or 2.7% of net sales, for 1995. These increased expenses resulted
from the Company's continued emphasis on engineering and product development in
an effort to anticipate and address technological advances in semiconductor
testing. During 1995, the Company was awarded two engineering and product
development contracts by SEMATECH, the U.S. semiconductor industry consortium.
The Company also performs ongoing contract engineering and product development
in collaboration with customers. Revenues from these collaborations are
accounted for as an offset to the total expenses incurred for the respective
projects.
Acquisition Related Expenses. Purchased research and development costs
from the December 1996 acquisition of CompuRoute totaled $4.6 million. The
acquisition was accounted for using the purchase method. Accordingly, the
purchase price was allocated to the assets acquired and the liabilities assumed
based upon their estimated fair values. The value of purchased research and
development in connection with the acquisition was $4.6 million. The state of
the research and development products/processes was not at a technologically
feasible or commercially viable stage. Therefore, consistent with generally
accepted accounting principles, the Company took a one-time charge for the full
value of the purchased research and development.
Interest Income. Interest income was $467,000 in 1996, compared to $45,000
for 1995. This increase is attributable to the interest earned on the net
proceeds from the issuance of Series A Convertible Preferred Stock in January
1996.
Provision for Income Taxes. The provision for income taxes increased to
$2.7 million, which represented an effective tax rate of 46.3% for 1996
(excluding the nondeductible acquisition related expenses of $4.6 million),
compared to $1.8 million, which represented an effective rate of 43.0% for 1995.
The increased effective tax rate, as adjusted for 1996, was due primarily to the
benefit in 1995 of the Company's net operating loss carryforwards and the tax
benefit of research tax credits.
Minority Interest Share of Loss. The minority interest share of loss of
$95,000 for 1996 represented the Company's joint venture partners' share of the
loss from the Company's Asian operations.
Net Income (Loss). Net loss for 1996 was $1.4 million, compared to the
income of $2.4 million for 1995. Excluding acquisition related expenses, net
income for 1996 would have been $3.2 million, or 8.6% of net sales for 1996,
compared to 9.2% of net sales for 1995.
YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
Net Sales. Net sales for 1995 were $26.1 million, an increase of 82.5%
over $14.3 million for 1994, primarily as a result of increased sales of its
probe card products. The increase in net sales was primarily due to an increase
in market share and continued strength in the semiconductor industry.
20
<PAGE> 22
Gross Profit. The gross profit for 1995 was $12.4 million, an increase of
106.7% from the gross profit of $6.0 million for 1994. Gross margin increased
from 42.4% in 1994 to 47.5% in 1995. The increase in gross margin resulted
primarily from fixed costs allocated over a larger net sales base.
Selling, General and Administrative. Selling, general, and administrative
expenses increased to $7.5 million, or 28.8% of net sales, for 1995, compared to
$3.7 million, or 25.9% of net sales, for 1994. The increased selling, general,
and administrative expenses resulted primarily from the increase in fixed
general and administrative costs due to the Company's continued expansion and
the acquisition of Fresh Test.
Engineering and Product Development. Engineering and product development
expenses were $707,000, or 2.7% of net sales, for 1995, compared to $407,000, or
2.9% of net sales, for 1994, reflecting an expansion of engineering and product
development efforts.
QUARTERLY RESULTS OF OPERATIONS
The following table presents unaudited consolidated financial results for
each of the 10 quarters in the period ended June 30, 1997. The Company believes
that all necessary adjustments have been included to present fairly the
quarterly information when read in conjunction with the Consolidated Financial
Statements and Notes thereto. The operating results for any quarter are not
necessarily indicative of the results for any subsequent quarter.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------------------------
1995 1996 1997
------------------------------------- ----------------------------------------- ---------------------
MAR. 31 JUN. 30 SEP. 30 DEC. 31 MAR. 31 JUN. 30 SEP. 30 DEC. 31 (1) MAR. 31 (2) JUN. 30
------- ------- ------- ------- ------- ------- ------- ----------- ----------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............. $4,963 $6,172 $6,834 $8,131 $9,700 $9,660 $8,799 $ 9,149 $15,899 $18,684
Gross profit.......... 2,272 3,024 3,283 3,816 4,528 4,485 3,861 4,091 6,505 7,675
Operating income...... 1,002 1,052 885 1,245 1,817 1,542 920 1,058 1,879 2,556
Net income............ 565 615 512 711 1,007 861 663 692 1,069 1,589
Fully diluted net
income per share.... $ 0.14 $ 0.13 $ 0.10 $ 0.14 $ 0.18 $ 0.15 $ 0.11 $ 0.13 $ 0.12 $ 0.24
AS A PERCENTAGE OF NET SALES:
Net sales............. 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0% 100.0% 100.0%
Gross profit.......... 45.8 49.0 48.0 46.9 46.7 46.4 43.9 44.7 40.9 41.1
Operating income...... 20.2 17.0 12.9 15.3 18.7 16.0 10.5 11.6 11.8 13.7
Net income............ 11.4 % 10.0 % 7.5 % 8.7 % 10.4 % 8.9 % 7.5 % 7.6% 8.0% 8.5%
</TABLE>
- ------------
(1) Does not include a one-time write-off of purchased research and development
costs of $4.6 million for the three months ended December 31, 1996, or $0.86
per share, related to the acquisition of CompuRoute.
(2) Does not include a one-time write-off of purchased research and development
costs of $5.7 million for the three months ended March 31, 1997, or $0.90
per share, related to the acquisition of SVTR nor an accrual during the same
period for the estimated costs to move SVTR's manufacturing operations from
California to Arizona for $500,000, or $0.05 per share, net of taxes, for a
total of $0.95 per share.
Quarterly results can be affected by a number of factors, including the
cyclical nature of the semiconductor industry, market acceptance of the
Company's products, product mix, customer order patterns, competition, the
availability and cost of raw materials and production capacity, and the
Company's ability to respond to technological advances.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations and capital requirements primarily
through cash flow from operations, equipment lease financing arrangements, and
sales of equity securities. In January 1996, the Company completed a private
placement of Series A Convertible Preferred Stock, which raised net proceeds of
$9.4 million. The net proceeds have been used in domestic and international
expansion and
21
<PAGE> 23
acquisition of companies and technologies. As of June 30, 1997, cash and cash
equivalents were $1.5 million, compared to $5.6 million at December 31, 1996,
and $264,000 as of December 31, 1995.
The Company generated $2.9 million of cash from operating activities for
the six months ended June 30, 1997, compared to $1.2 million for the six months
ended June 30, 1996. The Company generated $5.7 million, $1.6 million, and $1.5
million of cash from operating activities for the years ended December 31, 1996,
1995, and 1994, respectively.
Accounts receivable increased $4.1 million, or 73.2%, to $9.7 million at
June 30, 1997 from $5.6 million at December 31, 1996. Of this increase, $884,000
resulted from the acquisition of SVTR with the balance a result of increased
sales. Inventories increased $2.7 million, or 68.9%, over December 31, 1996 to
$6.5 million at June 30, 1997. The increase resulted primarily from the
acquisition of SVTR.
Accounts payable and accrued expenses increased $3.3 million, or 76.4%, to
$7.7 million at June 30, 1997. The increase resulted from the acquisition of
SVTR and the Company's continued expansion activities.
The current portions of notes payable and capital leases increased to $2.7
million at June 30, 1997 from $763,000 at December 31, 1996, primarily as a
result of the Company's recent acquisition of SVTR. The Company borrowed
approximately $2.0 million from its revolving line of credit during the second
quarter to pay off notes payable and capital lease obligations of CompuRoute and
SVTR, whose obligation interest rates were higher than the Company's borrowing
rate.
Working capital decreased $3.0 million, or 30.0%, to $7.0 million at June
30, 1997 from December 31, 1996. The current ratio decreased from 2.6 at
December 31, 1996 to 1.6 at June 30, 1997. These decreases were due primarily to
the use of $2.8 million in the SVTR acquisition.
The Company used $5.5 million of cash for investing activities for the six
months ended June 30, 1997, compared to $4.4 million for the six months ended
June 30, 1996. The Company used $10.2 million, $2.0 million, and $1.4 million of
cash for investing activities for the years ended December 31, 1996, 1995, and
1994, respectively. Cash for investing activities was primarily used for capital
expenditures and, in 1996, for the acquisition of CompuRoute.
The Company increased its investment in property, plant, and equipment
during the six months ended June 30, 1997 by $2.3 million, or 20.3%, to $13.8
million. This increase was attributable to the acquisition of SVTR and the
Company's efforts to expand capacity to meet customer demand for its products.
These capital expenditures were funded from cash flow from operations and
proceeds from the private placement of the Series A Convertible Preferred Stock.
The Company used $1.4 million of cash in financing activities for the six
months ended June 30, 1997, compared to $9.8 million of cash generated from
financing activities for the six months ended June 30, 1996. Cash generated from
financing activities in 1996 relates primarily to the net proceeds from the
issuance of the Series A Convertible Preferred Stock. The Company generated $9.7
million and $33,000 of cash from financing activities for the years ended
December 31, 1996 and 1994, respectively, and used $95,000 of cash in financing
activities for the year ended December 31, 1995.
On December 27, 1996, the Company assumed a demand note for approximately
$1 million on the purchase of land and building occupied by CompuRoute. As of
June 30, 1997, the interest rate was 9.50%, with an outstanding balance of $1.0
million.
In February 1997, the Company entered into a $10.0 million unsecured
revolving line of credit, which matures August 15, 1998, with its primary
lender, Wells Fargo Bank. Advances under the revolving line may be made as prime
rate advances, at the Bank's prime lending rate, or as LIBOR rate advances,
which bear interest at 175 basis points in excess of the LIBOR base rate. At
June 30, 1997, the Company had approximately $2 million outstanding from LIBOR
rate advances with an interest rate of 7.625%.
22
<PAGE> 24
In May 1997, the Company entered into a $3.0 million lease line of credit,
which matures February 28, 1998, with Banc One Leasing Corporation. The maximum
term for each lease schedule will not exceed 60 months. Pricing will be indexed
to like term treasuries plus 170 basis points. The advances will be
collateralized by the underlying leased manufacturing equipment, furniture,
fixtures, software and/or hardware. At June 30, 1997 no advances had been made
under the agreement.
The Company's total borrowings at June 30, 1996 were $5.3 million,
including notes payable of $2.6 million and capital leases of $1.7 million.
The Company believes that its working capital, together with the loan
commitments described above, anticipated cash flow from operations, and net
proceeds from this offering will provide adequate sources to fund operations for
at least the next 12 months. The Company anticipates that any additional cash
requirements for operations or capital expenditures will be financed through
cash flow from operations, by borrowing from the Company's primary lender, by
lease financing arrangements, or by sales of equity securities. There can be no
assurance that any such financing will be available on acceptable terms and that
any additional equity financing, if available, would not result in additional
dilution to existing investors.
SUBSEQUENT EVENTS
On August 18, 1997, a letter of understanding detailing the settlement of
certain open terms related to the purchase of SVTR by the Company on January 15,
1997 was signed by the former owners of SVTR. In general, the letter of
understanding requires these former owners to return 125,000 shares of Common
Stock currently held in escrow to the Company. In addition, the former owners
are required to release any claims or interests they may have to receive any
payments or shares of Common Stock with respect to an earnout provision detailed
in the January 15, 1997 agreement of merger between the two entities. Upon
completion and execution of documentation evidencing the terms of the letter of
understanding, both parties will release the other from any future liability
related to the purchase of SVTR by the Company. If the letter of understanding
is ultimately consummated through a formal agreement between the two parties,
the Company anticipates recording an estimated one-time $1.2 million reduction
in acquisition related expenses at the time the formal agreement is signed.
On August 25, 1997, the Company reached an agreement, which included mutual
releases, with the holders of the remaining 330 shares of Series A Convertible
Preferred Stock to redeem their shares for $5.3 million in cash. The redemption
will be funded through advances on the Company's line of credit.
23
<PAGE> 25
BUSINESS
Cerprobe offers comprehensive solutions for semiconductor test integration
and is a leading manufacturer of probe cards, ATE interface assemblies, and ATE
test boards. The Company believes it is the only company that designs,
manufactures, and assembles each of the electromechanical components that assure
the integrity of the electrical test signal that passes from the automatic test
equipment ("ATE") to the IC device under test ("DUT"). The Company also
refurbishes, reconfigures, and services wafer probers. The Company's products
and services enable semiconductor manufacturers to test integrated circuits
("ICs") in wafer form and as packaged ICs. Testing ICs assures IC quality,
reduces manufacturing costs, improves the accuracy of manufacturing yield data,
and identifies repairable memory ICs.
The Company has grown its business and expanded its product lines primarily
through internal product development. The development of the Company's CerCard
technology in 1990 served as the foundation for the growth of the Company's core
probe card business. The Company has also grown through strategic acquisitions
and joint ventures. The acquisition of Fresh Test Technology Corporation ("Fresh
Test") in April 1995 enabled the Company to expand its product line to include
ATE interface assemblies. The acquisition of CompuRoute, Inc. ("CompuRoute") in
December 1996 enabled the Company to offer ATE test boards, the Company's first
packaged IC testing product. In January 1997, the Company acquired Silicon
Valley Test & Repair, Inc. ("SVTR"), which refurbishes, reconfigures, and
services wafer prober equipment. Recently, the Company entered into a strategic
international joint venture with Upsys for the assembly of a memory IC testing
product, which the Company will distribute in the United States and Asia. Upsys
is a joint venture between IBM and a French test and engineering company. In
addition, the Company established an international joint venture with Mitsubishi
Materials to develop next generation probe card technology.
The Company maintains regional full service facilities in Arizona,
California, and Texas, as well as sales offices in Colorado, Florida,
Massachusetts, and Oregon to serve the U.S. market for its products and
services. The Company also maintains a full service facility in Scotland to
serve the European market and full service facilities in Singapore and Taiwan to
serve the Southeast Asian market. Each of the Company's facilities is located in
proximity to major semiconductor manufacturing centers. The Company's focus on
high quality products and innovative technologies has enabled it to establish
strong relationships with leading worldwide semiconductor manufacturers. In
1996, the Company's top five customers were Intel, Motorola, LSI Logic, IBM, and
Hewlett-Packard.
INDUSTRY OVERVIEW
The IC market is a high volume, high growth commodity market characterized
by rapid technological change. According to independent semiconductor market
research, worldwide production of ICs increased from approximately 34 billion
units in 1992 to in excess of 49 billion units in 1996.
Growing demand for ICs has driven the increased demand for semiconductor
testing products, such as probe cards, ATE interface assemblies, ATE test boards
and wafer probing equipment. Because probe cards, and to a lesser extent ATE
test boards, are consumable products rather than capital equipment, the rapid
unit growth of ICs and new IC designs are in particular fueling the demand for
probe cards and ATE test boards. VLSI Research Inc. ("VLSI"), an independent
semiconductor market research company, estimated the worldwide market for probe
cards in 1997 to be approximately $400 million. The Company estimates that the
market for ATE test boards is approximately $300 million. Based upon VLSI and
other industry data on projected sales of new material handling equipment (wafer
probers/handlers), the Company estimates the market for ATE interface assemblies
to be $150 million.
The long-term growth in demand for ICs and the required production capacity
to meet this demand drives the market for wafer prober equipment and services as
well. The market for wafer probers and associated equipment in new and existing
IC fabrication facilities ("fabs") in 1997 is estimated by VLSI to be
approximately $500 million. Because of the escalating costs of new fabs,
reconditioned and reconfigured wafer probers increasingly are being utilized by
manufacturers in order to extend the life of existing fabs and minimize capital
expenditures. As a result of the increasing size and the age of the installed
base of
24
<PAGE> 26
wafer probers, the Company expects the demand for wafer prober reconditioning
and refurbishing services to increase; however, there can be no assurance that
such an increase will occur.
In addition to the rapid unit growth in ICs, technological advances in ICs
have also fueled the increased demand for semiconductor testing products. IC
technology is changing rapidly due to constantly increasing demand for greater
functionality and higher processing speeds. Advances in IC design and process
technologies have enabled manufacturers to meet these demands by producing
smaller ICs with ever greater circuit densities, higher pin counts, more varied
configurations, and increased complexity. The intense competition among
semiconductor manufacturers to be first to market with a new IC and gain a
competitive edge has caused design and production cycles to continue to shrink.
As a result of the increased complexity of ICs and shorter product life cycles,
demand for sophisticated test products that can be produced in short lead times
has increased.
These trends in the IC market have caused corresponding trends in the probe
card, ATE interface assembly, and ATE test board markets, as well as in the
market for wafer prober equipment and services. IC manufacturers are placing
added emphasis on greater test accuracy, testing at higher speeds, multiple DUT
testing, and quicker turnaround times for probing devices and packaged testing
products. As IC technology has become increasingly sophisticated and complex, it
has become more difficult for IC manufacturers to maintain the necessary
technology, expertise, personnel, and equipment to design and produce internally
all of the various components required to carry the electrical signal between
the ATE tester and the DUT. The Company believes competitive market conditions
have led manufacturers to rely increasingly on outsourcing to reduce their own
investment in the personnel, equipment, and facilities necessary for the
specialized design and manufacturing of testing products in order to concentrate
on the design, production, and distribution of their core IC products.
INTEGRATED CIRCUIT TESTING
Semiconductor manufacturers test ICs during the design and manufacturing
processes to assure IC quality, reduce manufacturing costs, improve the accuracy
of manufacturing yield data, and identify repairable memory ICs. Semiconductor
manufacturers generally test each IC two or three times before completion of the
fabrication process in order to maintain high manufacturing yields and
acceptable profit margins. The increased cost associated with manufacturing ICs
has increased the importance of IC testing in the manufacturing process.
Wafer Probing
Most semiconductor manufacturers test ICs in wafer form by probing each
individual IC to determine whether it meets design specifications. Probing
involves establishing temporary electrical contact between the ATE and the DUT.
The ATE transmits electrical signals to the ICs and analyzes the signals upon
their return. The testing of ICs in wafer form is important to avoid incurring
the significant expense of assembling and packaging ICs that do not meet
specifications. The principal components of a wafer probing system include: (i)
the ATE, which is capital equipment that transmits the electrical signals to the
IC and evaluates the signals upon their return; (ii) the ATE test board, a
complex, multilayer printed circuit board ("PCB") that is mounted directly to
the ATE and transfers the test signals between the ATE and the pogo tower of the
ATE interface assembly; (iii) an ATE interface assembly, typically consisting of
a pogo tower, lock ring, and insert ring, that mechanically connects the ATE
with the wafer prober and carries the electrical signals between the ATE and the
probe card attached to the wafer prober; (iv) a probe card, which consists of a
complex, multilayer PCB and numerous probes positioned to "touch down" on or
make electrical contact with metallized test pads on the IC; and (v) a wafer
prober, which is the capital equipment that moves the wafers into position
enabling the probe card probes to touch down on the test pads.
During the probing process, the wafer prober successively positions each IC
on a wafer so that the pads on the IC align and make contact with the probes on
a probe card. The ATE transmits electrical signals through the ATE interface
assembly to the probe card. The ATE evaluates the return signals from the probe
25
<PAGE> 27
card to determine whether each IC meets design specifications. Depending on the
complexity of the DUT, the probe testing of a single IC can last from a few
milliseconds to over a minute.
Package (Final) Testing
ICs that pass the initial testing at the wafer level are separated from the
wafer and bonded onto plastic, ceramic, or other packages with extended leads.
The packaged IC must then be tested to validate design and performance
specifications. Packaged devices are loaded into a machine called a handler. The
ATE test board is placed on the ATE, and the ATE is coupled to the handler using
an ATE interface assembly. The handler, which performs a function similar to the
wafer prober in the wafer test process, successively positions each IC into a
test socket device that is connected to the ATE test board. The ATE tests the IC
and evaluates the return signals to determine whether a particular IC meets
performance specifications. After package testing, the handler sorts the IC
devices according to test performance.
The schematic below illustrates the wafer test and package test steps in
the manufacturing cycle of an IC:
[CERPROBE GRAPHIC]
Schematic of wafer test and package test steps in the manufacturing cycle
of an IC, including design, manufacture, wafer test, package, package test, and
end product.
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<PAGE> 28
THE COMPANY'S STRATEGY
The Company believes it is a leader in providing high quality semiconductor
testing products and services. The Company's goal is to enhance its leadership
position and increase its domestic and international market share. The Company's
strategy to achieve its goal includes the following key elements:
- Provide Comprehensive Solutions for Semiconductor Test Integration. The
Company is focused on providing its worldwide customers with
comprehensive solutions for semiconductor test integration, consisting of
each of the electromechanical components necessary to assure the
integrity of the electrical test signal. Historically, each component of
the testing system has been supplied by different vendors. The Company
believes IC manufacturers increasingly are seeking a single source
provider capable of supplying comprehensive solutions for the components
necessary to assure a clean test signal. The Company believes it is the
only company that designs, manufactures, and assembles each of the
components in the critical test signal path. The Company intends to
capitalize on its market position and technical expertise by broadening
existing product lines through internally developed products and as
appropriate through acquisitions or joint ventures.
- Maintain Strong Customer Relationships. The Company intends to continue
to maintain its long standing relationships with its broad customer base,
which includes leading semiconductor manufacturers such as Intel,
Motorola, and IBM, as well as with emerging companies. Engineering,
sales, and management personnel collaborate closely with customer
counterparts to determine customer needs and specifications, and custom
design specific testing solutions. The Company has accumulated
substantial design expertise through these collaborations and believes
this expertise, along with its in-house staff of over 100 engineers and
designers, provides it with a competitive advantage in meeting customer
requirements for increasingly sophisticated testing products. To help
meet the demanding service needs of the semiconductor manufacturing
industry, all of the Company's facilities are located in proximity to
semiconductor manufacturing centers in the United States, Europe, and
Asia.
- Expand Global Presence. The Company believes that the international
market for its products is at least as large as the domestic market. The
Company intends to continue its expansion into international markets,
including Europe and Asia, and has begun to pursue these markets by
aggressively mounting a focused sales and marketing effort directed at
key semiconductor manufacturers. To date, the Company's international
expansion includes the establishment of full service facilities in
Scotland, Singapore, and Taiwan. The Company also intends to enter the
Japanese market within the next 18 months through a joint venture
arrangement with local Japanese partners. In the Company's overseas
operations, the Company employs managers native to such markets to
minimize language and cultural barriers and provide market-specific
technical and operational insight.
- Focus on Technological Innovation. The Company custom designs or
customizes its products to manufacturers' particular IC design
specifications. Changes in the IC design require changes in the probe
card and, depending on the design change, in the ATE test board.
Consequently, the Company continually develops new designs and product
enhancements. The Company collaborates with IC manufacturers and
semiconductor equipment manufacturers to anticipate and address
technological advances in semiconductor testing and to improve
performance of its products. SEMATECH, the U.S. semiconductor industry
consortium that defines the standards for future semiconductor products,
awarded the Company research and development contracts in 1995. The
Company is focusing its engineering and new product development efforts
toward producing a variety of high performance custom designed products
to test more complex ICs and to test at higher speeds. In addition, the
Company is developing a next generation probe card through a joint
development relationship with Mitsubishi Materials Corporation.
27
<PAGE> 29
- Provide Quality Products and Services. The Company believes it has
developed a reputation as a leader in providing high quality products and
services. This high quality level is achieved through a robust,
documented, and controlled manufacturing process, and the application of
sound quality management policies and practices. The Company's use of
advanced metrology tools, which ensure precise measurement of all key
product parameters, is a cornerstone of its quality management system.
The Company believes that its design capabilities, customer focus, and
production methods enhance its ability to provide its customers with high
quality products and services with quick turnaround times.
PRODUCTS AND SERVICES
Historically, each component of the IC testing system has been supplied by
different vendors. As a result, IC manufacturers frequently have been left with
the task of combining separate components from many small vendors into a single
integrated testing system. The Company believes IC manufacturers increasingly
are seeking a single source provider capable of supplying comprehensive
solutions for the components necessary to assure a clean test signal between the
testing equipment and the DUT. Through its manufacture of probe cards, ATE
interface assemblies, and ATE test boards and through its wafer prober services,
the Company is able to be a single source provider for its customers.
Probe Card Products
The Company believes it is the leading U.S. producer of probe cards, which
constitute the majority of the Company's business. Probe cards accounted for
approximately 81% of net sales in 1996. Probe card sales continue to grow;
however, as a result of the CompuRoute and SVTR acquisitions and the related new
product and service offerings in 1997, the Company expects that probe cards will
account for a smaller percentage of 1997 net sales. Probe card sales accounted
for approximately 67% of net sales for the first six months of 1997.
The probe card consists of a complex, multilayer (some in excess of 25
layers) PCB and utilizes a number of probes designed to contact (or "probe")
separately a series of electrical contact points (or "pads") on the IC in wafer
form. At the point of contact with the wafer, each probe is significantly
smaller than a human hair. The majority of the Company's probe cards have fewer
than 200 probes; the Company's complex probe cards can have more than 1,500
probes. Because the type and complexity of ICs vary, the number and positioning
of the probes and the size of each probe card must be custom designed for the
specific IC being tested to ensure proper alignment.
The probe testing of a single IC can last from a few milliseconds to over a
minute, depending on the complexity of the semiconductor device. Unlike the
capital equipment used in the semiconductor manufacturing process, probe cards
are considered consumable products. The Company believes the average life of a
probe card is approximately three months, which provides for 200,000 to 500,000
touchdowns with each touchdown generally representing the testing of a single
IC. However, probe cards for application specific integrated circuits ("ASICs")
might be used to test a single batch order of 50,000 ICs and then discarded. The
Company estimates that about one-third of its probe cards become obsolete within
six months of being placed into service, primarily as a result of customer
initiated design changes. However, damage due to faulty test handling equipment
or operator error can render a probe card useless prior to the expiration of its
normal life.
The Company has invested over 20 years in the design of different types of
probe card components and the manufacturing processes required to assemble a
finished probe card. Because the signals carried by the probe card are complex
and vary by customer, the Company manufactures many types of probe cards.
The Company's probe card products utilize three technologies:
Epoxy ring technology uses probes that connect directly to a printed
circuit board. Probe cards using this type of technology are capable of
high speed, high density probing. The Company introduced its first ceramic
based epoxy ring probe card, the CerCard, in October 1990. Sales of
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<PAGE> 30
ceramic based epoxy ring probe cards generated approximately 56% of the
Company's net sales for the first six months of 1997. The Company
anticipates that such cards will continue to account for a substantial
portion of its net sales.
Ceramic blade technology uses a ceramic blade attached to a needle
designed to make contact with the IC pads. Probe cards using ceramic blade
technology, which was developed and patented by the Company, are capable of
low speed, low density probing. With optional features, the ceramic blade
can be used for high speed probing.
Cobra probe (buckle beam) technology uses vertical probes that match
the pattern of the pads on the IC being tested. This technology allows for
the probing of pads in the center of an IC and is used generally for high
density applications. Vertical contact probing is particularly well-suited
for multiple-IC and memory IC testing. In May 1997, the Company entered
into a joint venture with a French semiconductor testing and engineering
company to assemble and repair the Cobra probe card, which is based on
technology originally developed by IBM. The Company will be the exclusive
distributor for the product in the United States and Asia.
The Company's probe cards generally range in price from $500 to $65,000,
depending upon the complexity and performance specifications of the probe cards.
ATE Interface Assemblies
The Company entered the ATE interface business through the acquisition in
April 1995 of Fresh Test, a company engaged primarily in the design,
manufacture, and sale of ATE interface products. An ATE interface assembly
securely connects the ATE to the wafer prober or handler and is used to carry
signals from the ATE to the DUT. An interface assembly typically consists of
custom mechanical docking hardware such as a lock ring and insert ring, as well
as two intricate multilayer PCBs connected by either a system of cables or,
increasingly, spring-loaded "pogo" contact pins. Interface assemblies range from
small, single board, cable-type interfaces for less complex systems to high
speed, high frequency, digital or mixed signal interfaces used in testing more
complex ICs. One end of the interface connects to the ATE and the other to
either a probe card fixture mounted on a prober or a test socket mounted to a
handler for packaged IC testing. In each case, the reliability of the test is
highly dependent on maintaining the integrity of the signal between the ATE and
the IC being tested.
Each ATE interface assembly is custom designed or customized for each
application. The Company's ATE interface product line transmits a clean signal
from the ATE to the probe card or test socket and carries a return signal back
to the ATE after the circuit processes the signal. The Company's ATE interface
products are designed to optimize the integrity of return signal data through
the reduction of channel crosstalk and the matching of delay times and
impedance, thereby increasing the accuracy of the test data. Because the
Company's ATE interface assemblies enable the ATE to provide reliable yield data
by allowing for clear signal transmission, its interfaces can also be cost
saving devices. The Company's interface assemblies feature ease of mechanical
installation and facilitate access to the probe card or test socket during
testing.
The ATE and related wafer prober and handler typically have useful lives of
five to seven years. While the Company's ATE interface assemblies have a similar
useful life, any upgrade of the ATE or reconfiguration of the prober or handler
used with a specific ATE requires a new ATE interface assembly. As a result, the
Company believes its ATE interface products have an average life of two to three
years.
The Company's ATE interface assemblies range in price from $1,000 to
$65,000.
ATE Test Boards
Through the acquisition of CompuRoute in December 1996, the Company
expanded its product offerings to include custom-designed ATE test boards. The
CompuRoute acquisition also enabled the Company to internalize the fabrication
of PCBs, which are a critical component in its probe card and ATE interface
assembly products, rather than rely exclusively on third party PCB
manufacturers.
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<PAGE> 31
ATE test board products are also referred to as prober interface boards,
DUT boards, load boards, or performance boards, depending on whether the ATE
test board is used for wafer probing or package testing. The Company has
developed a database for different ATE designs, which are used as starting
designs and customized for the particular IC to be tested. The ATE test board is
a complex, multilayer PCB that is mounted to the ATE and transfers the test
signals between the ATE and the ATE interface assembly of a wafer prober or
handler. ATE test boards were the Company's first packaged IC testing product.
The Company believes its ATE test boards have an average life of one year
although their useful life could be much longer. The Company's ATE test board
products range in price from $2,000 to $30,000.
Wafer Prober Products and Services
Through the acquisition of SVTR in January 1997, the Company expanded its
services to include refurbishing, reconfiguring, and servicing wafer probers.
The wafer prober positions each IC on a wafer so that the pads on the IC align
and make contact with the probes on the probe card, which is mounted on the
wafer prober. The Company currently is focusing its services on wafer probers
originally manufactured by Electroglas, Inc. ("Electroglas"), because the
Company believes that Electroglas has the largest installed base of wafer
probers in the world, outside of Japan.
Prober refurbishment requires the Company to overhaul, reprofile, and
recertify its customers' wafer probers. Refurbishing extends the life of the
equipment, deferring the need to buy new capital intensive probing equipment.
The Company develops independent sources for most of the components necessary
for refurbishment or internally produces the part, particularly when the
required part has been discontinued by the original equipment manufacturer.
Prober reconfiguration requires the Company to retrofit its customers'
wafer probers to handle larger diameter wafers and improve the accuracy of wafer
positioning. The Company has developed the components and processes necessary to
reconfigure probers originally designed to handle four and six-inch wafers to
the current advanced fab requirement of eight-inch wafers. Many fab production
managers consider conversion of their existing four and six-inch equipment as an
effective way to optimize their capital equipment budgets and an expedient way
to upgrade to eight-inch wafer capability. Additionally, each conversion
provides the Company with salvageable components, which can be reconditioned and
used for the Company's service and repair business. The Company also converts
older generation four-inch probers into a single unit that is able to handle
five and six-inch wafers. The demand for six-inch wafer probers remains strong,
especially in developing nations. The Company recently introduced a
reaccurization service in which the customer's existing six-inch wafer probers
are reprofiled and upgraded beyond their originally manufactured specifications
to achieve the greater accuracy and performance that is required by many current
standards. Additionally, the Company has developed add-on and enhancement
products, including an automatic wafer transfer/handling system, and
probe-to-pad alignment positioning products.
The Company also provides other prober services, including providing
on-site maintenance and repair services and replacement parts for wafer probers
through a network of direct and contract field service personnel in the United
States, Europe, and parts of Asia.
The Company's wafer prober products and services range in price from
$25,000 to $150,000 per unit, depending on options.
ENGINEERING AND PRODUCT DEVELOPMENT
The customized nature of the Company's products results in ongoing
engineering and product development being included in the cost of goods sold for
the Company's products. In addition, the Company has devoted and will continue
to devote substantial resources to materials and process engineering and product
development. Engineering and new product development expenses were $417,000,
$707,000, and $903,000 for the years ended December 31, 1994, 1995, and 1996,
respectively,
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which represented 2.9%, 2.7%, and 2.4% of net sales, respectively. The Company
employs over 100 engineers and designers.
During 1995, the Company was awarded two engineering and product
development contracts with SEMATECH, a consortium of leading U.S. semiconductor
manufacturers and the U.S. government formed to promote technological innovation
in the U.S. semiconductor industry. In the first agreement with SEMATECH, the
Company concentrated on the extension of present technology to include tighter
pitches (i.e. placing probes closer together) as well as developing higher
frequency testing characteristics. The second agreement with SEMATECH called for
the Company to determine the best solution for probing the interior contact
points of semiconductors. The Company retains the rights to any technology
developed by it through these engineering and product development efforts. The
Company also believes it gains an added benefit from the SEMATECH relationship
by being able to work with its semiconductor manufacturer customers to
anticipate and address technological advances in semiconductor processing and
testing.
The Company has from time to time collaborated with certain customers that
pay the Company to develop new products. Funds received from such engineering
and product development are accounted for as offsets to the total expenses for
the related project.
The Company recently entered into a joint development agreement with
Mitsubishi Materials Corporation to accelerate the research and development of
the Company's next generation probe card, which will utilize the Company's
proprietary technology to address increasing demand for tighter pitches and the
higher performance requirements for wafer probing. Under such agreement each
party will own any patents and know-how resulting from its own efforts, subject
to a royalty free license back to the other party. Patents and know-how
resulting from the efforts of both parties will be owned jointly.
MANUFACTURING
The Company's manufacturing objective is to produce quality products that
meet its customers' testing needs and design specifications on a timely and cost
efficient basis.
The Company's manufacturing operations consist of procurement and/or
fabrication of components and subassemblies, assembly, and extensive testing of
finished products. All components and subassemblies are inspected for mechanical
and electrical compliance to Company specifications and all finished products
are tested against Company and customer specifications.
The Company believes that it is able to respond more quickly and accurately
to its customers' needs by maintaining manufacturing facilities and technical
support in geographic markets where its semiconductor manufacturing customers
are located. The Company designs and manufactures its probe cards in Arizona,
California, and Texas as well as in Scotland, Singapore, and Taiwan. The Company
typically designs and manufactures its probe cards within two weeks of receiving
a customer order. The Company manufactures its interface assemblies in its
Gilbert, Arizona facility. The Company typically designs and manufactures its
ATE interface assemblies within 12 weeks of receiving an order. The Company
conducts its ATE test board and related PCB fabrication and assembly operations
at its Dallas, Texas facility. The Company typically designs and fabricates its
ATE test boards within four weeks of receiving an order.
The Company refurbishes, reconfigures, and services wafer probers in its
facility in Tempe, Arizona. The Company's wafer prober services business
provides a variety of services to a large installed base of wafer probers in
North America, Europe, and Asia. These services include factory-based
refurbishing, upgrading to allow for the processing of larger wafers and/or to
improve prober accuracy, and providing field service at the user's site.
The Company emphasizes quality and reliability in both the design and
manufacture of its products. While the Company's facilities are not ISO 9000
certified, ISO 9000, the internationally recognized standard for quality
management, sets the criteria for the Company's quality management system
throughout its manufacturing processes. The Company's use of advanced metrology
tools, which ensure precise measurement of all key product parameters, is a
cornerstone of its quality management system. As the size of the ICs is driven
smaller by advances in IC technology, the accuracy of measurements becomes
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<PAGE> 33
increasingly important. The Company's Quality and Engineering Departments work
together to define measurement needs and develop tools that can achieve desired
results.
The Company relies on third party suppliers in the production and shipment
of its products. Although the Company believes that all raw materials, component
parts, and services are currently available in adequate amounts, there can be no
assurance that shortages will not develop in the future. Certain of the raw
materials and component parts for the Company's products are purchased from
single or a limited group of suppliers. The Company does not have long-term
written agreements with such suppliers. Although the Company believes there are
alternative suppliers for all such raw materials, component parts, and services,
termination or a significant disruption of any of its existing supplier
arrangements could have a material adverse effect on the Company's business,
financial condition, and operating results.
CUSTOMERS
An integral part of the Company's strategy is to continue to maintain its
long standing customer relationships. All of the Company's top 15 customers in
1996 were repeat customers. The top 15 customers fluctuate from year to year
depending on the growth cycles of the individual customers. These semiconductor
manufacturers provide the Company with a diversified customer base whose
products serve the communications, computer, automotive, military, and aerospace
industries. In addition to serving high volume established manufacturers, the
Company's products also are designed to meet the needs of emerging and leading
edge technology firms such as those offering ASICs and Gallium Arsenide ICs.
During 1996, the Company's two largest customers, Intel and Motorola, accounted
for approximately 15% and 12% of net sales, respectively. The Company's top 15
customers in 1996, which together accounted for approximately 63% of net sales,
were as follows:
<TABLE>
<S> <C> <C>
Advanced Micro Devices LSI Logic National Semiconductor
Hewlett-Packard Lucent Technologies Symbios Logic
IBM Medtronic Texas Instruments
Integrated Device Technology Microchip Technology VLSI Technology
Intel Motorola VTC
</TABLE>
MARKETING, SALES, AND SERVICES
The Company's customers place a high value on service. Technical features
and product quality also are attributes expected by the Company's customers. The
unique needs of purchasers of semiconductor testing products demand a high level
of customer responsiveness. The Company's products usually require a high degree
of customization in order to meet customer specifications. Response time,
product design specifications, and rapid delivery typically are critical factors
in customer satisfaction. In addition, the customer's evaluation of the design
and performance of completed products can be quite subjective. Engineering,
sales, and management personnel collaborate closely with customer counterparts
to determine their needs and product specifications. Additionally, in order to
meet the demanding service needs of its customers, all of the Company's
facilities are located in proximity to manufacturing centers worldwide.
The Company intends to leverage its worldwide sales facilities to market
and distribute all of the Company's products. The Company markets its products
in North America through direct technical sales personnel. To meet the demanding
service requirements of its customers, the Company has five regional
manufacturing, repair, and sales centers in Arizona, California, and Texas. In
addition to its regional full service facilities, the Company serves its
domestic customers through sales offices strategically located to facilitate
rapid response to major market centers and key customers. The Company maintains
sales offices in Oregon, Colorado, Florida, and Massachusetts.
The Company utilizes a network of independent foreign distributors in both
Europe and Asia. The Company's international business represented approximately
16% of net sales for the first six months of 1997. The Company believes the
potential exists to increase sales in international markets, and the Company is
positioning itself to initiate a more aggressive marketing and sales program in
these markets in
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the future. In particular, the Company intends to expand its sales efforts
throughout Europe and has opened a manufacturing, repair, and sales facility in
Scotland for the purpose of serving customers in Europe. In June 1995, the
Company formed Cerprobe Asia PTE LTD, a joint venture with Asian investors.
Through the joint venture, the Company established full service manufacturing
and repair facilities in Singapore and Taiwan in April 1996 and January 1997,
respectively, to penetrate the growing markets for the Company's products in
Southeast Asia. Within the next 18 months, the Company intends to enter into the
highly competitive Japanese market through a joint venture arrangement with
local Japanese partners.
COMPETITION
The semiconductor testing products industry is highly competitive. The
Company faces substantial competition in each of the probe card, interface
assembly, and ATE test board markets. In addition, the Company anticipates that
it may face substantial competition in the future from new entrants in the
Company's markets. The principal competitive factors in the industry are product
performance, service, delivery time, and price. Competition in international
markets is also significant, particularly in Asia where the Company is expanding
into new geographic markets while simultaneously addressing the testing
requirements of the memory IC market, a new product market for the Company. Some
of the Company's competitors, particularly in Asia, have substantially greater
financial, engineering, or manufacturing resources than the Company and larger
sales and service organizations. To compete successfully, the Company must make
substantial investments in its engineering and product development, marketing,
and customer service and support activities. There can be no assurance that
competition in the Company's markets will not intensify or that the Company's
technological advantages may not be reduced or lost as a result of technological
advances by competitors or customers.
Wafer prober manufacturers, such as Electroglas, Tokyo Electron Labs, and
Tokyo Semitsu, provide limited refurbishment services and offer new wafer
probers as an alternative. These wafer prober manufacturers have greater
financial, engineering, and manufacturing resources and larger service
organizations than the Company as well as long-standing customer relationships.
There can be no assurance that levels of competition in the market for wafer
prober refurbishing and reconfiguration services will not intensify in the
future or that customers will not elect to purchase new wafer probers.
FACILITIES
The Company's principal executive offices and primary manufacturing
facility are located in Gilbert, Arizona. The facility is owned by CRPB
Investors, L.L.C. ("CRPB Investors"). The Company owns a 36% interest in CRPB
Investors. The Company has entered into a long-term lease with CRPB Investors on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties. The initial term of the lease expires in May 2012 with seven
options to extend the lease for successive five-year terms.
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The Company's major facilities are described in the table below:
<TABLE>
<CAPTION>
LEASE
EXPIRATION
FACILITY SQUARE FEET FUNCTION PRODUCTS DATE
- --------------------------- ----------- --------------------------- --------------------------- --------------
<S> <C> <C> <C> <C>
Gilbert, Arizona........... 84,000 Corporate headquarters, Probe cards and ATE May 2012
manufacturing, sales and interface assemblies
service
Dallas, Texas.............. 35,000 CompuRoute headquarters, ATE test boards Company owned
manufacturing, sales and
service
San Jose, California....... 34,000 Manufacturing, sales and Probe cards July 2002
service
Tempe, Arizona............. 30,000 SVTR headquarters, Refurbished/reconfigured September 2004
manufacturing, sales and wafer probers
service
Chandler, Arizona.......... 16,000 Upsys-Cerprobe, L.L.C. Cobra probe cards November 1998
headquarters, manufacturing
and service
Hsin Chu, Taiwan........... 9,000 Manufacturing, sales and Probe cards April 2003
service
Austin, Texas.............. 7,000 Manufacturing, sales and Probe cards March 2002
service
East Kilbride, Scotland.... 4,800 Manufacturing, sales and Probe cards August 1999
service
Singapore.................. 1,000 Manufacturing, sales and Probe cards September 1998
service
</TABLE>
In addition, the Company leases space for its sales offices in Colorado
Springs, Colorado; Boca Raton, Florida; Westboro, Massachusetts; Beaverton,
Oregon; and Richardson, Texas. The Company believes that its existing facilities
are adequate to meet its current requirements.
BACKLOG
As of June 30, 1997, the Company had a backlog of orders of approximately
$10.4 million. These orders are believed to be firm and all are expected to be
filled during fiscal 1997. The backlog of orders at June 30, 1996 for the
Company was approximately $3.2 million. The Company's business has not been
seasonal to date. Because of possible changes in delivery schedules and
cancellations of orders, the Company's backlog at any particular date is not
necessarily indicative of future sales.
ENVIRONMENTAL REGULATIONS
The Company is subject to federal, state, and local provisions regulating
the discharge of materials into the environment. The Company has made certain
leasehold improvements in order to comply with Environmental Protection Agency
and local regulations. Proper waste disposal is a major consideration for PCB
manufacturers because metals and chemicals are used in the manufacturing
process. Water used in the printed circuit board manufacturing process must be
treated to remove metal particles and other contaminants before it can be
discharged into the municipal sanitary sewer system. The Company operates and
maintains wastewater treatment systems and effluent testing facilities at its
PCB manufacturing plant in Dallas, Texas.
The Company's PCB manufacturing plant operates under effluent discharge
permits issued by the appropriate governmental authorities. These permits must
be renewed periodically and are subject to revocation in the event of violations
of environmental laws. The Company believes that the waste treatment equipment
in its PCB manufacturing facility is currently in compliance with environmental
protection requirements in all material respects. However, there can be no
assurance that violations will not occur in the future as a result of human
error, equipment failure or other causes. The Company is also subject to
environmental laws relating to the storage, use and disposal of chemicals, solid
waste and other hazardous materials as well as air quality regulations.
Furthermore, environmental laws could become more stringent over time, and the
costs of compliance with more stringent laws could be substantial.
34
<PAGE> 36
Although the Company believes that it is in full compliance with all
regulations, the Company is unable to predict what effect, if any, the adoption
of more stringent regulations would have on its future operations. The Company
does not anticipate incurring any future material expenditures to remain in
substantial compliance with presently applicable environmental regulations.
INTELLECTUAL PROPERTY
While the Company considers intellectual property rights, patents, and
licenses to be important, the Company does not consider any single patent to be
material to the conduct of its business. The Company relies primarily on trade
secret protection for its proprietary information rather than patents to avoid
publicly disclosing its technology in a patent application. The Company believes
that its success will depend primarily on the technological competence and
creative skills of its personnel rather than the protection of its existing
patents or future patents.
EMPLOYEES
As of August 1, 1997, the Company had 523 employees, consisting of 103 in
engineering and product development, 294 in manufacturing, 67 in sales and
marketing, and 59 in administration. There are no collective bargaining
agreements, and the Company considers its relations with its employees to be
good.
LITIGATION
The Company is not a party to, nor is any of its property the subject of,
any material pending legal proceedings.
35
<PAGE> 37
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- -------------------------------------------------
<S> <C> <C>
C. Zane Close...................... 48 President, Chief Executive Officer, and Director
Eswar Subramanian.................. 40 Senior Vice President and Chief Operating Officer
Michael K. Bonham.................. 58 Senior Vice President -- Sales and Marketing
Randal L. Buness................... 40 Vice President, Chief Financial Officer,
Secretary, and Treasurer
Roseann L. Tavarozzi............... 43 Vice President, Corporate Controller, and
Assistant Secretary
Ross J. Mangano.................... 52 Chairman of the Board of Directors
William A. Fresh................... 68 Director
Kenneth W. Miller.................. 65 Director
Donald F. Walter................... 65 Director
</TABLE>
C. Zane Close has served as President and Chief Executive Officer and as a
director of the Company since July 1990. From September 1989 to July 1990, Mr.
Close served as Vice President and General Manager of Probe Technology
Corporation ("Probe Technology"), a manufacturer of probing devices for testing
integrated circuits. Mr. Close served as Vice President of Operations of Probe
Technology from February 1985 to September 1989.
Eswar Subramanian has served as Senior Vice President and Chief Operating
Officer of the Company since June 1996. Mr. Subramanian served as Vice President
of Engineering of the Company from July 1990 to June 1996. From April 1990, to
July 1990, Mr. Subramanian was Director of Development at Probe Technology,
where he was responsible for the development and establishment of new probing
technology and its production operations. From November 1984 to April 1990, Mr.
Subramanian was Engineering Manager at Probe Technology and was responsible for
the design, development, manufacture, and engineering of probing products.
Michael K. Bonham has served as Senior Vice President -- Sales and
Marketing of the Company since June 1996. Mr. Bonham served as Vice President of
Sales and Marketing of the Company from July 1990 to June 1996. From October
1988 to June 1990, Mr. Bonham served as Marketing Manager of the IC Probe and
Curve Tracer Group of Tektronix, Incorporated, a manufacturer of electronic test
measurement equipment.
Randal L. Buness has served as Vice President, Chief Financial Officer,
Secretary, and Treasurer of the Company since June 1996. From September 1994 to
June 1996, Mr. Buness served as Vice President -- Finance and Administration,
Chief Financial Officer, Secretary, and Treasurer of Three-Five Systems, Inc., a
publicly held manufacturer of liquid crystal displays. Mr. Buness served as
Chief Financial Officer, Secretary, and Treasurer of United Medical Network, a
developer of video conferencing networks for healthcare providers, from January
1993 to September 1994. From January 1989 to January 1993, Mr. Buness worked as
a self-employed consultant. Mr. Buness served as principal and manager with
Arthur Young from January 1986 to January 1989 and served as a manager, senior,
and staff accountant with Price Waterhouse from July 1979 to January 1986. Mr.
Buness is a Certified Public Accountant.
Roseann L. Tavarozzi has served as Vice President, Corporate Controller,
and Assistant Secretary of the Company since June 1996. Ms. Tavarozzi served as
Vice President -- Finance of the Company from April 1995 to June 1996 and as
Vice President and Chief Financial Officer from March 1994 to March 1995. Prior
to joining the Company, Ms. Tavarozzi was the Corporate Controller for Quorum
International, Ltd., an international distributor of security products. From May
1989 to April 1992, Ms. Tavarozzi was the
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<PAGE> 38
Controller-Mid Continent for Core-Mark International, Inc., an international
distributor of consumable products. Ms. Tavarozzi is a Certified Public
Accountant.
Ross J. Mangano has served as the Chairman of the Board of Directors of the
Company since February 1993 and as a director of the Company since February
1988. Mr. Mangano has served as the President of Oliver Estate, Inc., an
Indiana-based management company, since 1996. Prior to that time, Mr. Mangano
served in various management positions with Oliver Estate, Inc., since 1971. Mr.
Mangano also is an investment analyst for Oliver Estate, Inc. From December 1993
to 1996, Mr. Mangano served on the Board of Directors of Cole Taylor Financial
Group, a publicly held bank holding company based in Wheeling, Illinois. Since
its spin-off from Cole Taylor Financial Group in 1996, Mr. Mangano has served on
the Board of Directors of Reliance Acceptance Group Inc., a publicly held
commercial banking and financial services company based in San Antonio, Texas.
William A. Fresh has served as a director of the Company since April 1995.
Mr. Fresh co-founded Fresh Test, a designer and manufacturer of probe and
interface test technology for the semiconductor industry, which was acquired by
the Company in April 1995. He served as Chairman of the Board and Chief
Executive Officer of Fresh Test from January 1986 through March 1995. Mr. Fresh
also has served as the Chairman of the Board and Chief Executive Officer of
Magellan Technology, a public holding company; and Orem Tek Development Corp., a
real estate development company, since May 1990 and May 1991, respectively. Mr.
Fresh served as Chairman of the Board and Chief Executive Officer of Satellite
Images System Corporation, a medical information processing company, from
February 1992 to August 1996, and since August 1996 has served on the Board of
Directors of the successor company known as Satellite Images System, L.L.C. Mr.
Fresh served as Chairman of the Board of EFI Electronics, a publicly held power
conditioning company; and Fresh Technology Company, a PC-based software company,
from January 1991 to March 1994. Since April 1996, Mr. Fresh has served as a
director of Sento Technical Innovation Corporation, a publicly held software
company.
Kenneth W. Miller has served as a director of the Company since 1979. Mr.
Miller served as Treasurer of the Company from June 1994 to June 1996 and as
Secretary of the Company from October 1991 to June 1996. Since January 1992, Mr.
Miller has served as a business consultant to various companies involved in the
microelectronic industry. From April 1991 until October 1991, Mr. Miller served
as Marketing Director of Scrantom Engineering, Inc., a manufacturer of hybrid
circuits and ceramic circuit boards located in Costa Mesa, California. From
September 1988 until April 1991, Mr. Miller served as Marketing Director of
Advanced Packaging Systems, a manufacturer of high-density ceramic and polymer
thin film interconnect products. From September 1981 to September 1988, Mr.
Miller served as President of Interamics, a manufacturer of ceramic packages for
ICs and hybrid substrates.
Donald F. Walter has served as a director of the Company since May 1991.
Since April 1982, Mr. Walter has been a financial consultant and is the
principal of Walter & Keenan Financial Consulting Co., a financial consulting
firm located in Niles, Michigan. Since January 1982, Mr. Walter has served as a
director of National Standard Co., a publicly held manufacturer of specialty
wire products. Since October 1988, Mr. Walter has served as a director of Metro
BanCorp, a publicly held bank.
37
<PAGE> 39
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the shares of
the Company's outstanding Common Stock beneficially owned as of August 1, 1997
(i) by each of the Company's directors and executive officers; (ii) by all
directors and executive officers of the Company as a group; (iii) by each person
who is known by the Company to own beneficially or exercise voting or
dispositive control over more than 5% of the Company's Common Stock; and (iv) by
each of the Selling Stockholders.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER OFFERING
OFFERING (1)(2) SHARES BEING (1)(2)
-------------------- REGISTERED --------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT FOR SALE NUMBER PERCENT
- --------------------------------------------------------- --------- ------- ------------ --------- -------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Ross J. Mangano (3)...................................... 613,501 9.6% -- 453,501 5.8%
C. Zane Close (4)........................................ 86,600 1.3 -- 86,600 1.1
William A. Fresh (5)..................................... 314,298 4.9 55,000 249,298 3.2
Kenneth W. Miller (6).................................... 162,237 2.5 -- 162,237 2.1
Donald F. Walter (7)..................................... 23,001 * -- 23,001 *
Michael K. Bonham (8).................................... 110,450 1.7 25,000 85,450 1.1
Eswar Subramanian (9).................................... 123,400 1.9 -- 123,400 1.6
Randal L. Buness (10).................................... 22,000 * -- 22,000 *
Roseann L. Tavarozzi (11)................................ 30,000 * -- 30,000 *
All directors and executive officers as a group (nine
persons) (12).......................................... 1,485,487 22.3 80,000 1,235,487 15.1
5% STOCKHOLDERS:
Judd C. and Mary Morris Leighton (13).................... 460,000 7.2 260,000 200,000 2.5
Souad Shrime (14)........................................ 331,259 5.2 -- 331,259 4.2
Troon & Co., Ross J. Mangano, et al., Trustees (15)...... 380,200 5.9 100,000 280,200 3.6
OTHER SELLING STOCKHOLDERS:
Millie M. Cunningham..................................... 120,000 1.8 30,000 90,000 1.1
Oliver & Company......................................... 51,300 * 30,000 21,300 *
</TABLE>
- ------------
* Less than one percent.
(1) Unless otherwise indicated, and subject to community property laws where
applicable, all shares are owned of record by the persons named and the
beneficial ownership consists of sole voting power and sole investment
power.
(2) The percentages shown include the shares of Common Stock actually owned as
of August 1, 1997 and the shares of Common Stock that the identified person
or group had the right to acquire within 60 days of August 1, 1997 pursuant
to the exercise of stock options. In calculating the percentage of
ownership, all shares of Common Stock that the identified person or group
had the right to acquire within 60 days of August 1, 1997 upon the exercise
of stock options are deemed to be outstanding for the purpose of computing
the percentage of the shares of Common Stock owned by such person or group,
but are not deemed to be outstanding for the purpose of computing the
percentage of the shares of Common Stock owned by any other person.
(3) Includes 20,000 shares in the name of Nat & Co. voted pursuant to a power
of attorney, 51,300 shares in the name of Oliver & Company voted pursuant
to a power of attorney, of which 30,000 shares are being sold in this
offering; 120,000 shares in the name of Millie M. Cunningham voted pursuant
to a power of attorney, of which 30,000 shares are being sold in this
offering; 380,200 shares held in the name of Troon & Co., Ross J. Mangano,
et al., Trustees for which Mr. Mangano serves as a trustee, of which
100,000 shares are being sold in this offering; 20,000 shares that Mr.
Mangano has the right to acquire at an exercise price of $5.75 per share
pursuant to the exercise of options granted in September 1994; 1,334 shares
that Mr. Mangano has the right to acquire at an exercise price of $8.25 per
share pursuant to the exercise of options granted in June 1995; and 667
shares that Mr. Mangano has the right to acquire at an exercise price of
$10.375 per share pursuant to the exercise of options granted in July 1996.
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<PAGE> 40
(4) Includes 60,000 shares that Mr. Close has the right to acquire at an
exercise price of $5.75 per share pursuant to the exercise of options
granted in September 1994 and 15,000 shares that Mr. Close has the right to
acquire at an exercise price of $10.25 per share pursuant to the exercise
of options granted in May 1997.
(5) Includes 162,700 shares held by WAF Investment Company, a company 100%
owned by Mr. Fresh and his wife, of which 27,500 shares are being sold in
this offering; and 78,477 shares held by The William A. and Reva Luana
Fresh Charitable Remainder Unitrust, of which 27,500 shares are being sold
in this offering; and reflects 1,334 shares that Mr. Fresh has the right to
acquire at an exercise price of $8.25 per share pursuant to the exercise of
options granted in June 1995 and 667 shares that Mr. Fresh has the right to
acquire at an exercise price of $10.375 per share pursuant to the exercise
of options granted in July 1996.
(6) Includes 90,236 shares held by U.S. Trust Company of California, N.A., as
trustee for the Kenneth W. Miller Charitable Remainder Unitrust. Mr. Miller
disclaims beneficial ownership with respect to these shares. Also includes
20,000 shares that Mr. Miller has the right to acquire at an exercise price
of $5.75 per share pursuant to the exercise of options granted in September
1994, and 1,334 shares that Mr. Miller has the right to acquire at an
exercise price of $8.25 per share pursuant to the exercise of options
granted in June 1995 and 667 shares that Mr. Miller has the right to
acquire at an exercise price of $10.375 per share pursuant to the exercise
of options granted in July 1996.
(7) Includes 20,000 shares that Mr. Walter has the right to acquire at an
exercise price of $5.75 per share pursuant to the exercise of options
granted in September 1994, and 1,334 shares that Mr. Walter has the right
to acquire at an exercise price of $8.25 per share pursuant to the exercise
of options granted in June 1995 and 667 shares that Mr. Walter has the
right to acquire at an exercise price of $10.375 per share pursuant to the
exercise of options granted in July 1996.
(8) Includes 50,000 shares that Mr. Bonham has the right to acquire at an
exercise price of $5.75 per share pursuant to the exercise of options
granted in September 1994 and 3,750 shares that Mr. Bonham has the right to
acquire at an exercise price of $10.25 per share pursuant to the exercise
of options granted in May 1997.
(9) Includes 35,000 shares that Mr. Subramanian has the right to acquire at an
exercise price of $5.75 per share pursuant to the exercise of options
granted in September 1994 and 12,500 shares that Mr. Subramanian has the
right to acquire at an exercise price of $10.25 per share pursuant to the
exercise of options granted in May 1997.
(10) Includes 20,000 shares that Mr. Buness has the right to acquire at an
exercise price of $11.875 per share pursuant to the exercise of options
granted in June 1996.
(11) Includes 20,000 shares that Ms. Tavarozzi has the right to acquire at an
exercise price of $5.75 per share pursuant to the exercise of options
granted in June 1994 and 9,000 shares that Ms. Tavarozzi has the right to
acquire at an exercise price of $10.50 per share pursuant to the exercise
of options granted in August 1995.
(12) Includes 293,254 shares that members of the group had the right to acquire
as of August 1, 1997 or within 60 days of August 1, 1997 pursuant to the
exercise of stock options.
(13) Includes 60,000 shares owned by the Leighton-Oare Foundation, Inc., a
corporation for which Mr. and Mrs. Leighton serve as directors, which
shares are being sold in this offering. Judd C. and Mary Morris Leighton's
address is 211 W. Washington Ave, Suite 2400, South Bend, Indiana 46601.
(14) Includes 1,227 shares held by Mrs. Shrime's children. Mrs. Shrime's address
is 9611 Milltrail, Dallas, Texas 75238.
(15) The address of Troon & Co is P. O. Box 1655, South Bend, Indiana 46634.
39
<PAGE> 41
DESCRIPTION OF SECURITIES
The Company's authorized capital consists of 10,000,000 shares of Common
Stock, $0.05 par value and 10,000,000 shares of serial preferred stock, $0.05
par value, (the "Serial Preferred Stock"). As of August 1, 1997, 6,371,580
shares of Common Stock and 330 shares of Convertible Preferred Stock were issued
and outstanding. An additional 1,057,599 shares of Common Stock may be issued
upon exercise of options outstanding or available for issuance under the
Company's stock option plans, and 49,275 shares of Common Stock may be issued
upon exercise of outstanding options and warrants issued outside of such plans.
All of the currently issued and outstanding shares of Common Stock are, and all
of the shares of Common Stock to be issued in this offering will be, fully paid
and non-assessable.
COMMON STOCK
Except regarding the election of directors, the holders of Common Stock are
entitled to one vote for each share on all matters submitted to a vote of
stockholders. Every stockholder entitled to vote at any election for directors
has the right to cumulate his votes. Subject to preferences that may be
applicable to any then outstanding preferred stock, the holders of Common Stock
will be entitled to receive such dividends, if any, as may be declared by the
Board of Directors from time to time out of legally available funds. Upon
liquidation, dissolution or winding up of the Company, the holders of Common
Stock will be entitled to share ratably in all assets of the Company that are
legally available for distribution, after payment of all debts and other
liabilities and subject to the prior rights of holders of any preferred stock
then outstanding. The holders of Common Stock have no preemptive, subscription,
redemption, or conversion rights. The rights, preferences, and privileges of
holders of Common Stock are subject to the rights of the holders of shares of
any series of preferred stock that the Company may issue in the future.
SERIAL PREFERRED STOCK
The Company may issue Serial Preferred Stock in such series and
denominations as the Company's Board of Directors deems advisable. Accordingly,
the Board of Directors is empowered, without shareholder approval, to issue
Serial Preferred Stock with dividend, liquidation, conversion, voting, or other
rights that could adversely affect the voting power or other rights of holders
of the Common Stock. In the event of issuance, the Serial Preferred Stock could
be utilized, under certain circumstances, as a method of discouraging, delaying,
or preventing a change in control of the Company. The Company does not currently
intend to issue any additional shares of Serial Preferred Stock.
CERTAIN CHARTER PROVISIONS AND DELAWARE GENERAL CORPORATION LAW
The Company's Restated Certificate and Bylaws (the "Bylaws") contain a
number of provisions relating to corporate governance and to the rights of
stockholders. These provisions include (i) the authority of the Board of
Directors to fill vacancies on the Board of Directors; (ii) the authority of the
Board of Directors to issue series of preferred stock with such voting rights
and other powers as the Board of Directors may determine; (iii) notice
requirements relating to nominations to the Board of Directors and to the
raising of business matters at stockholder meetings; (iv) a provision that
special meetings of the stockholders may be called only by the Chairman of the
Board, the President, or the Board of Directors or by written demand of the
holders of 33% of all issued and outstanding shares of the Company entitled to
vote at such meeting; (v) a provision allowing the Board of Directors to
consider certain factors when evaluating certain matters such as tender offers;
(vi) a prohibition on stockholder action by written consent; (vii) a provision
requiring the satisfaction of certain minimum price and procedural requirements
in connection with certain transactions such as business combinations; and
(viii) the requirement that certain "anti-takeover" provisions in the Restated
Certificate may be amended only by super majority vote.
The Company is subject to the provisions of Section 203 of the Delaware
GCL. In general, this statute prohibits a publicly held Delaware corporation
from engaging, under certain circumstances, in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person becomes an interested stockholder, unless (i)
prior to the date at which the
40
<PAGE> 42
stockholder became an interested stockholder, the Board of Directors approved
either the business combination or the transaction in which the stockholder
becomes an interested stockholder, (ii) upon consummation of the transaction in
which the stockholder becomes an interested stockholder, the stockholder owned
at least 85% of the outstanding voting stock of the corporation (excluding
shares held by directors who are officers or held in certain employee stock
plans); or (iii) the business combination is approved by the Board of Directors
and by two-thirds of the outstanding voting stock of the corporation (excluding
shares held by the interested stockholder) at a meeting of stockholders (and not
by written consent) held on or subsequent to the date of the business
combination. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or at any time within the prior three years did
own) 15% or more of the corporation's voting stock. Section 203 defines a
"business combination" to include mergers, consolidations, stock sales and asset
based transactions, and other transactions resulting in a financial benefit to
the interested stockholder.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 7,871,580 shares of
Common Stock outstanding, of which approximately 7,366,548 (including all of the
shares sold in this offering) will be freely tradeable in the public market
without restriction or further registration under the Securities Act unless held
by an "affiliate" of the Company, as that term is defined in Rule 144 under the
Securities Act, or subject to the lock-up agreement discussed below. Affiliates
will be subject to certain of the resale limitations of Rule 144 as promulgated
under the Securities Act. In addition, 330,032 shares held by the former
principal stockholder of CompuRoute are subject to Rule 145 of the Securities
Act, which requires affiliates to sell any stock acquired in the acquisition in
accordance with the volume and manner of sale restrictions under Rule 144 under
the Securities Act. In addition, the former principal stockholder of CompuRoute
has agreed with the Company not to sell, publicly or privately, any of the
330,032 shares acquired by her in connection with the CompuRoute acquisition
until December 27, 1997, and no more than the greater of 1% of the outstanding
shares of the Company's Common Stock, or 50,000 shares, in any 90-day period
during the succeeding 12-month period. Subject to the terms of this agreement,
this same stockholder will have certain registration rights covering the resale
of shares of the Company's Common Stock acquired by her in the CompuRoute
acquisition for as long as she is subject to the volume limitations on resale
under Rule 145. The former principal stockholder of SVTR has agreed with the
Company generally not to sell, publicly or privately, any of the 175,000 shares
acquired by him in connection with the SVTR acquisition until January 15, 1998,
on which date such shares will become eligible for resale subject to the volume
limitations and other requirements of Rule 144.
The Company's directors and executive officers, the Selling Stockholders
and certain other stockholders have entered into lock-up agreements that
restrict the sale of their shares of Common Stock during the 90-day period after
the date of this Prospectus without the prior written consent of Adams, Harkness
& Hill, Inc. Notwithstanding the foregoing, Mr. Fresh, a director of the
Company, reserved the right to make a charitable contribution of up to 5,000
shares of Common Stock, which would not be subject to the lock-up agreement. In
addition, the Company has agreed not to offer, sell, contract to sell, or
otherwise dispose of any shares of Common Stock for a period of 90 days after
the date of this Prospectus without the prior written consent of Adams, Harkness
& Hill, Inc., except for the shares of Common Stock offered hereby and except
that the Company may issue securities pursuant to the Company's stock plans. See
"Underwriting."
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including a person who may be deemed to be an
"affiliate" of the Company as that term is defined under the Securities Act, is
entitled to sell, within any three-month period, a number of shares beneficially
owned by such person for at least one year in such amount that does not exceed
the greater of (i) one percent of the then-outstanding shares of Common Stock
(approximately 78,716 shares after the offering), or (ii) the average weekly
trading volume in the Common Stock during the four calendar weeks preceding such
sale. Sales under Rule 144 also are subject to certain requirements as to the
manner of sale, notice, and the availability of current public information about
the Company. However, a person who is not an affiliate,
41
<PAGE> 43
has not been an affiliate within three months prior to the date of sale, and who
has beneficially owned his or her shares for at least two years is entitled to
sell them without regard to the volume, manner of sale or notice requirements.
Upon completion of this offering, an aggregate of 947,233 shares currently held
by certain officers and directors of the Company will be available for sale
under Rule 144, subject to the lock-up agreements described above. Sales of
substantial amounts of Common Stock by stockholders of the Company under Rule
144 or otherwise, or even the potential for such sales, may have a depressive
effect on the market price of the Common Stock.
The Company has registered 1,057,599 shares of Common Stock reserved for
issuance pursuant to the exercise of stock options outstanding or to be granted
under the Company's stock option plans. Shares issued pursuant to such
registration statements upon the exercise of stock options generally will be
eligible for sale in the public market, subject to the lock-up agreements
described above.
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<PAGE> 44
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom Adams,
Harkness & Hill, Inc. and Dain Bosworth Incorporated are acting as
representatives (the "Representatives"), has severally agreed to purchase from
the Company and the Selling Stockholders, the respective numbers of shares of
Common Stock set forth opposite each Underwriter's name below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER OF COMMON STOCK
- ---------------------------------------------------------------------------- ----------------
<S> <C>
Adams, Harkness & Hill, Inc.................................................
Dain Bosworth Incorporated..................................................
----------------
Total.................................................................. 2,000,000
==============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters are committed to take and pay for all shares offered hereby, if any
are taken.
The Underwriters propose to offer the shares of Common Stock in part
directly to the public at the public offering price set forth on the cover page
of this Prospectus, and in part to certain securities dealers at such price less
a concession not in excess of $ per share. The Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share
to certain brokers and dealers. After the shares of Common Stock are released
for sale to the public, the offering price and other selling terms may from time
to time be varied by the Representatives.
The Company has granted the Underwriters an option exercisable for 30 days
after the date of this Prospectus to purchase up to an aggregate of 300,000
additional shares of Common Stock to cover over-allotments, if any. If the
Underwriters exercise their over-allotment option, the Underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them, as shown in the foregoing table, bears to the 2,000,000 shares of Common
Stock offered hereby. The Underwriters may exercise such option only to cover
over-allotments in connection with the sale of the 2,000,000 shares of Common
Stock offered hereby.
The Company has agreed not to offer, sell, contract to sell, or otherwise
dispose of any shares of Common Stock for a period of 90 days after the date of
this Prospectus without the prior written consent of Adams, Harkness & Hill,
Inc., except for the shares of Common Stock offered hereby and except that the
Company may issue securities pursuant to the Company's stock plans. In addition,
the Company's officers and directors, the Selling Stockholders and certain other
stockholders have agreed with the Underwriters not to offer to sell, contract to
sell, or otherwise sell, dispose of, loan, pledge, or grant any rights with
respect to any shares of Common Stock owned beneficially by them, other than as
a bona fide gift to a person or entity who agrees in writing to be bound by the
foregoing restrictions, without the prior written consent of Adams, Harkness &
Hill, Inc. Notwithstanding the foregoing, Mr. Fresh, a director of the Company,
reserved the right to make a charitable contribution of up to 5,000 shares of
Common Stock, which would not be subject to the foregoing restrictions.
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
In general, the rules of the Securities and Exchange Commission (the
"Commission") will prohibit the Underwriters from making a market in the Common
Stock during the "cooling off" period immediately preceding the commencement of
sales in the offering. The Commission has, however, adopted exemptions
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<PAGE> 45
from these rules that permit passive market making under certain conditions.
These rules permit an Underwriter to continue to make a market subject to the
conditions, among others, that its bid not exceed the highest bid by a market
maker not connected with the offering and that its net purchases on any one
trading day not exceed prescribed limits. Pursuant to these exemptions, certain
Underwriters, selling group members (if any), or their respective affiliates may
engage in passive market making in the Common Stock during the cooling off
period.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against or contribute to losses arising out of certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by O'Connor, Cavanagh, Anderson, Killingsworth & Beshears,
a professional association, Phoenix, Arizona. Certain legal matters will be
passed upon for the Underwriters by Cooley Godward LLP, San Diego, California.
EXPERTS
The consolidated financial statements of Cerprobe Corporation and
subsidiaries as of December 31, 1995 and 1996, and for each of the years in the
three-year period ended December 31, 1996, have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Commission. Such reports, proxy statements, and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the following Regional Offices of the Commission: New York Regional
Office, Seven World Trade Center, New York, New York 10048, and Chicago Regional
Office, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material may be obtained from the Public Reference Section of the Commission,
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 upon
payment of the prescribed fees. The Commission also maintains a Web site that
contains reports, proxy and information statements and other materials that are
filed through the Commission's Electronic Data Gathering, Analysis, and
Retrieval system. This Web site can be accessed at http://www.sec.gov.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act of 1933, with respect to the shares offered hereby.
This Prospectus does not contain all the information contained in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information regarding
the Company and the shares of Common Stock offered hereby, reference is made to
the Registration Statement, including the exhibits which are a part thereof,
which may be obtained upon request to the Commission and the payment of the
prescribed fee. Material contained in the Registration Statement may be examined
at the Commission's Washington, D.C. office and copies may be obtained at the
Commission's Washington, D. C. office upon payment of prescribed fees.
Statements contained in this Prospectus are not necessarily complete, and in
each case reference is made to the copy of such contracts or documents filed as
an exhibit to the Registration Statement, each such statement being qualified by
this reference.
44
<PAGE> 46
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents or information have been filed by the Registrant
with the Commission and are incorporated herein by reference, except as
superseded or modified herein:
1. The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1996;
2. The Company's Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 1997 and June 30, 1997;
3. The Company's Current Report on Form 8-K filed January 30, 1997;
4. The Company's Current Report on Form 8-K/A filed March 31, 1997;
and
5. The Company's Registration Statement filed December 15, 1983, as
amended by Form 8-A/A filed March 27, 1996, registering the Company's
Common Stock under Section 12(g) of the Exchange Act as it applies to the
description of the Company's Common Stock.
All documents and information filed by the Company pursuant to Sections
13(a), 13(c), 14, and 15(d) of the Exchange Act, after the date of this
Prospectus and prior to the termination of the offering shall be deemed to be
incorporated by reference into this Prospectus as of the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference into this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated or deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any document described
above (other than exhibits). Requests for such copies should be directed to
Cerprobe Corporation, 1150 North Fiesta Boulevard, Gilbert, Arizona 85233,
Attention: Investor Relations Department, telephone (602) 333-1500.
45
<PAGE> 47
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997
(unaudited)......................................................................... F-3
Consolidated Statements of Operations for the Years Ended December 31, 1994, 1995 and
1996 and for the Six Months Ended June 30, 1996 and 1997 (unaudited)................ F-4
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1994,
1995 and 1996 and for the Six Months Ended June 30, 1997 (unaudited)................ F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996 and for the Six Months Ended June 30, 1996 and 1997 (unaudited)................ F-6
Notes to Consolidated Financial Statements............................................ F-8
</TABLE>
F-1
<PAGE> 48
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Cerprobe Corporation:
We have audited the accompanying consolidated balance sheets of Cerprobe
Corporation and subsidiaries as of December 31, 1995 and 1996 and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Cerprobe
Corporation and subsidiaries as of December 31, 1995 and 1996 and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Phoenix, Arizona
February 14, 1997, except as to Note 20,
which is as of August 25, 1997
F-2
<PAGE> 49
CERPROBE CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1996
----------- ----------- JUNE 30,
1997
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 263,681 $ 5,564,557 $ 1,482,445
Accounts receivable, net of allowance of $173,000 in 1995,
$223,000 in 1996 and $218,278 in 1997.............................. 4,377,041 5,564,203 9,718,798
Inventories, net..................................................... 2,802,081 3,862,753 6,525,933
Note receivable...................................................... -- 250,000 --
Prepaid expenses..................................................... 111,673 377,003 230,344
Income taxes receivable.............................................. 163,464 214,097 --
Deferred tax asset................................................... 270,599 303,265 421,459
----------- ----------- -----------
Total current assets.......................................... 7,988,539 16,135,878 18,378,979
Property, plant and equipment, net..................................... 4,667,786 11,446,291 13,769,965
Intangibles, net....................................................... 1,997,409 2,602,812 2,481,121
Other assets........................................................... 313,716 1,326,592 1,802,681
----------- ----------- -----------
Total assets.................................................. $14,967,450 $31,511,573 $36,432,746
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................... $ 1,499,853 $ 2,739,064 $ 4,532,211
Accrued expenses..................................................... 788,599 1,600,120 3,124,388
Demand note payable.................................................. -- 1,030,000 1,000,000
Convertible subordinated debentures.................................. 595,000 -- --
Current portion of notes payable..................................... 123,743 128,180 2,135,585
Current portion of capital leases.................................... 209,885 634,755 581,760
----------- ----------- -----------
Total current liabilities..................................... 3,217,080 6,132,119 11,373,944
Notes payable, less current portion.................................... 408,376 278,645 452,312
Capital leases, less current portion................................... 572,830 1,462,799 1,139,279
Deferred tax liability................................................. 66,123 100,789 200,783
Other liabilities...................................................... 46,801 394,011 477,485
----------- ----------- -----------
Total liabilities............................................. 4,311,210 8,368,363 13,643,803
----------- ----------- -----------
Minority interest...................................................... -- 12,851 --
----------- ----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.05 par value; authorized 10,000,000 shares; issued
and outstanding 330 shares of Series A Convertible Preferred Stock,
liquidation preference of $10,164 per share at December 31, 1996
and $10,875 per share at June 30, 1997............................. -- 16 16
Common stock, $.05 par value; authorized, 10,000,000 shares; issued
and outstanding 4,095,851 shares at December 31, 1995, 6,027,714 at
December 31, 1996 and 6,353,047 at June 30, 1997................... 204,792 301,386 317,652
Additional paid-in capital........................................... 7,239,410 20,652,290 23,654,605
Retained earnings (accumulated deficit).............................. 3,466,464 2,105,674 (1,199,633)
Unearned compensation................................................ (241,872) -- --
Foreign currency translation adjustment.............................. (12,554) 70,993 16,303
----------- ----------- -----------
Total stockholders' equity.................................... 10,656,240 23,130,359 22,788,943
----------- ----------- -----------
Total liabilities and stockholders' equity.................... $14,967,450 $31,511,573 $36,432,746
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 50
CERPROBE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------------------------- --------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.......................... $14,251,485 $26,098,637 $37,308,199 $19,359,822 $34,582,921
Costs of goods sold................ 8,213,966 13,706,435 20,343,516 10,347,795 20,403,329
----------- ----------- ----------- ----------- -----------
Gross profit.............. 6,037,519 12,392,202 16,964,683 9,012,027 14,179,592
----------- ----------- ----------- ----------- -----------
Expenses:
Selling, general and
administrative................. 3,693,401 7,502,598 10,725,075 5,274,831 9,127,311
Engineering and product
development.................... 417,198 706,680 902,909 378,267 617,774
Acquisition related expenses..... -- -- 4,584,000 -- 6,164,156
----------- ----------- ----------- ----------- -----------
Total expenses............ 4,110,599 8,209,278 16,211,984 5,653,098 15,909,241
----------- ----------- ----------- ----------- -----------
Operating income (loss)... 1,926,920 4,182,924 752,699 3,358,929 (1,729,649)
----------- ----------- ----------- ----------- -----------
Other income (expense):
Interest income.................. 18,882 44,697 467,043 168,243 67,664
Interest expense................. (115,254) (153,758) (221,248) (116,457) (296,853)
Other income, net................ 92,796 140,111 246,862 87,482 114,846
----------- ----------- ----------- ----------- -----------
Total other income
(expense)............... (3,576) 31,050 492,657 139,268 (114,343)
----------- ----------- ----------- ----------- -----------
Income (loss) before
income taxes and
minority interest....... 1,923,344 4,213,974 1,245,356 3,498,197 (1,843,992)
Minority interest share of loss.... -- -- 94,854 62,288 28,985
----------- ----------- ----------- ----------- -----------
Income (loss) before
income
taxes................... 1,923,344 4,213,974 1,340,210 3,560,485 (1,815,007)
Provision for income taxes......... (710,521) (1,811,727) (2,701,000) (1,693,000) (1,490,300)
----------- ----------- ----------- ----------- -----------
Net income (loss)......... $ 1,212,823 $ 2,402,247 $(1,360,790) $ 1,867,485 $(3,305,307)
=========== =========== =========== =========== ===========
Net income (loss) per common and
common equivalent share:
Primary.......................... $ 0.36 $ 0.59 $ (0.30) $ 0.35 $ (0.52)
=========== =========== =========== =========== ===========
Fully diluted.................... $ 0.30 $ 0.49 $ (0.30) $ 0.32 $ (0.52)
=========== =========== =========== =========== ===========
Weighted average number of common
and common equivalent shares
outstanding:
Primary.......................... 3,387,220 4,071,233 4,579,598 5,262,320 6,321,399
=========== =========== =========== =========== ===========
Fully diluted.................... 4,006,801 4,862,137 4,579,598 5,797,680 6,321,399
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 51
CERPROBE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
COMMON PREFERRED RETAINED
SHARES SHARES ADDITIONAL EARNINGS
ISSUED AND ISSUED AND COMMON PREFERRED PAID-IN (ACCUMULATED
OUTSTANDING OUTSTANDING STOCK STOCK CAPITAL DEFICIT)
----------- ----------- -------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994............... 2,976,018 -- $148,800 $ -- $ 2,973,645 $ (59,129)
Conversion of subordinated
debentures......................... 40,000 -- 2,000 -- 38,000 --
Stock options exercised.............. 207,333 -- 10,367 -- 191,326 --
Tax benefit of exercise of
nonqualified stock options......... -- -- -- -- 482,461 --
Cash dividends paid ($0.03 a
share)............................. -- -- -- -- -- (89,477)
Translation adjustment............... -- -- -- -- -- --
Net income........................... -- -- -- -- -- 1,212,823
--------- ----- -------- ---- ----------- -----------
Balance, December 31, 1994............. 3,223,351 -- 161,167 -- 3,685,432 1,064,217
Issuance of stock options at less
than fair market value............. -- -- -- -- 387,000 --
Compensation expense related to stock
options............................ -- -- -- -- -- --
Stock options exercised.............. 160,000 -- 8,000 -- 199,464 --
Tax benefit of exercise of
nonqualified stock options......... -- -- -- -- 340,170 --
Issuance of common stock for
acquisition........................ 712,500 -- 35,625 -- 2,627,344 --
Translation adjustment............... -- -- -- -- -- --
Net income........................... -- -- -- -- -- 2,402,247
--------- ----- -------- ---- ----------- -----------
Balance, December 31, 1995............. 4,095,851 -- 204,792 -- 7,239,410 3,466,464
Issuance of convertible preferred
stock.............................. -- 1,000 -- 50 9,399,950 --
Conversion of subordinated
debentures......................... 595,000 -- 29,750 -- 565,250 --
Compensation expense related to stock
options............................ -- -- -- -- (192,489) --
Stock options exercised.............. 164,702 -- 8,235 -- 556,744 --
Tax benefit of exercise of
nonqualified stock options......... -- -- -- -- 542,000 --
Conversion of preferred stock for
common stock....................... 772,161 (670) 38,609 (34) (38,575) --
Issuance of common stock for
acquisition........................ 400,000 -- 20,000 -- 2,580,000 --
Translation adjustment............... -- -- -- -- -- --
Net loss............................. -- -- -- -- -- (1,360,790)
--------- ----- -------- ---- ----------- -----------
Balance, December 31, 1996............. 6,027,714 330 301,386 16 20,652,290 2,105,674
Stock options exercised
(unaudited)........................ 25,333 -- 1,266 -- 153,065 --
Issuance of common stock for
acquisition (unaudited)............ 300,000 -- 15,000 -- 2,849,250 --
Translation adjustment (unaudited)... -- -- -- -- -- --
Net loss (unaudited)................. -- -- -- -- -- (3,305,307)
--------- ----- -------- ---- ----------- -----------
Balance, June 30, 1997 (unaudited)..... 6,353,047 330 $317,652 $ 16 $23,654,605 $(1,199,633)
========= ===== ======== ==== =========== ===========
<CAPTION>
FOREIGN
CURRENCY TOTAL
UNEARNED TRANSLATION STOCKHOLDERS'
COMPENSATION ADJUSTMENT EQUITY
------------ ----------- -------------
<S> <C> <C> <C>
Balance, January 1, 1994............... $ -- $ -- $ 3,063,316
Conversion of subordinated
debentures......................... -- -- 40,000
Stock options exercised.............. -- -- 201,693
Tax benefit of exercise of
nonqualified stock options......... -- -- 482,461
Cash dividends paid ($0.03 a
share)............................. -- -- (89,477)
Translation adjustment............... -- 12,138 12,138
Net income........................... -- -- 1,212,823
--------- -------- -----------
Balance, December 31, 1994............. -- 12,138 4,922,954
Issuance of stock options at less
than fair market value............. (387,000) -- --
Compensation expense related to stock
options............................ 145,128 -- 145,128
Stock options exercised.............. -- -- 207,464
Tax benefit of exercise of
nonqualified stock options......... -- -- 340,170
Issuance of common stock for
acquisition........................ -- -- 2,662,969
Translation adjustment............... -- (24,692) (24,692)
Net income........................... -- -- 2,402,247
--------- -------- -----------
Balance, December 31, 1995............. (241,872) (12,554) 10,656,240
Issuance of convertible preferred
stock.............................. -- -- 9,400,000
Conversion of subordinated
debentures......................... -- -- 595,000
Compensation expense related to stock
options............................ 241,872 -- 49,383
Stock options exercised.............. -- -- 564,979
Tax benefit of exercise of
nonqualified stock options......... -- -- 542,000
Conversion of preferred stock for
common stock....................... -- -- --
Issuance of common stock for
acquisition........................ -- -- 2,600,000
Translation adjustment............... -- 83,547 83,547
Net loss............................. -- -- (1,360,790)
--------- -------- -----------
Balance, December 31, 1996............. -- 70,993 23,130,359
Stock options exercised
(unaudited)........................ -- -- 154,331
Issuance of common stock for
acquisition (unaudited)............ -- -- 2,864,250
Translation adjustment (unaudited)... -- (54,690) (54,690)
Net loss (unaudited)................. -- -- (3,305,307)
--------- -------- -----------
Balance, June 30, 1997 (unaudited)..... $ -- $ 16,303 $22,788,943
========= ======== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 52
CERPROBE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
YEARS ENDED DECEMBER 31,
--------------------------------------- -------------------------
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................... $ 1,212,823 $ 2,402,247 $(1,360,790) $ 1,867,485 $(3,305,307)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization........... 458,436 1,125,584 1,930,341 854,628 1,657,746
Purchased research and development...... -- -- 4,584,000 -- 5,664,156
Tax benefit from stock options
exercised............................. 482,461 340,170 542,000 182,000 --
(Gain) loss on sale of fixed assets..... (50) 4,787 -- -- 426
Deferred income taxes................... (93,974) (110,502) 2,000 (52,000) (18,000)
Provision for losses on accounts
receivable, net....................... 24,000 12,000 12,000 2,000 (14,605)
Provision for obsolete inventory, net... 67,200 80,000 75,000 31,000 167,132
Compensation expense.................... -- 145,128 49,383 51,398 --
Loss applicable to minority interest.... -- -- (94,854) (62,288) (28,985)
Changes in operating assets and
liabilities, net of effects of
acquisitions:
Accounts receivable..................... (907,762) (1,444,689) (194,293) (1,472,922) (3,255,550)
Inventories............................. (51,285) (1,038,216) (812,904) (630,129) 528,436
Prepaid expenses and other assets....... (59,418) (389,988) (562,590) 187,607 (57,474)
Income taxes receivable................. -- (163,464) (50,633) 163,464 214,097
Accounts payable and accrued expenses... 315,979 724,796 1,229,408 68,360 1,297,644
Other liabilities....................... 90,356 (42,289) 311,947 6,996 48,240
----------- ----------- ----------- ----------- -----------
Net cash provided by operating
activities....................... 1,538,766 1,645,564 5,660,015 1,197,599 2,897,956
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Purchase of property, plant and
equipment............................... (1,354,694) (1,960,775) (4,922,960) (2,091,021) (3,195,310)
Purchase of marketable securities......... -- -- -- (2,279,188) --
Investment in CRPB Investors, L.L.C. ..... -- -- (659,233) -- (607)
Investment in Upsys-Cerprobe, L.L.C. ..... -- -- -- -- (21,892)
Purchase of Fresh Test Technology, net of
cash acquired........................... -- (81,698) -- -- --
Purchase of CompuRoute, net of cash acquired... -- -- (4,327,162) -- (80,102)
Purchase of SVTR, net of cash acquired.... -- -- -- -- (2,565,697)
Proceeds from sale of equipment........... 50 42,062 -- -- 71,183
(Increase) decrease in note receivable.... -- -- (250,000) -- 250,000
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities....................... (1,354,644) (2,000,411) (10,159,355) (4,370,209) (5,542,425)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Dividends paid............................ (89,477) -- -- -- --
Principal payments on notes payable and
capital leases.......................... (79,603) (302,563) (356,015) (178,322) (3,539,072)
Net proceeds from note payable............ -- -- -- -- 2,001,788
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 53
CERPROBE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
YEARS ENDED DECEMBER 31,
1994 1995 1996 1996 1997
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net proceeds from issuance of convertible
preferred stock......................... -- -- 9,400,000 9,400,000 --
Net proceeds from stock options
exercised............................... 201,693 207,464 564,979 528,574 154,331
Capital contribution by minority interest
partners................................ -- -- 107,705 -- --
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities............. 32,613 (95,099) 9,716,669 9,750,252 (1,382,953)
----------- ----------- ----------- ----------- -----------
Effect of exchange rates on cash and cash
equivalents............................... 12,138 (24,692) 83,547 26,913 (54,690)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................... 228,873 (474,638) 5,300,876 6,604,555 (4,082,112)
Cash and cash equivalents, beginning of
period.................................... 509,446 738,319 263,681 263,681 5,564,557
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents, end of period.... $ 738,319 $ 263,681 $ 5,564,557 $ 6,868,236 $ 1,482,445
=========== =========== =========== =========== ===========
Supplemental schedule of noncash investing
and financing activities:
Conversion of subordinated debentures to
common stock............................ $ 40,000 $ -- $ 595,000 $ 110,000 $ --
=========== =========== =========== =========== ===========
Equipment acquired under capital leases
and issuances of notes payable.......... $ 195,293 $ 1,056,817 $ 1,553,968 $ -- $ 4,144
=========== =========== =========== =========== ===========
Supplemental disclosures of cash flow
information:
Interest paid............................. $ 115,873 $ 153,690 $ 218,383 $ 93,833 $ 296,853
=========== =========== =========== =========== ===========
Income taxes paid......................... $ (9,731) $ 1,679,876 $ 2,060,000 $ 1,128,016 $ 1,315,096
=========== =========== =========== =========== ===========
Supplemental disclosures of noncash investing activities:
The Company made acquisitions for $3.1 million, $7.4 million and $5.7 million in the years ended December 31,
1995 and 1996 and the six months ended June 30, 1997, respectively. The purchase prices were allocated to
the assets acquired and liabilities assumed based on their fair values as indicated in the notes to the
consolidated financial statements. A summary of the acquisitions is as follows:
Purchase price............................ $ 3,065,834 $ 7,432,543 $ 5,715,263
Less cash acquired........................ (321,167) (505,381) (285,316)
Common stock issued....................... (2,662,969) (2,600,000) (2,864,250)
----------- ----------- -----------
Cash invested........................... $ 81,698 $ 4,327,162 $ 2,565,697
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 54
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Cerprobe offers comprehensive solutions for semiconductor test integration
and is a leading manufacturer of probe cards, ATE interface assemblies, and ATE
test boards. The Company believes it is the only company that designs,
manufactures, and assembles each of the electromechanical components that assure
the integrity of the electrical test signal that passes from the automatic test
equipment ("ATE") to the IC device under test. The Company also refurbishes,
reconfigures, and services wafer probers. The Company's products and services
enable semiconductor manufacturers to test integrated circuits ("ICs") in wafer
form and as packaged ICs. Testing ICs assures IC quality, reduces manufacturing
costs, improves the accuracy of manufacturing yield data, and identifies
repairable memory ICs. The Company markets its products and services worldwide
to semiconductor manufacturers, both those who manufacture ICs for resale and
those who manufacture ICs for inclusion in their own products.
Unless the context indicates otherwise, all references to "Cerprobe" or the
"Company" refer to Cerprobe Corporation and its subsidiaries.
Basis of Preparation
The accompanying consolidated financial statements as of June 30, 1997 and
for the six months ended June 30, 1996 and June 30, 1997 are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of
financial position and operating results for the interim periods.
Results of operations for interim periods are not necessarily indicative of
those to be achieved for full fiscal years.
Principles of Consolidation
The consolidated financial statements include the accounts of Cerprobe and
its wholly-owned subsidiaries: Cerprobe Europe Limited, Cerprobe Asia Holdings
PTE LTD, CompuRoute, Inc., Silicon Valley Test & Repair, Inc. and Cobra Venture
Management, Inc.
Cerprobe Asia Holdings PTE LTD together with Asian investors, formed
Cerprobe Asia PTE LTD in 1995. Cerprobe Asia Holdings PTE LTD is a 70% owner of
Cerprobe Asia PTE LTD. Cerprobe Asia PTE LTD created wholly-owned subsidiaries,
Cerprobe Singapore PTE LTD and Cerprobe Taiwan Co. LTD, to operate full service
sales and manufacturing plants. Cerprobe-Singapore became operational in April
1996 and Cerprobe-Taiwan in January 1997. All significant intercompany
transactions have been eliminated in consolidation.
The consolidated balance sheet at December 31, 1996 also includes the
assets and liabilities of CompuRoute, Inc. ("CompuRoute"), a wholly-owned
subsidiary, acquired on December 27, 1996; the consolidated financial statements
do not include the 1996 operations of CompuRoute due to the date of acquisition.
On January 15, 1997, the Company acquired all of the outstanding stock of
Silicon Valley Test & Repair, Inc. ("SVTR"), a company that refurbishes,
reconfigures and services wafer probing equipment. Accordingly, the consolidated
financial statements as of June 30, 1997 and for the six months ended June 30,
1997 include SVTR's activities since the date of acquisition.
F-8
<PAGE> 55
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
On May 30, 1997, the Company entered into a joint venture with Upsys Reseau
Eurisys ("Upsys"), a French company owned by IBM and GAME, a French test and
engineering company. The joint venture, called Upsys-Cerprobe, L.L.C., will
assemble and repair the Cobra Probe in Arizona for distribution by Cerprobe
throughout the United States and Asia. Cerprobe owns 55% of the joint venture
and Upsys owns 45%.
The Company manages the joint venture and established a wholly owned
subsidiary called Cobra Venture Management, Inc. to function as manager of
Upsys-Cerprobe, L.L.C. Accordingly, the consolidated financial statements as of
June 30, 1997 and for the six months ended June 30, 1997 include the activities
of both organizations.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and in banks and cash
invested in short-term securities with original maturities of three months or
less.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated by the
straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Building..................................................... 39 years
Manufacturing tools and equipment............................ 3-7 years
Office furniture and equipment............................... 3-7 years
Computer hardware and software............................... 3 years
Leasehold improvements....................................... Life of lease
</TABLE>
Other Intangibles
Goodwill represents the amount by which the cost of businesses purchased
exceeds the fair value of the net assets acquired. Goodwill is amortized over a
period of eight years using the straight-line method. The Company continually
evaluates whether events and circumstances have occurred that indicate the
remaining estimated useful life of goodwill may warrant revision or that the
remaining balance may not be recoverable. When factors indicate that the asset
should be evaluated for possible impairment, the Company uses an estimate of the
undiscounted net cash flows over the remaining life of the asset in measuring
whether the asset is recoverable.
Patents and technology are stated at fair market value at the date of
acquisition less accumulated amortization and are amortized over a period of
five years using the straight-line method. Research and
F-9
<PAGE> 56
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
development costs and any costs associated with internally developed patents,
formulas or other proprietary technology are expensed in the year incurred.
Income Taxes
The Company utilizes the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
Foreign Currency Translation
The financial statements of the Company's Europe and Asia subsidiaries are
translated into U.S. dollars in accordance with SFAS No. 52, "Foreign Currency
Translation." Assets and liabilities of the subsidiaries are translated into
U.S. dollars at current exchange rates. Income and expense items are translated
at the average exchange rate for the year. The resulting translation adjustments
are recorded directly as a separate component of stockholders' equity. All
transaction gains or losses are recorded in the statement of operations.
Revenue Recognition
The Company records revenue when goods are shipped.
Net Income (Loss) Per Share
Primary net income (loss) per common and common equivalent share is
computed using the weighted average number of common shares outstanding during
each year and includes shares issuable upon exercise of stock options, warrants,
and conversion of convertible preferred stock when the effect of such issuance
is dilutive. The calculation of fully diluted net income (loss) per common and
common equivalent share also includes shares issuable upon conversion of
convertible subordinated debentures when the effect of such issuance is
dilutive.
Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of " ("SFAS No. 121"), which requires impairment losses to
be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. SFAS No. 121 also
addresses the accounting for long-lived assets that are expected to be disposed
of. The Company adopted SFAS No. 121 in the first quarter of 1996 and this
adoption did not have a material impact on the consolidated financial
statements.
Stock Based Compensation
Prior to January 1, 1996, the Company accounted for its stock option plans
in accordance with the provisions of Accounting Principles Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," and related interpretations.
As such, compensation expense would be recorded on the date of
F-10
<PAGE> 57
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
grant only if the current market price of the underlying stock exceeded the
exercise price. On January 1, 1996, the Company adopted SFAS No. 123,
"Accounting for Stock Based Compensation" ("SFAS No. 123"), which permits
entities to recognize as expense over the vesting period the fair value of all
stock based awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion No. 25 and provide
pro forma net income and pro forma earnings per share disclosures for employee
stock option grants made in 1995 and future years as if the fair value based
method defined in SFAS No. 123 had been applied. The Company has elected to
continue to apply the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform to the 1996 presentation.
Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share" ("SFAS No. 128). SFAS No. 128 establishes standards
for computing and presenting earnings per share ("EPS"), and supersedes APB
Opinion No. 15. SFAS No. 128 replaces primary EPS with basic EPS and requires
dual presentation of basic and diluted EPS. SFAS No. 128 is effective for both
interim and annual periods ending after December 15, 1997. Earlier application
is not permitted. After adoption, all prior-period EPS data shall be restated to
conform to SFAS No. 128. Pro forma basic and diluted EPS, as calculated under
SFAS No. 128 would have been $0.38, $0.59, $(0.23) and $(0.52) and $0.30, $0.51,
$(0.23) and $(0.52) for the years ended December 31, 1994, 1995, 1996 and for
the six months ended June 30, 1997, respectively.
(2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1995 1996 1997
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials................................ $1,655,974 $3,328,422 $5,747,767
Work-in-process.............................. 1,229,107 615,360 1,058,158
Finished goods............................... -- 47,971 98,010
Reserve for obsolete inventories............. (83,000) (129,000) (378,002)
---------- ---------- ----------
$2,802,081 $3,862,753 $6,525,933
========== ========== ==========
</TABLE>
(3) NOTE RECEIVABLE
The Company had a note receivable from SVTR dated December 12, 1996, for
$250,000. Interest on the outstanding balance was 1% in excess of the prime
rate. As of December 31, 1996, the interest rate was 9.25%. This note was repaid
upon the acquisition of SVTR by the Company on January 15, 1997.
F-11
<PAGE> 58
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
(4) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- JUNE 30,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Land...................................... $ -- $ 359,253 $ 364,017
Building.................................. -- 1,947,877 1,973,704
Manufacturing tools and equipment......... 4,825,724 8,789,140 10,551,767
Office furniture and equipment............ 694,643 1,063,547 1,697,900
Leasehold improvements.................... 759,843 1,112,576 1,770,813
Computer hardware and software............ 1,067,444 2,402,551 2,823,245
Construction in progress.................. 398,838 483,591 567,727
Accumulated depreciation and
amortization............................ (3,078,706) (4,712,244) (5,979,208)
---------- ---------- ----------
$ 4,667,786 $11,446,291 $13,769,965
========== ========== ==========
</TABLE>
(5) INTANGIBLES
Intangibles consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1995 1996 1997
---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Goodwill..................................... $2,120,505 $3,009,638 $3,089,740
Patents and technology....................... 90,839 90,839 90,839
Accumulated amortization..................... (213,935) (497,665) (699,458)
---------- ---------- ----------
$1,997,409 $2,602,812 $2,481,121
========== ========== ==========
</TABLE>
(6) OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1995 1996 1997
-------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Investment in CRPB Investors, L.L.C. .......... $ -- $ 659,233 $ 659,840
Deferred compensation.......................... 306,348 343,755 412,175
Other assets and deposits...................... 7,368 323,604 730,666
-------- ---------- ----------
$313,716 $1,326,592 $1,802,681
======== ========== ==========
</TABLE>
In September 1996, the Company acquired a 36% interest in CRPB Investors,
L.L.C. for $659,233. CRPB Investors, L.L.C., an Arizona limited liability
company, was formed for the purpose of owning and operating the 83,000 square
foot facility being built to serve as Cerprobe's worldwide headquarters. The
investment will be accounted for by the equity method of accounting.
F-12
<PAGE> 59
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
(7) ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1995 1996 1997
-------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Accrued payroll and related taxes.............. $482,866 $1,070,777 $1,218,162
Accrued acquisition related expenses........... -- -- 490,676
Other accrued expenses......................... 305,733 529,343 1,415,550
-------- ---------- ----------
$788,599 $1,600,120 $3,124,388
======== ========== ==========
</TABLE>
(8) DEMAND NOTE PAYABLE
On December 27, 1996, the Company assumed a demand note with Security Bank
of Garland, Texas for approximately $1,030,000 on the purchase of land and
building occupied by CompuRoute, Inc., located in Dallas, Texas. Interest on the
outstanding balance is 1.00% in excess of the prime rate. As of December 31,
1996 and June 30, 1997, the interest rate was 9.25% and 9.50%, respectively,
with balances outstanding of $1,030,000 and $1,000,000, respectively.
(9) CONVERTIBLE SUBORDINATED DEBENTURES AND NOTES PAYABLE
In March 1991, the Company issued $1,000,000 in aggregate principal amount
of Convertible Subordinated Debentures (the "Debentures"). The Debentures were
convertible into shares of the Company's common stock at a conversion price
equal to $1.00 per share. As of December 31, 1995 and 1996, respectively,
$595,000 and $0 in principal amount of debentures were outstanding.
On April 30, 1996, the Company entered into an unsecured $3,000,000
revolving line of credit with First Interstate Bank (now Wells Fargo Bank),
which expired on April 28, 1997. The non-use fee under the line of credit was
0.125% of the unused portion, calculated per annum. The interest rate on any
amounts borrowed under the revolving credit agreement was the lower of prime
rate, which was 8.25% at December 31, 1996, or LIBOR (London Interbank Rate)
plus 2.25%, which was 7.75% at December 31, 1996. There was no amount
outstanding under this agreement at December 31, 1996.
In February 1997, the Company entered into a revolving line of credit with
Wells Fargo Bank of $10,000,000 for general corporate purposes and possible
future acquisitions, which matures on August 15, 1998. The unsecured line of
credit replaced the $3,000,000 revolving line of credit. Interest on the
outstanding balance is at the prime rate or 30, 60, or 90 day LIBOR plus 1.75%.
The non-use fee under the line of credit is 0.125% for outstanding balances
exceeding $3,000,000 and 0.25% for outstanding balances less than $3,000,000.
The line of credit contains certain restrictive covenants which include, among
other things, restrictions on the declaration or payment of dividends, the
incurrence or assumption of other indebtedness, and the making of loans to or
investments in others. The line also requires the Company to maintain a
specified net worth, as defined, to maintain a required debt to equity ratio,
and to maintain certain other financial ratios. The Company was in compliance
with all such covenants at December 31, 1996 and June 30, 1997. At June 30,
1997, the Company had approximately $2,000,000 outstanding from LIBOR rate
advances with an interest rate of 7.625%.
The Company has a note payable with Zion Credit Corporation for the
purchase of manufacturing equipment. The note accrues interest at 9.4% annually
with monthly payments of $13,185 including
F-13
<PAGE> 60
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
interest through December 1999. At December 31, 1996 and June 30, 1997, $406,825
and $344,109, respectively, was outstanding under the note.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1995 1996 1997
---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Convertible subordinated debentures............ $ 595,000 $ -- $ --
Notes payable.................................. 532,119 406,825 586,109
---------- --------- ---------
1,127,119 406,825 586,109
Less current portion........................... (718,743) (128,180) (133,797)
---------- --------- ---------
Long-term debt................................. $ 408,376 $ 278,645 $ 452,312
========== ========= =========
</TABLE>
Annual maturities of long-term debt as of December 31, 1996 are as follows:
<TABLE>
<S> <C>
1997...................................................... $128,180
1998...................................................... 139,660
1999...................................................... 138,985
--------
$406,825
========
</TABLE>
(10) STOCKHOLDERS' EQUITY
Convertible Preferred Stock
In January 1996, the Company issued 1,000 shares of convertible preferred
stock for $10,000,000. Net proceeds, after deducting expenses, were $9,400,000.
If a holder did not convert within the first two years, then automatic
conversion would occur at the end of the second year. The convertible preferred
stock would convert 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 was entitled to call the convertible preferred stock at any time in
minimum amounts of $2,000,000 at a price of 125% of par, or upon a merger,
buyout, or acquisition.
Additionally, the Company issued 39,275 common stock warrants in January
1996 to the placement agent. These give the holder the right to purchase from
the Company not more than 39,275 shares of the Company's common stock at a price
of $16.55 per share on or after January 16, 1997, with expiration in four years.
During 1996, 670 shares of convertible preferred stock were converted into
772,161 shares of common stock. Accordingly, 330 shares of convertible preferred
stock were outstanding at December 31, 1996 and June 30, 1997. If the remaining
holders of the convertible preferred stock were to elect to convert their shares
into shares of Cerprobe common stock based on the market price of common stock
as of December 31, 1996, or as of June 30, 1997, the Company would have been
required to issue more than 800,000 shares of common stock. To insure compliance
with Nasdaq National Market rules requiring shareholder approval of issuances of
common stock representing greater than 20% of all shares outstanding, the
Company has the right to redeem any shares of convertible preferred stock that,
if converted, would result in the issuance of more than 800,000 shares of
Cerprobe common stock. See Note 20.
F-14
<PAGE> 61
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
(11) INCOME TAXES
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
---------------------------------- -----------------------
1994 1995 1996 1996 1997
-------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Federal............................. $495,000 $1,391,499 $2,093,000 $1,352,000 $1,165,000
State............................... 215,521 420,228 608,000 341,000 325,300
-------- ---------- ---------- ---------- ----------
$710,521 $1,811,727 $2,701,000 $1,693,000 $1,490,300
======== ========== ========== ========== ==========
Current............................. $804,495 $1,922,229 $2,699,000 $1,745,000 $1,508,300
Deferred............................ (93,974) (110,502) 2,000 (52,000) (18,000)
-------- ---------- ---------- ---------- ----------
$710,521 $1,811,727 $2,701,000 $1,693,000 $1,490,300
======== ========== ========== ========== ==========
</TABLE>
A reconciliation of the difference between the provision for income taxes
and income taxes at the statutory U.S. federal income tax rate is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEARS ENDED DECEMBER 31, 30,
----------------------------------- -----------------------
1994 1995 1996 1996 1997
--------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Income tax expense (benefit) at
statutory rate................... $ 654,000 $1,433,000 $ 456,000 $1,211,000 $ (617,000)
State income taxes, net............ 142,000 253,000 362,700 233,000 218,000
Purchased research and development
not benefited.................... -- -- 1,558,560 -- 1,926,000
Foreign losses not benefited....... 149,000 199,000 167,450 99,000 --
Amortization of intangibles........ -- 67,000 90,200 45,000 66,000
Utilization of net operating loss
carryforwards.................... (186,400) (38,045) -- -- (80,000)
Research tax credit................ -- (54,440) -- -- --
Other.............................. (48,079) (47,788) 66,090 105,000 (22,700)
--------- ---------- ---------- ---------- ----------
$ 710,521 $1,811,727 $2,701,000 $1,693,000 $1,490,300
========= ========== ========== ========== ==========
</TABLE>
F-15
<PAGE> 62
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
The components of the Company's deferred tax asset and deferred tax
liability are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1995 1996 1997
--------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Foreign loss carry forward................................ $ 348,000 $ 545,000 $ 465,000
Reserves and accruals not currently deductible............ 270,599 303,265 421,459
Deferred compensation..................................... 48,784 87,747 87,747
--------- --------- ---------
Total gross deferred tax assets................... 667,383 936,012 974,206
Less valuation allowance.................................. (348,000) (545,000) (465,000)
--------- --------- ---------
Deferred tax asset........................................ 319,383 391,012 509,206
--------- --------- ---------
Deferred tax liability:
Difference between book and tax depreciation of property,
plant and equipment.................................... 114,907 188,536 288,530
--------- --------- ---------
Net deferred tax asset.................................... $ 204,476 $ 202,476 $ 220,676
========= ========= =========
</TABLE>
The valuation allowance increased by $163,000 and $197,000 for the years
ended December 31, 1995 and 1996, respectively, decreased by $80,000 during the
six months ended June 30, 1997, and is due to foreign losses for which there is
no assurance of realizing a tax benefit. A valuation allowance has not been
provided for the other deferred tax assets since management believes realization
of these deferred tax assets is considered more likely than not.
During 1995 and 1996, tax benefits were recorded for the exercise of stock
options under the nonqualified stock option plan. The benefits of $340,170 and
$542,000 were recorded to additional paid-in capital.
(12) STOCK OPTION PLAN
The Company adopted in 1983, 1989, and 1995, respectively, an incentive
stock option plan, a nonqualified stock option plan, and a combination stock
option plan. The combined plans provided for the issuance of options to purchase
1,685,000 shares of the Company's common stock, of which 207,834 were available
for grant as of December 31, 1996. In accordance with the plans, options are to
be granted at no less than 100% of the fair market value of the shares at the
date of grant. The options become exercisable on a basis as established by the
Company's Compensation Advisory Committee of the Board of Directors and are
exercisable for a period of 5 to 10 years. The Company extended the exercise
date on 72,000 options issued under the nonqualified stock option plan in 1995.
Compensation expense related to these options was $145,128 and $49,383 during
the years ended December 31, 1995 and 1996, respectively. On June 4, 1997, the
stockholders approved the amendments to and the restatement of the Company's
1995 stock option plan to increase the number of shares of the Company's common
stock that may be issued pursuant to the 1995 plan from 500,000 to 800,000.
The Company has elected to follow APB Opinion No. 25, "Accounting for Stock
Issued to Employees," and related Interpretations in accounting for its plans
because, as discussed below, the alternative fair value accounting provided for
under SFAS No. 123, "Accounting for Stock-Based Compensation," requires the use
of option valuation models that were not developed for use in valuing employee
stock options. Under
F-16
<PAGE> 63
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
APB No. 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of the grant, no
compensation expense is recognized.
Pro forma information regarding net income (loss) and earnings (loss) per
share is required by SFAS No. 123 and has been determined as if the Company had
accounted for its employee stock options under the fair value method. The fair
value of each option granted for 1995 and 1996 was estimated as of the date of
the grant using the Black-Scholes option pricing model with the following
weighted average assumptions for 1995 and 1996, respectively; risk-free interest
rates of 5.8% and 6.1%; dividend yields of zero for both years; volatility
factors of the expected market price of the Company's common stock of 51.3% and
52.5%; and weighted average expected lives of the options of 3 years for both
years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
Pro forma net income (loss) reflects only options granted in 1995 and 1996.
Therefore, the full impact of calculating compensation cost for employee stock
options under SFAS No. 123 is not reflected in the pro forma amounts presented
below because compensation cost is reflected over the options' vesting periods
of generally between 3 and 4 years and the compensation cost for options granted
prior to January 1, 1995 is not considered. The Company's pro forma information
follows:
<TABLE>
<CAPTION>
1995 1996
---------- -----------
UNAUDITED
<S> <C> <C>
Net income (loss)
As reported............................................. $2,402,247 $(1,360,790)
Pro forma............................................... $2,360,326 $(1,543,070)
Primary earnings (loss) per share
As reported............................................. $ 0.59 $ (0.30)
Pro forma............................................... $ 0.58 $ (0.34)
Fully diluted earnings (loss) per share
As reported............................................. $ 0.49 $ (0.30)
Pro forma............................................... $ 0.49 $ (0.34)
</TABLE>
F-17
<PAGE> 64
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
A summary of the Company's employee stock option activity and related
information for the years ended December 31, 1995 and 1996 and the six months
ended June 30, 1997 follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
SIX MONTHS ENDED
1995 1996 JUNE 30, 1997
-------------------- -------------------- -------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- --------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year............................ 562,333 $ 3.52 598,333 $ 6.44 593,631 $ 8.46
Granted......................... 206,000 $10.42 160,000 $10.86 153,000 $10.38
Exercised....................... (160,000) $ 1.30 (164,702) $ 3.43 (25,333) $ 5.68
Expired/Canceled................ (10,000) $ 6.75 -- -- --
--------- --------- --------
Outstanding at end of period...... 598,333 $ 6.44 593,631 $ 8.46 721,298 $ 8.97
========= ========= ========
Exercisable at end of period...... 347,940 $ 4.68 360,233 $ 6.94 366,902 $ 7.24
========= ========= ========
Weighted average fair value of
options granted................. $ 4.20 $ 4.45
========= =========
</TABLE>
Exercise prices for the options outstanding as of December 31, 1996 and
June 30, 1997 ranged from $0.50 to $12.88, and from $5.50 to $12.88,
respectively. The weighted average remaining contractual life of those options
was 7.7 years and 8.2 years as of December 31, 1996 and June 30, 1997,
respectively.
(13) RELATED PARTY TRANSACTIONS
Effective May 1, 1991, the Company entered into an agreement with a former
director and officer of the Company, whereby this officer left the employ of the
Company and agreed not to compete with the Company for a two-year period. The
agreement required the Company to pay $3,125 per month from May 1, 1991 through
April 30, 1993 and to provide certain other benefits to this individual. This
agreement was extended for an additional year, through April 30, 1994, and is
presently on a month-to-month basis. Beginning July 1, 1997 the monthly payment
will be reduced to $1,563 and the agreement will terminate on December 31, 1997,
except for certain life insurance and health care benefits which will continue
under the terms of the original agreement.
Two of the Company's stockholders, who together beneficially own 460,000
shares of the Company's common stock, beneficially own an approximately 24%
interest in CRPB Investors, L.L.C.
An Executive Director of Cerprobe Asia, owns 10% of Cerprobe Asia PTE LTD.
(14) COMMITMENTS AND CONTINGENCIES
Leases
The Company leases certain equipment under capital leases. These assets
have been capitalized at the present value of the future minimum lease payments
and are included with manufacturing tools and equipment and office furniture at
a cost of $1,043,082 and $3,381,836 with related accumulated amortization of
$266,014 and $896,637 at December 31, 1995 and 1996, respectively. In addition,
the Company is obligated under certain noncancelable operating leases for the
Company's manufacturing and office space. Certain operating lease agreements
provide for annual rent escalations and renewal options.
F-18
<PAGE> 65
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
The following is a schedule of the minimum future lease payments for the
years ending December 31:
<TABLE>
<CAPTION>
RENTALS
RECEIVABLE
CAPITAL OPERATING UNDER
LEASES LEASES SUBLEASES
---------- ----------- --------
<S> <C> <C> <C>
1997........................................ $ 790,075 $ 1,674,262 $111,700
1998........................................ 718,985 1,913,694 75,300
1999........................................ 473,780 1,761,189 78,900
2000........................................ 338,132 1,681,783 47,600
2001........................................ 224,164 1,572,393 --
Thereafter.................................. -- 12,020,464 --
---------- ----------- -------
Total minimum future lease payments........... 2,545,136 $20,623,785 $313,500
=========== =======
Less amounts representing interest (at rates
ranging from 4.5% to 27.5%)................. (447,582)
----------
Present value of net minimum future lease
payments.................................... 2,097,554
Less current portion.......................... (634,755)
----------
Long-term portion............................. $1,462,799
==========
</TABLE>
Amortization expense applicable to assets under capital leases is charged
to depreciation and amortization expense.
Rental expense for the years ended December 31, 1994, 1995 and 1996 was
$446,422, $723,396, and $1,002,856, respectively.
On August 21, 1996, Cerprobe entered into a long term commercial operating
lease to consolidate its Arizona operations into a single facility on a twelve
acre parcel in Gilbert, Arizona. The lease commenced upon completion of the
83,000 square foot facility in May 1997. The facility serves as the Company's
worldwide headquarters and was built for Cerprobe's use by CRPB Investors,
L.L.C., a limited liability company formed for the purpose of owning and
operating the property. Cerprobe is a 36% shareholder in CRPB Investors, L.L.C.
The initial term of the lease is 15 years with seven options to extend the lease
for successive 5 year terms. The initial lease rate is dependent on final
construction costs, but is currently expected to approximate $875,000 per year.
(15) BUSINESS SEGMENT
The Company is engaged in one business segment, the design, development,
manufacture and marketing of integrated circuit test products and services. For
the years ended December 31, 1994, 1995 and 1996 and the six months ended June
30, 1997, 5%, 11%, 20% and 16%, respectively, of the Company's sales were
outside of the United States.
One customer accounted for 16%, 19%, 15% and 21% of net sales for the years
ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1997.
Another customer accounted for 11%, 10%, 12% and 13% of net sales for the years
ended December 31, 1994, 1995 and 1996 and the six months ended June 30, 1997.
F-19
<PAGE> 66
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
(16) ACQUISITIONS
Fresh Test Technology Corporation
On April 3, 1995, the Company acquired all of the outstanding stock of
Fresh Test Technology Corporation ("Fresh Test"), a manufacturer of test and
interface hardware products, for 712,500 shares of the Company's common stock.
The acquisition has been accounted for by the purchase method of accounting and,
accordingly, the purchase price has been allocated to the assets purchased and
the liabilities assumed based upon the fair values at the date of acquisition.
The excess of the purchase price over the fair values of the net assets acquired
was $2,120,505 and has been recorded as goodwill, which is being amortized on a
straight-line basis over eight years. The purchase price of $2,662,969 plus
acquisition costs of $402,865 was allocated as follows:
<TABLE>
<S> <C>
Purchase price:
Common stock.................................................. $2,662,969
Costs of acquisition.......................................... 402,865
----------
$3,065,834
==========
Assets acquired and liabilities assumed:
Current assets................................................ $1,252,176
Property, plant and equipment................................. 253,684
Other assets.................................................. 83,051
Goodwill...................................................... 2,120,505
Current liabilities........................................... (531,634)
Noncurrent liabilities........................................ (111,948)
----------
$3,065,834
==========
</TABLE>
The operating results of Fresh Test have been included in the consolidated
statement of operations from the date of acquisition. The following summary,
prepared on a pro forma basis, presents the results of operations as if the
acquisition had occurred January 1, 1994:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1994 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Net sales....................................... $18,712,171 $27,601,795
Net income...................................... 998,856 2,543,690
Primary net income per share.................... 0.24 0.62
Fully diluted net income per share.............. 0.21 0.52
</TABLE>
The pro forma results are not necessarily indicative of what the actual
consolidated results of operations might have been if the acquisition had been
effective at the beginning of 1994 or as a projection of future results.
CompuRoute, Inc.
On December 27, 1996, the Company acquired all of the outstanding stock of
CompuRoute, a manufacturer of printed circuit boards, for $7,037,797. The
purchase price consisted of $4,437,797 in cash and 400,000 shares of common
stock. The acquisition has been accounted for by the purchase method of
accounting and accordingly, the purchase price has been allocated to the assets
purchased and the
F-20
<PAGE> 67
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
liabilities assumed based upon the fair values at the date of acquisition. The
excess of the purchase price over the fair values of the net assets acquired was
$969,235 and has been recorded as goodwill, which is being amortized on a
straight-line basis over eight years. The purchase price of $7,037,797 plus
acquisition costs of $474,848 was allocated as follows.
<TABLE>
<S> <C>
Purchase price:
Cash....................................................... $ 4,437,797
Common stock............................................... 2,600,000
Costs of acquisition....................................... 474,848
-----------
$ 7,512,645
===========
Assets acquired and liabilities assumed:
Current assets............................................. $ 1,870,903
Property, plant and equipment.............................. 1,948,189
Other assets............................................... 18,498
Purchased research and development......................... 4,584,000
Goodwill................................................... 969,235
Current liabilities........................................ (1,177,286)
Noncurrent liabilities..................................... (700,894)
-----------
$ 7,512,645
===========
</TABLE>
At acquisition, the state of the research and development products was not
yet at a technological or commercially viable stage. The Company does not
believe that the research and development products have any future alternative
use because if these products are not finished and brought to ultimate product
completion, they have no other value. Therefore, consistent with generally
accepted accounting principles, the Company recorded a one-time charge for the
full value of the purchased in-process research and development.
The consolidated balance sheet as of December 31, 1996 includes the
accounts of CompuRoute; however, due to the fact that the acquisition occurred
on December 27, 1996, CompuRoute's 1996 results of operations are not included
in the 1996 consolidated statements of operations. The following summary,
prepared on a pro forma basis, excluding the charge for purchased research and
development, presents the results of operations as if the acquisition had
occurred January 1, 1995:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1996
----------- -----------
(UNAUDITED)
<S> <C> <C>
Net sales....................................... $36,296,077 $47,732,502
Net income...................................... 3,261,074 3,585,440
Primary net income per share.................... 0.73 0.63
Fully diluted net income per share.............. 0.62 0.58
</TABLE>
The pro forma results are not necessarily indicative of what the actual
consolidated results of operations might have been if the acquisition had been
effective at the beginning of 1995 or as a projection of future results.
F-21
<PAGE> 68
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
Silicon Valley Test & Repair, Inc.
On January 15, 1997, the Company acquired all of the outstanding stock of
SVTR. The purchase price paid by the Company consisted of $2,753,217 in cash and
300,000 shares of common stock.
Under the terms of the acquisition, the Company has agreed to pay up to an
additional $500,000 in cash and up to 50,000 additional shares of common stock
if certain sales and operating profit targets for calendar year 1997 are
achieved by SVTR. See Note 20.
The acquisition has been accounted for using the purchase method.
Accordingly, the purchase price has been allocated to assets acquired and
liabilities assumed based upon their estimated fair values at the date of
acquisition.
The purchase price of $5,617,467 plus acquisition costs of $97,796 was
allocated as follows.
<TABLE>
<S> <C>
Purchase price:
Cash......................................................... $ 2,753,217
Common stock................................................. 2,864,250
Costs of acquisition......................................... 97,796
-----------
$ 5,715,263
===========
Assets acquired and liabilities assumed:
Current assets............................................... $ 4,979,145
Property, plant and equipment................................ 651,781
Other assets................................................. 185,007
Purchased research and development........................... 5,664,156
Current liabilities.......................................... (4,795,473)
Noncurrent liabilities....................................... (969,353)
-----------
$ 5,715,263
===========
</TABLE>
At acquisition, the state of the research and development products was not
yet at a technologically or commercially viable stage. The Company does not
believe that the research and development products have any future alternative
use because if these products are not finished and brought to ultimate product
completion, they have no other value. Therefore, consistent with generally
accepted accounting principles, the Company recorded a one-time charge of
$5,664,156 on January 15, 1997 for the full value of the purchased research and
development. In addition at the date of acquisition, the Company recorded a
$500,000 accrual for the estimated costs to move SVTR's manufacturing operations
from California to Arizona during 1997.
F-22
<PAGE> 69
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
The following summary, prepared on a pro forma basis, excluding the charges
for acquisition related expenses, presents the results of operations as if the
acquisitions of CompuRoute and SVTR had occurred January 1, 1996:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER ENDED
31, JUNE 30,
1996 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
Net sales....................................... $62,268,096 $34,636,301
Net income...................................... 2,916,563 2,518,783
Primary net income per share.................... 0.48 0.38
Fully diluted net income per share.............. 0.45 0.38
</TABLE>
The pro forma results are not necessarily indicative of what the actual
consolidated results of operations might have been if the acquisitions had been
effective at the beginning of 1996 or as a projection of future results.
(17) 401(K) PLAN
On April 1, 1993, the Company established the Cerprobe Corporation 401(k)
Plan (the "Plan"). Employees who have reached 18 years of age and who have
completed one year of service for the Company are eligible to participate in the
Plan. Participants may elect to defer up to 15% of their salary. Any
contribution by the Company is at its discretion. The Company expensed
discretionary contributions pursuant to the Plan in the amount of $0, $90,000,
and $91,000 for the years ended December 31, 1994, 1995, and 1996, respectively.
The participants are fully vested in their contributions and become fully vested
in the Company's contributions after three years of service.
(18) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments"
requires that the Company disclose estimated fair values for its financial
instruments. The following summary presents a description of the methodologies
and assumptions used to determine such amounts.
The carrying amount of cash equivalents approximates fair value because
their maturity is generally less than three months. The carrying amount of
receivables, accounts payable and accrued expenses approximates fair value as
they are expected to be collected or paid within 90 days of year-end. The fair
value of notes payable, demand note payable, capital lease obligations and other
long-term obligations approximate the terms in the marketplace at which they
could be replaced. Therefore, the fair value approximates the carrying value of
these financial instruments.
F-23
<PAGE> 70
CERPROBE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
INFORMATION AS OF JUNE 30, 1997 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1996 AND 1997 IS UNAUDITED
(19) SUPPLEMENTAL FINANCIAL INFORMATION
A summary of additions and deductions related to the allowances for
accounts receivable and inventories for the years ended December 31, 1994, 1995
and 1996 follows:
<TABLE>
<CAPTION>
BALANCE BALANCE
AT AT
BEGINNING END OF
OF YEAR ADDITIONS ACQUISITIONS DEDUCTIONS YEAR
-------- ------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1994... $ 10,000 $24,000 $ -- $(11,000) $ 23,000
Year ended December 31, 1995... 23,000 12,000 139,094 (1,094) 173,000
Year ended December 31, 1996... 173,000 12,000 44,000 (6,000) 223,000
Allowance for obsolescence of
inventories:
Year ended December 31, 1994... $ 48,500 $67,200 $ -- $(63,700) $ 52,000
Year ended December 31, 1995... 52,000 80,000 30,600 (79,600) 83,000
Year ended December 31, 1996... 83,000 75,000 -- (29,000) 129,000
</TABLE>
(20) SUBSEQUENT EVENTS
On August 18, 1997, a letter of understanding detailing the settlement of
certain open terms related to the purchase of SVTR by the Company on January 15,
1997 was signed by the former owners of SVTR. In general, the letter of
understanding requires these former owners to return 125,000 shares of the
Company's common stock currently held in escrow to the Company. In addition, the
former owners are required to release any claims or interests they may have to
receive any payments or shares of common stock of the Company with respect to an
earnout provision detailed in the January 15, 1997 agreement of merger between
the two entities. Upon completion and execution of documentation evidencing the
terms of the letter of understanding, both parties will release the other from
any future liability related to the purchase of SVTR by the Company. If the
letter of understanding is ultimately consummated through a formal agreement
between the two parties, the Company anticipates recording an estimated one-time
$1,200,000 reduction in acquisition related expenses at the time the agreement
is signed.
On August 25, 1997, the Company reached an agreement, which included mutual
releases, with the holders of the remaining 330 shares of convertible preferred
stock to redeem their shares for $5,250,000 in cash. The redemption will be
funded through advances on the Company's line of credit.
F-24
<PAGE> 71
Inside Back Cover:
Pictures of ceramic blade probe card, multilayer DUT board, probe ring assembly,
test board for packaged ICs, Upsys Cobra probe, ATE-to-prober interface system,
and prototype photolithographic probe card.
<PAGE> 72
======================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR
ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 6
Use of Proceeds....................... 12
Price Range of Common Stock........... 12
Dividend Policy....................... 13
Capitalization........................ 13
Selected Consolidated Financial
Data................................ 14
Unaudited Pro Forma Combined Condensed
Financial Information............... 15
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 24
Management............................ 36
Principal and Selling Stockholders.... 38
Description of Securities............. 40
Underwriting.......................... 43
Legal Matters......................... 44
Experts............................... 44
Available Information................. 44
Additional Information................ 44
Incorporation of Certain Information
by Reference........................ 45
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
------------------------
======================================================
======================================================
2,000,000 SHARES
[CERPROBE LOGO]
COMMON STOCK
--------------------
PROSPECTUS
--------------------
ADAMS, HARKNESS & HILL, INC.
DAIN BOSWORTH
INCORPORATED
, 1997
======================================================
<PAGE> 73
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses payable by the
Registrant in connection with the offering described in the Registration
Statement. All of the amounts shown are estimates except for the SEC, NASD, and
Nasdaq fees:
<TABLE>
<CAPTION>
AMOUNT TO BE PAID
-----------------
<S> <C>
SEC Registration Fee............................................... $ 14,724
NASD Filing Fee.................................................... 5,359
Nasdaq National Market Additional Listing Fee...................... 17,500
Legal Fees and Expenses............................................ 150,000
Accounting Fees and Expenses....................................... 100,000
Printing and Engraving Expenses.................................... 80,000
Blue Sky Fees and Expenses......................................... 10,000
Transfer Agent's and Registrar's Fees.............................. 3,000
Miscellaneous Fees................................................. 19,417
------
Total......................................................... $ 400,000
======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's First Restated Certificate of Incorporation (the "Restated
Certificate") provides for indemnification of directors and officers of the
Registrant to the fullest extent permitted by Delaware law.
Under Article VI of the Registrant's Restated Certificate, the Registrant
shall indemnify and advance expenses, to the fullest extent permitted by the
Delaware General Corporation Law, to each person who is or was a director,
officer, agent, or employee of the Registrant, or who serves or served any other
enterprise or organization at the request of the Registrant (an "Indemnitee").
An Indemnitee also may be indemnified under Delaware law against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement if
he or she acted in good faith and in a manner he or she reasonably believed to
be in, or not opposed to, the best interests of the Registrant, and, with
respect to any criminal action, had no reasonable cause to believe his or her
conduct was unlawful.
An Indemnitee also may be indemnified under Delaware law against expenses
(including attorney's fees) actually and reasonably incurred in the defense or
settlement of a suit by or in the right of the Registrant if he or she acted in
good faith and in a manner he or she reasonably believed to be in, or not
opposed to, the best interests of the Registrant, except that no indemnification
may be made if the Indemnitee is adjudged to be liable to the Registrant, unless
a court determines that such Indemnitee is entitled to indemnification for such
expenses which the court deems proper.
Also under Delaware law, expenses incurred by an officer or director in
defending a civil or criminal action, suit or proceeding may be paid by the
Registrant in advance of the final disposition of the suit, action or proceeding
upon receipt of an undertaking by or on behalf of the officer or director to
repay such amount if it is ultimately determined that he or she is not entitled
to be indemnified by the Registrant. The Registrant may also advance expenses
incurred by other employees and agents of the Registrant upon such terms and
conditions, if any, that the board of directors of the Registrant deems
appropriate.
II-1
<PAGE> 74
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------
<S> <C>
1 Form of Underwriting Agreement.
4(a ) Specimen Stock Certificate filed as Exhibit 4(c) to the Company's Form S-18
Registration Statement (No. 2-85679) and incorporated herein by reference.
*5 Opinion of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, P.A.
*23.1 Consent of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, P.A. (to be
included in its Opinion filed as Exhibit 5).
23.2 Independent Auditors' Consent.
24 Powers of Attorney of Directors and Executive Officers (included on the Signature
Page of this Registration Statement).
27 Financial Data Schedule.
</TABLE>
* To be filed by amendment
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each posteffective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE> 75
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Gilbert, Arizona, on the 26th day of August, 1997.
CERPROBE CORPORATION
By: /s/ C. ZANE CLOSE
------------------------------------
C. Zane Close
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints jointly and severally, C. Zane Close and Randal
L. Buness and each one of them, as his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including pre-effective and post-effective amendments) to this Registration
Statement, and to sign any Registration Statement and amendments thereto for the
same offering pursuant to Rule 462(b) under the Securities Act of 1933, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all which said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do, or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- -------------------------------------- ----------------
<S> <C> <C>
By: /s/ ROSS J. MANGANO Chairman of the Board of Directors and August 26, 1997
- ------------------------------------- Director
Ross J. Mangano
By: /s/ C. ZANE CLOSE President, Chief Executive Officer, August 26, 1997
- ------------------------------------- and Director (Principal Executive
C. Zane Close Officer)
By: /s/ RANDAL L. BUNESS Vice President, Chief Financial August 26, 1997
- ------------------------------------- Officer, Secretary, and Treasurer
Randal L. Buness (Principal Financial and Accounting
Officer)
By: /s/ KENNETH W. MILLER Director August 26, 1997
- -------------------------------------
Kenneth W. Miller
</TABLE>
II-3
<PAGE> 76
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- -------------------------------------- ----------------
<S> <C> <C>
By: /s/ DONALD F. WALTER Director August 26, 1997
- -------------------------------------
Donald F. Walter
By: /s/ WILLIAM A. FRESH Director August 26, 1997
- -------------------------------------
William A. Fresh
</TABLE>
II-4
<PAGE> 1
EXHIBIT 1
CERPROBE CORPORATION
[2,300,000] Shares(1)
Common Stock
(par value $.05 per share)
--------------
Underwriting Agreement
September , 1997
Adams, Harkness & Hill, Inc.
Dain Bosworth Incorporated
As representatives of the several
Underwriters named in Schedule I hereto,
c/o Adams, Harkness & Hill, Inc.
60 State Street
Boston, Massachusetts 02109
Dear Sirs:
Cerprobe Corporation, a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to you and
the several Underwriters named in Schedule I hereto (collectively, the
"Underwriters"), for whom you are acting as representatives (the
"Representatives") an aggregate of [1,500,000] shares (the "Company Firm
Shares") and, at the election of the Underwriters, up to ____________ additional
shares (the "Company Optional Shares") of common stock of the Company, $.05 par
value per share (the "Common Stock"), and _________________________
(collectively, the "Selling Stockholders"), propose, subject to the terms and
conditions stated herein, to sell to the Underwriters an aggregate of [500,000]
shares (the "Selling Stockholder Firm Shares", and together with the Company
Firm Shares, the "Firm Shares") and at the election of the Underwriters, up to
an additional ____________ shares (the "Selling Stockholder Optional Shares",
and together with the Company Optional Shares, the "Optional Shares") of Common
Stock. The Firm Shares and any Optional Shares that the Underwriters elect to
purchase pursuant to Section 3 hereof are herein collectively called the
"Shares".
- --------
(1) Includes ___________ shares subject to an option to purchase additional
shares to cover over-allotments.
<PAGE> 2
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and
warrants to, and agrees with, each of the Underwriters that:
(a) A registration statement on Form S-3 (File No. 333-______)
(the "Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement including any pre-effective amendments thereto, including
any documents incorporated by reference therein, and any post-effective
amendment thereto, including any documents incorporated by reference therein,
each in the form heretofore delivered to you, and, excluding exhibits thereto,
to you for each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any, increasing
the size of the offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Act"), which became effective upon filing, no other document with respect to
the Initial Registration Statement has heretofore been filed with the
Commission; and no stop order suspending the effectiveness of the Initial
Registration Statement, any post-effective amendment thereto or any Rule 462(b)
Registration Statement has been issued and no proceeding for that purpose has
been initiated or, to the Company's knowledge, threatened by the Commission (any
preliminary prospectus, including any documents incorporated by reference
therein, included in the Initial Registration Statement and incorporated by
reference in any Rule 462(b) Registration Statement or filed with the Commission
pursuant to Rule 424(a) of the rules and regulations of the Commission under the
Act is hereinafter called a "Preliminary Prospectus"; the various parts of the
Initial Registration Statement and any Rule 462(b) Registration Statement
including all exhibits thereto, including any exhibits incorporated by reference
in the Initial Registration Statement or any Rule 462(b) Registration Statement,
and including the information contained in the form of final prospectus filed
with the Commission pursuant to Rule 424(b) under the Act in accordance with
Section 6(a) hereof and deemed by virtue of Rule 430A under the Act to be part
of the Initial Registration Statement at the time it was declared effective or
any Rule 462(b) Registration Statement at the time it became effective, each as
amended at the time such part of such registration statement became effective,
including any documents incorporated by reference therein, are hereinafter
collectively called the "Registration Statement"; and such final prospectus, in
the form first filed pursuant to Rule 424(b) under the Act, including any
documents incorporated by reference therein, is hereinafter called the
"Prospectus");
(b) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder, and did not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which
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they were made, not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company by an
Underwriter through you expressly for use therein. The Company acknowledges that
the statements set forth under the heading "Underwriting" in the Prospectus
constitute the only information relating to any Underwriter furnished in writing
to the Company by the Representatives specifically for inclusion in the
Registration Statement;
(c) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration Statement or the
Prospectus, including any documents incorporated by reference therein, will
conform, in all respects to the requirements of the Act and the rules and
regulations of the Commission thereunder and do not and will not, as of the
applicable effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus and any
amendment or supplement thereto, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company by an
Underwriter through you expressly for use therein;
(d) There are no contracts or other documents required to be
described in the Registration Statement or to be filed as exhibits to the
Registration Statement by the Act or by the rules and regulations of the
Commission thereunder which have not been described or filed as required; the
contracts so described in the Prospectus to which the Company or any of its
subsidiaries is a party have been duly authorized, executed and delivered by the
Company or its subsidiaries, constitute valid and binding agreements of the
Company or its subsidiaries and are enforceable against and by the Company or
its subsidiaries in accordance with their respective terms, and are in full
force and effect on the date hereof; and neither the Company nor any of its
subsidiaries, nor, to the best of the Company's knowledge, any other party is in
breach of or default under any of such contracts;
(e) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements included in
the Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since the respective
dates as of which information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital stock or long-term debt
of the Company or any of its subsidiaries or any material adverse change, or any
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development involving a prospective material adverse change, in or affecting the
general affairs, prospects, management, financial position, stockholders' equity
or results of operations of the Company and its subsidiaries, otherwise than as
set forth or contemplated in the Prospectus;
(f) Except as disclosed in the Prospectus or such as are not
material to the business, prospects, financial condition or results of operation
of the Company and its subsidiaries, taken as a whole, the Company and each of
its subsidiaries has good and marketable title, free and clear of all liens,
claims, encumbrances and restrictions except liens for taxes not yet due and
payable, to all property and assets described in the Registration Statement as
being owned by it. Except as disclosed in the Prospectus, neither the Company
nor any subsidiary of the Company owns any real property; any real property and
buildings held under lease by the Company are held by it under valid, subsisting
and enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its subsidiaries; the Company owns or leases all
such properties as are necessary to its operations as now conducted or as
proposed to be conducted, except where the failure to so own or lease would not
result in a material adverse change in or affecting the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company;
(g) Except as disclosed in the Prospectus, the Company has no
subsidiaries. Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of its respective jurisdiction of organization, each with full power and
authority (corporate and otherwise) to own its properties and conduct its
business as described in the Prospectus, and each has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties,
or conducts any business, so as to require such qualification, or is subject to
no material liability or disability by reason of the failure to be so qualified
in any such jurisdiction;
(h) The Company has an authorized capitalization as set forth
in the Prospectus, and all the issued shares of capital stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase any securities which have
not been waived and conform to the description of the Common Stock contained in
the Prospectus and have been issued in compliance with all federal and state
securities laws; all of the issued shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued, are fully paid and
non-assessable and, except as disclosed in the Prospectus, are owned directly by
the Company, free and clear of all liens, encumbrances, equities or claims;
except as disclosed in or contemplated by the Prospectus and the financial
statements of the
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Company, and the related notes thereto, included in the Prospectus, neither the
Company nor any subsidiary has outstanding any options to purchase, or any
preemptive rights, registration rights, co-sale rights or other rights to
subscribe for or to purchase any securities or obligations convertible into, or
any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations; and the
description of the Company's stock option and stock purchase plans and the
options or other rights granted and exercised thereunder set forth in the
Prospectus, or incorporated by reference therein, accurately and fairly presents
the information required to be shown with respect to such plans, options and
rights;
(i) The unissued Shares to be issued and sold by the Company
to the Underwriters hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be duly
and validly issued and fully paid and non-assessable and will conform to the
description of the Common Stock contained in the Prospectus; no preemptive
rights, registration rights, co-sale rights or other rights to subscribe for or
purchase exist with respect to the issuance and sale of the Shares by the
Company or, to the best of the Company's knowledge, the sale of the Shares by
the Selling Stockholders pursuant to this Agreement; no stockholder of the
Company has any right which has not been waived to require the Company to
register the sale of any shares of capital stock owned by such stockholder under
the Act in the public offering contemplated by this Agreement (except with
respect to the Shares to be sold by the Selling Stockholders pursuant to this
Agreement); and no further approval or authority of the stockholders or the
Board of Directors of the Company will be required for the issuance and sale of
the Shares to be sold by the Company or for the sale of the Shares to be sold by
the Selling Stockholders as contemplated herein;
(j) The Company has full corporate power and authority to
enter into this Agreement, this Agreement has been duly authorized, executed and
delivered by the Company, constitutes a valid and binding obligation of the
Company and is enforceable against the Company in accordance with its terms;
(k) The issuance and sale of the Shares by the Company and the
compliance by the Company with all of the provisions of this Agreement and the
consummation of the transactions herein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries is
bound or to which any of the property or assets of the Company or any of its
subsidiaries is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the Company or any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any of its subsidiaries or any of
their properties; and no
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<PAGE> 6
consent, approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the issue and
sale of the Shares or the consummation by the Company of the transactions
contemplated by this Agreement, except the registration under the Act of the
Shares and such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws or the
by-laws and rules of the National Association of Securities Dealers, Inc. (the
"NASD") in connection with the purchase and distribution of the Shares by the
Underwriters;
(l) There are no legal or governmental actions, suits or
proceedings pending or, to the best of the Company's knowledge, threatened to
which the Company or any of its subsidiaries is or may be a party or of which
property owned or leased by the Company or any of its subsidiaries is or may be
the subject, or related to environmental or discrimination matters, which
actions, suits or proceedings, might, individually or in the aggregate, prevent
or adversely affect the transactions contemplated by this Agreement or result in
a material adverse change in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company; no labor disturbance by the employees of the Company or any of its
subsidiaries exists or, to the knowledge of the Company, is imminent which might
be expected to affect adversely such general affairs, management, financial
position, stockholders' equity or results of operations; and neither the Company
nor any of its subsidiaries is a party or subject to the provisions of any
material injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body;
(m) The Company and its subsidiaries possess all licenses,
certificates, authorizations or permits issued by the appropriate governmental
or regulatory agencies or authorities that are necessary to enable them to own,
lease and operate their respective properties and to carry on their respective
businesses as presently conducted and which are material to the Company and its
subsidiaries, and neither the Company nor any of its subsidiaries has received
any notice of proceedings relating to the revocation or modification of any such
license, certificate, authority or permit which, singly or in the aggregate,
would be expected to materially and adversely affect the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company and its subsidiaries;
(n) KPMG Peat Marwick LLP, who have audited certain financial
statements of the Company, are independent public accountants as required by the
Act and the rules and regulations of the Commission thereunder;
(o) The consolidated financial statements and schedules of the
Company and certain of its subsidiaries, and the related notes thereto, included
in the Registration Statement and the Prospectus present fairly the financial
position of the Company and its
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<PAGE> 7
subsidiaries as of the respective dates of such financial statements and
schedules, and the results of operations and cash flows of the Company and its
subsidiaries for the respective periods covered thereby; such statements,
schedules and related notes have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis as certified by the
independent public accountants named in paragraph (n) above; no other financial
statements or schedules are required to be included in the Registration
Statement; and the selected financial data set forth in the Prospectus under the
captions "Capitalization" and "Selected Consolidated Financial Data" fairly
present the information set forth therein on the basis stated in the
Registration Statement;
(p) Except as disclosed in or specifically contemplated by the
Prospectus, the Company and its subsidiaries have sufficient trademarks, trade
names, patent rights, copyrights, licenses, approvals and governmental
authorizations to conduct their business as now conducted; the Company has no
knowledge of any material infringement by the Company of trademark, trade name
rights, patent rights, copyrights, licenses, trade secret or other similar
rights of others; and there is no claim being made against the Company regarding
trademark, trade name, patent, copyright, license, trade secret or other
infringement which could have a material adverse effect on the general affairs,
management, financial position, stockholders' equity or results of operations of
the Company and its subsidiaries;
(q) The Company and each of its subsidiaries have filed all
necessary federal, state and foreign income and franchise tax returns and have
paid all taxes shown as due thereon; and the Company has no knowledge of any tax
deficiency which has been or might be asserted or threatened against the Company
or any of its subsidiaries which could materially and adversely affect the
general affairs, management, financial position, stockholders' equity or results
of operation of the Company;
(r) The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
investment company, as such terms are defined in the Investment Company Act of
1940, as amended (the "Investment Company Act");
(s) Each of the Company and its subsidiaries maintains
insurance of the types and in the amounts which it deems adequate for its
business, including, but not limited to, insurance covering real and personal
property owned or leased by the Company and its subsidiaries against theft,
damage, destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect;
(t) Neither the Company nor any of its subsidiaries has at any
time during the last five years (i) made any unlawful contribution to any
candidate for foreign office, or failed to disclose fully any contribution in
violation of law, or (ii) made any
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<PAGE> 8
payment to any foreign, federal or state governmental officer or official, or
other person charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof;
(u) The Company has not taken and will not take, directly or
indirectly through any of its directors, officers or controlling persons, any
action which is designed to or which has constituted or which might reasonably
be expected to cause or result in stabilization or manipulation of the price of
any security of the Company to facilitate the sale or resale of the Shares;
(v) The Common Stock of the Company has been registered
pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the Company is not required to take any further action
for the inclusion of the Shares on the Nasdaq National Market and has received
notification that the listing has been approved, subject to notice of issuance
of the Shares;
(w) All documents filed by the Company with the Commission
pursuant to the Act or the Exchange Act, when they became effective or were
filed with the Commission, as the case may be, conformed in all material
respects to the requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder, and none of such
documents contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and any further documents so filed or any further
amendment or supplement thereto, when such documents become effective or are
filed with the Commission, as the case may be, will conform in all material
respects to the requirements of the Act or the Exchange Act, as applicable, and
the rules and regulations of the Commission thereunder and will not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading;
(x) The Shares have been duly authorized for inclusion on the
Nasdaq National Market System, subject to the Company's notice of issuance;
(y) The conditions for use of Form S-3, as set forth in the
General Instructions thereto, have been satisfied;
(z) The Company does not know of any claims for services in
the nature of a finder's fee, brokerage fee or otherwise with respect to this
offering for which the Company or any of the Underwriters may be responsible;
(aa) There are no outstanding loans or advances or guarantees
of indebtedness by the Company or any subsidiary to or for the benefit of any
affiliate of the Company or any subsidiary, any of the officers or directors of
the Company or any
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subsidiary, or any of the members of the families of any of them, which are
required by rules and regulations of the Commission under the Act to be
described in the Prospectus except such that are so described.
2. REPRESENTATIONS OF THE SELLING STOCKHOLDERS. Each of the Selling
Stockholders, severally and not jointly, represents and warrants to, and agrees
with, each of the Underwriters that:
(a) All consents, approvals, authorizations and orders
necessary for the execution and delivery by such Selling Stockholder of this
Agreement and the Power-of-Attorney (as hereinafter defined) and Custody
Agreement hereinafter referred to (collectively, the "Custody Agreement"), and
for the sale and delivery of the Shares to be sold by such Selling Stockholder
hereunder, have been obtained; and such Selling Stockholder has full right,
power and authority to enter into this Agreement and the Custody Agreement and
to sell, assign, transfer and deliver the Shares to be sold by such Selling
Stockholder hereunder;
(b) This Agreement and the Custody Agreement have each been
duly authorized, executed and delivered by such Selling Stockholder and each
such document constitutes a valid and binding obligation of such Selling
Stockholder, enforceable in accordance with its terms;
(c) No consent, approval, authorization or order of, or any
filing or declaration with, any court or governmental agency or body with
respect to such Selling Stockholder is required in connection with the sale of
the Shares by such Selling Stockholder or the consummation by such Selling
Stockholder of the transactions on his or its part contemplated by this
Agreement and the Custody Agreement, except such as have been obtained under the
Act or the rules and regulations thereunder and such as may be required under
state securities or Blue Sky laws or the by-laws and rules of the NASD in
connection with the purchase and distribution by the Underwriters of the Shares;
(d) The sale of the Shares to be sold by such Selling
Stockholder hereunder and the performance by such Selling Stockholder of this
Agreement and the Custody Agreement and the consummation of the transactions
contemplated hereby and thereby will not result in a breach or violation of any
of the terms or provisions of, or constitute a default under, or give any party
a right to terminate any of its obligations under, or result in the acceleration
of any obligation under, any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement or other evidence of
indebtedness, lease, contract or other agreement or instrument to which such
Selling Stockholder is a party or by which such Selling Stockholder or any of
his or its properties is bound or affected, or violate or conflict with any
judgment, ruling, decree,
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order, statute, rule or regulation of any court or other governmental agency or
body applicable to such Selling Stockholder;
(e) Such Selling Stockholder has, and at the First Time of
Delivery (as defined in Section 5 hereof) will have, good and valid title to the
Shares to be sold by such Selling Stockholder hereunder, free and clear of all
liens, encumbrances, equities or claims; and, upon delivery of such Shares and
payment therefor pursuant hereto, good and valid title to such Shares, free and
clear of all liens, encumbrances, equities or claims, will pass to each of the
several Underwriters who have purchased such Shares in good faith and without
notice of any such lien, encumbrance, equity or claim or any other adverse claim
within the meaning of Section 8-302 of the Massachusetts Uniform Commercial
Code;
(f) Such Selling Stockholder has the authority to and has
executed and delivered a lock-up agreement the form of which is attached hereto
as Annex II;
(g) Such Selling Stockholder has not taken and will not at any
time take, directly or indirectly, any action designed, or which might
reasonably be expected, to cause or result in, or which will constitute,
stabilization of the price of shares of Common Stock to facilitate the sale or
resale of any of the Shares;
(h) To the extent that any statements or omissions made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto are made in reliance upon and in conformity with
written information furnished to the Company by such Selling Stockholder
expressly for use therein, such Preliminary Prospectus and the Registration
Statement did, and the Prospectus and any further amendments or supplements to
the Registration Statement and the Prospectus will, when they become effective
or are filed with the Commission, as the case may be, conform in all material
respects to the requirements of the Act and the rules and regulations of the
Commission thereunder and not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading; and
(i) Such Selling Stockholder has reviewed the Registration
Statement and Prospectus and, although such Selling Stockholder has not
independently verified the accuracy or completeness of all the information
contained therein, nothing has come to the attention of such Selling Stockholder
that would lead such Selling Stockholder to believe that on the Effective Date,
the Registration Statement contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading, or that on the Effective
Date, the Prospectus contained and, at each Time of Delivery, contains any
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untrue statement of a material fact or omitted or omits to state any material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 with respect to the transactions herein contemplated, each Selling
Stockholder agrees to deliver to you prior to or at the First Time of Delivery a
properly completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department regulations
in lieu thereof).
Each of the Selling Stockholders represents and warrants that a
certificate in negotiable form representing all of the Shares to be sold by such
Selling Stockholder has been placed in custody under the Custody Agreement, in
the form heretofore furnished to you, duly executed and delivered by such
Selling Stockholder to the Custodian (as defined in the Custody Agreement), and
that such Selling Stockholder has duly executed and delivered a
power-of-attorney, in the form heretofore furnished to you and included in the
Custody Agreement (the "Power-of-Attorney"), appointing C. Zane Close and Randal
L. Buness, and each of them, as such Selling Stockholder's attorneys-in-fact
(the "Attorneys-in-Fact") with authority to execute and deliver this Agreement
on behalf of such Selling Stockholder, to determine (subject to the provisions
of the Custody Agreement) the purchase price to be paid by the Underwriters to
such Selling Stockholder as provided in Section 3 hereof, to authorize the
delivery of the Shares to be sold by such Selling Stockholder hereunder and
otherwise to act on behalf of such Selling Stockholder in connection with the
transactions contemplated by this Agreement and the Custody Agreement.
Each of the Selling Stockholders specifically agrees that the Shares
represented by the certificates held in custody for such Selling Stockholder
under the Custody Agreement are subject to the interests of the Underwriters
hereunder, and that the arrangements made by such Selling Stockholder for such
custody, and the appointment by such Selling Stockholder of the
Attorneys-in-Fact by the Power-of-Attorney, are to that extent irrevocable. Each
of the Selling Stockholders specifically agrees that the obligations of such
Selling Stockholder hereunder shall not be terminated by operation of law,
whether by the death or incapacity of such Selling Stockholder or, in the case
of an estate or trust, by the death or incapacity of any executor or trustee or
the termination of such estate or trust, or by the occurrence of any other
event. If such Selling Stockholder or any such executor or trustee should die or
become incapacitated, or if any such estate or trust should be dissolved, or if
any other such event should occur, before the delivery of the Shares hereunder,
certificates representing the Shares to be sold by such Selling Stockholder
shall be delivered by or on behalf of such Selling Stockholder in accordance
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with the terms and conditions of this Agreement and of the Custody Agreement,
and actions taken by the Attorneys-in-Fact pursuant to the Power-of-Attorney
shall be as valid as if such death, incapacity, termination, dissolution or
other event had not occurred, regardless of whether or not the Custodian, the
Attorneys-in-Fact, or any of them, shall have received notice of such death,
incapacity, termination, dissolution or other event.
3. SHARES SUBJECT TO SALE. (a) On the basis of the representations,
warranties and agreements of the Company and the Selling Stockholders contained
herein, and subject to the terms and conditions of this Agreement, (i) the
Company agrees to issue and sell the Company Firm Shares to the several
Underwriters, (ii) each of the Selling Stockholder agrees to sell its, his or
her, Selling Stockholder Firm Shares to the several Underwriters, and (iii) each
of the Underwriters agrees, severally and not jointly, to purchase from the
Company and the Selling Stockholders, at a purchase price per share of $____,
the respective number of Firm Shares (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying the aggregate number of Firm Shares
by a fraction, the numerator of which is the aggregate number of Firm Shares to
be purchased by such Underwriter as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the aggregate
number of Firm Shares to be purchased by all the Underwriters and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, (i) the Company agrees to issue and
sell the Company Optional Shares to the several Underwriters, (ii) each Selling
Stockholder agrees to sell the Selling Stockholder Optional Shares to the
several Underwriters, and (iii) each of the Underwriters agrees, severally and
not jointly, to purchase from the Company and the Selling Stockholders, at the
purchase price per share set forth in clause (a) of this Section 3, that portion
of the number of Optional Shares as to which such election shall have been
exercised (to be adjusted by you so as to eliminate fractional shares)
determined by multiplying such number of Optional Shares by a fraction the
numerator of which is the maximum number of Optional Shares which such
Underwriter is entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is the maximum
number of the Optional Shares which all of the Underwriters are entitled to
purchase hereunder.
The Company and the Selling Stockholders each hereby grant to the
Underwriters the right to purchase at their election up to ______ Company
Optional Shares and _______ Selling Stockholder Optional Shares, respectively,
at the purchase price per share set forth in the paragraph above, for the sole
purpose of covering overallotments in the sale of the Firm Shares. Any such
election to purchase Optional Shares shall be made in proportion to the maximum
number of Optional Shares to be sold by the Company and the Selling
Stockholders. Any such election to purchase Optional Shares may be exercised by
written notice from you to the Company and the Attorneys-in-Fact of the
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Selling Stockholders, given within a period of 30 calendar days after the date
of this Agreement and setting forth the aggregate number of Optional Shares to
be purchased and the date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First Time of Delivery or,
unless you, the Company and the Attorneys-in-Fact on behalf of the Selling
Stockholders otherwise agree in writing, earlier than two or later than three
business days after the date of such notice.
4. OFFERING. Upon the authorization by you of the release of the Firm
Shares, the several Underwriters propose to offer the Firm Shares for sale upon
the terms and conditions set forth in the Prospectus.
5. CLOSING. Certificates in definitive form for the Shares to be
purchased by each Underwriter hereunder, and in such denominations and
registered in such names as Adams, Harkness & Hill, Inc. may request upon at
least forty-eight hours' prior notice to the Company, shall be delivered by or
on behalf of the Company and the Selling Stockholders to you for the account of
such Underwriter, against payment by such Underwriter or on its behalf of the
purchase price therefor by certified or official bank check or checks, payable
to the order of the Company and each Selling Stockholder, respectively, in New
York Clearing House (same day) funds, all at the office of Adams, Harkness &
Hill, Inc., 60 State Street, Boston, Massachusetts 02109. The time and date of
such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m.,
Boston time, on September __, 1997 or such other time and date as you and the
Company may agree upon in writing, and, with respect to the Optional Shares,
9:30 a.m., Boston time, on the date specified by you in the written notice given
by you of the Underwriters' election to purchase such Optional Shares, or at
such other time and date as you and the Company may agree upon in writing. Such
time and date for delivery of the Firm Shares is herein called the "First Time
of Delivery," such time and date for delivery of the Optional Shares, if not the
First Time of Delivery, is herein called the "Second Time of Delivery," and each
such time and date for delivery is herein called a "Time of Delivery." Such
certificates will be made available for checking and packaging at least
twenty-four hours prior to each Time of Delivery at such location as you may
specify.
6. COVENANTS OF THE COMPANY. The Company agrees with each of the
Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or Prospectus unless
after reasonable notice you shall have approved such amendment or supplement
(such approval not to be unreasonably withheld or delayed) to
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advise you, promptly after it receives notice thereof, of the time when the
Registration Statement, or any amendment thereto, has been filed or becomes
effective or any supplement to the Prospectus or any amended Prospectus has been
filed and to furnish you copies thereof; to advise you, promptly after it
receives notice thereof, of the issuance by the Commission of any stop order or
of any order preventing or suspending the use of any Preliminary Prospectus or
Prospectus, of the suspension of the qualification of the Shares for offering or
sale in any jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; to provide you copies of any filings that will be incorporated by
reference into the Registration Statement while the distribution of the Shares
is ongoing and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, to use promptly its best efforts to obtain
its withdrawal;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Shares, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus
in such quantities as you may from time to time reasonably request, and, if the
delivery of a prospectus is required at any time prior to the expiration of nine
months after the time of issuance of the Prospectus in connection with the
offering or sale of the Shares and if at such time any events shall have
occurred as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, if for any other reason it shall
be necessary during such same period to amend or supplement the Prospectus in
order to comply with the Act, to notify you and upon your request to prepare and
furnish without charge to each Underwriter and to any dealer in securities as
many copies as you may from time to time reasonably request of an amended
Prospectus or a supplement to the Prospectus which will correct such statement
or omission or effect such compliance, and in case any Underwriter is required
to deliver a prospectus in connection with sales of any of the Shares at any
time nine months or more after the time of issue of the Prospectus, upon your
request but at the expense of such Underwriter, to prepare and deliver to such
Underwriter as many copies as you may request of an amended or supplemented
Prospectus complying with Section 10(a)(3) of the Act;
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(d) To make generally available to its securityholders as soon
as practicable, but in any event not later than the forty-fifth (45th) day
following the end of the full fiscal quarter first occurring after the first
anniversary of the effective date of the Registration Statement (as defined in
Rule 158(c) under the Act), an earning statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a) of the Act
and the rules and regulations of the Commission thereunder (including at the
option of the Company Rule 158 under the Act);
(e) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the Prospectus,
not to offer, sell, contract to sell or otherwise dispose of any securities of
the Company which are substantially similar to the Shares, without your prior
written consent other than (i) the sale of the Shares to be sold by the Company
hereunder, and (ii) the Company's issuance of options under its option plans in
amounts not in excess of the amount shown as available for future grant in the
Prospectus;
(f) During a period beginning from the date hereof and
continuing to and including the date 90 days after the date of the Prospectus,
not to grant options to purchase shares of Common Stock at a price less than the
fair market value of the Common Stock at the time of grant;
(g) To furnish to its stockholders as soon as practicable
after the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flow of the Company and
its consolidated subsidiaries certified by independent public accountants) and
to make available (within the meaning of Rule 158(b) under the Act), as soon as
practicable after the end of each of the first three quarters of each fiscal
year (beginning with the fiscal quarter ending after the effective date of the
Registration Statement), consolidated summary financial information of the
Company and its subsidiaries for such quarter in reasonable detail;
(h) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders generally, and
deliver to you (i) as soon as they are available, copies of any reports and
financial statements furnished to or filed with the Commission, the Nasdaq
National Market or any national securities exchange on which any class of
securities of the Company is listed; and (ii) such additional information
concerning the business and financial condition of the Company as you may from
time to time reasonably request (such financial statements to be on a combined
or consolidated basis to the extent the accounts of the Company and its
subsidiaries are combined or consolidated in reports furnished to its
stockholders generally or to the Commission);
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(i) To use the net proceeds acquired by it from the sale of
the Shares in the manner specified in the Prospectus under the caption "Use of
Proceeds" and in a manner such that the Company will not become an "investment
company" as that term is defined in the Investment Company Act; and
(j) Not to accelerate the vesting of any option issued under
any stock option plan such that any such option may be exercised within 90 days
from the date of the Prospectus.
7. COVENANTS OF THE SELLING STOCKHOLDERS. Each of the Selling
Stockholders agrees to pay or cause to be paid all taxes, if any, on the
transfer and sale of the Shares to be sold by such Selling Stockholder hereunder
and the fees and expenses, if any, of counsel and accountants retained by such
Selling Stockholder. The Company agrees with the Selling Stockholders to pay all
costs and expenses incident to the performance of the obligations of the Selling
Stockholders under this Agreement (except as set forth above), including, but
not limited to, all expenses incident to the delivery of the certificates for
the Shares to be sold by the Selling Stockholders, the costs and expenses
incident to the preparation, printing and filing of the Registration Statement
(including all exhibits thereto) and the Prospectus and any amendments or
supplements thereto, the expenses of qualifying the Shares to be sold by the
Selling Stockholders under the state securities or Blue Sky laws, all filing
fees and the reasonable fees and expenses of counsel for the Underwriters
payable in connection with the review of the offering of the Shares by the NASD,
and the cost of furnishing to the Underwriters the required copies of the
Registration Statement and Prospectus and any amendments or supplements thereto;
provided that each Selling Stockholder agrees to pay or cause to be paid its pro
rata share (based on the percentage which the number of Shares sold by such
Selling Stockholder bears to the total number of Shares sold) of all
underwriting discounts and commissions.
8. EXPENSES. The Company covenants and agrees with the several
Underwriters that the Company will pay or cause to be paid the following: (i)
the fees, disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost of printing or producing
any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum and
any other documents in connection with the offering, purchase, sale and delivery
of the Shares; (iii) all expenses in connection with the qualification of the
Shares for offer and sale under state securities laws as provided in Section
6(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky survey; (iv) the filing fees and the reasonable fees and expenses of
counsel to the Underwriters incident to securing any
16.
<PAGE> 17
required review by the NASD of the terms of the sale of the Shares; (v) the cost
of preparing stock certificates; (vi) the cost and charges of any transfer agent
or registrar; and (vii) all other costs and expenses incident to the performance
of its obligations hereunder which are not otherwise specifically provided for
in this Section. It is understood, however, that, except as provided in this
Section, Section 10 and Section 13 hereof, the Underwriters will pay all of
their own costs and expenses, including the fees of their counsel, stock
transfer taxes on resale of any of the Shares by them, and any advertising
expenses connected with any offers they may make.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
Underwriters hereunder, as to the Shares to be delivered at each Time of
Delivery, shall be subject, in their discretion, to the condition that all
representations and warranties and other statements of the Company and each
Selling Stockholder herein are, at and as of such Time of Delivery, true and
correct, the condition that the Company and each Selling Stockholder shall each
have performed all of their respective obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for such
filing by the rules and regulations under the Act and in accordance with Section
6(a) hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the Commission; and all
requests for additional information on the part of the Commission shall have
been complied with to your reasonable satisfaction;
(b) Cooley Godward LLP, counsel to the Underwriters, shall
have furnished to you such opinion or opinions, dated such Time of Delivery,
with respect to this Agreement, the Registration Statement, the Prospectus, and
other related matters as you may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to enable
them to pass upon such matters;
(c) O'Connor, Cavanagh, Anderson, Killingsworth & Beshears,
P.A., counsel to the Company, shall have furnished to you their written opinion,
dated such Time of Delivery, in form and substance satisfactory to you, to the
effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the State
of Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Registration Statement
and Prospectus;
(ii) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the issued shares of capital stock of
the Company have been
17.
<PAGE> 18
duly and validly authorized and issued, are fully paid and non-assessable and,
to the best of such counsel's knowledge, were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or purchase
any securities which have not been waived; the Shares have been duly authorized
and when issued and paid for as contemplated by this Agreement will be validly
issued, fully paid and non-assessable; and the Shares conform to the description
of the Common Stock contained in the Prospectus;
(iii) The Company has been duly qualified as a
foreign corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases properties,
or conducts any business, so as to require such qualification, or is subject to
no material liability or disability by reason of failure to be so qualified in
any such jurisdiction (such counsel being entitled to rely in respect of the
opinion in this clause upon certificates of public officials and in respect of
matters of fact upon certificates of officers of the Company, provided that such
counsel provide you with copies of such certificates and shall state that they
believe that both you and they are justified in relying upon such certificates);
(iv) Each subsidiary of the Company has been duly
incorporated and is validly existing as a corporation in good standing under the
laws of its jurisdiction of organization; and all of the issued shares of
capital stock of each such subsidiary have been duly and validly authorized and
issued, are fully paid and non-assessable, and are owned directly by the
Company, free and clear of all liens, encumbrances, equities or claims (such
counsel being entitled to rely in respect of the opinion in this clause upon
opinions of local counsel and in respect of matters of fact upon certificates of
officers of the Company or its subsidiaries, provided that such counsel shall
state that they believe that both you and they are justified in relying upon
such opinions and certificates);
(v) Except as otherwise set forth in the Prospectus
or such as are not material to the business, prospects, financial condition or
results of operation of the Company and its subsidiaries, taken as a whole, the
Company and each of its subsidiaries has good and marketable title, free and
clear of all liens, claims, encumbrances and restrictions except liens for taxes
not yet due and payable, to all property and assets described in the
Registration Statement as being owned by it. The real property and buildings
held under lease by the Company and its subsidiaries are held by them under
valid, subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries (in giving the
opinion in this clause, such counsel may state that they are relying upon
opinions of counsel to the lessors of such property and, in respect of matters
of fact, upon certificates of officers of the Company or its subsidiaries,
provided that such counsel shall state that they believe that both you and they
are justified in relying upon such opinions and certificates);
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(vi) To the best of such counsel's knowledge, neither
the Company nor any of its subsidiaries is infringing or otherwise violating any
trademarks, trade names, patents, mask works, copyrights, licenses, trade
secrets or other intellectual property rights of others, and to the best of such
counsel's knowledge there are no infringements by others of any of the Company's
or any of its subsidiaries' trademarks, trade names, patents, mask works,
copyrights, licenses, trade secrets or other intellectual property rights which
in the judgment of such counsel could affect materially the use thereof by the
Company or any of its subsidiaries; and
(vii) To the best of such counsel's knowledge, the
Company and each of its subsidiaries owns or possesses sufficient licenses or
other rights to use all trademarks, trade names, patents, mask works,
copyrights, licenses, trade secrets or other intellectual property rights
necessary to conduct the business now being or proposed to be conducted by the
Company and its subsidiaries as described in the Prospectus.
(viii) To the best of such counsel's knowledge and
other than as set forth in the Prospectus, there are no legal or governmental
proceedings, actions or suits pending or threatened to which the Company or any
of its subsidiaries is or may be a party or of which property owned or leased by
the Company or any of its subsidiaries is or may be the subject, or related to
environmental or discrimination matters, which actions, suits or proceedings,
might, individually or in the aggregate, prevent or adversely affect the
transactions contemplated by this Agreement or result in a material adverse
change in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company; no labor
disturbance by the employees of the Company or any of its subsidiaries exists or
is imminent which might be expected to affect adversely such general affairs,
management, financial position, stockholders' equity or results of operations;
and neither the Company nor any of its subsidiaries is a party or subject to the
provisions of any material injunction, judgment, decree or order of any court,
regulatory body, administrative agency or governmental body;
(ix) The Company has full corporate power and
authority to enter into this Agreement and this Agreement has been duly
authorized, executed and delivered by the Company;
(x) The issuance and sale of the Shares being
delivered at such Time of Delivery by the Company and the compliance by the
Company with all of the provisions of this Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument known to such counsel to which the Company is a party or by which the
Company or any of its subsidiaries is a party or to which the Company or any of
its subsidiaries is bound or to which any of the property or
19.
<PAGE> 20
assets of the Company or any of its subsidiaries is subject, nor will such
action result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order, rule or
regulation known to such counsel of any court or governmental agency or body
having jurisdiction over the Company or any of its properties;
(xi) No consent, approval, authorization, order,
registration or qualification of or with any such court or governmental agency
or body is required for the issuance and sale of the Shares or the consummation
by the Company of the transactions contemplated by this Agreement, except the
registration under the Act of the Shares, and such consents, approval,
authorizations, registrations or qualifications as may be required under state
securities or Blue Sky laws or the by-laws and rules of the NASD in connection
with the purchase and distribution of the Shares by the Underwriters;
(xii) To the best of such counsel's knowledge, there
are no contracts or other documents required to be described in the Registration
Statement or to be filed as exhibits to the Registration Statement by the Act or
by the rules and regulations thereunder (or as exhibits to documents
incorporated by reference in the Prospectus by the Act or the Exchange Act or
the rules and regulations thereunder) which have not been described or filed as
required; the contracts so described in the Prospectus are in full force and
effect on the date hereof; and neither the Company nor any of its subsidiaries
is in breach of or default under any such contract;
(xiii) The statements under the captions "Risk
Factors - Effect of Anti-Takeover Provisions", "Risk Factors - Shares Eligible
for Future Sale" and "Description of Securities" in the Prospectus, insofar as
such statements constitute a summary of documents referred to therein or matters
of law, are accurate summaries and fairly and correctly present, in all material
respects, the information called for with respect to such documents and matters
(provided, however, that such counsel may rely on representations of the Company
with respect to the factual matters contained in such statements, and provided
further that such counsel shall state that nothing has come to the attention of
such counsel which leads them to believe that such representations are not true
and correct in all material respects);
(xiv) The Company is not an "investment company" or
an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company" as defined in the Investment Company Act;
(xv) The Shares have been duly authorized for
inclusion on the Nasdaq National Market System, subject to notice of issuance;
20.
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(xvi) The Registration Statement and the Prospectus
and any further amendments and supplements thereto made by the Company prior to
such Time of Delivery, including any documents incorporated by reference therein
(other than the financial statements, financial data and related schedules
therein, as to which such counsel need express no opinion) comply as to form in
all material respects with the requirements of the Act and the rules and
regulations thereunder; and
(xvii) All documents filed by the Company with the
Commission pursuant to the Act or the Exchange Act or any further amendment or
supplement thereto made by the Company prior to the First Time of Delivery,
including any documents incorporated by reference therein (other than the
financial statements, financial data and related schedules therein, as to which
such counsel need express no opinion), when they became effective or were filed
with the Commission, as the case may be, complied as to form in all material
respects with the requirements of the Act or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder; and they have no
reason to believe that any of such documents, when such documents became
effective or were so filed, as the case may be, contained, in the case of a
registration statement which became effective under the Act, an untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading, or, in the
case of other documents which were filed under the Exchange Act with the
Commission, an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made when such documents were so filed,
not misleading;
Such counsel shall also state that they have participated in the
preparation of the Registration Statement and Prospectus and they have no reason
to believe that, as of its effective date, the Registration Statement or any
further amendment thereto made by the Company prior to such Time of Delivery,
including any documents incorporated by reference therein (other than the
financial statements, financial data and related schedules therein, as to which
such counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that, as of its
date, the Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery, including any documents incorporated by
reference therein (other than the financial statements, financial data and
related schedules therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading or that, as of such Time of Delivery,
either the Registration Statement or the Prospectus or any further amendment or
supplement thereto made by the Company prior to such Time of Delivery, including
any documents incorporated by reference therein (other than the financial
statements, financial data and related schedules therein, as to which such
counsel need express no
21.
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opinion) contains an untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; and they do not know
of any amendment to the Registration Statement required to be filed which is not
filed as required.
Such counsel shall also include a statement in such opinion as to the
matters set forth in this paragraph. The Registration Statement has become
effective under the Act. To the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been issued by
the Commission nor has any proceeding been instituted or contemplated for that
purpose under the Act. The Prospectus has been filed with the Commission
pursuant to Rule 424(b) of the Rules and Regulations under the Act within the
time period required thereby.
(d) O'Connor, Cavanagh, Anderson, Killingsworth & Beshears
P.A., counsel to the Selling Stockholders, shall have furnished to you their
written opinion, dated such Time of Delivery, in form and substance satisfactory
to you, to the effect that:
(i) This Agreement, the Custody Agreement and the
Power-of-Attorney have been duly authorized, executed and delivered by or on
behalf of the Selling Stockholders; the Custodian has been duly and validly
authorized to act as the custodian of the Shares to be sold by the Selling
Stockholders; the performance of this Agreement, the Custody Agreement and the
Power-of-Attorney and the consummation of the transactions therein contemplated
by the Selling Stockholders does not conflict with, result in a breach of, or
constitute a default under, any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement or other evidence of
indebtedness, lease, contract or other agreement or instrument to which any
Selling Stockholder is a party or by which any Selling Stockholder or any of its
properties are bound or affected, or violate or conflict with (i) any judgment,
ruling, decree or order known to such counsel or (ii) any statute, rule or
regulation of any court or other governmental agency or body applicable to any
Selling Stockholder (except that such counsel need express no opinion as to
state securities or Blue Sky laws or as to compliance with the antifraud
provisions of federal and state securities laws); and no consent, approval,
authorization or order of, or any filing or declaration with, any court or
governmental agency or body is required for consummation by any Selling
Stockholder of the transactions on its part contemplated by this Agreement, the
Custody Agreement and the Power-of-Attorney, except such as may be required
under state securities or Blue Sky laws or the by-laws and rules of the NASD in
connection with the purchase and distribution by the Underwriters of the Shares
(as to which such counsel need express no opinion) and such as have been
obtained or made under the Act or the rules and regulations thereunder;
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(ii) Each Selling Stockholder has full power and
authority to enter into this Agreement, the Custody Agreement and the
Power-of-Attorney, and to sell, transfer and deliver the Shares to be sold by
such Selling Stockholder; immediately prior to the date hereof, each Selling
Stockholder was the sole registered owner of the Shares to be sold by such
Selling Stockholder on the date hereof; upon registration of the Shares to be
sold by each Selling Stockholder in the names of the Underwriters in the stock
records of the Company, assuming the Underwriters purchased such Shares in good
faith and without notice of any adverse claim within the meaning of Section
8-302 of the Massachusetts Uniform Commercial Code, the Underwriters will have
acquired all rights of each Selling Stockholder in such Shares free of any
adverse claim, any lien in favor of the Company and any restrictions on transfer
imposed by the Company; and
(iii) Each of this Agreement and the Custody
Agreement is a valid and binding agreement of each Selling Stockholder,
constitutes a valid and binding obligation of each Selling Stockholder and is
enforceable against each Selling Stockholder in accordance with its terms.
(e) At 10:00 a.m., Boston time, on the effective date of the
Registration Statement and the effective date of the most recently filed
post-effective amendment to the Registration Statement and also at each Time of
Delivery, KPMG Peat Marwick LLP shall have furnished to you a letter or letters,
dated the respective date of delivery thereof, in form and substance
satisfactory to you, to the effect set forth in Annex 1 hereto;
(f) (i) Neither the Company nor any of its subsidiaries have
sustained since the date of the latest audited financial statements included in
the Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, other than as set
forth or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been any
change in the capital stock or long-term debt of the Company or any change, or
any development involving a prospective change, in or affecting the general
affairs, management, financial position, stockholders' equity or results of
operations of the Company and its subsidiaries, other than as set forth or
contemplated in the Prospectus, the effect of which, in any such case described
in clause (i) or (ii), is in your judgment so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(g) On or after the date hereof there shall not have occurred
any of the following: (i) additional material governmental restrictions, not in
force and effect on the date hereof, shall have been imposed upon trading in
securities generally or minimum or
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maximum prices shall have been generally established on the New York Stock
Exchange or on the American Stock Exchange or in the over the counter market by
the NASD, or trading in securities generally shall have been suspended on either
such Exchange or in the over the counter market by the NASD, or a general
banking moratorium shall have been established by federal or New York
authorities, (ii) an outbreak of major hostilities or other national or
international calamity or any substantial change in political, financial or
economic conditions shall have occurred or shall have accelerated or escalated
to such an extent, as, in your judgment, to affect adversely the marketability
of the Shares, or (iii) there shall be any action, suit or proceeding pending or
threatened, or there shall have been any development or prospective development
involving particularly the business or properties or securities of the Company
or any of its subsidiaries or the transactions contemplated by this Agreement,
which, in your judgment, may materially and adversely affect the Company's
business or earnings and make it impracticable or inadvisable to offer or sell
the Shares;
(h) The Shares to be sold by the Company at such Time of
Delivery shall have been accepted, subject to notice of issuance, on the Nasdaq
National Market; and
(i) Each director, executive officer and stockholder holding
at least 5% of the Company's capital stock shall have executed and delivered to
you lock-up agreements in substantially the form attached hereto as Annex II;
and
(j) The Company and each Selling Stockholder shall have
furnished or caused to be furnished to you at such Time of Delivery certificates
of officers of the Company and of such Selling Stockholder, respectively,
satisfactory to you, as to the accuracy of the representations and warranties of
the Company and of such Selling Stockholder, respectively, herein at and as of
such Time of Delivery, as to the performance by the Company and of such Selling
Stockholder of all of its or his obligations hereunder to be performed at or
prior to such Time of Delivery, and as to such other matters as you may
reasonably request and the Company shall have furnished or caused to be
furnished certificates as to the matters set forth in subsections (a) and (g) of
this Section, and as to such other matters as you may reasonably request.
10. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company will indemnify and hold harmless each
Underwriter and each person, if any, who controls such Underwriter against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter or controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary
24.
<PAGE> 25
Prospectus, the Registration Statement or the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through you expressly for use therein.
(b) Each Selling Stockholder, severally and not jointly, will
indemnify and hold harmless each Underwriter and each person, if any, who
controls such Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter or controlling person may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i) a
breach of such Selling Stockholder's representations and warranties contained in
Section 2, (ii) an untrue statement or alleged untrue statement of a material
fact contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or (iii) the omission or
alleged omission to state in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, a material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that such Selling Stockholder shall not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary Prospectus,
the Registration Statement or the Prospectus or any such amendment or supplement
in reliance upon and in conformity with written information furnished to such
Selling Stockholder by any Underwriter through you expressly for use therein;
and, provided further, that the liability of the Selling Stockholders under the
indemnity agreement in this Section 10 shall not exceed the total initial public
offering price of the Shares sold by the Selling Stockholders under this
Agreement, less underwriters' discounts.
(c) Each Underwriter will indemnify and hold harmless the
Company and each Selling Stockholder against any losses, claims, damages or
liabilities to which the Company or each Selling Stockholder may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of
25.
<PAGE> 26
a material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through you expressly
for use therein; and will reimburse the Company and the Selling Stockholders for
any legal or other expenses reasonably incurred by the Company or the Selling
Stockholders in connection with investigating or defending any such action or
claim as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under
subsection (a) (b) or (c) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or compromise
of, or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act, by or
on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 10 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c)
26.
<PAGE> 27
above in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Stockholders on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (d) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and the Selling Stockholders on the one hand and the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Selling Stockholders on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total net proceeds from the offering (before deducting expenses) received
by the Company and the Selling Stockholders, respectively, bear to the total
underwriting discounts and commissions received by the Underwriters, in each
case as set forth in the table on the cover page of the Prospectus. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or the Selling Stockholders on the one hand or the Underwriters on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company, the Selling
Stockholders and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this subsection (e) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this subsection (e). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above in this
subsection (e) shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this subsection (e),
no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations
27.
<PAGE> 28
in this subsection (e) to contribute are several in proportion to their
respective underwriting obligations and not joint.
(f) The obligations of the Company and the Selling
Stockholders under this Section 10 shall be in addition to any liability which
the Company and the Selling Stockholders may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriter under this Section 10 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the Act.
11. TERMINATION. (a) If any Underwriter shall default in its obligation
to purchase the Shares which it has agreed to purchase hereunder at a Time of
Delivery, you may in your discretion arrange for you or another party or other
parties to purchase such Shares on the terms contained herein. If within
thirty-six hours after such default by any Underwriter you do not arrange for
the purchase of such Shares, then the Company shall be entitled to a further
period of thirty-six hours within which to procure another party or other
parties satisfactory to you to purchase such Shares on such terms. In the event
that, within the respective prescribed periods, you notify the Company that you
have so arranged for the purchase of such Shares, or the Company notifies you
that it has so arranged for the purchase of such Shares, you or the Company
shall have the right to postpone such Time of Delivery for a period of not more
than seven days, in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in this Agreement
shall include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to such
Shares.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by you and
the Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the aggregate
number of all the Shares to be purchased at such Time of Delivery, then the
Company shall have the right to require each non-defaulting Underwriter to
purchase the number of Shares which such Underwriter agreed to purchase
hereunder at such Time of Delivery and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the number
of Shares which such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting Underwriter from
liability for its default.
28.
<PAGE> 29
(c) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by you and
the Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-eleventh of the aggregate number of
all the Shares to be purchased at such Time of Delivery, or if the Company shall
not exercise the right described in subsection (b) above to require
non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or
Underwriters, then this Agreement (or, with respect to the Second Time of
Delivery, the obligations of the Underwriters to purchase and of the Company to
sell the Optional Shares) shall thereupon terminate, without liability on the
part of any non-defaulting Underwriter or the Company, except for the expenses
to be borne by the Company and the Underwriters as provided in Section 8 hereof
and the indemnity and contribution agreements in Section 10 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
12. SURVIVAL. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several Underwriters, as
set forth in this Agreement or made by or on behalf of them, respectively,
pursuant to this Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof) made by or on
behalf of any Underwriter or any controlling person of any Underwriter, or the
Company, or any officer or director or controlling person of the Company and
shall survive delivery of and payment for the Shares.
13. EXPENSES OF TERMINATION. If this Agreement shall be terminated
pursuant to Section 11 hereof, the Company shall not then be under any liability
to any Underwriter except as provided in Section 8 and Section 10 hereof; but,
if for any other reason this Agreement is terminated, the Company will reimburse
the Underwriters through you for all out-of-pocket expenses approved in writing
by you, including fees and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and delivery of the
Shares not so delivered, but the Company shall then be under no further
liability to any Underwriter in respect of the Shares not so delivered except as
provided in Section 8 and Section 10 hereof.
14. NOTICE. In all dealings hereunder, you shall act on behalf of each
of the Underwriters, and the parties hereto shall be entitled to act and rely
upon any statement, request, notice or agreement on behalf of any Underwriter
made or given by you jointly or by Adams, Harkness & Hill, Inc. on behalf of you
as the Representatives; and in all dealing with any Selling Stockholder
hereunder, you and the Company shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of such Selling Stockholder
made or given by any or all of the Attorneys-in-Fact for such Selling
Stockholder.
29.
<PAGE> 30
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the Representatives in care of Adams, Harkness
& Hill, Inc., 60 State Street, Boston, MA 02109, Attention: Joseph W. Hammer; if
to the Company shall be delivered or sent by mail, telex or facsimile
transmission to the address of the Company set forth in the Registration
Statement, Attention: President; and if to a Selling Stockholder shall be
delivered or sent by mail, telex or facsimile transmission to the Selling
Stockholders to the attention of C. Zane Close or Randal Buness at the Company;
provided, however, that any notice to an Underwriter pursuant to Section 10(d)
hereof shall be delivered or sent by mail, telex or facsimile transmission to
such Underwriter at its address set forth in its Underwriter's Questionnaire or
telex constituting such Questionnaire, which address will be supplied to the
Company by you on request. Any such statements, requests, notices or agreements
shall take effect upon receipt thereof.
15. MISCELLANEOUS. (a) This Agreement shall be binding upon, and inurea
solely to the benefit of, the Underwriters and the Company and, to the extent
provided in Sections 10 and 12 hereof, the officers and directors of the Company
and each person who controls the Company or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
(b) Time shall be of the essence of this Agreement. As used
herein, the term "business day" shall mean any day when the Commission's office
in Washington, D.C. is open for business.
(c) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
(d) This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us six counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters and the
Company. It is understood that your acceptance of this letter on behalf of each
of the Underwriters is pursuant to the authority set forth in a form of
Agreement Among Underwriters, the form of which shall be submitted to the
Company and the Selling Stockholders for examination, upon request, but without
warranty on your part as to the authority of the signors thereof.
30.
<PAGE> 31
Any person executing and delivering this Agreement as Attorney-in-Fact
for the Selling Stockholders represents by so doing that he has been duly
appointed as Attorney-in-Fact by the Selling Stockholders pursuant to a validly
existing and binding Power-of-Attorney which authorizes such Attorney-in-Fact to
take such action.
Very truly yours,
CERPROBE CORPORATION
By:____________________________________
Name:__________________________________
Title:_________________________________
THE SELLING STOCKHOLDERS NAMED IN
SCHEDULE II ATTACHED HERETO
By:____________________________________
Name:__________________________________
Title: Attorney-in-Fact
_________________________________
Accepted as of the date
hereof at Boston, Massachusetts
ADAMS, HARKNESS & HILL, INC.
DAIN BOSWORTH INCORPORATED
By:_____________________________________
(Adams, Harkness & Hill, Inc. On
behalf of each of the Underwriters)
[UNDERWRITING AGREEMENT]
<PAGE> 32
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Optional Shares
Total Number of to be Purchased if
Firm Shares to be Maximum Option
Purchased Exercised
--------- ---------
<S> <C> <C>
Adams, Harkness & Hill, Inc.
Dain Bosworth Incorporated
TOTAL:
</TABLE>
<PAGE> 33
SCHEDULE II
SCHEDULE OF SELLING STOCKHOLDERS
<PAGE> 34
ANNEX I
Pursuant to Section 9(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the consolidated financial statements and any
supplementary financial information and schedules (and, if applicable,
prospective financial statements and/or pro forma financial information)
examined by them and included in the Prospectus or the Registration Statement
comply as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations
thereunder; and, if applicable, they have made a review in accordance with
standards established by the American Institute of Certified Public Accountants
of the unaudited consolidated interim financial statements, selected
consolidated financial data, pro forma financial information, prospective
financial statements and/or condensed financial statements derived from audited
consolidated financial statements of the Company for the periods specified in
such letter, as indicated in their reports thereon, copies of which have been
furnished to the representatives of the Underwriters (the "Representatives");
(iii) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for the
five most recent fiscal years included in the Prospectus agrees with the
corresponding amounts (after restatements where applicable) in the audited
consolidated financial statements for such five fiscal years;
(iv) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards, consisting
of a reading of the unaudited consolidated financial statements and other
information referred to below, a reading of the latest available interim
consolidated financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries since the
date of the latest audited consolidated financial statements included in the
Prospectus, inquiries of officials of the Company and its subsidiaries
responsible for financial and accounting matters and such other inquiries and
procedures as may be specified in such letter, nothing came to their attention
that caused them to believe that:
<PAGE> 35
(A) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows included
in the Prospectus do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the related published rules
and regulations thereunder, or are not in conformity with generally accepted
accounting principles applied on a basis substantially consistent with the basis
for the audited consolidated statements of income, consolidated balance sheets
and consolidated statements of cash flows included in the Prospectus;
(B) any other unaudited consolidated income statement data and
consolidated balance sheet items included in the Prospectus do not agree with
the corresponding items in the unaudited consolidated financial statements from
which such data and items were derived, and any such unaudited data and items
were not determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements included
in the Prospectus;
(C) the unaudited consolidated financial statements which were
not included in the Prospectus but from which were derived any unaudited
condensed consolidated financial statements referred to in Clause (A) and any
unaudited consolidated income statement data and consolidated balance sheet
items included in the Prospectus and referred to in Clause (B) were not
determined on a basis substantially consistent with the basis for the audited
consolidated financial statements included in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma adjustments have not
been properly applied to the historical amounts in the compilation of those
statements;
(E) as of a specified date not more than five days prior to
the date of such letter, there have been any changes in the consolidated capital
stock (other than issuances of capital stock upon exercise of options and stock
appreciation rights, upon earn-outs of performance shares and upon conversions
of convertible securities, in each case which were outstanding on the date of
the latest financial statements included in the Prospectus) or any increase in
the combined long-term debt of the Company and its subsidiaries, or any
decreases in combined net current assets or net assets or other items specified
by the Representatives, or any increases in any items specified by the
Representatives, in each case as compared with amounts shown in the latest
balance sheet included in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred or may occur
or which are described in such letter; and
I-2
<PAGE> 36
(F) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred to in
Clause (E) there were any decreases in consolidated net revenues or operating
profit or the total or per share amounts of consolidated net income or other
items specified by the Representatives, or any increases in any items specified
by the Representatives, in each case as compared with the comparable period of
the preceding year and with any other period of corresponding length specified
by the Representatives, except in each case for decreases or increases which the
Prospectus discloses have occurred or may occur or which are described in such
letter; and
(v) In addition to the examination referred to in their report(s) included
in the Prospectus and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraphs (iii) and (iv) above,
they have carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards, with
respect to certain amounts, percentages and financial information specified by
the representatives, which are derived from the general accounting records of
the Company and its subsidiaries, which appear in the Prospectus, or in Part II
of, or in exhibits and schedules to, the Registration Statement specified by the
Representatives, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
I-3
<PAGE> 37
ANNEX II
FORM OF LOCK-UP AGREEMENT
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Cerprobe Corporation:
We consent to the use of our reports included and incorporated herein by
reference and to the reference to our firm under the headings "Selected
Consolidated Financial Data" and "Experts" in the prospectus.
KMPG Peat Marwick LLP
Phoenix, Arizona
August 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AS OF AND FOR THE
SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS INCLUDED IN THE REGISTRATION STATEMENT FILED ON FORM
S-3 BY THE COMPANY.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,482
<SECURITIES> 0
<RECEIVABLES> 9,937
<ALLOWANCES> 218
<INVENTORY> 6,526
<CURRENT-ASSETS> 18,379
<PP&E> 19,749
<DEPRECIATION> 5,979
<TOTAL-ASSETS> 36,433
<CURRENT-LIABILITIES> 11,374
<BONDS> 5,308
0
0
<COMMON> 318
<OTHER-SE> 22,471
<TOTAL-LIABILITY-AND-EQUITY> 36,433
<SALES> 34,583
<TOTAL-REVENUES> 34,583
<CGS> 20,403
<TOTAL-COSTS> 15,909
<OTHER-EXPENSES> (114)
<LOSS-PROVISION> 218
<INTEREST-EXPENSE> 297
<INCOME-PRETAX> (1,844)
<INCOME-TAX> 1,490
<INCOME-CONTINUING> (3,305)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,305)
<EPS-PRIMARY> (0.52)
<EPS-DILUTED> (0.52)
</TABLE>
