-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GHmA7yRHr/G4pi2wCxFjRqaUXcwsEswNF6S7xCed2sPtvKbr3SQFzZx9JsWFyT+D 1Ax3wzyksPvk5sReMtk6cw== 0000950147-96-000513.txt : 19961108 0000950147-96-000513.hdr.sgml : 19961108 ACCESSION NUMBER: 0000950147-96-000513 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961107 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CERPROBE CORP CENTRAL INDEX KEY: 0000725259 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 860312814 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-11370 FILM NUMBER: 96656140 BUSINESS ADDRESS: STREET 1: 600 S ROCKFORD DR CITY: TEMPE STATE: AZ ZIP: 85281 BUSINESS PHONE: 6029677885 MAIL ADDRESS: STREET 1: 600 S ROCKFORD DR CITY: TEMPE STATE: AZ ZIP: 85281 10QSB 1 FORM 10QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 10-QSB Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended September 30, 1996 ------------------ Commission File Number 0-11370 CERPROBE CORPORATION -------------------- (Name of Issuer Specified in Its Charter) Delaware 86-0312814 ------------------------------- ---------------------- (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification Number) 600 South Rockford Drive, Tempe, Arizona 85281 - ---------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code) (602) 967-7885 -------------- (Registrant's Telephone Number, Including Area Code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, at the latest practical date. CLASS OUTSTANDING AS OF NOVEMBER 1, 1996 - ----- ---------------------------------- Common 5,037,821 Par value $.05 per share Traditional Small Business Disclosure Format (check one): Yes No X ----- ----- 1 CERPROBE CORPORATION QUARTERLY REPORT ON FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1996 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION ITEM 1. Condensed Consolidated Balance Sheets - September 30, 1996 and December 31, 1995 ......................... 3 Condensed Consolidated Statements of Income - Three and Nine Months Ended September 30, 1996 and 1995 .......... 4 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1996 and 1995 .................... 5 Notes to Condensed Consolidated Financial Statements ............. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS .................... 11 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS ................ 16 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................. 17 SIGNATURES ................................................................ 18 2 CERPROBE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31, ASSETS 1996 1995 ------ ------------ ------------ (unaudited) CURRENT ASSETS: Cash and cash equivalents $ 7,232,995 $ 263,681 Marketable securities (Note B) 2,260,063 0 Accounts receivable, net (Note C) 5,169,219 4,377,041 Inventories (Note D) 3,811,354 2,802,081 Prepaid expenses 138,245 111,673 Income taxes receivable 364,116 163,464 Deferred income taxes 336,598 270,599 ------------ ------------ TOTAL CURRENT ASSETS 19,312,590 7,988,539 ------------ ------------ PROPERTY AND EQUIPMENT, net (Notes E & I) 6,681,928 4,667,786 GOODWILL & INTANGIBLES, net 1,734,424 1,923,396 PATENTS AND TECHNOLOGY, net 59,854 74,013 OTHER ASSETS (Note F) 1,348,924 313,716 ------------ ------------ TOTAL ASSETS $ 29,137,720 $ 14,967,450 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 1,849,836 $ 1,499,853 Accrued expenses (Note G) 1,307,981 788,599 Convertible subordinated debentures 485,000 595,000 Current portion of notes payable (Note H) 124,770 123,743 Current portion of capital leases (Note I) 225,165 209,885 ------------ ------------ TOTAL CURRENT LIABILITIES 3,992,752 3,217,080 ------------ ------------ Notes payable, less current portion 312,584 408,376 Capital leases, less current portion 644,693 572,830 Deferred income taxes 66,123 66,123 Other liabilities 339,159 46,801 ------------ ------------ TOTAL LIABILITIES 5,355,311 4,311,210 ------------ ------------ MINORITY INTEREST 29,211 0 ------------ ------------ STOCKHOLDERS' EQUITY: Preferred stock, par value $.05 per share: Authorized, 10,000,000 shares; Issued and outstanding 523 shares at September 30, 1996 26 0 Common stock, par value $.05 per share: Authorized, 10,000,000 shares; Issued and outstanding 4,909,279 and 4,095,851 shares at September 30, 1996 and December 31, 1995 245,464 204,792 Additional paid-in-capital 17,488,202 7,239,410 Retained earnings 5,997,348 3,466,464 Unearned compensation 0 (241,872) Foreign currency translation adjustment 22,158 (12,554) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 23,753,198 10,656,240 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 29,137,720 $ 14,967,450 ============ ============
3
CERPROBE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, -------------------------------- ------------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ NET SALES $ 8,799,247 $ 6,834,260 $ 28,159,069 $ 17,968,454 COST OF GOODS SOLD 4,937,571 3,551,627 15,285,366 9,390,742 ------------ ------------ ------------ ------------ GROSS MARGIN 3,861,676 3,282,633 12,873,703 8,577,712 ------------ ------------ ------------ ------------ EXPENSES: Engineering and product development 345,963 199,745 724,230 529,068 Selling, general and administrative 2,595,559 2,197,764 7,870,390 5,110,197 ------------ ------------ ------------ ------------ 2,941,522 2,397,509 8,594,620 5,639,265 ------------ ------------ ------------ ------------ OPERATING INCOME 920,154 885,124 4,279,083 2,938,447 OTHER INCOME AND (EXPENSE): Interest expense (50,737) (50,273) (167,194) (134,207) Interest income 177,113 8,950 345,356 34,576 Other income 64,348 30,357 151,830 119,726 ------------ ------------ ------------ ------------ INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 1,110,878 874,158 4,609,075 2,958,542 MINORITY INTEREST 21,521 0 83,809 0 PROVISION FOR INCOME TAXES 469,000 362,000 2,162,000 1,267,000 ------------ ------------ ------------ ------------ NET INCOME $ 663,399 $ 512,158 $ 2,530,884 $ 1,691,542 ============ ============ ============ ============ INCOME PER COMMON AND COMMON EQUIVALENT SHARE: PRIMARY NET INCOME PER SHARE $ 0.14 $ 0.12 $ 0.56 $ 0.42 ============ ============ ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 4,778,398 4,405,372 4,503,963 4,022,993 ============ ============ ============ ============ FULLY DILUTED NET INCOME PER SHARE $ 0.11 $ 0.10 $ 0.45 $ 0.36 ============ ============ ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 5,782,576 4,992,874 5,647,789 4,708,352 ============ ============ ============ ============
4
CERPROBE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine months ended September 30, ------------------------------ 1996 1995 ----------- ----------- OPERATING ACTIVITIES: Net income $ 2,530,884 $ 1,691,542 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,339,227 485,502 Gain on sale of fixed assets 0 6,444 Tax benefit from stock options exercised 407,000 0 Deferred income taxes (65,999) (8,901) Provision for losses on accounts receivable 5,000 51,000 Provision for obsolete inventory 46,000 95,000 Compensation expense 49,383 0 Loss applicable to minority interest (83,809) 0 Changes in operating assets and liabilities: Accounts receivable (797,178) (859,701) Inventories (1,055,273) (935,603) Prepaid expenses and other assets (461,780) (322,438) Accounts payable and accrued expenses 869,365 168,549 Income taxes receivable (200,652) 0 Other liabilities 292,358 424,133 ----------- ----------- Net cash provided by operating activities 2,874,526 795,527 ----------- ----------- INVESTING ACTIVITIES: Capital expenditures (2,896,861) (1,187,269) Purchase of marketable securities (2,260,063) 0 Investment in CRPB Investors, L.L.C (600,000) 0 Cost incurred in Fresh Test Technology acquisition 0 (402,865) Cash acquired in purchase of Fresh Test Technology 0 321,167 Proceeds from sale of fixed assets 0 43,613 ----------- ----------- Net cash used in investing activities (5,756,924) (1,225,354) ----------- ----------- FINANCING ACTIVITIES: Principal payments on notes payable and capital leases (261,000) (253,692) Net proceeds from issuance of convertible preferred stock 9,400,000 0 Net proceeds from issuance of common stock 564,980 207,464 Capital contribution by minority interest partner 113,020 0 ----------- ----------- Net cash provided by (used in) financing activities 9,817,000 (46,228) ----------- ----------- EFFECT OF EXCHANGE RATES ON CASH 34,712 (18,479) ----------- ----------- NET INCREASE IN CASH AND CASH EQUIVALENTS 6,969,314 (494,534) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 263,681 738,319 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,232,995 $ 243,785 =========== =========== SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES: Conversion of subordinated debentures to common stock $ 110,000 0 ----------- ----------- Property acquired under capital leases and notes payable $ 253,378 $ 547,613 ----------- ----------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION : Interest paid $ 118,685 $ 110,263 ----------- ----------- Income taxes paid $ 1,812,000 $ 1,679,876 ----------- ----------- Issuance of stock for purchase of Fresh Test Technology $ 0 $ 2,662,969 ----------- -----------
5 CERPROBE CORPORATION -------------------- NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- SEPTEMBER 30, 1996 ------------------ A. INTERIM FINANCIAL REPORTING --------------------------- The balance sheet as of September 30, 1996, the statements of operations for the three and nine months ended September 30, 1996 and September 30, 1995, and the statements of cash flows for the nine months ended September 30, 1996 and September 30, 1995 have been prepared by Cerprobe Corporation (the "Company") without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's 1995 Form 10-KSB. The results of operations of the interim periods are not necessarily indicative of the results to be obtained for the entire year. In late 1995, Cerprobe Corporation formed a wholly owned Singapore subsidiary called Cerprobe Asia Holdings PTE. LTD. Cerprobe Asia Holdings PTE. LTD., together with Asian investors, formed a joint venture named Cerprobe Asia PTE. LTD. Cerprobe Asia Holdings PTE. LTD. is a 70% owner of Cerprobe Asia PTE. LTD. Subsequently, Cerprobe Asia PTE. LTD created wholly owned subsidiaries, Cerprobe Singapore PTE. LTD and Cerprobe Taiwan Co. LTD, to operate full service sales and manufacturing plants. At present, Cerprobe Taiwan Co. LTD is not fully operational. All activities that are related to the above Asian Companies will, henceforth, be referred to as "Asian Operations." B. MARKETABLE SECURITIES --------------------- Marketable securities consist of a U.S. Treasury Note for $2,225,000 at 6 3/8%, maturing on July 15, 1999. This balance is stated at cost plus accrued interest, which approximates fair market value. C. ALLOWANCE FOR DOUBTFUL ACCOUNTS ------------------------------- The allowance for doubtful accounts at September 30, 1996 and December 31, 1995 were $178,000 and $173,000, respectively. 6 D. INVENTORIES ----------- Inventories are stated at the lower of cost (determined on the first-in, first-out method) or market and consist of the following:
September 30, December 31, 1996 1995 -------------- ------------ Raw materials $ 2,250,649 $ 1,655,974 Work-in-process 1,689,705 1,229,107 Reserve for obsolete inventory (129,000) (83,000) -------------- ------------ Total $ 3,811,354 $ 2,802,081 ============== ============
E. PROPERTY AND EQUIPMENT ---------------------- Property and equipment consist of the following:
September 30, December 31, 1996 1995 -------------- ------------ Manufacturing tools and equipment $ 6,671,614 $ 4,825,724 Office furniture and equipment 2,783,528 1,722,312 Leasehold improvements 881,554 759,843 Construction in progress 507,185 398,838 Computer software 39,775 39,775 Accumulated depreciation and amortization (4,201,728) (3,078,706) -------------- ------------ $ 6,681,928 $ 4,667,786 ============== ============
F. OTHER ASSETS ------------ In September 1996, the Company acquired a 36% interest in CRPB Investors, L.L.C., for $600,000. CRPB Investors, L.L.C., an Arizona limited liability company, was formed for the purpose of owning and operating the 83,000 square foot facility being built to serve as Cerprobe's worldwide headquarters. The investment will be accounted for by the equity method of accounting. A holder of $460,000 of Cerprobe's convertible subordinated debentures is a 24% owner of CRPB Investors, L.L.C.. G. ACCRUED EXPENSES ---------------- Accrued expenses consist of the following:
September 30, December 31, 1996 1995 --------------- ------------- Accrued payroll and related taxes $ 910,957 $ 482,866 Other accrued expenses 397,024 305,733 --------------- ------------- $ 1,307,981 $ 788,599 =============== =============
7 H. NOTES PAYABLE ------------- On April 30, 1996, the Company entered into an unsecured $3,000,000 revolving line of credit with First Interstate Bank (now Wells Fargo Bank), which expires on April 28, 1997. The non-use fee under the line of credit is .125% of the unused portion, calculated per annum. The interest rate on any amounts borrowed under the revolving credit agreement is the lower of Prime Rate, which was 8.25% at September 30, 1996, or LIBOR (London Interbank Rate), plus 2.25%, which was 7.684% at September 30, 1996. There was no amount outstanding under this agreement at September 30, 1996. On April 3, 1995, due to the acquisition of Fresh Test Technology Corporation ("Fresh Test"), the Company acquired a note related to an exclusive license for probe card technology, which provided for monthly payments of $2,500. This note was paid in full on March 14, 1996. I. LONG-TERM DEBT AND COMMITMENTS ------------------------------ On August 21, 1996, Cerprobe entered into a long term commercial operating lease to consolidate its Arizona operations into a single facility on a 12 acre parcel in Gilbert, Arizona. The lease will commence upon completion of the 83,000 square foot facility in May 1997. The facility will serve as Cerprobe's worldwide headquarters and is being built for Cerprobe's use by CRPB Investors, L.L.C., a limited liability company formed for the purpose of owning and operating the property. Cerprobe is a minority shareholder in CRPB Investors, L.L.C. The initial term of the lease is 15 years with 7 options to extend the lease for successive 5 year terms. The initial lease rate is dependent on final construction costs, but is currently expected to be about $875,000 per year. On September 9, 1996, the Company leased various equipment with an aggregate cost of $253,378 from Wells Fargo Leasing Corporation. The interest rate on this lease is 8.48%. On September 30, 1996, the long term portion of this lease was $209,227. On October 10, 1996, the Company leased various equipment with an aggregate cost of $270,590 from Wells Fargo Leasing Corporation. The interest rate on this lease is 8.08%. Convertible Subordinated Debentures In March and April 1991, the Company issued $1,000,000 in aggregate principal amount of Convertible Subordinated Debentures (the "Debentures"). The Debentures are convertible into shares of the Company's Common Stock at a conversion price equal to $1.00 per share. As of September 30, 1996, $515,000 in principal amount of the Debentures had been converted into 515,000 shares of Common Stock. Accordingly, $485,000 in principal amount of the Debentures was outstanding at September 30, 1996, all of which is due on December 15, 1996 ($480,000 of which bears interest at 12 1/2% and $5,000 of which bears interest at 25%, payable semi-annually in June and December of each year). 8 Convertible Preferred Stock On January 18, 1996, the Company issued 1,000 shares of Convertible Preferred Stock for $10,000,000. Net proceeds, after deducting expenses, were $9,400,000. If a holder does not convert within the first two years, then automatic conversion occurs at the end of the second year. The Convertible Preferred Stock converts at the lesser of 110% of the fixed strike price of $16.55 or 90% of the average five day closing price prior to the conversion date. The Company may call the Convertible Preferred Stock at any time in minimum amounts of $2,000,000 at a price of 125% of par, or upon a merger, buyout or acquisition. Additionally, the Company issued 39,275 common stock warrants on January 18, 1996. These give the holder the right to purchase from Cerprobe Corporation not more than 39,275 fully paid and non-assessable shares of the Company's Common Stock, $.05 par value, at a price of $16.55 per share on or after January 16, 1997, with expiration in four years. During the first quarter ended March 31, 1996, 22 shares of Convertible Preferred Stock were converted into 17,655 shares of Common Stock. During the second quarter ended June 30, 1996, 106 shares of Convertible Preferred Stock were converted into 83,300 shares of Common Stock. During the third quarter ended September 30, 1996, 349 shares of Convertible Preferred Stock were converted into 437,771 shares of Common Stock. Accordingly, 523 shares of Convertible Preferred Stock were outstanding at September 30, 1996. Acquisition On October 25, 1996, the Company signed an Agreement of Merger and Plan of Reorganization with CRoute, Inc., a Texas corporation, pursuant to which Cerprobe will acquire CompuRoute, Incorporated, a manufacturer of printed circuit boards, 89% of which is owned by CRoute, Inc., in exchange for 400,000 shares of Cerprobe common stock and $4.6 million in cash, subject to reduction. The transaction will be accounted for by Cerprobe under the purchase method of accounting in accordance with generally accepted accounting principles. In connection with this transaction, Cerprobe will purchase the existing building leased by CompuRoute for $1.2 million and the assumption of the remaining principal balance against the building, which at September 30, 1996, was approximately $1,040,000. This transaction is subject to a number of conditions, as well as approval by the shareholders of CRoute and CompuRoute. 9 J. PRO FORMA DATA - FRESH TEST TECHNOLOGY ACQUISITION -------------------------------------------------- The following summary, prepared on a pro forma basis, presents the results of operations as if the acquisition had occurred January 1, 1995. Nine Months Ended ----------------- September 30, 1995 ------------------ Net sales $19,446,606 Net income 1,871,418 Primary earnings per share .46 Fully diluted earnings per share .40 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF --------------------------------------- FINANCIAL CONDITION AND RESULTS OF OPERATIONS --------------------------------------------- General Cerprobe designs, manufactures, and markets high-performance probing and interface products for use in the testing of integrated circuits and hybrid electronic circuits for the semiconductor industry. Its probe cards generally range from $500 to $24,000, but may cost more depending upon the complexity and performance specifications of the probe cards. Cerprobe's interface assemblies range in price from $1,000 to $65,000. The Company has experienced significant growth over the past few years with sales of $14 million in 1994, $26 million in 1995, and $28 million for the first nine months of 1996. Approximately $4 million of 1995 sales and $5.4 million of the first nine months of 1996 sales were sales of interface products from the Company's 1995 acquisition of Fresh Test Technology Corporation ("Fresh Test"). The Company operates domestic full service manufacturing and sales facilities in Tempe and Chandler, Arizona; San Jose, California; Austin, Texas; and Westboro, Massachusetts, and maintains sales offices in Beaverton, Oregon; Colorado Springs, Colorado; and Boca Raton, Florida. In Europe and Asia, Cerprobe markets its products and services its customers through its full service manufacturing and sales facilities in Scotland and Singapore. Cerprobe recently leased space for a Taiwan facility under the name of Cerprobe Taiwan Co., LTD. This subsidiary is in the initial startup phase. The Company intends to continue to expand in Southeast Asia as it believes that area is the fastest growing region for the semiconductor industry. Results of Operations Three Months Ended September 30, 1996 Compared to Three Months Ended September 30, 1995 Net sales for the three months ended September 30, 1996 were $8,799,247 compared to $6,834,260 for the three months ended September 30, 1995, an increase of 29%. The increase in net sales reflects a continuation of higher order rates for the Company's probe card products and the contribution of interface products from the Company's 1995 acquisition of Fresh Test. Gross margin for the three months ended September 30, 1996 was 44% of sales compared to 48% of sales for the comparable period in 1995. The decrease in gross margin was a result of the change in product mix, which includes a higher ratio of interface product sales in the three months ended September 30, 1996, as well as manufacturing variances due to decreased volume in relation to capacity during the three months ended September 30, 1996. Engineering and product development expenses for the three months ended September 30, 1996 were $345,963 compared to $199,745 for the three months ended September 30, 1995, an increase of 73%. This increase represents a controlled expansion of research and development efforts to pursue the development of new integrated circuit testing systems for the future. 11 Selling, general and administrative expenses for the three months ended September 30, 1996 were $2,595,559 compared to $2,197,764 for the three months ended September 30, 1995, an increase of 18%. The increase in selling, general and administrative expenses resulted primarily from increased sales and marketing efforts, and increased fixed general and administrative costs due to the Company's domestic facility expansion and the start-up of Asian operations. Operating income for the three months ended September 30, 1996 was $920,154 compared to $885,124 for the three months ended September 30, 1995, an increase of 4%. The increase in operating income resulted primarily from the increase in net sales as a result of higher order rates. Interest income for the three months ended September 30, 1996 was $177,113 compared with $8,950 for the three months ended September 30, 1995, an increase of 1,879%. This increase was primarily due to the interest income earned on the net proceeds from the issuance of Convertible Preferred Stock. Income before income taxes and minority interest for the three months ended September 30, 1996 was $1,110,878 as compared to $874,158 for the three months ended September 30, 1995, an increase of 27%. The majority of the increase was due to increased sales reflecting a continuation of higher order rates for the Company's probe card and interface products. The minority interest from Asian operations for the three months ended September 30, 1996 of $21,521 represents the Company's joint venture partner's share (30%) of the loss from Asian operations. The initial start up phase for the Asian operations, which includes training and build up of inventory, has been occurring during 1996. For the three months ended September 30, 1996, the Company's income tax rate remained comparable to that of the same period in 1995. Net income for the three months ended September 30, 1996 was $663,399 compared to $512,158 for the three months ended September 30, 1995, an increase of 30%. The increase was primarily due to the increase in net sales due to higher order rates. Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30, 1995 Revenues for the nine months ended September 30, 1996 were $28,159,069 compared to $17,968,454 for the nine months ended September 30, 1995, an increase of 57%. The increase in net sales reflects a continuation of higher order rates for the Company's probe card products and the contribution of interface products from the Company's 1995 acquisition of Fresh Test. Gross margin for the nine months ended September 30, 1996 was 46% of sales compared to 48% of sales for the comparable period in 1995. The decrease in gross margin is a result of a change in product mix, which includes a higher ratio of interface product sales, as well as manufacturing variances due to decreased volume in relation to capacity during the three months ended September 30, 1996. Engineering and product development expenses for the nine months ended September 30, 1996 were $724,230 compared to $529,068 for the nine months ended September 30, 1995, an 12 increase of 37%. This increase represents a controlled expansion of research and development efforts to pursue the development of new integrated circuit testing systems for the future. Selling, general and administrative expenses for the nine months ended September 30, 1996 were $7,870,390 compared to $5,110,197 for the nine months ended September 30, 1995, an increase of 54%. The increase in selling, general and administrative expenses resulted primarily from increased sales and marketing efforts, increased fixed general and administrative costs due to the Company's domestic facility expansion and the start-up of Asian operations. Operating income for the nine months ended September 30, 1996 was $4,279,083 compared to $2,938,447 for the nine months ended September 30, 1995, an increase of 46%. The increase in operating income resulted primarily from the increase in net sales as a result of higher order rates. Interest expense for the nine months ended September 30, 1996 was $167,194 compared to $134,207 for the nine months ended September 30, 1995, an increase of 25%. The increase in interest expense is primarily attributable to the increase in lease equipment financing. Interest income for the nine months ended September 30, 1996 was $345,356 compared to $34,576 for the nine months ended September 30, 1995, an increase of 899%. This increase was primarily due to the interest income earned on the net proceeds from the issuance of Convertible Preferred Stock. Income before income taxes and minority interest for the nine months ended September 30, 1996 was $4,609,075 compared to $2,958,542 for the comparable period in 1995, an increase of 56%. The majority of the increase was due to an increase in sales which reflects a continuation of higher order rates for the Company's probe card and interface products. The minority interest from Asian operations for the nine months ended September 30, 1996 of $83,809 represents the Company's joint venture partner's share (30%) of the loss from Asian operations. During the nine months ended September 30, 1996, the Asian operations were in the initial start up phase which includes training and build up of inventory. For the nine months ended September 30, 1996, the Company's income tax rate was 47% compared to 43% for the same period in 1995. The increase in income tax rate was due to the non-deductibility of losses from the Company's European and Asian subsidiaries. Net income for the nine months ended September 30, 1996 was $2,530,884 compared to $1,691,542 for the comparable period in 1995, an increase of 50%. The increase was primarily due to the increase in net sales. Liquidity and Capital Resources The Company has financed its operations and capital requirements primarily through cash flow from operations, equipment lease financing arrangements, and sales of equity securities. In January 1996, the Company completed a private placement of Convertible Preferred Stock which raised net proceeds of $9,400,000 to fund its domestic and international expansion as well as acquisitions of other companies and/or technologies. At September 30, 1996, cash and marketable securities were $9,493,058, compared to $263,681 as of December 31, 1995. 13 During the nine months ended September 30, 1996, the Company generated $2,874,526 in cash flow from operations. Accounts receivable increased $797,178, or 18%, to $5,169,219, primarily due to the 8% increase in net revenues for the three months ended September 30, 1996 compared to the three months ended December 31, 1995, as well as the timing of the shipments during the respective quarters. Inventories increased $1,055,273, or 36%, to $3,811,354 at September 30, 1996, to support the higher production levels related to the continuing year-over-year increase in net sales. Both accounts receivable days sales outstanding and inventory turns improved during the nine months ended September 30, 1996 compared to the fiscal year ended December 31, 1995. Accounts payable and accrued expenses increased $869,365 from December 31, 1995, or 38%, to $3,157,817 primarily due to increased activities with vendors. Working capital increased $10,548,379, or 221%, to $15,319,838 from December 31, 1995 to September 30, 1996. The current ratio increased from 2.5 to 1 at December 31, 1995 to 4.8 to 1 at September 30, 1996. These increases were primarily as a result of the net proceeds from the private placement of the Convertible Preferred Stock.. The Company increased its investment in property, plant, and equipment during the nine months ended September 30, 1996 by $3,150,239 or 40%, to $10,883,656, in order to expand capacity to meet customer demand for its products. These capital expenditures were funded from cash flow from operations, proceeds from the private placement of the Convertible Preferred Stock, and a capital lease of $253,378 with Wells Fargo Leasing Corporation. Long term debt, comprised of notes payable and capital leases, decreased $23,929, or 2%, to $957,277. On October 25, 1996, the Company signed an Agreement of Merger and Plan of Reorganization with CRoute, Inc., a Texas corporation, pursuant to which Cerprobe will acquire CompuRoute, Incorporated, a manufacturer of printed circuit boards, 89% of which is owned by CRoute, Inc., in exchange for 400,000 shares of Cerprobe common stock and $4.6 million in cash, subject to reduction. The transaction will be accounted for by Cerprobe under the purchase method of accounting in accordance with generally accepted accounting principles. In connection with this transaction, Cerprobe will purchase the existing building leased by CompuRoute for $1.2 million and the assumption of the remaining principal balance against the building, which at September 30, 1996, was approximately $1,040,000. This transaction is subject to a number of conditions, as well as approval by the shareholders of CRoute and CompuRoute. The Company has signed a long-term lease for a corporate headquarters and manufacturing facility in Arizona. Construction began in September 1996 and is anticipated to continue over an eight month period. The Company would be the sole tenant of the approximately 83,000 square foot facility, which will permit the Company to consolidate all of its Arizona activities. In April 1996, the Company entered into a $3,000,000 unsecured revolving line of credit, which matures April 28, 1997, with its primary lender, First Interstate Bank of Arizona (now Wells Fargo Bank). Advances under the revolving line may be made as Prime Rate Advances, which accrue interest payable monthly, at the Bank's prime lending rate, or as LIBOR Rate Advances which bear interest at 225 basis points in excess of the LIBOR Base Rate. At September 30, 1996, no borrowings were outstanding under this credit facility. 14 If the remaining holders of the Convertible Preferred Stock elect to convert their shares into shares of Common Stock based on the current market price of the Company's Common Stock, the Company would be required to issue more than 800,000 shares of Common Stock. To insure compliance with Nasdaq National Market rules requiring shareholder approval of issuances of Common Stock representing greater than 20% of all shares outstanding, the Company has the right to redeem any shares of Convertible Preferred Stock that, if converted, would result in the issuance of more than 800,000 shares of Common Stock. In such event, the Company may redeem those shares of Convertible Preferred Stock for cash in an amount determined by a formula based on the current market price of the Company's Common Stock. If the holders of all outstanding shares of Convertible Preferred Stock had elected to convert their shares on October 24, 1996, the Company estimates that it would have been required to pay approximately $3,300,000 to have redeemed all shares of Convertible Preferred Stock that, if converted, would have resulted in the issuance of more than 800,000 shares of Common Stock. Based on the formula referred to above, the amount of cash required to redeem any shares of Convertible Preferred Stock will increase if the price of the Company's Common Stock decreases, and will decrease if the price of the Company's Common Stock increases. The Company believes that its capital, together with loan commitments described above and anticipated cash flow from operations, will provide adequate sources to fund operations in the near term. The Company anticipates that any additional cash requirements as the result of operations or capital expenditures will be financed through cash flow from operations, by borrowing from the Company's primary lender, or by lease financing arrangements. "Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995 Statements in this report regarding the expansion of the Company's operations in Southeast Asia and adequacy of sources of capital are forward looking statements. Words such as "expects", "intends", "believes", "anticipates" and "will likely" also identify forward looking statements. Actual results, however, could differ materially from those anticipated for a number of reasons, including increased competition in Southeast Asia, a downturn in the market for semiconductors, increases in interest rates, foreign currency fluctuations, and other unanticipated factors. Risk factors, cautionary statements, and other conditions that could cause actual results to differ are contained in the Company's SEC filings, its press releases dated July 22, 1996 and October 17, 1996, and the Company's Annual Report on Form 10-KSB. 15 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- a. The annual meeting of stockholders of the Company was held on July 23, 1996 in Tempe, Arizona. The table below briefly describes the proposals and results from the annual meeting of stockholders. 1. Election of Directors For Withheld --- -------- Ross J. Mangano 3,718,932 14,256 C. Zane Close 3,718,932 14,256 Kenneth W. Miller 3,718,932 14,256 Donald F. Walter 3,622,734 110,454 William A. Fresh 3,718,932 14,256 2. Proposal to ratify the appointment of KPMG Peat Marwick LLP as the independent auditors of the Company. For Against Abstain --- ------- ------- 3,722,454 1,500 9,234 b. A special meeting of stockholders of the Company, which was a continuation of the annual meeting of stockholders, was held on August 20, 1996 in Phoenix, Arizona. 1. Proposal to amend the Company's Certificate of Incorporation to add a provision allowing the Board of Directors to consider certain factors when evaluating certain matters such as tender offers. For Against Withheld Abstain --- ------- -------- ------- 2,409,732 104,540 1,266,860 74,741 2. Proposal to amend the Company's Certificate of Incorporation so that the Company will be subject to the provisions of Section 203 of the Delaware General Corporation Law. For Against Withheld Abstain --- ------- -------- ------- 2,409,857 100,390 1,266,860 75,766 3. Proposal to amend the Company's Certificate of Incorporation to eliminate actions by written consent of stockholders. For Against Withheld Abstain --- ------- -------- ------- 2,416,769 119,228 1,296,860 20,016 4. Proposal to amend the Company's Certificate of Incorporation to add certain minimum price and procedural requirements in connection with certain transactions such as business combinations. For Against Withheld Abstain --- ------- -------- ------- 2,463,557 104,140 1,226,860 18,316
16 ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- a. Exhibits required by Item 601 of Regulation S-K 1. Capital Lease Agreement between the Company and Wells Fargo Leasing Corporation dated October 10, 1996. 2. Capital Lease Agreement between the Company and Wells Fargo Leasing Corporation dated September 9, 1996. 3. Lease Agreement between the Company and CRPB Investors L.L.C. dated August 21, 1996. 4. Employment Agreement between the Company and Randal L. Buness dated June 26, 1996. 5. Operating Agreement between the Company and CRPB Investors, L.L.C. dated September 18, 1996. b. Exhibit 11. Statement regarding computation of per share earnings. 17 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CERPROBE CORPORATION /s/ Randal L. Buness ------------------------- Randal L. Buness Vice President - Chief Financial Officer November 1, 1996 18 EX-1 2 MASTER LEASE AGREEMENT EQUIPMENT SCHEDULE DATED October 10, 1996 to MASTER LEASE AGREEMENT DATED June 6, 1994 LESSEE: LESSOR: CERPROBE CORPORATION Wells Fargo Leasing Corporation "(as assignee of all right, title and interest of First Interstate Bank of Arizona)" Name 600 S. Rockford Drive P.O. Box 53456, MAC 4101-250 - --------------------------------------------- Address Tempe, Arizona 85281 Phoenix, Arizona 85072-3456 1. Master Lease: The terms and conditions of that Master Lease Agreement dated as of the date set forth above by and between the Lessor, Wells Fargo Leasing Corporation "(as assignee of all right, title and interest of First Interstate Bank of Arizona)" and Lessee (the "Master Agreement") are by this reference incorporated herein as if fully set forth herein and together with the terms and conditions hereof, and of all schedules, riders, addenda and/or exhibits that are attached or refer to this Equipment Schedule, constitute a single and severable agreement of lease (this "Lease"). Subject to all of the terms and conditions of this Lease, Lessor hereby leases to Lessee, and Lessee hereby hires from Lessor, the personal property described below and on any supplemental Schedule "A" hereto (hereinafter, together with all replacement parts, additions, modifications, repairs and accessories incorporated therein and/or attached thereto, said personal property is referred to as the "Equipment"):
- ---------------------------------------------------------------------------------------------------------------------- Qty. Description of Equipment - Make, kind, model no., serial no., and Original any other pertinent identification Cost - ----------- ----------------------------------------------------------------------------------- -------------------- Applied Precision Invoice #2541 1 PRVX System, 960 Channels, LP $250,125.50 1 PRVX Table Short 1280 1 Assy, PRVX W/S PF Compat 1 Assy, VX CPLT W/BEVEL Postgrind 1 PRVX Controller Pkg. 1 Monitor 17" Samsung 1 PRV/PRVX Test Software 1 Assy, PRVX Channel Config. Pkg. 1 Assy, PRVX Accessory kit 2 PRVX Training AT API 1 Checkpoint System Install. 1 Assy, PRVX Shipping Pkg. 1 Assy, Probe Force, PRVX, factory 1 PWA, Edge Card 48 Pin VX $697.50 1 PWA, PRVX Cal Card Conn $697.50 1 PWA, Edge Card 88 Pin VX $813.75 1 PWA, Edge Card 128 Pin VX $1,046.25 2 Manual PRVX 7.1 1 Manual PRVX 7.1 Cleanroom Shipping Charges $935.00 location: 600 S. Rockford Drive, Tempe, Arizona 85281 - ---------------------------------------------------------------------------------------------------------------------- Applied Precision Invoice #2699 1 Probe Force $16,275.00 location: 600 S. Rockford Drive, Tempe, Arizona 85281 - ---------------------------------------------------------------------------------------------------------------------- Sales or Use Tax - ---------------------------------------------------------------------------------------------------------------------- *If additional space is required, attach Schedule A. Total Original Cost $270,590.50 - ---------------------------------------------------------------------------------------------------------------------- Location of Equipment (if additional space is required, attach Schedule A) A. 600 S. Rockford Drive Tempe Maricopa Arizona 85281 ----------------------------------------------------------------------------------- Address City County State Zip B. ----------------------------------------------------------------------------------- Address City County State Zip
2. Acceptance Deadline: October 25, 1996 3. Term: The term of this Lease shall be a period of 60 months and shall commence on the date that the Equipment is accepted by Lessee on behalf of Lessor (the "Acceptance Date"). 4. Rent Commencement Date: The first day of the month immediately following the Acceptance Date. 1 5. Basic Rent Payment Date: The first day of each month beginning with the Rent Commencement Date. 6. Rent: (a) Interim Rent: An amount equal to 1/30th of the Basic Rent multiplied by the number of days elapsed from and including the Acceptance Date but excluding the Rent Commencement Date and due and payable concurrently with the delivery of the Certificate of Acceptance by Lessee to Lessor. (b) Basic Rent: for the term of this Lease, Lessee shall pay Lessor Basic Rent of $5,460.20 monthly payable on each Basic Rent Payment Date. If the first day of each month during the term of this Lease is not a business day, Basic Rent shall be due on the next subsequent business day. Unless otherwise expressly agreed to in writing by Lessor, sales tax on each rental payment received by Lessor under this lease shall be due and payable by Lessee to Lessor on each Basic Rent Payment Date. (c) Overdue Rent: Lessee shall pay to Lessor an Overdue Rent Charge of 5% of all Basic Rent payments not received by Lessor on or before the Basic Rent Payment Date. 7. Purchase Option: Provided that (i) an Event of Default (or an event or condition which, with the lapse of time or the giving of notice or both, would constitute an Event of Default) does not exist; (ii) this Lease has not previously been terminated, and (iii) Lessee has given Lessor not less than sixty (60) days notice prior to the expiration of the initial term of the Lease, Lessor shall have the option to purchase all (but not less than all) of the Equipment on the original expiration date of this Lease under the following terms and conditions: [Lessee shall have the right to purchase the Equipment, on an "as-is, where-is" basis, without representation or warranty of any kind, for $1.00, provided that such right is further subject to payment in full of the purchase price on or before the expiration of the initial term of this Lease.] Lessee shall pay or reimburse Lessor all of Lessor's costs and expenses incurred in connection with such purchase and shall pay all taxes imposed in connection with such sale (other than taxes imposed on or measured by lessor's net income). 8. Modification to Master Agreement: All terms and conditions of this Lease shall be as set forth above and in the Master Agreement, except (if additional space is required, attach an Addendum to this Lease): N/A 9. Conditions Precedent: Lessor shall have no obligation to purchase the Equipment and to lease the same to Lessee hereunder. (i) if the actual cost of the Equipment exceeds the original cost thereof set forth hereinabove; (ii) if there exists any Event of Default or event or condition which, with the lapse of time or the giving of notice or both, would constitute an Event of Default; or (iii) unless prior to the Acceptance Deadline Lessee, at its expense, shall have delivered or caused to be delivered to Lessor all of the Documents required under Section 3 of the Master Agreement and, in addition, Lessee, at its expense, shall have fully satisfied all of the following additional conditions precedent (if additional space is required, attach an Addendum to this Lease): N/A 10. Schedule: The "Schedule of Stipulated Loss Percentages" that is attached or refers to this Equipment Schedule is by this reference expressly incorporated herein as if fully set forth herein. 11. Reaffirmation: By their execution and delivery of this Equipment Schedule, the parties hereby reaffirm all of the terms and conditions of the Master Agreement, except to the extent, if any, modified hereby. 12. Counterparts: The Equipment Schedule evidencing this Lease may be executed in more than one original counterpart. However, only the counterpart designated below as "Counterpart No. 1" shall evidence the monetary obligation of Lessee with respect to this Lease. To the extent, if any, that this Lease constitutes "chattel paper," as that term is defined in the Arizona Uniform Commercial Code, no security interest in this Lease may be created or perfected by the transfer or possession of any counterpart hereof other than said "Counterpart No. 1." THIS IS COUNTERPART NO. 1 OF 1 COUNTERPART ORIGINALS. IN WITNESS WHEREOF, this Equipment Schedule has been executed, delivered and accepted this 10th day of October 1996. LESSOR: LESSEE: CERPROBE CORPORATION Wells Fargo Leasing Corporation - ---------------------------------- ------------------------------- "(as assignee of all right, title and interest of First Interstate Bank of Arizona)" By SIGNATURE NOT LEGIBLE By SIGNATURE NOT LEGIBLE ------------------------------- ---------------------------- Its President/CEO Its Vice President ------------------------------- --------------------------- 2 SCHEDULE OF STIPULATED LOSS PERCENTAGES to EQUIPMENT SCHEDULE DATED October 10, 1996 to MASTER LEASE AGREEMENT DATED June 6, 1994 Rental Payment Date Stipulated Loss in the month of: Percentage - ---------------- ---------- 1 98.64 2 97.27 3 95.90 4 94.51 5 93.12 6 91.71 7 90.30 8 88.88 9 87.44 10 86.00 11 84.55 12 83.09 13 81.61 14 80.13 15 78.64 16 77.14 17 75.63 18 74.10 19 72.57 20 71.03 21 69.47 22 67.91 23 66.34 24 64.75 25 63.16 26 61.55 27 59.93 28 58.30 29 56.67 30 55.02 31 53.36 32 51.68 33 50.00 34 48.30 35 46.60 36 44.88 37 43.15 38 41.41 39 39.66 40 37.89 41 36.12 42 34.33 43 32.53 44 30.72 45 28.89 46 27.05 47 25.21 48 23.34 49 21.47 50 19.58 51 17.68 52 15.77 53 13.84 54 11.91 55 9.96 56 7.99 57 6.01 58 4.02 59 2.02 For purposes of the "Master Agreement" (defined below) and the "Lease " (defined below), the term "Stipulated Loss Percentage" means, with respect to any item of "Equipment" (defined in the Lease) for which "Stipulated Loss Value" (defined in the Master Agreement) is determined, the percentage set forth hereinabove that corresponds to the "Rental Payment Date" (defined in the Lease) through which rental payments on such Equipment have actually been paid (exclusive of prepayments of rent otherwise due and payable at the end of the Lease term, if any are required under the Lease) as of the date that the Stipulated Loss Value of such item of Equipment is determined. -1- IN WITNESS WHEREOF, the undersigned "Lessor" and "Lessee" have this 10th day of October, 1996 executed and delivered this "Schedule of Stipulated Loss Percentages" to that Equipment Schedule dated as set forth above (the "Lease") to that Master Lease Agreement dated as set forth above (the "Master Agreement") between the undersigned "Lessor" and "Lessee." LESSOR: LESSEE: WELLS FARGO LEASING CORPORATION CERPROBE CORPORATION By By /s/ Signature Illegible ----------------------------------- ------------------------------- Its Authorized Representative Title President/CEO ----------------------------- -2- CERTIFICATE OF ACCEPTANCE Wells Fargo Leasing Corporation "(as assignee of all right, title and interest of First Interstate Bank of Arizona)" P.O. Box 53456, MAC 4101-250 Phoenix, Arizona 85072-3456 RE: Acceptance of Equipment Leased Under Equipment Schedule dated October 10, 1996 (the "Lease") to Master Lease Agreement dated June 6, 1994 (the "Master Agreement") between the undersigned and Wells Fargo Leasing Corporation. Gentlemen: This Certificate of Acceptance is delivered pursuant to Section 2 of the Master Agreement, and constitutes a "Certificate of Acceptance," as defined therein. We, as Lessee, have received all of the "Equipment" (as defined in the Lease), and all necessary installation thereof has been completed. We have inspected, tested and approved all of the Equipment, and find that each piece is in good working order and is of the size, design, type, quality, condition, capacity and manufacture specified by us, and conforms to any applicable purchase orders therefor. We approve the contract by which you acquired the Equipment or the right to possession and use of the goods. Our inspection and test has disclosed no defects or deficiencies in any of the Equipment. You are hereby notified that we accepted delivery of all of the Equipment on your behalf on 10/24/96 , 199 . We hereby certify that as of the date hereof (i) no Event of Default has occurred under the Lease of the Master Agreement; (ii) the presentations and warranties made by Lessee pursuant to the Lease and Master Agreement are true and correct, (iii) Lessee has obtained insurance policies with respect to the Equipment as are required to be obtained under the Lease and Master Agreement; and (iv) the Equipment will be located at 600 S. Rockford Rd., Tempe, Arizona 85281. Sincerely, Cerprobe Corporation - -------------------------------------- ("Lessee") By: SIGNATURE NOT LEGIBLE ----------------------------------- Its: President/CEO ---------------------------------- Dated: October 10, 1996
- -------------------------------------------------------------------------------------------------------------- Approved by the Secretary of State of Arizona Rev. 10/90 FORM UCC-1 Space below used by filing office - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- Return copy or recorded original to: ARIZONA UNIFORM COMMERCIAL CODE FINANCING STATEMENT--FORM UCC-1 This FINANCING STATEMENT is presented for filing (recording) pursuant to the Arizona Uniform Commercial Code. - -------------------------------------------------------------------------------------------------------------- 1. (Last name first and address): Lessee 2. Address: Lessor Cerprobe Corporation Wells Fargo Leasing Corporation 600 S. Rockford Drive 100 West Washington MAC 4101-250 Tempe, Arizona 85281 Phoenix, Arizona 85003 - -------------------------------------------------------------------------------------------------------------- 3. Name and Address of Assignee of Secured 4. [ ] if checked, products of collateral are Party(ies): also covered. --------------------------------------------------- 5. This Financing Statement covers the following types (or items) of property: - ------------------------------------------------------ See Exhibit "A" attached hereto and by this 6. If the collateral is crops, the crops are reference incorporated herein as if fully set growing or to be grown on the following forth. described real estate: The transaction related to this financing statement is a true lease; this precautionary notice file is made pursuant to U.C.C. 9-408 (A.R.S. 47-9408). - -------------------------------------------------------------------------------------------------------------- 7. If the collateral is (a) goods which are or are to become fixtures; (b) timber to be cut; or (c) minerals or the like (including oil and gas), or accounts resulting from the sale thereof at the wellhead or minehead to which the security interest attaches upon extraction, the legal description of the real estate concerned is: And, this Financing statement is to be recorded in the office where a mortgage on such real estate would be recorded. If the Debtor does not have an interest of record, the name of a record owner is: - -------------------------------------------------------------------------------------------------------------- 8. This Financing Statement is signed by the Secured Party instead of the debtor to perfect or continue perfection of a security interest in: [ ] collateral already subject to a security interest in jurisdiction when it was brought into this state. [ ] proceeds of collateral because of a change in type or use. [ ] collateral as to which the filing has lapsed or will lapse. [ ] collateral acquired after a change of name, identity, or corporate structure of the Debtor. - -------------------------------------------------------------------------------------------------------------- Cerprobe Corporation (Use Dated: 10/10/96 - ------------------------------------- whichever -------------------------------------- By: SIGNATURE NOT LEGIBLE is Wells Fargo Leasing Corporation - ------------------------------------- applicable) --------------------------------------------- Its: President/CEO By: SIGNATURE NOT LEGIBLE Its:Vice President - ------------------------------------- ---------------------------------------------
EX-2 3 MASTER LEASE AGREEMENT EQUIPMENT SCHEDULE DATED September 9, 1996 to MASTER LEASE AGREEMENT DATED September 9, 1996 LESSEE: LESSOR: CERPROBE CORPORATION Wells Fargo Leasing - ----------------------------------------------- Corporation "(as assignee of all right, title and interest of First Interstate Bank of Arizona)" Name 600 S. Rockford Drive P.O. Box 53456, MAC 4101-250 - ---------------------------------------------- Address Tempe, Arizona 85281 Phoenix, Arizona 85072-3456 - ---------------------------------------------- 1. Master Lease: The terms and conditions of that Master Lease Agreement dated as of the date set forth above by and between the Lessor, Wells Fargo Leasing Corporation "(as assignee of all right, title and interest of First Interstate Bank of Arizona)" and Lessee (the "Master Agreement") are by this reference incorporated herein as if fully set forth herein and together with the terms and conditions hereof, and of all schedules, riders, addenda and/or exhibits that are attached or refer to this Equipment Schedule, constitute a single and severable agreement of lease (this "Lease"). Subject to all of the terms and conditions of this Lease, Lessor hereby leases to Lessee, and Lessee hereby hires from Lessor, the personal property described below and on any supplemental Schedule "A" hereto (hereinafter, together with all replacement parts, additions, modifications, repairs and accessories incorporated therein and/or attached thereto, said personal property is referred to as the "Equipment"):
Qty. Description of Equipment - Make, kind, model no., serial no., and Original any other pertinent identification Cost - ----------- ----------------------------------------------------------------------------------- -------------------- 1 Applied Precision Invoice #2372 $251,518.50 po req date 6/14/96 1 52-502755-1280 ASSY, PRVX ACCESSORY KIT 1 52-502757-000 Assy, PRVX ACCESSORY KIT 2 53-201061-000 PRVX TRAINING AT API 1 53-201031-000 CHECKPOINT SYSTEM INSTALL 1 52-502904-000 ASSY, PRVX SHIPPING PKG 1 21-503328-000 PWA, EDGE CARD 48 PIN VX 21-502885-000 PWA, PRVX CAL CARD CONN 1 53-262030-000 PRVX SYSTEM, 1280 CHANNELS, LP 1 52-502758-003 PRVX TABLE SHORT 1280 1 52-502763-002 ASSY, PRVX W/S PF COMPAT 1 52-503357-001 ASSY, VX CPLT W/BEVEL POSTGRIND 1 52-502756-000 PRVX CONTROLLER PKG. 1 62-805304-700 PRV/PRVX TEST SOFTWARE 1 - ---------------------------------------------------------------------------------------------------------------------- Applied Precision Invoice #2444 $ 1,860.00 1 21-503329-000 PWA, Edge Card 88 Pin VX 1 21-503331-000 PWA, Edge Card 128 Pin VX - ---------------------------------------------------------------------------------------------------------------------- Sales or Use Tax - ---------------------------------------------------------------------------------------------------------------------- *If additional space is required, attach Schedule A Total Original Cost $253,378.50 - ---------------------------------------------------------------------------------------------------------------------- Location of Equipment (if additional space is required, attach Schedule A) A. 30 Montague Expressway San Jose Santa Clara California 95134 --------------------------------------------------------------------------------------------- Address City County State Zip B. --------------------------------------------------------------------------------------------- Address City County State Zip
2. Acceptance Deadline: September 30, 1996 3. Term: The term of this Lease shall be a period of 60 months and shall commence on the date that the Equipment is accepted by Lessee on behalf of Lessor (the "Acceptance Date"). 4. Rent Commencement Date: The first day of the month immediately following the Acceptance Date. 5. Basic Rent Payment Date: The first day of each month beginning with the Rent Commencement Date. 6. Rent: (a) Interim Rent: An amount equal to 1/30th of the Basic Rent multiplied by the number of days elapsed from and including the Acceptance Date but excluding the Rent Commencement Date and due and payable concurrently with the delivery of the Certificate of Acceptance by Lessee to Lessor. (b) Basic Rent: for the term of this Lease, Lessee shall pay Lessor Basic Rent of $5,121.00 monthly payable on each Basic Rent Payment Date. If the first day of each month during the term of this Lease is not a business day, Basic Rent shall be due on the next subsequent business day. Unless otherwise expressly agreed to in writing by Lessor, sales tax on each rental payment received by Lessor under this lease shall be due and payable by Lessee to Lessor on each Basic Rent Payment Date. (c) Overdue Rent: Lessee shall pay to Lessor an Overdue Rent Charge of 5% of all Basic Rent payments not received by Lessor on or before the Basic Rent Payment Date. 7. Purchase Option: Provided that (i) an Event of Default (or an event or condition which, with the lapse of time or the giving of notice or both, would constitute an Event of Default) does not exist; (ii) this Lease has not previously been terminated, and (iii) Lessee has given Lessor not less than sixty (60) days notice prior to the expiration of the initial term of the Lease, Lessor shall have the option to purchase all (but not less than all) of the Equipment on the original expiration date of this Lease under the following terms and conditions: [Lessee shall have the right to purchase the Equipment, on an "as-is, where-is" basis, without representation or warranty of any kind, for $1.00, provided that such right is further subject to payment in full of the purchase price on or before the expiration of the initial term of this Lease.] Lessee shall pay or reimburse Lessor all of Lessor's costs and expenses incurred in connection with such purchase and shall pay all taxes imposed in connection with such sale (other than taxes imposed on or measured by lessor's net income). 8. Modification to Master Agreement: All terms and conditions of this Lease shall be as set forth above and in the Master Agreement, except (if additional space is required, attach an Addendum to this Lease): N/A 9. Conditions Precedent: Lessor shall have no obligation to purchase the Equipment and to lease the same to Lessee hereunder: (i) if the actual cost of the Equipment exceeds the original cost thereof set forth hereinabove; (ii) if there exists any Event of Default or event or condition which, with the lapse of time or the giving of notice or both, would constitute an Event of Default; or (iii) unless prior to the Acceptance Deadline Lessee, at its expense, shall have delivered or caused to be delivered to Lessor all of the Documents required under Section 3 of the Master Agreement and, in addition, Lessee, at its expense, shall have fully satisfied all of the following additional conditions precedent (if additional space is required, attach an Addendum to this Lease): N/A 10. Schedule: The "Schedule of Stipulated Loss Percentages" that is attached or refers to this Equipment Schedule is by this reference expressly incorporated herein as if fully set forth herein. 11. Reaffirmation: By their execution and delivery of this Equipment Schedule, the parties hereby reaffirm all of the terms and conditions of the Master Agreement, except to the extent, if any, modified hereby. 12. Counterparts: The Equipment Schedule evidencing this Lease may be executed in more than one original counterpart. However, only the counterpart designated below as "Counterpart No. 1" shall evidence the monetary obligation of Lessee with respect to this Lease. To the extent, if any, that this Lease constitutes "chattel paper," as that term is defined in the Arizona Uniform Commercial Code, no security interest in this Lease may be created or perfected by the transfer or possession of any counterpart hereof other than said "Counterpart No. 1." THIS IS COUNTERPART NO. 1 OF 1 COUNTERPART ORIGINALS. IN WITNESS WHEREOF, this Equipment Schedule has been executed, delivered and accepted this 9th day of September, 1996. LESSOR: LESSEE: CERPROBE CORPORATION Wells Fargo Leasing Corporation - ---------------------------------------- --------------------------------- "(as assignee of all right, title and interest of First Interstate Bank of Arizona)" By SIGNATURE NOT LEGIBLE By SIGNATURE NOT LEGIBLE ------------------------------------- ----------------------------- Its President/CEO Its Vice President ------------------------------------ ----------------------------- 2 SCHEDULE OF STIPULATED LOSS PERCENTAGES to EQUIPMENT SCHEDULE DATED September 9, 1996 to MASTER LEASE AGREEMENT DATED June 6, 1994 Rental Payment Date Stipulated Loss in the month of: Percentage - ---------------- ---------- 1 100.00 2 98.70 3 97.39 4 96.07 5 94.74 6 93.39 7 92.04 8 90.67 9 89.30 10 87.91 11 86.51 12 85.10 13 83.68 14 82.25 15 80.80 16 79.35 17 77.88 18 76.40 19 74.91 20 73.40 21 71.89 22 70.36 23 68.82 24 67.27 25 65.70 26 64.12 27 62.53 28 60.93 29 59.31 30 57.68 31 56.03 32 54.38 33 52.71 34 51.02 35 49.32 36 47.61 37 45.89 38 44.15 39 42.39 40 40.63 41 38.84 42 37.05 43 35.24 44 33.41 45 31.57 46 29.71 47 27.84 48 25.96 49 24.06 50 22.14 51 20.21 52 18.26 53 16.29 54 14.32 55 12.32 56 10.31 57 8.28 58 6.23 59 4.17 60 2.09 For purposes of the "Master Agreement" (defined below) and the "Lease " (defined below), the term "Stipulated Loss Percentage" means, with respect to any item of "Equipment" (defined in the Lease) for which "Stipulated Loss Value" (defined in the Master Agreement) is determined, the percentage set forth hereinabove that corresponds to the "Rental Payment Date" (defined in the Lease) through which rental payments on such Equipment have actually been paid (exclusive of prepayments of rent otherwise due and payable at the end of the Lease term, if any are required under the Lease) as of the date that the Stipulated Loss Value of such item of Equipment is determined. -1- IN WITNESS WHEREOF, the undersigned "Lessor" and "Lessee" have this 9th day of September, 1996 executed and delivered this "Schedule of Stipulated Loss Percentages" to that Equipment Schedule dated as set forth above (the "Lease") to that Master Lease Agreement dated as set forth above (the "Master Agreement") between the undersigned "Lessor" and "Lessee." LESSOR: LESSEE: WELLS FARGO LEASING CORPORATION CERPROBE CORPORATION By /s/ Signature Illegible By /s/ Signature Illegible ---------------------------- ----------------------------- Its Authorized Representative Title President/CEO -2- CERTIFICATE OF ACCEPTANCE Wells Fargo Leasing Corporation "(as assignee of all right, title and interest of First Interstate Bank of Arizona)" Leasing and Equipment MAC 4101-250 100 West Washington Phoenix, Arizona 85003 RE: Acceptance of Equipment Leased Under Equipment Schedule dated September 9, 1996 (the "Lease") to Master Lease Agreement dated May 1, 1995 (the "Master Agreement") between the undersigned and Wells Fargo Leasing Corporation "(as assignee of all right title and interest of First Interstate Bank of Arizona). Gentlemen: This Certificate of Acceptance is delivered pursuant to Section 2 of the Master Agreement, and constitutes a "Certificate of Acceptance," as defined therein. We, as Lessee, have received all of the "Equipment" (as defined in the Lease), and all necessary installation thereof has been completed. We have inspected, tested and approved all of the Equipment, and find that each piece is in good working order and is of the size, design, type, quality, condition, capacity and manufacture specified by us, and conforms to any applicable purchase orders therefor. We approve the contract by which you acquired the Equipment or the right to possession and use of the goods. Our inspection and test has disclosed no defects or deficiencies in any of the Equipment. You are hereby notified that we accepted delivery of all of the Equipment on your behalf on 9/17, 1999. We hereby certify that as of the date hereof (i) no Event of Default has occurred under the Lease of the Master Agreement; (ii) the presentations and warranties made by Lessee pursuant to the Lease and Master Agreement are true and correct, (iii) Lessee has obtained insurance policies with respect to the Equipment as are required to be obtained under the Lease and Master Agreement; and (iv) the Equipment will be located at 30 West Montague Expressway, San Jose, California 95134. Sincerely, Cerprobe Corporation - ------------------------------- ("Lessee") By: SIGNATURE NOT LEGIBLE ---------------------------- Its: President/CEO --------------------------- Dated: September 9, 1996
- -------------------------------------------------------------------------------------------------------------------- This FINANCING STATEMENT is presented for filing and will remain effective with certain exceptions for a period of five years from the date of filing pursuant to section 9403 of the California Uniform Commercial Code. - -------------------------------------------------------------------------------------------------------------------- 1. Lessee 1A. Social Security or Federal Tax No. Cerprobe Corporation - -------------------------------------------------------------------------------------------------------------------- 1B. Mailing Address 1C City, State, 1D Zip Code 600 S. Rockford Drive Tempe, Arizona 85281 - -------------------------------------------------------------------------------------------------------------------- 2. Additional Debtor (If Any) 2A. Social Security or Federal Tax No. - -------------------------------------------------------------------------------------------------------------------- 2B Mailing Address: 2C City, State, 2D Zip Code - -------------------------------------------------------------------------------------------------------------------- 3. Debtor's Trade Names or Styles: 3A. Federal Tax Number: - -------------------------------------------------------------------------------------------------------------------- 4: Lessor: 4A: Social Security or Federal Tax No. Name Wells Fargo Leasing Corporation or Bank Transit and A.B.A. No. Mailing Address: 100 W. Washington MAC 4101-250 City Phoenix AZ 85003 State AZ Zip Code 85003 - -------------------------------------------------------------------------------------------------------------------- 5. Assignee of Secured Party: (If Any) 5A: Social Security or Federal Tax No. Name or Bank Transit and A.B.A. No. Mailing Address: City State Zip Code - -------------------------------------------------------------------------------------------------------------------- 6. This FINANCING STATEMENT covers the following types or items of property (include description of real property on which located and owner of record when required by instruction 4). See Schedule "A" attached hereto and by this reference incorporated herein as if fully set forth. The transaction related to this financing statement is a true lease; this precautionary notice file is made pursuant to U.C.C. 9-408 (A.R.S. 47-9408) - -------------------------------------------------------------------------------------------------------------------- 7. Check [X] 7A Products of collateral 7B Debtor(s) signature not required in accordance with if applicable: are also covered instruction 5(a) item [ ] [ ] (1) [ ] (2) [ ] (3) [ ] (4) - -------------------------------------------------------------------------------------------------------------------- 8. Check [X] if applicable: [ ] Debtor is a "transmitting utility" in accordance with UCC statute 9105 (1)(n) - -------------------------------------------------------------------------------------------------------------------- 9. Cerprobe Corporation Date: 9/9/96 C 10. This Space For Use of Filing Officer X /s/ Signature Illegible O (Date, Time, File Number Signature(s) of Lessee D And Filing Officer) E - -------------------------------------------------------------------------------------------------------------------- 1 2 Type or Print Name(s) of Debtor(s) - -------------------------------------------------------------------------------------------------------------------- Wells Fargo Leasing Corporation 3 X /s/ Signature Illegible 4 Signature of Lessor: - -------------------------------------------------------------------------------------------------------------------- 5 6 Type or Print Name(s) of Secured Party(ies) - -------------------------------------------------------------------------------------------------------------------- 11. Return copy to: 7 Name 8 Address 9 City 0 State Zip Code - -------------------------------------------------------------------------------------------------------------------- Filing Officer is requested to note file number, date and FORM UCC1- hour of filing on PINK copy and return to the above party Approved by the Secretary of State - --------------------------------------------------------------------------------------------------------------------
EX-3 4 FIRST ADDENDUM TO LEASE FIRST ADDENDUM TO LEASE ----------------------- This First Addendum to Lease ("Addendum") is attached to and made a part of that certain Lease, dated August 21, 1996, by and between CRPB INVESTORS, L.L.C., an Arizona limited liability company, as Lessor, and CERPROBE CORPORATION, a Delaware corporation, as Lessee, including the Work Agreement attached as Exhibit "B". Should the provisions of the Lease and this Addendum conflict, then the terms and conditions contained in this Addendum shall control. Any reference to "Lease" shall include this Addendum, including all exhibits, unless a different intent is clearly indicated. 49. Definitions. All capitalized terms not otherwise defined in this First Addendum shall have the meanings given to them in the Lease or the Work Agreement attached hereto. 50. Term; Completion. The Original Term of this Lease is fifteen (15) years from the Commencement Date. The Commencement Date shall be the date on which Substantial Completion occurs. If the Commencement Date occurs on a day other than the first day of a calendar month, the Original Term of this Lease shall be fifteen (15) years plus the number of days remaining in the month in which the Commencement Date occurs. In the event that Substantial Completion of the Work does not occur before the Scheduled Completion Date set forth in the Work Agreement, then Lessee shall be credited with two (2) days of free Base Rent for each day of delay until Substantial Completion of the Work occurs. In the event that Substantial Completion does not occur within sixty (60) days following the Scheduled Completion Date set forth in the Work Agreement, then Lessee, upon written notice to Lessor, shall be entitled to terminate the Lease in which case Lessee shall be released from all liability and obligation thereunder. Upon any such termination by Lessee, Lessor shall pay to and reimburse Lessee on demand for all reasonable costs and expenses incurred in connection with the Project and this Lease including, but not limited to, architect's fees, consultant fees, legal fees, and any additional rental, costs or expenses incurred for the lease or occupancy of substitute premises, including any increased rent or penalties for the premises now occupied by Lessee, to the extent that such rental costs for comparable space exceed the Base Rent that Lessee otherwise would have been obligated to pay to Lessee if the Lease had not been terminated, plus such other damages and costs as Lessee may incur as a result of Lessor's default. 51. Base Rent. The Base Rent for the Original Term shall be calculated according to the schedule set forth below. The Base Rent shall be payable in equal monthly installments, each due on the first day of each month. In the event the Commencement Date occurs on a day other than the first day of a month, then the Base Rent for the partial month shall be calculated by prorating the monthly Base Rent according to the number of days in the partial month occurring after the Commencement Date. (a) Commencing on the Commencement Date and ending upon expiration of the fifth Lease Year of the Original Term, the monthly Base Rent shall be calculated by multiplying the Project Costs (as defined herein) times 11.5% and dividing the result by twelve (12) ("Initial Base Rent"). Lessor and Lessee acknowledge and agree that the estimated Project Costs is $7,600,000.00. Lessor and Lessee also agree that in no event shall: (i) the monthly Initial Base Rent be less than $71,875.00 per month or (ii) the total Project Costs be greater than $7,600,000.00 without Lessee's prior written consent; or (iii) line item expenditures exceed the line item amounts set forth in the budget approved by Lessee as provided in subparagraph (e) below, without Lessee's prior written consent. (b) For Lease Years six (6) through ten (10) of the Original Term, the monthly Base Rent shall be calculated by multiplying the monthly Initial Base Rent for Lease Years one (1) through five (5) times 115%. (c) For Lease Years eleven (11) through fifteen (15) of the Original Term, the monthly Base Rent shall be calculated by multiplying the monthly Base Rent for Lease Years six (6) through ten (10) times 115%. (d) With each monthly payment of Base Rent, Lessee shall also pay to Lessor any sales or transactional privilege taxes imposed by the City of Gilbert, County of Maricopa, or State of Arizona. (e) No later than twenty (20) days following the delivery to Lessor of the Building Permit issued by the City of Gilbert, Lessor shall prepare and deliver to Lessee for Lessee's approval an itemized budget for the Project, reflecting the costs of all labor, materials, supplies, equipment, fees and services necessary for the Work. Upon Lessee's approval thereof, Lessor agrees that the cost of any line item shall not be exceeded by more than ten percent (10%) of such line item or $25,000, whichever is greater, without Lessee's approval, so long as the total costs do not exceed the total Project Costs set forth in the budget approved by Lessee. Lessor agrees that upon forty-eight (48) hours notice, Lessee, its employees or accountants shall have the right to audit all Project Costs at reasonable intervals, and Lessor shall deliver or make available to Lessee all invoices and statements of account supporting the amounts so expended and claimed by Lessor as part of the Project Costs. In the event of any dispute between Lessor and Lessee as to any of the costs, the good faith and reasonable determination by the architect as to whether such costs are appropriate and are to be included as a part of the Project Costs shall be conclusive and binding on the parties. 52. Option to Renew Lease. Lessor hereby grants to Lessee the option to extend the term of this Lease (the "Option") for seven (7) additional periods of five (5) Lease Years each, subject to the following conditions. If the Option is exercised, each successive term shall commence when the prior term expires. 2 (a) To exercise its Option to extend the Original Term or any extended term, Lessee shall deliver to Lessor written notice of Lessee's election to extend no less than one hundred eighty (180) days nor more than two hundred seventy (270) days prior to the expiration of the then current lease term. If said notification of the exercise of the Option is not so delivered, the Option shall continue and shall expire seven (7) days after Lessor has delivered written notice to Lessee that the Option will expire within seven (7) days following Lessee's receipt thereof. Each Option may (if more than one) only be exercised consecutively. (b) The provisions of Paragraph 39, including the provision relating to the default of Lessee set forth in Paragraph 39.4 of this Lease, are conditions of this Option. (c) All of the other terms and conditions of this Lease except where specifically modified by this Option shall apply during each extended term. (d) The annual Base Rent for each five-year period (each "Option Period") of the Option(s) shall be determined as follows: (i) For the first three (3) five-year Option Periods (Lease Years 16- 30), the monthly Base Rent for each Option Period shall be equal to the greater of (A) the monthly Base Rent for the previous five (5) Lease Year period multiplied by 115%, or (B) the Market Rental Value (determined as set forth in paragraphs 52(d)(ii) and (iii) below) for comparable space in comparable real estate located within the same market area. (ii) Four (4) months prior to the expiration of the Original Term, or four (4) months prior to the expiration of the current Option Period, as the case may be, Lessor and Lessee shall meet to establish an agreed upon new monthly Base Rent for the Option Period or Periods as to which Lessee has elected to extend. If agreement cannot be reached within sixty (60) days after the first meeting, Lessor shall obtain, at its expense, and deliver to Lessee, an appraisal as to the Market Value Rental of the Premises. (iii) If, within thirty (30) days after Lessee's receipt of the appraisal, Lessor and Lessee cannot mutually agree as to the Market Value Rental of the Premises, then Lessee shall have the right within thirty (30) days to obtain, at its expense, and deliver to Lessor, an appraisal reflecting the Market Value Rental of the Premises. If the two appraisers are unable to agree on the Market Value Rental within fifteen (15) days after delivery of Lessee's appraisal to Lessor, such two appraisers shall, within fifteen (15) days thereafter, join to appoint a third appraiser and if they fail so to appoint such third appraiser within such period, the third appraiser shall be appointed by the Presiding Judge of the Federal District Court for the District of Arizona, or if said Presiding Judge should refuse to make such appointment, by the Presiding Judge of the Maricopa County Superior Court. Such third appraiser shall individually determine such fair market value of the Premises within forty-five (45) days thereafter. The Market Value Rental and purchase 3 price of the Premises shall then become the average of the Market Value Rental determinations of the two (2) appraisals closest in value. All appraisers appointed hereunder shall be competent, qualified by training and experienced in Maricopa County, Arizona, to appraise real estate of the type to be appraised hereunder, disinterested and independent and shall be members in good standing of the American Institute of Real Estate Appraisers (or any successor association, or a body of comparable standing if such Institute is not then in existence) and all appraisal reports shall be rendered in writing and signed by the appraiser or appraisers making the report. Lessor and Lessee shall bear the costs of their respective appraisers and shall share the cost of the third appraiser, if any. (iv) For the fourth, fifth, sixth and seventh five-year Option Periods (i.e., Lease Years 31-70), the annual Base Rent for each Option Period shall be equal to the lesser of: (A) the monthly Base Rent for the immediately prior Option Period multiplied by 115%, or the Market Rental Value for comparable space in comparable real estate located within the same market area. The procedure used to establish Market Rental Value set forth in paragraphs 52(d)(ii) and (iii) above shall be utilized to establish Market Rental Value for the fourth, fifth, sixty and seventh Option Periods. 53. Security Deposit. (a) On or before the Commencement Date, Lessee shall remit to Lessor a security deposit in the amount of one month's Base Rent, which will be held by Lessor as security for the payment and performance by Lessee of the amounts and obligations to be paid and performed by Lessee under this Lease. If Lessee shall faithfully pay and perform the obligations to be paid and performed by it, then Lessor shall disburse to Lessee the security deposit together with all accrued interest thereon within thirty (30) days following the expiration of the third Lease Year. (b) The Security Deposit shall be held by Lessor in an interest bearing money market account subject to immediate withdrawal without penalty, or, at Lessee's option a certificate of deposit with a maturity of no more than one (1) year, with the accrued interest to be added to the Security Deposit. If these funds are not available because of a bankruptcy or similar proceeding involving Lessor, Lessee shall have the right to offset the loss of the funds against the amounts next due from Lessee under the Lease. 54. Assignment of Lessor's Interest. Lessor shall not have the right to assign its interest under this Lease prior to Substantial Completion without Lessee's prior written consent. Following Substantial Completion, Lessor shall have the right to assign its interest under this Lease, without the consent of the Lessee, during the Original Term of this Lease and any Option Period, provided that the assignee executes and delivers to Lessee an instrument pursuant to which the assignee has agreed to assume and perform all of the obligations of Lessor that are to be performed by Lessor following the date of such assignment. Any assignment by Lessor shall release and discharge Lessor from any 4 obligations that are to be performed by Lessor subsequent to such assignment, but shall in no event release or discharge Lessor from any obligations that are to be or were to have been performed by Lessor prior to such assignment. 55. Liability of Lessor. The liability of Lessor under this Lease shall be limited to Lessor's interest in the Premises and the Security Deposit. In no event shall there be any recourse against any partner, member or agent of Lessor or Lessee, or any member, person or entity comprising Lessor or Lessee, or against any property or assets of any such partner or member or agent for or on account of any obligation or liability arising under this Lease or otherwise in connection with the Premises. 56. Construction. In consideration of the covenants and obligations to be performed by Lessor under this Lease, Lessor, at Lessor's sole expense, shall provide all labor, materials, supplies and equipment necessary to construct the building and other improvements, all as described in Paragraph 1.2 and Exhibit "A", Exhibit "B" and Exhibit "C" to this Lease. 57. Expansion of Premises/Option To Purchase. 57.1 Grant of Option. Lessor and Lessee acknowledge that Lessee may require, from time to time, additional space to be constructed and added to the Premises during the Original Term of this Lease or any Option Period so as to accommodate the business and operations of Lessee. Each time that Lessee determines that it will require such additional space and there is no existing Breach under this Lease; Lessee shall give written notice thereof to Lessor, and Lessor and Lessee shall thereafter negotiate in good faith to agree upon terms for the construction of such additional space, including, if necessary, additional buildings and improvements to accommodate Lessee's requirements, and associated revisions to this Lease, including the amount of the Base Rent. If Lessee gives notice, within the last ten (10) years of the term of the Lease, that Lessee will require additional space, and Lessor and Lessee thereafter agree upon terms for the construction of such additional space, the term of the Lease shall be extended so that the remaining term of the Lease shall be no less than ten (10) years from the date of Lessee's notice. If Lessor and Lessee are unable to agree upon terms within sixty (60) days after delivery of Lessee's written notice to Lessor of Lessee's requirements for additional space Lessor hereby grants to Lessee an option (the "Option"), for a period of twelve (12) months commencing upon the expiration of the sixty (60) day period, to purchase the Premises upon and subject to the terms and conditions described below. If Lessee does not elect to exercise the Option within such twelve (12) month period, or exercises the Option, but cancels and terminates the purchase transaction prior to the closing pursuant to Paragraph 57.13, Lessee shall not have the right to exercise any Option to purchase in connection with a requested expansion for a period of twelve (12) months after the expiration of the prior Option or the termination of the purchase transaction. 5 57.2 Notice of Exercise. The Option may be exercised by Lessee delivering written notice of such exercise to Lessor at the address specified below. 57.3 Price. (a) Determination of Purchase Price. After the exercise of the Option, Lessor and Lessee shall negotiate in good faith to agree upon the price at which the Premises will be purchased by Lessee. Such purchase price to be paid for the Premises shall be the then fair market value of the Premises, subject to the terms and conditions of this Lease; provided, however, that the purchase price shall not be less than the amount of the unpaid balance of principal, interest, and other charges on the Construction Loan and the Permanent Loan. (b) Negotiation of Purchase Price and use of Appraisals. Not later than forty-five (45) days after Lessee exercises the Option, Lessor shall obtain, at its expense, and deliver to Lessee, an appraisal as to the fair market value of the Premises. If, within sixty (60) days after Lessee's receipt of the appraisal, Lessor and Lessee cannot mutually agree as to the fair market value of the Premises, then Lessee shall have the right within forty- five (45) days after the expiration of the sixty (60) day negotiation period to obtain, at its expense, and deliver to Lessor, an appraisal reflecting the fair market value of the Premises. If the two appraisers are unable to agree on the fair market value within fifteen (15) days after delivery of Lessee's appraisal to Lessor, such two appraisers shall, within fifteen (15) days thereafter, join to appoint a third appraiser and if they fail so to appoint such third appraiser within such period, the third appraiser shall be appointed by the Presiding Judge of the Federal District Court for the District of Arizona, or if said Presiding Judge should refuse to make such appointment, by the Presiding Judge of the Maricopa County Superior Court. Such third appraiser shall individually determine such fair market value of the Premises within forty-five (45) days thereafter. The fair market value and purchase price of the Premises shall then become the average of the fair market value determinations of the two (2) appraisals closest in value. All appraisers appointed hereunder shall be competent, qualified by training and experienced in Maricopa County, Arizona, to appraise real estate of the type to be appraised hereunder, disinterested and independent and shall be members 6 in good standing of the American Institute of Real Estate Appraisers (or any successor association, or a body of comparable standing if such Institute is not then in existence) and all appraisal reports shall be rendered in writing and signed by the appraiser or appraisers making the report. Lessor and Lessee shall bear the costs of their respective appraisers and shall share the cost of the third appraiser, if any. (c) Payment of the Purchase Price. The purchase price to be paid for the Premises shall be paid at close of escrow. The purchase price to be paid for the Premises may, at Lessee's option, be paid through Lessee's assumption at the close of escrow of existing indebtedness on the Premises and the remainder thereof in cash. However, Lessee's ability to assume the existing indebtedness on the Premises shall be conditioned upon the discharge of the liability of Lessor and any guarantors for such indebtedness. 57.4 Title Report. Not later than thirty (30) days after Lessee exercises the Option, Lessor shall cause to be delivered to Lessee by a title company selected by the parties: (i) an "extended coverage" title report with respect to the Premises showing that title to the Premises is subject to only those matters set forth in Paragraph 57.9; (ii) legible copies of all documents, whether recorded or unrecorded, referred to as special exceptions in such title report or any supplemental title report issued by the title insurance company; and (iii) an ALTA survey of the Premises from a surveyor selected by the parties in form reasonably acceptable to Lessor and Lessee. Lessor agrees that during the term of this Lease Lessor will not do anything that could reasonably be expected to prevent the parties from obtaining an extended coverage title policy with respect to the Premises. 57.5 Conveyance Document. The conveyance of the Premises to Lessee or its designee shall be by a good and sufficient special warranty deed in form acceptable to Lessee conveying to Lessee or its designee good and marketable title to the Premises, subject only to the exceptions permitted under Paragraph 57.9. 57.6 Title Insurance. As of the closing date, Lessor shall cause to be delivered to Lessee, a standard coverage title insurance policy and, if available, an extended coverage title policy issued by the title insurance company in the amount of the purchase price insuring that Lessee has acquired good and marketable title to the Premises subject only to those matters set forth in Paragraph 57.9 hereof. Lessee shall reimburse Lessor for the difference between the premiums for an extended coverage title insurance policy and the premiums for a standard coverage title insurance policy. 7 57.7 Closing Date. The purchase transaction shall be closed within one hundred twenty (120) days after the purchase price is determined pursuant to Paragraph 57.3. 57.8 Condition of Title. (a) Exceptions to Title. The Premises shall be conveyed by Lessor to Lessee subject only to: (i) current real estate taxes for the year during which the closing occurs; (ii) current assessments; (iii) current property owner's association dues; (iv) matters to which the Premises are subject on the Commencement Date of this Lease; (v) matters affecting title caused or created by Lessee or that have been approved in writing by Lessee; (vi) utility easements and other easements incidental to the development and use of the Premises that do not impair the value, or interfere with Lessee's use and occupancy, of the Premises; and (vii) the effect of all other applicable documents executed hereafter by both Lessor and Lessee, or by one of them with the written consent of the other, or which Lessor is permitted to execute alone and without Lessee pursuant to the provisions of this Lease, including any mortgage or deed of trust that is assumed by Lessee in connection with the purchase of the Premises. (b) Removal of Title Exceptions. Prior to closing, Lessor shall satisfy, remove or cause to be removed, prior to the close of escrow for the purchase and sale of the Premises, all matters affecting title to the Premises other than those matters permitted in this Paragraph 57.9. Lessor shall indemnify, defend, and hold Lessee harmless for, from and against and any and all losses, debts, liabilities or claims, absolute or contingent, 8 and all actions, suits proceedings, demands, judgments, costs and expenses incident thereto, incurred in connection with or resulting from any failure of Lessor to comply fully with the provisions of this Paragraph. 57.9 Fees and Charges. The escrow fees and charges, and all other expenses in connection with the transaction for which the Option may be exercised, will be shared equally by Lessee and Lessor. Real estate taxes, assessments, property owner's association dues and those costs and expenses relating to the Premises which constitute Lessee's obligations pursuant to this Lease shall not be prorated between Lessor and Lessee, it being the understanding of the parties hereto that Lessee solely shall be obligated to pay the same. 57.10 Lessee's Remedies. By reason of, among other things, the uniqueness of the Premises, Lessee shall be entitled to exercise and enforce the equitable remedies of specific performance and/or injunction for each and every obligation of Lessor under Paragraph 57, which remedies may be exercised and enforced separately or cumulatively with any other rights or remedies available to Lessee in the event of a breach by Lessor of any of Lessor's obligations under Paragraph 57 or any other provision of this Lease. 57.11 No Real Estate Commission. No real estate commission shall be payable by Lessee in connection with Lessee's exercise of the Option or Lessee's purchase of the Premises. 57.12 Lessee's Right To Terminate Purchase. Notwithstanding Lessee's exercise of the Option pursuant to Paragraph 57.2, Lessee shall have the right to cancel and terminate the purchase transaction in Lessee's sole discretion at any time prior to the closing of the sale. Lessee shall pay Lessor's reasonable out-of-pocket expenses for surveys, title examination, appraisals, and similar services provided by third parties and reasonable attorney's fees incurred in connection with the terminated sale. 57.13 Further Documents. Lessor and Lessee shall execute, acknowledge and deliver such instruments, and shall do such acts, as may be necessary or appropriate to close the purchase and sale of the Premises, including without limitation such instruments as may be necessary or appropriate to cancel or amend existing documents which no longer will be applicable to the Premises after and by reason of Lessee's purchase. 57.14 Lessee's Continuing Duty to Perform Under Lease. From and after Lessee's exercise of the Option until the closing of the purchase transaction or the earlier termination of the purchase transaction, Lessee shall continue to perform all of its obligations under this Lease. If Lessee fails to perform its obligations under this Lease during that period, Lessor may exercise any remedies available to it under this Lease. 9 58. Right of First Offer/Option to Purchase. If at any time during term of this Lease, Lessor shall elect to sell the Premises, Lessor grants Lessee the first offer to purchase the Premises and an option to purchase the Premises in accordance with the provisions of this paragraph: (a) Prior to offering the Premises for sale to third parties, Lessor shall deliver to Lessee written notice of Lessor's election to do so ("Notice to Sell") and a current appraisal of the fair market value of the Premises. The Notice to Sell shall contain the price and terms upon which Lessor intends to sell the Premises. Lessee shall have thirty (30) days from the receipt of the Notice to Sell to (i) deliver written notice to Lessor that Lessee has elected to purchase the Premises upon the terms and conditions established by Lessor in the Notice to Sell ("Notice to Purchase"), or (ii) to deliver written notice to Lessor that Lessee is exercising the option to purchase the Premises granted in this Paragraph 58 upon and subject to the terms, conditions and procedures set forth in Paragraph 57. If Lessee has not delivered the Notice to Purchase to Lessor within such thirty (30) day period, or if Lessee has not delivered written notice of Lessee's exercise of the option granted in this Paragraph 58 within such thirty (30) day period, Lessee's right to purchase the Premises shall be deemed waived by Lessee, and Lessor shall have the right to sell the Premises to any third party upon customary and reasonable terms and with the price not to be less than eighty percent (80%) of the price specified in Lessor's Notice to Sell to Lessee. If the Premises are not transferred to a third party in connection with a sale within 270 days after the date of Lessee's receipt of the Notice to Sell, or if Lessor thereafter decides to offer the Premises for sale on customary and reasonable terms at a price less than eighty (80%) of the price specified in the Notice to Sell, then Lessor shall first re-offer the Premises for sale to Lessee upon such new terms, in accordance with the procedures and time limits set forth in this Paragraph 58 and Lessee's rights under this Paragraph 58, including the option to purchase, shall be restored. (b) In the event that Lessee delivers to Lessor written notice that Lessee has elected to purchase the Premises upon the terms and conditions established by Lessor in the Notice to Sell, then Lessor shall sell, and Lessee shall purchase, the Premises upon and subject to such terms. In the event that Lessee delivers to Lessor written notice that Lessee has elected to exercise the option to purchase the Premises, then Lessor shall sell, and Lessee shall purchase, the Premises upon and subject to the terms, conditions, and procedures set forth in Paragraph 57. However, Lessee shall have the option to rescind its election to purchase the Premises by delivering written notice of such rescission to Lessor at any time prior to the closing of the sale. In such case, Lessee shall pay Lessor's reasonable, out-of-pocket expenses incurred in connection with the purchase, including attorney's fees, but not for other expenses for services such as surveys, appraisals and similar services that can reasonably be expected to be used in connection with a subsequent sale of the Premises to a third party. 10 59. Liens. Lessor shall not record or suffer to be recorded any deed of trust or other security instrument, other than the deed of trust securing the Construction Loan or the Permanent Loan, which creates, may create or appear to create a lien or encumbrance upon the Premises, or any part thereof, without Lessee's prior written consent, which consent shall not be unreasonably withheld, conditioned or delayed. 60. Exhibits and Addenda. Exhibits as referenced in Paragraph 1.12 are incorporated by reference in this Lease and listed below: Exhibit "A" - Description of Working Drawings prepared by Deutsch & Associates, as the architect of the Lessee, describing the construction of the Premises, which Working Drawings shall be initialed by Lessor and Lessee; Exhibit "B" - Work Agreement; Exhibit "C" - Contractor's building and premises construction specifications; Exhibit "D" - Hazardous Substances Addendum. Exhibit "E" - Itemization of Project Costs 61. Definitions. The following capitalized terms as used in the Lease shall have the definitions set forth below: (a) "Commencement Date". The date on which Substantial Completion of the Work occurs. (b) "Construction Loan". That loan by Guaranty Federal Bank, F.S.B. to Lessor the proceeds of which shall be used to finance the initial construction of an office/manufacturing building and other improvements on the land generally located at the southwest corner of West San Angelo Road and North Fiesta Boulevard, Gilbert, Arizona as described in the Plans. (c) "Lease Year". The year commencing on the Commencement Date and ending on the day immediately preceding the next anniversary of the Commencement Date, except that if the Commencement Date does not occur on the first day of a calendar month, then the year commencing on the first day of the calendar month next succeeding the Commencement Date and ending on the last day of the twelfth calendar month thereafter. (d) "Permanent Loan". The long term financing secured by a deed of trust on the Premises that replaces the Construction Loan. 11 (e) "Plans". The plans and specifications referred to in Exhibits "A" and "C", as hereafter modified from time to time, and, where applicable, as approved by the City of Gilbert, Arizona. (f) "Project". The land, buildings, structures, parking areas, pedestrianways, and other improvements, together with all machinery and equipment, all as provided in Exhibits "A", "B" and "C" to this Lease, as modified or omitted from to time. (g) "Project Costs". The total cost of land and all labor, materials, equipment, supplies and other items and services that are incurred by Lessor and are necessary to the construction of the Project, including, but not limited to, financing costs, consulting fees, fees for building permits and other governmental approvals, architectural fees, legal fees of Lessor incurred in connection with this Lease and the Operating Agreement of Lessor and other documentation necessary to the formation and capitalization of Lessor, all as provided on Exhibit "E" to this Lease, as modified or amended from time to time. (h) "Substantial Completion" and "Substantially Complete". The issuance by the City of Gilbert, Arizona of a certificate of occupancy that allows Lessee to take possession of and use the Premises and the completion of the Work such that the Premises are suitable and can be occupied and used by Lessee for the purposes intended, and the completion all of the Work as provided by the Plans with the exception of punch-list items that do not impair Lessee's use or occupancy of the Premises. 62. Replacement Provisions. Paragraphs 9 and 14 of the Lease are deleted in their entirety and replaced with the following provisions, respectively: "9. Damage or Destruction. 9.1 Definitions. (a) "Premises Partial Damage" shall mean damage or destruction to the improvements on the Premises, the repair cost of which damage or destruction is less than 50% of the then Replacement Cost of the Premises immediately prior to such damage or destruction, excluding from such calculation the value of the land. (b) "Premises Total Destruction" shall mean damage or destruction to the Premises, the repair cost of which damage or destruction is 50% or more of the then Replacement Cost of the Premises immediately prior to such damage or destruction, excluding from such calculation the value of the land. (c) "Insured Loss" shall mean damage or destruction to improvements in the Premises, which was caused by an event required to be covered by the 12 insurance described in Paragraph 8.3(a), irrespective of any deductible amounts or coverage limits involved. (d) "Replacement Cost" shall mean the cost to repair or rebuild the building(s), structure(s) and other improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of applicable building codes, ordinances, or laws, and without deduction for depreciation. (e) "Hazardous Substance Condition" shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the Premises. 9.2 Partial Damage--Insured Loss. If a Premises Partial Damage that is an Insured Loss occurs, Lessor shall, at Lessor's expense, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect; provided, however, that Lessee shall, at Lessor's election, repair any damage or destruction the total cost to repair of which is $10,000 or less. The insurance proceeds shall be made available to the party making the repairs. If the required insurance was not in force or the insurance proceeds are not sufficient to effect such repairs, Lessee shall promptly contribute the shortage in proceeds necessary to complete such repairs; provided, however, that Lessee shall not be required to contribute the shortage in proceeds where such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance coverage was not commercially reasonable or available. If Lessee does not provide the shortage in proceeds attributable to the unique aspects of the improvements within thirty (30) days following receipt of written notice and request therefor, Lessor shall not be required to fully restore the unique aspects of the Premises and Lessor may terminate this Lease as to such unique aspects of the Premises sixty (60) days following the occurrence of the damage or destruction. Unless otherwise agreed, Lessee shall not be entitled to reimbursement from Lessor for any funds contributed by Lessee to repair any damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2, but the net proceeds of any insurance shall be made available to the party making the repairs. 9.3 Partial Damage--Uninsured Loss. If a Premises Partial Damage that is not an insured loss occurs, Lessor may at Lessor's option, either: (i) repair such damage as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect; or (ii) give written notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of the occurrence of such damage of Lessor's desire to terminate this Lease as of the date sixty (60) days following the giving of such notice. In the event Lessor elects to give such notice of Lessor's intention to terminate this Lease, Lessee shall have the right within ten (10) days after the receipt of such notice to give written notice to Lessor of Lessee's commitment to pay for the repair of such damage 13 totally at Lessee's expense and without reimbursement from Lessor. Lessee shall provide Lessor with the required funds or satisfactory assurance thereof within thirty (30) days following Lessee's said commitment. In such event, this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible, to the extent the funds are available. If Lessee does not give such notice, and provide the funds or assurance thereof within the times specified above, this Lease shall terminate as of the date specified in Lessor's notice of termination. 9.4 Total Destruction. If a Premises Total Destruction (including any destruction required by any authorized public authority) occurs prior to the last five (5) years of the term of this Lease, Lessor shall repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. Notwithstanding the foregoing, if the required insurance was not in force or the insurance proceeds are not sufficient to effect such repairs, Lessee shall promptly contribute the shortage in proceeds necessary to complete said repairs; provided, however, that Lessee shall not be required to contribute the shortage in proceeds where such shortage was due to the fact that, by reason of the unique nature of the improvements, full replacement cost insurance coverage was not commercially reasonable or available. If Lessee does not provide the shortage in proceeds attributable to the unique aspects of the improvements within thirty (30) days following receipt of written notice and request therefor, Lessor shall not be required to fully restore the unique aspects of the Premises and Lessor may terminate this Lease as to such unique aspects of the Premises sixty (60) days following the occurrence of the destruction. Notwithstanding any other provision of this Lease, if a Premises Total Destruction occurs (including any destruction required by any authorized public authority) during the last five (5) years of the term of this Lease, Lessor may, at Lessor's option, either: (i) repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect (subject to Lessee's right to terminate this Lease pursuant to paragraph 9.4A of this Lease) or (ii) give written notice to Lessee within ten (10) days of the Premises Total Destruction of Lessor's desire to terminate this Lease effective as of the date of such damage or destruction. 9.4A Lessee's Absolute Right to Terminate. If a Premises Partial Damage or Premises Total Destruction occurs, and the damage or destruction cannot be fully repaired or replaced within two hundred ten (210) days of the Premises Partial Damage or Premises Total Destruction, Lessee may, at Lessee's option, by written notice to Lessor, terminate this Lease effective as of the date specified by Lessee in the notice to Lessor (but no earlier than the date of the Premises Partial Damage or Premises Total Destruction). Lessee shall exercise its option to terminate this Lease pursuant to this Paragraph within one hundred eighty (180) days after the Premises Partial Damage or Premises Total Destruction/ 9.4B Excess Insurance Proceeds. Lessee shall be entitled to any insurance proceeds that exceed the cost of repair or restoration of the Premises. 14 9.5 Abatement of Rent; Lessee's Remedies. (a) In the event of damage described in Paragraph 9.2 (Partial Damage-Insured Loss), Paragraph 9.3 (Partial Damage-Uninsured Loss), or Paragraph 9.4 (Total Destruction) whether or not Lessor or Lessee repairs or restores the Premises, the Base Rent, Real Premises Taxes, insurance premiums, and other charges, if any, payable by Lessee hereunder for the period during which such damage, its repair or the restoration continues (not to exceed the period for which rental value insurance is required under Paragraph 8.3(b), shall be abated in proportion to the degree to which Lessee's use of the Premises is impaired. Except for abatement of Base Rent, Real Property Taxes, insurance premiums, and other charges, if any, as aforesaid, all other obligations of Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim against Lessor for any damage suffered by reason of any such repair or restoration. (b) If Lessor shall be obligated to repair or restore the Premises under the provisions of this paragraph 9 and shall not commence, in a substantial and meaningful way, the repair or restoration of the Premises within ninety (90) days after such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice of Lessee's election to terminate this Lease on a date not less than sixty (60) days following the giving of such notice. If Lessee gives such notice to Lessor and such Lenders and such repair or restoration is not commenced within thirty (30) days after receipt of such notice, this Lease shall terminate as of the date specified in said notice. If Lessor or a Lender commences the repair or restoration of the premises within thirty (30) days after receipt of such notice, this Lease shall continue in full force and effect. "Commence" as used in this Paragraph shall mean either the unconditional authorization of the preparation of the required plans, or the beginning of the actual work on the Premises whichever first occurs." "14. Condemnation. 14.1. Condemnation of Entire Premises. If the entire Premises are taken under the power of eminent domain or sold under the threat of the exercise of said power, this Lease shall terminate as of the first to occur of: (i) the date a condemnation decree is entered, or (ii) if condemnation is by consent decree or sale in lieu of condemnation, the date that such consent decree or sale becomes effective. 14.2. Condemnation of Less than Entire Premises. If less than all of the Premises are taken under the power of eminent domain or sold under the threat of the exercise of said power (a "Partial Taking"), and such Partial Taking has a material adverse impact on the business of Lessee or results in the remainder of the Premises being unable to be substantially used for the purposes intended, then, Lessee, in its discretion, may, by written notice to Lessor, terminate this Lease as of the date a condemnation decree is 15 entered, or if condemnation is by consent decree or sale in lieu of condemnation, the date that such consent decree or sale becomes effective. Lessee's election to terminate shall be made and given to Lessor within one hundred eighty (180) days after the Partial Taking and shall be effective as of the date specified by Lessee in the notice of election, but in no event earlier than the date of Lessee's election to terminate. 14.3. Rent Reduction Upon Partial Taking. Upon the occurrence of a Partial Taking, the Base Rent shall be adjusted by a fair and equitable amount taking into account, among other factors, the loss of usable rental space and the impact of the Partial Taking upon the business and operations of Lessee. The amount of the reduced Base Rent shall not, in any event, be greater than the Base Rent then in effect (without giving effect to the Partial Taking) multiplied by a fraction, the numerator of which is equal to that portion of the Project Costs attributable to the remainder of the Project after giving effect to the Partial Taking, and the denominator of which is equal to the amount of the total Project Costs. 14.4. Award. Subject to the right of a lender to condemnation proceeds under any mortgage or deed of trust encumbering the Premises, any award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Lessor, or as severance damages; provided, however, that Lessee shall be entitled to any compensation separately awarded to Lessee for Lessee's damages, including the value of Lessee's interest in this Lease, Lessee's relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is not terminated by reason of such condemnation, Lessor shall to the extent of its net severance damages received, over and above the legal and other expenses incurred by Lessor in the condemnation matter, repair any damage to the Premises caused by such condemnation, except to the extent that Lessee has been reimbursed therefor by the condemning authority. Lessee shall be responsible for the payment of any amount in excess of such net severance damages required to complete such repair." LESSOR: LESSEE: CRPB Investors, L.L.C., an Arizona Cerprobe Corporation, a Delaware limited liability company corporation By: P.B. Bell & Associates, Inc. By: ___________________________________ Randal L. Buness Its: Managing Member Its: Chief Financial Officer, Vice By: _____________________ President and Secretary Its: ____________________ Date: _________________________________ Date: ____________________________ 16 EXHIBIT "A" DESCRIPTION OF WORKING DRAWINGS PREPARED BY DEUTSCH & ASSOCIATES 1 EXHIBIT "B" WORK AGREEMENT B-1 EXHIBIT "C" CONTRACTOR'S BUILDING AND PREMISES CONSTRUCTION SPECIFICATIONS C-2 EXHIBIT "D" HAZARDOUS SUBSTANCES ADDENDUM D-1 EXHIBIT "E" ITEMIZATION OF PROJECT COSTS D-2 WHEN RECORDED RETURN TO: K. David Lindner, Esq. O'CONNOR, CAVANAGH, ET AL One East Camelback Road, Suite 1100 Phoenix, Arizona 85012-1656 SHORT FORM MEMORANDUM OF LEASE AND PURCHASE OPTION -------------------------------------------------- THIS SHORT FORM MEMORANDUM OF LEASE AND PURCHASE OPTION evidences that there is in existence a Lease as hereinafter described. It is executed by the parties hereto for recording purposes only as to the Lease hereinafter described, and it is not intended and shall not modify, amend, supersede or otherwise effect the terms and provisions of said Lease. 1. Name of Document: Standard Industrial/Commercial Single-Tenant Lease-Net ("Standard Lease") 2. Addendum to Lease: The terms of the Standard Lease are amended and supplemented by the First Addendum to Lease executed by the Lessor and Lessee effective as of the date of the Standard Lease (the Form Lease and the First Addendum to Lease are collectively referred to as the "Lease") 3. Name of Lessor: CRPB INVESTORS, L.L.C., an Arizona limited liability company 4. Name of Lessee: CERPROBE CORPORATION, a Delaware corporation 5. Address of Lessor: c/o P.B. Bell & Associates, Inc. 8603 East Royal Palm Road, Suite 210 Scottsdale, Arizona 85258 Attention: Philip B. Bell 6. Address of Lessee: Cerprobe Corporation 600 South Rockford Drive Tempe, Arizona 85281 Attention: Chief Financial Officer 7. Date of Lease: August 21, 1996 8. Term of Lease: Fifteen (15) years commencing on the Commencement Date (as defined in the Lease). 9. Option to Extend: Lessee has the option to extend the Lease Term for seven (7) successive periods of five (5) years each. 10. Premises: The land, building and improvements more particularly described on Schedule "A" attached hereto. 11. Right of First Offer: If Lessor elects to sell the Premises, Lessee shall have a right of first offer to purchase the Premises upon and subject to the terms and conditions described in the Lease. 12. Option to Purchase: Upon the occurrence of certain events more particularly described in the Lease, Lessor grants to Lessee an option to purchase the Premises upon and subject to the terms contained in the Lease. 13. Demise of Lease Premises: Lessor leases to Lessee and Lessee accepts from Lessor the Leased Premises. A copy of the Lease is on file with Lessor and Lessee at their respective addresses set forth above. IN WITNESS WHEREOF, parties have executed this Short Form Memorandum of Lease this ____ day of August 1996. LESSEE: LESSOR: CERPROBE CORPORATION, CRPB INVESTORS, L.L.C., an Arizona a Delaware corporation limited liability company By: P.B. Bell & Associates, Inc. Its:Managing Member By: ______________________________ By: ______________________ Name: Randal L. Buness Name: ____________________ Its: _____________________ Its: Chief Financial Officer, Vice President and Secretary STATE OF ARIZONA ) ) ss. COUNTY OF MARICOPA ) The foregoing instrument was acknowledged before me this _____ day of August 1996, by Randal L. Buness, the Chief Financial Officer, Vice President and Secretary of Cerprobe Corporation, a Delaware corporation, on behalf of the corporation. _____________________________________ Notary Public My commission expires: ______________________ STATE OF ARIZONA ) ) ss. COUNTY OF MARICOPA ) The foregoing instrument was acknowledged before me this _____ day of August 1996, by ____________________ as ___________________ of P.B. Bell & Associates, Inc., the managing member of CRPB Investors, L.L.C., an Arizona limited liability company, on behalf of the limited liability company. ______________________________________ Notary Public My commission expires: ______________________ 2 SCHEDULE "A" ------------ LEGAL DESCRIPTION OF LEASED PREMISES EX-4 5 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of the 26th day of June, 1996, by and between CERPROBE CORPORATION, a Delaware corporation ("Employer"), and RANDAL L. BUNESS ("Employee"). RECITALS -------- A. Employer is in the business of the design, manufacture, and sale of probe cards for use in the semiconductor industry and for semiconductor testing and the design, manufacture and sale of test and interface hardware products, including, without limitation, performance boards, prober and handler interfaces, including complete interface systems (digital, mixed signal and analog), used by the semiconductor industry (the "Business"). B. Employer desires to employ Employee, and Employee desires to accept such employment, on the terms and conditions set forth in this Agreement. AGREEMENT --------- NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants set forth in this Agreement, the parties hereto hereby agree as follows: 1. Employment. Employer hereby employs Employee and Employee hereby accepts such employment, to perform such duties and services for and on behalf of Employer as may, from time to time, be determined by the President of Employer. Employee shall devote Employee's full and undivided business time, attention and efforts to Employer's business and to the performance of Employee's duties under this Agreement, and shall fully and faithfully perform all duties assigned to Employee under this Agreement, consistent with Employee's position hereunder, to the best of Employee's abilities. Employee also agrees to serve as Employer's Chief Financial Officer or in such other position as Employer's Board of Directors shall determine from time to time. 2. Compensation. Employee shall be entitled to receive a per annum salary of One Hundred Fifteen Thousand Dollars ($115,000) ("Salary") as full compensation for all the services rendered by Employee during the term of Employee's employment hereunder. Employee shall be entitled to receive the Salary in fifty-two (52) equal payments; payments to be made every week commencing on June 27, 1996, or pursuant to such other payment schedule consistent with Employer's compensation policy as from time to time in effect (less all applicable deductions for all taxes, including federal, state, and FICA; insurance; pension plans; etc.). 3. Other Benefits. In addition to Employee's Salary, during the term of Employee's employment hereunder, Employee shall be entitled to the following: (a) Incentive Stock Option. Receive an option to purchase Fifty Thousand (50,000) shares of Employer's Common Stock, par value $.05 per share, such option to be granted at an option exercise price and subject to such other terms and conditions of exercise as the Board of Directors of Employer shall determine, in the exercise of its sole discretion. (b) Pension Plans. Participation in such pension, profit sharing and deferred compensation plans and programs, if any, as may be provided from time to time by Employer to such other comparable level employees of Employer. Participation in any other executive bonus plan(s) as may be approved by the Board of Directors in the exercise of its sole discretion. (c) Medical and Dental Benefits. Participation in such group medical, accident and dental plans, if any, as may be provided from time to time by Employer to such other comparable level employees of Employer. (d) Vacation. Three (3) weeks paid vacation during the term of this Agreement. Vacation shall be taken at such times as determined by Employee and approved by Employer. Vacation benefits will be used in a manner consistent with Employer's vacation policy as from time to time in effect. (e) Reimbursement. Reimbursement within thirty (30) days of the submittal of an approved expense report, for ordinary and necessary out-of-pocket business expenses incurred by Employee in connection with the business of Employer and Employee's duties under this Agreement. The term "business expenses" shall include any item of expense that is reasonable, ordinary or necessary in relation to Employee's duties hereunder. To obtain reimbursement, Employee shall submit to Employer receipts, bills or sales slips for the expenses incurred. (f) Other Benefits. Such other fringe benefits, such as life and disability insurance, as Employer may make generally available on a nondiscriminatory basis to all other employees of Employer. 4. Term of Employment. (a) Employment Term. The term of Employee's employment hereunder shall commence on June 17,1996, and shall terminate June 16,1997, unless earlier terminated in accordance with the terms of this Agreement. (b) Termination. Notwithstanding anything contained in this Agreement to the contrary, Employee's employment hereunder is entirely at will, and may be terminated by Employer with or without cause, subject only to the payment obligations of Employer as hereafter set forth. In the event Employer terminates Employee's employment hereunder for Cause (as hereafter defined), Employee's employment hereunder shall immediately terminate on the effective date of such termination as established by Employer, and Employee shall only receive Salary and any other benefits under this Agreement prorated through the effective date of Employee's termination. 2 For purposes of this Agreement, "Cause" means: (i) "Total and Permanent Incapacity" (as hereinafter defined) of Employee; (ii) the failure or inability (not as a consequence of any illness, accident or other disability, as confirmed by competent medical evidence) of Employee to perform Employee's duties hereunder for a period of thirty (30) days in a manner reasonably satisfactory to Employer's Board of Directors, provided the decision of the Board of Directors is not arbitrary or capricious, and is not made in bad faith and further that the failure or inability is not as a consequence of any illness, accident or other disability as confirmed by competent medical evidence; or (iii) "Serious Misconduct" (as hereinafter defined) of Employee. "Total and Permanent Incapacity" means such physical or mental condition of Employee, including alcoholism, which renders Employee incapable of performing Employee's duties hereunder for a period in excess of sixty (60) days. In the event Employee is a Qualified Individual with a Disability, as defined in the American with Disabilities Act, Employer shall not terminate Employee's employment hereunder if Employee is able to perform the essential functions of the Employee's job with or without reasonable accommodation from Employer. "Serious Misconduct" means embezzlement or misappropriation of corporate funds; other acts of Dishonesty (as hereinafter defined); activities harmful to the reputation of Employer (other than as a consequence of good faith decisions made by Employee in the normal performance of Employee's duties hereunder); the conviction of or the plea by Employee to any criminal felony offense or any criminal offense regarding dishonesty or moral turpitude; the refusal to perform the duties assigned to Employee pursuant to this Agreement (unless such duties shall be unlawful); or the breach of any of the terms or conditions contained in this Agreement or any other Agreement between Employee and Employer. "Dishonesty" shall include, but shall not be limited to, the furnishing of any information, reports, documents or certificates by Employee to Employer which Employee knew, believed or should have known to be false or misleading or omitted to state a material fact necessary to be stated therein in order to make any of the statements, or information therein not misleading. In the event Employer terminates Employee's employment hereunder, for reasons other than for Cause, Employee's employment hereunder shall immediately terminate on the effective date of such termination as established by Employer, and Employee shall only receive (i) Salary for the remaining period of the term of this Agreement, payable on the dates such Salary shall otherwise have been payable hereunder, and (ii) any other fringe benefits under this Agreement prorated through the effective date of Employee's termination. Notwithstanding anything contained in this Agreement to the contrary, Employee may resign and terminate Employee's employment hereunder, with or without cause, subject to the requirement that Employee shall provide Employer with not less than sixty (60) days' prior written notice. In such event, Employee shall not receive any Salary or any other benefits under this Agreement after the effective date of Employee's resignation. (c) Death. In the event of the death of Employee during the term of this Agreement, this Agreement and Employee's employment hereunder shall terminate as of the date of the death of Employee, and Employee's estate or personal representative shall be entitled to receive Salary and other fringe benefits prorated for the period of Employee's employment to the date of death. 3 (d) Suspension. Employer shall have the right to suspend Employee with full pay for any period of time the Board of Directors of Employer deems, in its sole discretion, necessary or appropriate to investigate Employee's conduct in connection with Section 4(b) hereof. 5. Noncompetition. During the period of Employee's employment hereunder, and for a period of six (6) months from and after the date of termination of Employee's employment hereunder (or such lesser period to the maximum extent permitted by applicable law), neither Employee nor any person or entity controlled (directly or indirectly) by Employee, whether as employer, employee, proprietor, partner, stockholder (other than the holder of less than five percent (5%) of the stock of a corporation the securities of which are traded on a national securities exchange or in the over-the-counter market), director, officer, consultant, agent or otherwise, shall within, into or from the Restricted Territory (as defined below) engage or cause others to engage in the Business unless first authorized in writing by Employer, which authorization may be withheld in the sole and absolute discretion of Employer. For purposes of this Agreement, the term "Restricted Territory" shall mean the United States of America, and all other countries in which the Employer conducts the Business on the date hereof. If Employee violates Employee's obligations contained in this Section 5, then the time periods hereunder shall be extended by the period of time equal to that period beginning when the activities constituting such violation commenced and ending when the activities constituting such violation terminated. 6. Nonsolicitation. During the period of Employee's employment hereunder, and for a period of twelve (12) months from and after the date of termination of Employee's employment hereunder (or such lesser period to the maximum extent permitted by applicable law), neither Employee nor any person or entity controlled (directly or indirectly) by Employee whether as employer, employee, proprietor, partner, stockholder (other than the holder of less than five percent (5%) of the stock of a corporation the securities of which are traded on a national securities exchange or in the over-the-counter market), director, officer, consultant, agent or otherwise, shall solicit (a) in respect of the Business, any person or other entity that is, or was within the previous twelve (12) month period immediately prior to the date of termination of Employee's employment hereunder, a customer or supplier of Employer, or (b) any person who, on such date, is an employee of Employer, for employment, or as an independent contractor with any person or entity, unless first authorized in writing by Employer, which authorization may be withheld in Employer's sole and absolute discretion. If Employee violates Employee's obligations contained in this Section 6, then the time periods hereunder shall be extended by a period of time equal to that period beginning when the activities constituting such violation commenced and ending when the activities constituting such violation terminated. 7. Trade Secrets and Other Confidential Information. From and after the date hereof, Employee shall not communicate or divulge to, or use for the benefit of, any person, firm or corporation other than Employer and/or Employer's subsidiaries and its or their agents and representatives, any of the trade secrets, methods, formulas, business and/or marketing plans, processes or any other proprietary or confidential information with respect to Employer, its subsidiaries, its or their business, financial condition, business operations or methods, or business prospects. The preceding sentence shall not apply to information which (a) is, was or becomes generally known or available to the public or the industry other than as a result of a disclosure by Employee in violation of this Agreement, or (b) is required to be disclosed by law. Employee shall advise Employer, in writing, of any request, including a subpoena or similar legal inquiry, to disclose 4 any such confidential information, such that Employer and/or its subsidiaries can seek appropriate legal relief. 8. Return of Employer Property. Immediately upon the expiration of this Agreement or the termination of Employee's employment with Employer, whichever shall later occur, Employee shall return to Employer any and all property of Employer, including, but not limited to, all documents, agreements, schedules, statements, customer lists, supplier lists, plans, designs, parts and equipment, that is in the possession or control (direct or indirect) of Employee. Notwithstanding the foregoing, Employee shall immediately return to Employer all such property described in this Section 8 upon termination of this Agreement at any time for Cause. 9. Survival/Remedies/Severability. Employee specifically acknowledges that (a) Employer currently has operating facilities located in the Restricted Territory; (b) Employer receives much of its business from and throughout the Restricted Territory; (c) Employer has plans to expand its operations throughout the Restricted Territory; and (d) the geographic restrictions contained in Section 5 hereof, and the length of time restrictions in Sections 5, 6 and 7 hereof are each necessary and reasonable and were negotiated with Employer. The restrictions and obligations set forth in Sections 5, 6, 7 and 8 hereof shall survive the expiration or termination of this Agreement. The parties hereto hereby acknowledge and agree that the restrictions and obligations set forth in Sections 5, 6, 7 and 8 hereof are reasonable and necessary, and that any violation thereof would result in substantial and irreparable injury to Employer, and that Employer may not have an adequate remedy at law with respect to any such violation. Accordingly, Employee agrees that, in the event of any actual or threatened violation thereof, Employer shall have the right and privilege to obtain, in addition to any other remedies that may be available, equitable relief, including temporary and permanent injunctive relief, to cease or prevent any actual or threatened violation of any provision hereof. Each and every provision set forth in Sections 5, 6, 7 and 8 hereof is independent and severable from the others, and no restriction will be rendered unenforceable by virtue of the fact that, for any reason, any other or others of them may be unenforceable in whole or in part. If any provision in Sections 5, 6, 7 or 8 hereof is unenforceable for any reason whatsoever, that provision will be appropriately limited and reformed to the maximum extent provided by applicable law. If the scope of any restriction contained herein is too broad to permit enforcement to its full extent, then such restriction shall be enforced to the maximum extent permitted by law so as to be judged reasonable and enforceable, and the parties agree that such scope may be modified by an arbitrator or judge in any proceeding to enforce this Agreement. This includes, without limitation, altering or enforcing only portions of the limits on activity restrictions, the geographic scope, and the duration of the restrictions unless to do so would be contrary to law or public policy. 10. Miscellaneous. (a) Notices. All notices required or permitted to be given hereunder shall be in writing and shall be deemed given when delivered in person, or three (3) business days after being placed in the hands of a courier service (e.g., DHL or Federal Express) prepaid or faxed provided that a confirming copy is delivered forthwith as herein provided, addressed as follows: 5 If to Employer: --------------- CerProbe Corporation 600 South Rockford Drive Tempe, Arizona 85281 Attention: C. Zane Close FAX: 602-967-4636 If to Employee: --------------- Randal L. Buness 3504 East Claremont Avenue Paradise Valley, Arizona 85253 and/or to such other respective addresses and/or addressees as may be designated by notice given m accordance with the provisions of this Section. (b) Entire Agreement. This Agreement constitutes the entire agreement between the parties and shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns. Except as set forth herein, the provisions of this Agreement supersede any and all other agreements or understandings, whether oral or written, between Employer and Employee, with respect to Employee's employment by Employer. Any amendments, or alternative or supplementary provisions to this Agreement must be made in writing and duly executed by an authorized representative or agent of each of the parties hereto. (c) Non-Waiver. The failure in any one or more instances of a party to insist upon performance of any of the terms, covenants or conditions of this Agreement, to exercise any right or privilege in this Agreement conferred, or the waiver by said party of any breach of any of the terms, covenants or conditions of this Agreement, shall not be construed as a subsequent waiver of any such terms, covenants, conditions, rights or privileges, but the same shall continue and remain in full force and effect as if no such forbearance or waiver had occurred. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party. A breach of any representation, warranty or covenant shall not be affected by the fact that a more general or more specific representation, warranty or covenant was not also breached. (d) Counterparts. This Agreement may be executed in multiple count erparts, each of which shall be deemed to be an original, and all such counterparts shall constitute but one instrument. (e) APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONTROLLED AS TO VALIDITY, ENFORCEMENT, INTERPRETATION, CONSTRUCTION, EFFECT AND IN ALL OTHER RESPECTS BY THE INTERNAL LAWS OF THE STATE OF ARIZONA APPLICABLE TO CONTRACTS MADE IN THAT STATE. 6 (f) Construction. The parties hereto acknowledge and agree that each party has participated in the drafting of this Agreement and that this document has been reviewed by the respective legal counsel for the parties hereto and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be applied to the interpretation of this Agreement. No inference in favor of, or against, any party shall be drawn from the fact that one party has drafted any portion hereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. EMPLOYER: EMPLOYEE: CerProbe Corporation By: /s/ C. Zane Close /s/ Randal L. Buness ---------------------- --------------------------- Name: C. Zane Close Randal L. Buness ---------------------- Its: President/CEO ---------------------- EX-5 6 OPERATING AGREEMENT OPERATING AGREEMENT OF CRPB INVESTORS, L.L.C. This Operating Agreement (the Agreement) is made and entered into by and among those persons executing this Agreement as the Members as set forth on Schedule A to this Agreement. In consideration of the foregoing and of the mutual promises and conditions hereinafter set forth, the parties agree as follows: ARTICLE 1 Formation of Limited Liability Company 1.1 Company. The Members have formed a limited liability company pursuant to the Arizona Limited Liability Company Act (the Act"). The name of the company is CRPB Investors, L.L.C. (the "Company"), with such changes or variations thereof as may be necessary to comply with the requirements of law or regulatory bodies in any jurisdiction in which the Company may do business. It is the intent of the Members that the Company be operated in a manner consistent with its treatment as a "partnership" for federal and state income tax purposes. It is also the intent of the Members that the Company not be operating or treated as a "partnership" for purposes of Section 303 of the United States Bankruptcy Code. No Member shall take any action inconsistent with the express intent of the parties hereto as set forth herein. 1.2 Filing. The Articles of Organization have been filed and are in effect in the State of Arizona. To the extent not provided for in this Agreement, the Company and its Members shall be governed by the Act. 1.3 Character of Business. The Company shall not engage in any other business or activity except as set forth in or contemplated by this Agreement. The business of the Company shall be: 1.3.a. To acquire and take title to real property and to hold for investment, maintain, develop, manage, improve, lease, sell, dispose of, transfer, convey, mortgage and otherwise deal with such property; 1.3.b. To enter into, perform and carry out contracts and agreements which are, in the judgment of the Manager, necessary, appropriate or incidental to the accomplishment of the business and purposes of the Company; 1.3.c. To engage in all business activities permitted under the law; and 1.3.d. To do any other acts or things which may be necessary, appropriate, related or incidental, in the judgment of the Manager, to carry out the business and purpose of the Company as stated above. 1 1.4 Office and Principal Place of Business. The initial office and principal place of business of the Company shall be 8603 East Royal Palm Road, Suite 210, Scottsdale, Arizona 85258, or such substituted or additional place of business as may be designated by the Manager from time to time. 1.5 Term. The Company's existence shall commence on the date of the filing of the Articles of Organization and shall be governed by this Agreement which provides for dissolution of the Company in accordance with Article 9, dissolution of Company on the earliest to occur of the following: 1.5.a. December 3 1, 2047. 1.5.b. The Members holding not less than two-thirds (2/3) of the issued and outstanding Units determine that the Company should be dissolved; or 1.5.c. The Company sells or disposes of all or substantially all of its interest in the Property and any promissory note, mortgage, deed of trust, agreement of sale or other assets which the Company may acquire in exchange for such Property. 1.6 Continuation of Company. Subject to all of the provisions of this Agreement, the death, withdrawal, resignation, retirement, expulsion, bankruptcy, insanity or substitution of any Member shall dissolve or terminate the Company, unless the Members holding not less than two-thirds (2/3) of the issued and outstanding Units consent to continue the business of the Company pursuant to the voting procedures described in paragraph 10.2 below. 1.7 Members. The Members shall be as named herein, or any other Person admitted to the Company as an additional Member. The addresses of the Members are set forth on Schedule A which is attached hereto and made a part hereof by this reference. ARTICLE 2 Definitions 2.1 Definitions. Whenever used in this Agreement the following terms shall have the meanings described below: 2.1.a. "Adjusted Capital Contributions" shall be the Capital Contributions paid pursuant to Article 3 of this Agreement at any point, as decreased from time to time by Distributions pursuant to paragraph 4.1.b below. 2.1.b. "Agreement" shall mean this Operating Agreement pursuant to which the Company is organized, as the same may be amended from time to time. 2.1.c. "Affiliate" shall mean, with respect to any Person, (I) any Person directly or indirectly controlling, controlled by or under common control with such Person, (ii) any Person owning or controlling 10% or more of the outstanding voting interests of such Person, (iii) any officer, director, or general manner of such Person, or (iv) any Person who is an officer, director, general partner, trustee, 2 or holder of 10% or more of the voting interests of any Person described in clauses (I) through (iii) of this sentence. 2.1.d. "Capital Account" shall mean a Member's separate capital account as determined from time to time pursuant to Article 4. 2.1.e. "Capital Contributions " shall mean, with respect to any Member, the fair market value of any property and the total amount of any money contributed to the Company by such Member at any point pursuant to Article 3, Capital Contributions. 2.1.f. "Capital Percentage" shall mean the ratio which the Capital Contributions by each Member on the last day of each calendar month bears to the total of all Capital Contributions by all Members as of that date, without regard to Capital Accounts or the number of days during such months in which a Person was a Member. The respective Capital Percentages of the Members are set forth in Schedule A opposite each Member's name. 2.1.g. "Cash Available for Distribution" shall mean the excess of Gross Receipts, after payment of any and all indebtedness currently payable with respect to the Property, over expenses, costs, cash disbursements, and other obligations, whether accrued or paid, without deductions for any depreciation, and less a reasonable allowance for cash reserves for contingencies and anticipated obligations, including property taxes, insurance, assessments, capital improvements and replacements, as determined by the Manager. At such time as the Manager determines that the unused balance of any such reserves previously retained out of funds which would otherwise have been Cash Available for Distribution is no longer necessary, the same shall thereupon be deemed Cash Available for Distribution If during any month of operation actual Cash Available for Distribution is less than ninety percent (90%) of the monthly budgeted amount for such Distributions, all subsequent determinations of Cash Available for Distribution shall be made upon the vote of the Members holding two-thirds (2/3) of the total issued and outstanding Units herein 2.1.h. "Company" shall mean CRPB Investors, L C organized pursuant to this Agreement 2.1.i. "Distributions" shall mean Cash Available for Distribution paid to the Members with respect to any fiscal year of the Company. 2.1.j. "Gross Receipts" shall mean all cash received by the Company from every source, excluding Capital Contributions and Assessments or from any Company borrowing. 2.1.k. "Initial Capital Contributions" shall mean the total of the capital contributions received from the Initial Members. 2.1.l. "Initial Construction Phase" shall mean the period between the date of this Agreement and the date of 'Substantial Completion as that term is defined in the lease referred to in paragraph 6.6 below. 3 2.1.m. "Initial Construction Phase Return" with respect to any Member who has contributed cash to the Company for its Units, means the Adjusted Capital Contributions in cash of such Member existing from time-to-time during the Initial Construction Phase of the Property multiplied by an interest rate equal to ten percent (10%) per annum, cumulative but not compounded. Any such Returns will be deemed to be a line item expense for purposes of computing Total Project Costs as that term is defined in the Lease referred to in paragraph 6.6 below. 2.1.n. "Initial Members" shall mean P. B. Bell & Associates, Inc., CORP, Inc., Cerprobe Corporation and the investor or investors that contribute funds used to return $768,000 of Cerprobe Corporation's Capital Contribution. 2.1.o. "Member" shall mean any Person admitted to the Company. 2.1.p. "Majority Vote" shall mean the vote of the Members representing more than fifty percent (50%) of the Total Outstanding Units. 2.1.q. "Manager" shall mean P. B. Bell & Associates, Inc., an Arizona corporation. The Manager shall also be a Member. 2.1.r. "Net Losses" shall mean the net losses of the Company as determined for federal income tax purposes. 2.1.s. "Net Profits" shall mean the taxable income of the Company as determined for federal income tax purposes, exclusive of net gains or net losses recognized for federal Income tax purposes in a fiscal year from the sale or other disposition of all or substantially all of the Property in dissolution of the Company. 2.1.t. "Property" shall mean the real property as described on Schedule B hereto and any building, structure or improvements now or hereafter added thereto or thereon, and any other property, real, personal or mixed, or any interest therein, thereafter acquired directly or indirectly by the Company 2.1.u. "Person" shall mean any natural person, partnership, corporation, limited liability company, association or other legal entity. 2.1.v. "Recoupment" shall mean any point in time at which cumulative Distributions equal one hundred percent (100%) of the total Capital Contributions made by a Member. 2.1.w. "Total Outstanding Units" shall mean all Units issued to Members. 2.1.x. "Unit" shall mean one (I) of the total one hundred (100) ownership Interests outstanding in the Company to be acquired by the Members and which shall represent the Capital Contribution to the Company pursuant to Paragraph 3.1, "Capital Contributions." Ownership of Units shall entitle the holder thereof to the Capital Percentage respecting such interest as set forth on Schedule A, and an interest in the Net Profits, Net Losses, credits, deductions, Distributions and any other rights 4 of a Member as specified herein. ARTICLE 3 Capital Contributions 3.1 Capital Contributions. The Company is authorized to accept an unlimited amount of Capital Contributions and issue a maximum of one hundred (100) Units. 3.1.a. The Company will admit as Members such Persons who have contributed cash, property, or other consideration to the capital of the Company for such Capital Percentage and Units as set forth on Schedule A hereto, as may be amended from time to time. 3.1.b. The Company may issue fractional Units. 3.1.c. The Manager shall have the authority to admit the Initial Members subject to paragraph 3.1.a The Manager shall, upon the admission of Members, obtain the signature to and acceptance of this Agreement by the Member and make the appropriate adjustments to Schedule A hereto respecting Capital Contributions and Capital Percentages. 3.2 Additional Capital Contributions. In the event that the Company is in need of capital in excess of the contributions set forth in Schedule A for ordinary and necessary construction costs and for recurring expenses of the Company such as real estate taxes and assessments, insurance premiums, accounting and legal fees and similar expenses, additional Capital Contributions shall be required to be contributed to the Company, to be payable in proportion to the respective Units of the Members, up to an aggregate maximum of ten percent (10%) of the Initial Capital Contribution of a Member. To the extent contributions are needed in excess of such ten percent (10%), a Member shall only be required to contribute its prorata share upon the vote of the Members holding two-thirds (2/3) of the total issued and outstanding Units herein. 3.3 Failure to Make Additional Capital Contributions. 3.3.a. If a Member fails to make an Additional Capital Contribution as required by Paragraph 3.2, Additional Capital Contributions, on or before the specified payment date, the Manager shall deliver written notice of such failure to the defaulting Member. If the defaulting Member fails to make the required Additional Capital Contribution within the time specified in the notice, such defaulting Member shall remain personally liable for the Additional Capital Contribution until the Company receives the same and the Manager, to the extent permitted by law, may at its option and on behalf of the Company: (I) expel the defaulting Member from the Company by delivery of written notice thereof to such Member; (ii) extend the time for payment; (iii) bring suit against the defaulting Member for the amount in default, together with interest thereon from the day such amount was due at the rate of eighteen percent (18%) per annum plus collection expenses, including, without limitation, the fees and disbursements of counsel for the Company; and/or (iv) pursue any other remedy or course of action which the Manager deems to be appropriate and is permitted by law. 5 3.3.b. If a Member is expelled, such expulsion shall be effective upon delivery of the Manager's written notice to the defaulting Member. A Member who is adjudged a bankrupt may forthwith be expelled from the Company without prior notice or the necessity of any further action by the Manager. Upon expulsion, the expelled Member shall cease to have any further right to vote as a Member or to attend or receive notice of any meetings of Members or to otherwise participate in any decisions of the Members, the Manager or the Company In the event the expelled Member is the Manager, then ail management and administrative powers as manager' shall cease effective as of the time of expulsion, and a new Manager shall be appointed by those Members holding two-thirds (2/3) of the Units held by the non-expelled Members. Any expelled Member shall also cease to participate in or receive any Net Profits, Net Losses, Distributions, credits or deductions of the Company, commencing at the time such expulsion occurs and thereafter for the term of the Company. An expelled Member shall not be entitled to the return of its Adjusted Capital Contributions to the Company until Recoupment has occurred with respect to all of the unexpelled Members. The rights of an expelled Member to the return of its Adjusted Capital Contributions shall be junior in all respect to the Distributions of the remaining Members and shall be refunded, if at all, only when all other Distributions to which the other Members are entitled have been made. 3.3.c. The Manager shall deliver written notice to all Members of the expulsion of a Member and shall request each Member to advise the Manager, in writing, whether such Member wishes to acquire all or any of the Units owned by the expelled Member immediately prior to the expulsion by paying the delinquent contributions attributable to such Units of the expelled Member. If more than one Member elects to purchase such Units within the time specified in the notice, which shall be not less than ten (10) days after delivery of the Manager's notice, they shall acquire such Units in the proportions that their respective Units bear to each other and shall pay a proportionate share of the delinquent contributions attributable to the Units of the expelled Member. If none of the Members elects to acquire the Units or if some or all of the Members elect to acquire only a portion of such Units, the Manager may purchase the remaining Units or may sell such Units to a third person in consideration of the fulfillment of all the following conditions: (I) payment of all delinquent capital contributions attributable to the Units to be purchased; (2) written agreement to pay all future capital contributions attributable to the Units to be purchased; and (3) execution of a counterpart of this Agreement as a Member If no third party purchases the Units of the expelled Member, the Company shall have the option to purchase the Units by paying the delinquent contributions attributable to such Units. In the event the Units of an expelled Member are purchased as described above, the rights of an expelled Member to the return of its Adjusted Capital Contributions shall be junior in all respects to the Distributions of the remaining Members and shall be refunded, if at all, only when all other Distributions to which the other Members are entitled have been made. 3.4 Use of Capital Contributions. All Capital Contributions shall be expended in furtherance of the business of the Company. No interest shall be paid on Capital Contributions, except as otherwise permitted in this Agreement. Pending the use of Capital Contributions in Company operations, such Contributions will not be commingled with the funds of any other Person or entity, except that the funds may be deposited in an account in the name of the Company in such bank or other financial institution as the Manager may deem appropriate or in a money market mutual fund or such other investments or securities as determined by the Members holding not less than two-thirds (2/3) of the issued and outstanding Units. 6 3.5 Loans. If the Manager at any time or from time to time, determines that the business of the Company requires funds for any reason in addition to those contributed by the Members, one or more Members may lend such required funds to the Company in such amounts as determined by the Manager but in proportion among the Members willing to make loans according to their respective Units owned herein, and at an annual interest rate equal to the prime interest rate in effect at Bank of America plus two (2) percentage points, cumulative but not compounded unless loans can be obtained elsewhere at more favorable terms. Said loans shall be payable out of the general funds of the Company and shall in no event be treated as contributions to the capital of the Company. ARTICLE 4 Net Profits, Net Losses and Distributions 4.1 Allocation of Distributions. From and after the date of this Agreement and until termination of the Company, no Distributions to the Members shall be made except as provided in this Article. The Manager shall, from time to time as it may deem appropriate, determine the amount of Cash Available for Distribution, if any Distributions will be allocated among the Members in the following manner: 4.1.a. Ninety-nine percent (99%) to the Members who have Adjusted Capital Contribution balances from cash contributions prorata according to their respective Capital Percentages and one percent (1%) to the Manager until all such Members receive Distributions in an amount equal to their Initial Construction Phase Return; then 4.1.b. To the Members in accordance with their respective Capital Percentages. 4.2 Distributions and Admissions of Members. Upon the admission of a Member, the share of Distributions allocable to such Member shall be determined consistent with the portion of the year during which it was a Member. 4.3 Distributions and Withdrawal of Members. Although the Manager may make Distributions with respect to the Units during the term of the Company, no Member shall have the right to withdraw from the Company or to demand any Distributions or a return of all or any part of its Capital Contributions. No Member, by reason of its withdrawal from the Company, shall receive any Distributions other than in such amounts and at such times as it would have received had such Member not withdrawn from the Company. 4.4 Net Profits, Net Losses, Credits and Deductions. 4.4.a. Except as provided in subparagraph 4.4.c below, Net Profits, Net Losses, credits and deductions of the Company with respect to each fiscal year in which there are Distributions to the Members shall be allocated among the Members (including the Manager) in the same ratio that Distributions are allocated in Paragraph 4.1, Allocation of Distributions, in such fiscal year. If there are no Distributions in any given fiscal year, Net Profits, Net Losses, credits and deductions of the Company with respect to such fiscal year shall be allocated among the Members (including the Manager) 7 in the same ratio that Distributions would be allocated pursuant to Paragraph 4 1, Allocation of Distributions, in such fiscal year, taking into account the cumulative Distributions made by the Company prior to such fiscal year. 4.4.b. If any Member is not a Member for an entire fiscal year, or if its Capital Percentage changed during such year, the share of Net Profits, Net Losses, Distributions, credits and deductions of the Company allocable to such Member shall be determined consistent with the portion of the year during which it was a Member and by taking into account its varying Capital Percentages. 4.4.c. Net gains or net losses recognized for federal income tax purposes in a fiscal year from the sale, including an installment sale or other disposition of all or substantially all of the Property in dissolution of the Company shall be allocated among the Members in the following manner: 4.4.c.1. Net gains shall be allocated to the Members to increase their Capital Accounts by an amount equal to the net reductions made to their Capital Accounts by reason of the allocation of Net Losses and other items which, under Paragraph 4.5, capital Accounts, resulted in decreases in the Members' Capital Accounts during the term of the Company (provided that if the amount of net gains shall be Insufficient to accomplish the foregoing, then the net gains shall be apportioned among the Members in the ratios that the Members respective net reductions bear to each other). 4.4.c.2. Any balance of the net gains and any net losses shall be allocated among the Members in the same ratio that Distributions would be allocated among the Members pursuant to Paragraph 4.1, "Allocation of Distributions, " as though there were no dissolution of the Company in such fiscal year, taking into account the cumulative Distributions made prior to such fiscal year. 4.5 Capital Accounts. The Company shall maintain a separate Capital Account for each Member in accordance with the rules set forth in Section 1.704-1(b)(2)(iv) of the Treasury Regulations under the Internal Revenue Code Subject to those rules, Capital Account shall mean the amount of any money paid by the Member to the Company, increased by: (I) the fair market value of property contributed by the Member to the Company (net of liabilities secured by the property or to which the property is subject); and (ii) the net amount of any income allocated to the Member; and decreased by: (a) the amount of money paid to the Member; (b) the fair market value of property distributed to the Member by the Company (net of liabilities secured by the property or to which the property is subject); (c) the Member's share of expenditures of the Company described in Section 705(a)(2)(B) of the Code (including, for this purpose, losses which are nondeductible under Section 267(a)(1) or Section 707(b) of the Code); (d) the Member's share of amounts paid or incurred by the Company to organize the Company or to promote the sale of (or to sell) an interest in the Company (except to the extent properly amortizable for tax purposes); and (e) the net amount of loss allocated to the Member. The Capital Account of each Member shall be calculated on December 31 of each calendar year. 4.6 Capital Account of Substituted Member. The Capital Account of a substituted Member shall be, with respect to any Units transferred to such substituted Member pursuant to Article 8, "Transfer of Company Interests," the Capital Account of the transferor Member determined in accordance with Paragraph 4.5, "Capital Accounts," as of the transfer date on which the substitution is 8 effective. ARTICLE 5 Management 5.1. Manager's Powers. Subject to the Members' approval of the major Decisions as provided in paragraph 5.2 below, the Manager shall have the exclusive right, power and duty to manage the business and affairs of the Company, with all powers necessary, advisable or convenient to that end. The powers and duties of the Manager shall include, but are not limited to, the following: 5.1.a. To execute all documents and do all things necessary to acquire the Property, or to execute any other documents required in connection with the acquisition, maintenance, development, operation or sale of the Property or reasonable or necessary in connection with the Company business; 5.1.b. To enter into a construction loan for the Company for $6,232,000 bearing interest at L.I.B.O.R plus 240 basis points or the prime rate plus one-half percent (l/2%)from Guaranty Federal Bank with a five (5) year term consisting of one (1) two (2) year period of interest-only and three (3) one (1) year extension options thereafter with amortization of principal to commence after the first two (2) years; the Manager is hereby authorized to execute such promissory notes, security agreements and other loan documentation as necessary to consummate the foregoing loan. 5.1.c. To employ or engage on behalf of the Company such Persons, as in the Manager's exclusive discretion or judgment may be deemed advisable for the proper operation of the business of the Company, upon such terms and for such compensation as the Manager shall determine, provided that such compensation paid by the Company shall not exceed the cost of obtaining similar services from third parties; 5.1.d. To make, execute, acknowledge and deliver such certificates, instruments and documents as may be required by, or may be appropriate under, the laws of the State of Arizona in connection with the conduct of business by the Company; 5.1.e. To enter into such contracts and execute, acknowledge and deliver all instruments in connection therewith which the Manager deems necessary to effectuate the powers set forth herein and to take all such action in connection therewith as the Manager deems necessary or appropriate; 5.1.f. To establish and maintain operating bank accounts and reserves for such purposes and in such amounts as the Manager deems appropriate from time-to-time and in their discretion designate persons to have signature authority on such accounts; 5.1.g. In addition to the specific rights and powers herein granted, to engage in any activities necessary or incidental to the accomplishment of any of the purposes and business which the Company was formed to conduct; 5.1.h. To protect and preserve the title and interest of the Company with respect to the 9 Property and other assets now or hereafter owned by the Company; 5.1.i. To pay from the funds of the Company, before delinquency and prior to the addition thereto of interest or penalties, all taxes, assessments, rents and other impositions applicable to the Property and other assets now or hereafter owned by the Company and undertake, when approved by the Members holding at least two-thirds (2/3) of the Units, any action or proceeding seeking to reduce such taxes, assessments, terms or other impositions; 5.1.j. To retain or employ and coordinate the services of all contractors, approved architects, engineers, accountants, attorneys and other professional persons in connection with the construction of buildings and other improvements; 5.1.k. To maintain all funds of the Company in an interest-bearing account or accounts established by the Manager with a bank or banks chartered in the United States as may from time to time be selected by the Manager; 5.1.1. When permitted or required by this Agreement or otherwise approved by the Members, to make distributions periodically to the Members in accordance with the provisions of this Agreement, 5.1.m. To supervise or assure the prompt compliance with all present and future laws, ordinances, orders, rules, regulations and requirements of all federal, state and municipal governments, courts, departments, commissions, boards and officers pertaining to the Company or the Property; 5.1.n. To make application for and obtain all necessary governmental approvals and permits and perform such acts as shall be necessary to effect compliance by the Company with all laws, rules, ordinances, statutes and regulations of any governmental authority applicable to the renovation and operation of the Property; 5.1.o. To maintain all books and records of the Company in accordance with good and acceptable accounting practices; 5.1.p. To reimburse itself from the Company funds for its reasonable expenses incurred in connection with its duties under this Agreement but only to the extent provided for in the annual operating budget and construction budget approved by the Members as provided in paragraphs 5.2.g and 5.2.h. below; 5.1.q. To perform any other obligations provided elsewhere in this Agreement to be performed by the Manager; and 5.1.r. To give the Company's indemnification to the entity insuring title to the Property to the extent required by such entity to indemnify said title company for any losses caused by mechanic and materialman liens created by construction activity begun before the closing of the construction loan. 5.2 Major Decisions. Notwithstanding anything contained in paragraph 5.1 above to the 10 contrary, the following Company decisions ("Major Decisions") shall require the vote of the Members holding at least two-thirds (2/3) of the issued and outstanding Units herein: 5.2.a. Any sale, transfer or disposition or refinance of all or any portion of the Property; 5.2.b. The release of any Retentions as that term is defined under the construction contract with MT Builders LLC; 5.2.c. Following Substantial Completion of the Property, any additional contracts covering the construction of any improvements or repairs or alterations to the Property; 5.2.d. Except as provided in paragraph 3.1.c. above, the admission of additional Members; 5.2.e. The initiation of any lawsuit or other legal proceeding that involves an obligation in excess of 550,000; 5.2.f. The execution of the construction contract or contracts for the Property; 5.2.g. Each annual operating budget; 5.2.h. The budget for the construction of the Property; 5.2.i. Except for the construction loan and the indemnification of the title insurance company as provided in paragraph 5.1.r. above, the mortgaging or the placing of any encumbrances on the Property or the granting of any options, rights of first refusal, liens, pledges or security interests, or the creation of any debt, guarantee or financial obligation in excess of 525,000. No debt or other obligation shall be contracted or liability incurred by or on behalf of the Company except by the Manager; 5.2.j. The filing or arbitrating of, adjusting, settling or compromising of, or entering a confession of judgment with respect to any claim, obligation, debt, demand, suit or judgment by or against the Company in an amount greater than 550,000; 5.2.k. The construction of any capital improvements other than those reflected in the construction budget; 5.2.1. The extension of credit to, or execution of any loan, bond, guarantee, indemnity or accommodation endorsement relating to the debt or obligation of another party; 5.2.m. Making an assignment for the benefit of creditors or filing a petition under federal bankruptcy law or any state insolvency law; 5.2.n. Changing the designation of the holder of legal title to the Property and any other property owned by the Company; 11 5.2.o. Consenting to any rezoning or subdivision of the Property or any other material change in the legal status thereof; 5.2.p. Entering into any agreement or arrangement with any Member or Affiliate of any Member or reimbursing any expense or expenditure of any Member or Affiliate unless such agreement, arrangement, expense or expenditure is specifically disclosed and authorized in the construction budget or the operating budget; and 5.2.q. The removal or appointment of any Person as "Manager" of the Company or as manager of the Property except, however, that P. B. Bell & Associates, Inc. shall in no event be removed as Manager until the earlier of (I) October 5, 1996 or (ii) the satisfaction of the conditions of paragraph 8.6 a. below. If the Manager is removed pursuant to this paragraph 5.2.q., then Cerprobe shall attempt to obtain from the lender the release of all the guaranties on the construction loan of the Company and if unable to obtain those releases, then to indemnify any and all guarantors from any losses under those guaranties If the Manager is removed under this subparagraph 5.2.q after the closing of the construction loan and Cerprobe Corporation is able to obtain a release of the guaranties, the Manager shall return to the Company the Loan Guaranty Fee less that pan of the Loan Guaranty Fee that equals the product of the Loan Guaranty Fee multiplied by a fraction, the denominator of which shall be 180 days and the numerator of which shall be the number of days that have elapsed since the date of the closing of the construction loan. If the guaranties are not released and the Manager only receives an indemnity from Cerprobe Corporation, then the Manager shall not refund any of the Loan Guaranty Fee. 5.3 Other Activities and Certain Transactions. The Manager shall devote to the Company such time as is necessary to the proper conduct of the Company's business The Manager and the Members shall at all times be free to engage generally in all aspects of real estate ownership and management, including the purchase, sale, development and management of real estate and the formation of partnerships, joint ventures, other investment programs similar to the Company, or in any other business or venture of every nature and description, even though said other activities and organizations may compete or tend to compete with the Company. The Manager and the other Members shall have no duty or obligation to present to the Company any real or personal properties, or opportunities in connection therewith, which they may discover. Neither the Company nor its Members shall have any right by virtue of this Agreement in or to such other ventures, partnerships or entities or to the income or profits derived therefrom, provided, that this Paragraph shall not be construed to either contract or expand the duty of the Manager to the Members or the Company. 5.4 Indemnification and Exculpation of Manager. The Manager shall not be liable to the Company or the Members for or as a result of any act, omission or error in judgment which was taken, omitted or made by the Manager in the exercise of its judgment in good faith under this Agreement and which does not constitute fraud, gross negligence or breach of fiduciary duty by the Manager. The Manager may consult with such legal or other professional counsel as it may select. Any action taken or omitted by it in good faith reliance on, or in accordance with, the opinion or advice of such counsel shall be full protection and justification to the Manager with respect to the actions taken or omitted. The Company will defend, reimburse and indemnify and save and hold the Manager 12 harmless from any liability, loss or damage and any and all costs and expenses reasonably incurred by it in connection with, or any action, suit or proceeding of whatever nature threatened or brought against it, or in which it may be involved as parties or otherwise, by reason of any act performed or omitted to be performed by it in connection with the business of the Company authorized by this Agreement, whether or not the Manager continues to be such at the time of including such costs and expenses, including amounts paid or incurred by it in connection with reasonable settlements of any such claim, action, suit or proceeding, provided such act or omission was done, in the good faith judgment of the Manager, in the best interests of the Company and did not constitute fraud, gross negligence, breach of fiduciary duty or misconduct by the Manager. 5.5 Arbitration. In the event the fair market value of the Units of a Terminated Member (as hereinbelow defined) cannot be agreed upon, any Member may provide the other Members with written notice (the "Arbitration Notice") that the decision must be submitted to binding arbitration. Each party shall name an arbitrator within twenty (20) days after either party notifies the other in writing that there is such a dispute existing, and the two (2) arbitrators shall name a third (3rd) arbitrator. If either party fails to select an arbitrator within twenty (20) days as required herein, or if the two (2) arbitrators fail to select a third (3rd) arbitrator within fifteen (15) days after both have been appointed, then the then Presiding Judge of the Maricopa County Superior Court shall appoint such other arbitrator or arbitrators. The arbitrators shall render a decision within sixty (60) days after their appointment and shall conduct all proceedings pursuant to Arizona Revised Statutes, Section 12-1501 through Section 12-1517, or the successor statutes, and the Rules of the American Arbitration Association governing commercial transactions then existing, to the extent that such rules are not inconsistent with said statutes and this Agreement. Judgment upon the award rendered under arbitration may be entered in any court having jurisdiction. The cost of the arbitration procedure shall be borne by the losing party or, if the decision is not clearly in favor of one party or the other, then the costs shall be borne as determined by such arbitration proceeding. 5.6 Tax Matters Officer. The Manager will act as "Tax Matters Partner" in accordance with the Internal Revenue Code, or any successor statute. ARTICLE 6 Contractual Relationships With Manager, Members and Affiliates 6.1 Development Fee. The Company shall pay a Development Fee to P. B. Bell & Associates, Inc., the Manager, in the amount of Two Hundred Thirty Thousand Dollars ($230,000) for its services and assistance in the acquisition of the Property. The Fee shall be paid Fifty Seven Thousand Five Hundred Dollars ($57,500) upon acquisition of the Property by the Company and the balance in eight (8) equal monthly installments of Twenty One Thousand Five Hundred Sixty Two and 50/100 Dollars ($21,562.50) beginning thirty (30) days from the date of closing on the Property. 6.2 Construction Fee. The Company shall pay a Construction Fee to MT Builders, LLC, an Affiliate of the Manager, in the amount of Two Hundred Fifty Thousand Dollars ($250,000) for its services In supervising the construction of the improvements on the Property pursuant to a separate construction Contract with such Affiliate The Fee shall be paid Sixty Two Thousand Five Hundred 13 Dollars ($62,500) upon commencement of construction of the improvements by the Company and the balance in eight (8) equal monthly installments of Twenty Three Thousand Four Hundred Thirty Seven Dollars and 50/100 Dollars ($23,437.50) beginning thirty (30) days from the date of commencement of construction. 6.3 Management Fee. So long as P. B. Bell & Associates, Inc. is the Manager of the Company, the Company will pay a Management Fee to P. B Bell & Associates, Inc., the Manager, for its services in managing the Property pursuant to a separate maintenance contract with P. B Bell & Associates. The Fee will be equal to three-fourths of one percent (.75 %) of the triple-net lease payments received by the Company payable monthly. 6.4 Loan Guarantee Fee. The Company shall pay a Loan Guarantee Fee to P. B. Bell & Associates, Inc., the Manager, or to the principals of the Manager as appropriate, equal to one percent (I %) of the face amount of any loan for the project contemplated hereunder that the Manager or said principals guaranty. Said Fee shall be paid in cash upon the Closing of the loan involved. 6.5 Reimbursement. The Company shall reimburse the Manager for the costs incurred by the Manager for any organization expenses paid by them prior to or after formation of the Company, including but not limited to earnest deposits, legal, engineering and accounting fees, appraisal fees, environmental engineering fees and other acquisition costs, mailing, copying costs and any direct general and administrative expenses incurred by the Manager directly related to the formation of the Company and acquisition, development and operation of the Property. All such reimbursements shall be made within sixty (60) days of submission of substantiation, cash permitting. After formation of the Company, all expenses of the Company shall be billed directly to, and paid by, the Company where practical. The Manager shall receive reimbursement of the costs incurred for services such as accounting and other extraordinary services which would normally be performed directly for the Company by independent parties, but which the Manager may provide. No amounts charged to the Company will exceed those which the Company would be required to pay to independent parties for comparable services in the greater Phoenix, Arizona metropolitan area. 6.6 Lease. Concurrently with the execution of this Agreement, the Company will enter into a separate agreement with Cerprobe Corporation, a Member, for the lease of the Property with improvements. ARTICLE 7 Accounts, Books, Reports and Banking 7.1 Accrual Basis. The Company shall utilize the accrual method of accounting. 7.2 Fiscal Year. The fiscal year of the Company shall be the calendar year ending December 31 of each year. 7.3 Books. The Manager shall keep, at the expense of the Company, books of account for the Company adequate for its purposes. The books of account shall be maintained at the principal office 14 of business of the Company and shall be open at all reasonable times to inspection and copying by any Member upon advance notice to the Manager and as otherwise provided in the Act. The books of account may, at the sole discretion of the Manager, be compiled or reviewed at the end of each accounting year by an accountant selected by the Manager. 7.4 Reports. The Manager shall make available to each Member, within one hundred and twenty (120) days after the end of the Company's fiscal year, an annual report (unaudited) of the activities of the Company during the period covered to be prepared at the Company's expense. The Manager shall also provide a monthly operating statement within thirty (30) days of the end of each month reflecting the revenues and expenses of the Company for and during the preceding month. The Manager also shall prepare and deliver to the Members for approval an annual operating budget no later than December 1 of each year reflecting in reasonable detail the projected revenues and expenses of the Company for the next succeeding calendar year. The Manager agrees that it shall not authorize or incur any debts, liabilities or expenses on behalf of the Company in excess of the total amount projected therefor without the approval of the Members as provided in paragraphs 5.2.g. and 5.2.h. 7.5 Income Tax Returns. The Income Tax Returns for the Company shall be prepared by the accountant employed by the Manager at the expense of the Company. A statement of each Member's share of income, credits, deductions, etc., completed by said accountant in a final form which is satisfactory to the Manager and to said accountant, shall be sent to all of the Members within thirty (30) days after completion, but no later than March 15 of each year. 7.6 Access to and Maintenance of Records. The Manager shall maintain a list of the names and last known business addresses of all Members at the principal office of the Company. The list shall be made available for the review of any Member or its designated representative at reasonable times and, upon request either in person or by mail, the Manager shall furnish a copy of such list to any Member or its designated representative for the cost of reproduction and mailing. ARTICLE 8 Transfer of Company Interests 8.1 General Restrictions on Transfer. A Member shall not assign, transfer, hypothecate or sell all or any of its Units or other rights or benefits in the Company or in any way pledge, grant a security interest in or alienate or encumber its interest in the Company, except as permitted in Paragraphs 8.2, "Permitted Transfers and Substitutions," and 8.3, "Right of First Refusal," and any document or instrument or other action purponing to do so shall be null and void. 8.2 Permitted Transfers and Substitutions. Each Member may sell, assign or transfer its Units in the Company, without the consent of the Members, to any (I) trust of which the Member is a Grantor or Trustee and a beneficiary (ii) corporation which is wholly-owned by the Member; (iii) one or more Persons who own one hundred percent (100%) of the equity or beneficial interest of the Member, if the Member is a corporation, partnership or trust; (iv) partnership, limited liability company or corporation of which the equity or beneficial owners are the same Persons (and in the same percentages) as the equity or beneficial owners of the Member, if the Member is a partnership, limited 15 liability company, corporation or trust; or (v) private foundation; provided, however, that any Person, partnership, limited liability company, corporation or trust entitled to receive such a transfer shall succeed to all the rights and obligations of the former Member as a substituted Member only upon satisfaction of the requirements of Paragraph 8.4, "Substitution of Members." 8.3 Right of First Refusal. Any Member desiring to dispose of all or any of its Units in the Company (the "Offering Member") in any manner other than as provided in Paragraph 8.7, "Permitted Transfers and Substitutions," shall comply with the following: 8.3.a. Such Member shall deliver notice to the Company and the other Members of such proposed disposition. The notice must include (I) a copy of the offer, which must be a bona fide offer, (ii) the name of the proposed transferee, (iii) the price offered for the Units and any other terms and conditions of the proposed disposition which the Members may request. Upon receipt of such notice of proposed disposition, each such Member shall have the option for a period of thirty (30) days from the delivery of the notice of proposed transfer to purchase such Units at the same price and on the same payment terms as specified in such notice. If more than one Member elects within the foregoing time period to acquire such Units, such Members shall purchase such Units in the proportions that their respective Capital Percentages bear to each other. No Member shall be required to dispose of any portion of its Units unless the Company and other Members, individually or collectively, agree to acquire all of the Units it proposes to dispose. 8.3.b. If the Members do not exercise their options to purchase the Units of the Offering Member, then the Offering Member may sell said Units not purchased by the other Members within sixty. (60) days of the end of the thirty (30) day option period to the proposed transferee at the price and on the terms and conditions originally stated in the notice of proposed transfer. If such a sale is consummated, the transferee shall become a substituted Member only upon satisfaction of the requirements of Paragraph 8.4, "Substitution of Members." If the sale is not consummated within such sixty (60) day period, then the restrictions of Paragraph 8.1 shall again be in full force and effect with respect to the Units of the Offering Member. 8.4 Substitution of Member. No assignee or transferee of a Unit or any fraction thereof shall have the right to become a Member without the consent of the Members holding two-thirds (2/3) of the issued and outstanding Units (which consent may be withheld at the sole discretion of each Member) and until the assignee assumes all of the obligations and accepts and adopts in writing all of the terms and provisions of this Agreement, as the same may have been amended. 8.5 Events of Termination of a Member. Except as otherwise approved by the specific written consent of all of the remaining Members, a Person ceases to be a Member ("Terminated Member") upon the occurrence of any of the following events: death, disability, resignation, retirement, expulsion, adjudication of bankruptcy, insolvency, insanity or incompetency, making an assignment for the benefit of creditors, or the dissolution or termination of a Member which is a corporation, limited liability company or partnership. If a Member that is an individual dies, his or her personal representative, administrator or trustee or, if he or she is adjudicated incompetent or insane, his or her guardian or conservator, or if a Member is adjudicated a bankrupt, its bankruptcy estate, shall have the rights of the Member for settling or managing the estate. The death, withdrawal, resignation, retirement, 16 expulsion, bankruptcy, insanity or substitution of a Member shall dissolve the Company unless the Members holding at least two-thirds (2/3) of the issued and outstanding Units consent to continue the business of the Company pursuant to the voting procedures described in Paragraph 10.2 below. If such Members elect to continue the business of the Company then the remaining Members shall have the option of purchasing the interest of a Terminated Member at its then agreed upon fair market value. The remaining Members shall have the right to pay such purchase price with a minimum of ten percent (10%) down, the balance in annual payments over a five (5) year period with interest equal to the prime rate in effect at Bank of America plus two percent (2%), cumulative but not compounded. In the event the fair market value of the Units of a Terminated Member cannot be agreed upon, any Member may provide the other Members with written notice (the "Arbitration Notice") that the decision must be submitted to binding arbitration pursuant to paragraph 5.5 above. 8.6 Cerprobe's Option to Purchase RCORP's and Manager's Interest. The Units of P. B. Bell & Associates. Inc. ("Bell") and RCORP, Inc. ("RCORP") may be purchased by Cerprobe Corporation at certain times and under certain events as follows: 8.6.a. The Manager and RCORP each agree that it shall cause the following events to occur not later than October 5, 1996: 8.6.a.1. The contribution of sufficient equity from a subsequent Member investor to return $768,000 of the Initial Capital Contribution of Cerprobe Corporation; and 8.6.a.2. The closing of a construction loan sufficient to construct the building and otherwise improve the Property as required under the Lease referred to in paragraph 6.6 above when such loan proceeds are added to the then remaining Capital Contributions of the Company. 8.6.b. In the event the Manager or RCORP fails to complete either of these two events in the time provided, the Manager and RCORP, Inc. shall be in default hereunder. Unless and until such default is cured, all voting rights of the Manager and RCORP, Inc. hereunder shall immediately be suspended and Cerprobe Corporation shall have the right % be and Cerprobe is hereby appointed as attorney-in-fact for the Manager and RCORP to cast all votes with respect to the Units held by the Manager and RCORP and to make all decisions and to grant or withhold all approvals that otherwise could be exercised, cast, made, granted or withheld by the Manager and RCORP until such time as a substitute Manager is elected as provided herein. Manager and RCORP expressly agree that neither of them shall have the right to cure such default except upon the approval of Cerprobe which it may grant or withhold in its sole and absolute discretion. 8.6.c. Additionally, in the event the Manager or RCORP fails to complete either of the two events listed in 8.6.a. above in the time provided, the Member Cerprobe Corporation or its designee, without further notice to or approval of the Manager, shall then have the right, for a period of ninety (90) days from such event of default, to purchase the interest of the Manager and RCORP in the Company for the purchase price of One Dollar (51.00) to be paid in cash and to remove Bell as the Manager of the Company and to appoint itself or any other Person that is a member according to Cerprobe's sole and absolute discretion. If Cerprobe does not exercise this purchase right within said ninety (90) day period, said right shall lapse. If Bell and RCORP are bought out pursuant to these provisions, the parties agree 17 as follows: 8.6.c.1. RCORP and Bell shall execute and deliver to Cerprobe or its designee on demand such documents and instruments as Cerprobe deems necessary to effect the transfer to Cerprobe or its designee the Units held by Bell and RCORP; 8.6.c.2. If the construction loan has been closed but the investor funds required under paragraph 8.6.a.1 above have not been obtained and contributed to the Company, then Cerprobe shall agree to indemnify Bell and any and all guarantors from any losses under the guaranties on the construction loan. 8.6.c.3. Cerprobe agrees to pay any remaining reimbursements due Bell pursuant to paragraph 6.5 above; and 8.6.c.4. Bell agrees to pay to the Company any Loan Guaranty Fee that Bell may have received pursuant to paragraph 6.4 above. ARTICLE 9 Dissolution of Company 9.1 Distribution on Dissolution. In the event of a dissolution of the Company in accordance with Paragraph 1.5 "Term," the Company shall be dissolved, wound-up and liquidated and the proceeds of such liquidation shall be applied and distributed in the following order of priority: 9.1.a. to the payment of the lawful debts and liabilities of the Company (other than any loans or advances that may have been made by the Members to the Company) and the expenses of dissolution, winding-up and liquidation; then 9.1.b. to the establishment of any reserves which the liquidator may deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the Company or the liquidator arising out of or in connection with the Company. The liquidator shall pay such reserves to an escrow agent selected by the liquidator to be held by such agent for the purpose of disbursing such reserves in payment of any of the aforementioned contingencies, and, at the expiration of such period as the liquidator shall deem advisable, to distribute the balance thereafter remaining in the manner hereinafter provided; then 9.1.c. to the repayment of any loans or advances that may have been made by any of the Members to the Company; provided that if the amount available for such repayment shall be insufficient, then prorata on account thereof. 9.1.d. to the Members that have net balances in their then existing Capital Accounts until all of such balances have been reduced to zero; provided that the foregoing Distributions shall be allocated to each Member in the ratio that the Member's Capital Account bears to the Capital Accounts of ail other Members having net balances in their Capital Accounts and provided further that if any 18 Member's Capital Account has a deficit balance (after giving effect to all allocations for the current taxable year), such Member shall contribute to the capital of the Company the amount necessary to restore such deficit balance to zero. 9.2. Liquidation. If the Company is dissolved for any of the reasons stated in paragraph 1.5, a Manager or some other Person selected by the vote of the Members holding at least two-thirds (2/3) of the Units hereunder, shall act as liquidator, to wind up the business affairs of the Company. The liquidator shall have full power, authority and duty to sell and assign any or all of the Company's assets and to pay or cause to be paid the Company's debts, liabilities and obligations as provided in paragraph 9.1 above. The liquidator shall immediately commence to wind up the Company affairs and shall liquidate the assets of the Company as promptly as possible, but in an orderly and businesslike manner so as not to involve undue sacrifice or injury to the Company. ARTICLE 10 Rights of Members 10.1 Matters upon which Members May Vote. Members shall have the right to vote upon certain matters affecting the Company under the terms and conditions set forth in Paragraph 10.2, "Voting Procedures and Meetings of the Members." Action shall be taken on the following matters if the Members vote in favor of such action by the vote of the Members holding at least two-thirds (2/3) of the issued and outstanding Units hereunder: 10.1.a. Amendment of this Agreement; 10.1.b. Selection of a liquidator in the event of dissolution of the Company if there is no Manager; 10.1.c. To elect a new Manager in the event of the resignation or removal of P. B. Bell & Associates, Inc. as Manager. 10.2 Voting Procedures and Meetings of the Members. 10.2.a. Any Member holding more than ten percent (10%) of the issued and outstanding Units may at any time call a meeting of the Members, or call for a vote without a meeting of the Members, on matters on which the Members are entitled to vote. The Manager shall call for such a meeting or vote following receipt of written request for such a meeting of the Members ("Notice Date"). Within two (2) days of such Notice Date, the Manager shall notify all Members of record as of the Notice Date as to the time and place of the Company meeting, if called, and the general nature of the business to be transacted at such meeting. 19 ARTICLE 11 Representations and Warranties of Members 11.1 Representations and Warranties of Member. The Members hereby represent, warrant and covenant, each to the others, that the Member has received, studied and independently evaluated the documents listed on Schedule C hereto and each Member understands the terms and conditions of the transactions evidenced by such documents and is capable of understanding real estate and investment matters generally. ARTICLE 12 General 12.1 Notices. All notices, consents, requests, demands and offers required or permitted to be delivered pursuant to this Agreement will be in writing and will be considered properly delivered when personally delivered, telecopied or delivered by professional courier service to the party entitled thereto or if mailed, then three (3) business days after mailing by certified United States mail, postage prepaid, return receipt requested, addressed, to a Manager or to a Member, to the address appearing on Schedule A to this Agreement. 12.2 Further Documents. Each of the Members for itself, his or her heirs, personal representatives, successors and assigns hereby covenants and agrees that such Member shall from time to time and at such time as may be required, execute such further agreements, supplemental agreements, assurances of title, and other documents and instruments as may be reasonably required and necessary to carry out Company business and to effectuate the provisions hereof. This Agreement shall be binding on the Members and their respective heirs, executors, administrators, personal representatives, successors and permitted assigns. 12.3 Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an original, but all of which, taken together, shall constitute one agreement. It shall not be required that any single counterpart hereof be signed by all of the Members, so long as each Member signs any counterpart hereof. 12.4 Applicable Law. This Agreement shall be governed by and construed in accordance with the Arizona Limited Liability Company Act and the other laws of the State of Arizona. 12.5 Attorneys' Fees. In case of any action or proceeding to compel compliance with, or for a breach of, any of the terms and conditions of this Agreement, the prevailing party shall be entitled to recover from the losing party ail costs of such action or proceeding, including, but not limited to, reasonable attorneys' fees. 12.6 Construction. Such pronouns as "he," "his," "him," "it," or "who" with "Member" or "Member" or "Manager" as the antecedent shall be deemed to refer also to each such persons or entity who is a woman, a partnership, a joint venture, an association, a corporation or a trust. Whenever required by the contact hereof, the singular shall include the plural and vice versa, and the masculine 20 gender shall include the feminine and neuter genders, and vice versa. Section headings and captions contained in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision hereof. 12.7 Severability. This Agreement is intended to be performed in accordance with, and only to the extent permitted by, all applicable laws, ordinances, rules and regulations of the jurisdictions in which the Company does business. If any provision of this Agreement, or any application thereof to any person or circumstances shall, for any reason and to any extent, be invalid or unenforceable, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected thereby, but shall be enforced to the greatest extent permitted by law. 12.8 Entire Agreement. This Agreement contains the entire agreement and understanding between the parties and supersedes any prior understandings and agreements between or among them respecting the subject matter contained herein. There are no representations or warranties, oral or written, expressed or implied, between or among the parties hereby relating to the subject matter of this Agreement which are not fully expressed herein. 12.9 Organization Expenses. All legal, recording and related expenses in connection with the formation and qualification of this Company and purchase of the Property shall be considered and treated as Company expenses, subject to the limitations in the budgets approved by the Members, as provided elsewhere in this Agreement. [The remainder of this page has intentionallty been left blank.] 21 IN WITNESS WHEREOF, the undersigned have executed this Operating Agreement of Company to be effective the 18th day of September, 1996. MANAGER: P. B. BELL & ASSOC'S, INC., an Arizona corporation By /s/ P. B. Bell ---------------------------------------------- PHILLIP B. BELL, President MEMBERS: RCORP, INC., an Arizona corporation By /s/ Ronald L. Clifton ---------------------------------------------- RONALD L. CLIFTON, President CERPROBE CORPORATION, a Delaware corporation By /s/ Randal L. Buness ---------------------------------------------- RANDAL L. BUNESS, Chief Financial Officer, Vice President and Secretary THE LEIGHTON-OARE FOUNDATION, INC. By /s/ Judd C. Leighton ---------------------------------------------- JUDD C. LEIGHTON /s/ Judd C. Leighton ---------------------------------------------- /s/ Mary Morris Leighton ---------------------------------------------- By /s/ Judd C. Leighton ---------------------------------------------- MARY MORRIS LEIGHTON Pursuant to Power of Atty dated 2-12-93 22 THE PLYM FOUNDATION By /s/ James F. Keenan ---------------------------------------------- JAMES F. KEENAN THE EDWARD & IRMA HUNTER FOUNDATION By /s/ James F. Keenan ---------------------------------------------- JAMES F. KEENAN 23 SCHEDULE A CRPB INVESTORS, L.L.C.
Initial Member Capital Number Capital Capital Name and Address Contributions of Units Percentage Account ============================================================================================================================= P. B. Bell & Associates, Inc. Land Purchase and Sale 16.2 16.2% $270,264 8603 East Royal Palm Road Agreement Rights, Plans and Suite 210 Specifications, Negotiated Net Scottsdale, Arizona 85258 Lease with Tenant, Formation of Entity and Loan Guaranties RCORP, INC. Value Engineering and Site 1.8 1.8% $30,029 1717 East Morten Negotiations Suite 210 Phoenix, Arizona 85020 Cerprobe Corporation Cash 35.96 35.96% $600,000 600 South Rockford Drive Tempe, Arizona 85281 The Leighton-Oare Foundation, Cash 11.99 11.99% $200,000 Inc. 211 West Washington, #2400 South Bend, IN 46601 Mr. Judd C. Leighton Cash 5.995 5.995% $100,000 211 West Washington, #2400 South Bend, IN 46601 Mary Morris Leighton Cash 5.995 5.995% $100,000 211 West Washington, #2400 South Bend, IN 46601 The Plym Foundation Cash 11.03 11.03% $184,000 423 Sycamore Street, #101 Niles, MI 49120 The Edward & Irma Hunter Cash 11.03 11.03% $184,000 Foundation 423 Sycamore Street, #101 Niles, MI 49120 TOTAL $1,668,293 =============================================================================================================================
24 SCHEDULE B Property Description 25 EXHIBIT A A portion of the Southwest quarter of Section 34, Township 1 South, Range 5 East of the Gila and Salt River Base and Meridian, Maricopa County, Arizona, more particularly described as follows: Commencing at the Southwest Corner of said Section 3, said point being a brass cap in handhold; thence North 02 degrees, 54' 47" West (record North 02 degrees 53' 38" West), along the West line of said Section 3, a distance of 1613.68 feet (recorded 1613.22 feet) to the brass cap in handhole monumented intersection of the said West section line and the monument line of West San Angelo Street as shown on CONTINENTAL TECH CENTER, a Map of Dedication as recorded in Book 308 of Maps, page 17, Maricopa County Records; thence North 88 degrees 45' 42" East, along said monument line of West San Angelo Street, a distance of 1393.81 feet to a point; thence South 01 degrees 14' 18" East, perpendicular to the aforementioned monument line of West San Angelo Street, a distance of 65.00 feet to a one-half inch iron bar, said point being the Northwest corner of parcel and the Point of Beginning; thence North 88 degrees 45' 42" East, a distance of 419.03 feet to a one-half inch iron bar, said point being on the arc of a circle, the center of which bears North 01 degrees 14' 18" West, a distance of 2162.50 feet; thence Northeasterly along said arc, through a central angle of 08 degrees 31' 43", a distance of 321.89 feet, to a one-half inch iron bar, said point also being on the arc of a second circle, the center of which bears North 77 degrees 36' 55" East, a distance of 1565.00 feet; thence Southeasterly along said arc, through a central angle of 01degrees 18' 35", a distance of 35.77 feet to a one-half inch iron bar; thence South 13 degrees 42' 40" East, a distance of 123.85 feet to a one-half inch iron bar, said point being on the arc of a third circle, the center of which bears South 76 degrees 18' 37" West, a distance of 685.00 feet; thence Southwesterly along said arc; through a central angle of 04 degrees 56' 26", a distance of 59.07 feet to a non-tangent point, said point being a one-half inch iron bar; thence South 13 degrees 37' 50" East, a distance of 72.85 feet to a one-half inch iron bar, said point lying 55.00 feet West of the monument line of Fiesta Boulevard; thence South 02 degrees 46' 30" East, along said line, a distance of 347.41 feet to a one-half inch iron bar; thence South 88 degrees 45' 42" West, a distance of 809.00 feet to a one-half inch iron bar; thence North 01 degrees 14' 18" West, a distance of 608.62 feet to the Point of Beginning. Described property being in and forming a part of the Town of Gilbert, Arizona and comprising an area of 483,845 square feet or 11.1076 acres more or less. REGISTERED LAND SURVEYOR CERTIFICATE NO. 19809 CHRISTOPHER S. AULERICH DATE SIGNED 9/19/__ ARIZONA, U.S.A. PARCEL No. 2: Nonexclusive easement for use and enjoyment in and to the Common Areas (as defined in that certain Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 86-419846, as amended by that certain First Amendment to Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 88-494774, re-recorded in Instrument No. 88-516441 and Instrument No. 89-312262, and as assigned and assumed by that certain Assignment and Assumption of Declarant's Rights Under the Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 92-0420403, that certain Assignment and Assumption of Declarant's Rights Under the Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 92-0420406 and that certain Assignment and Assumption of Declarant's Rights Under the Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 94-0889207). PARCEL NO. 3: A permanent, nonexclusive easement for vehicular and pedestrian ingress and egress in, upon, over and across the Landscape Tracts, described as Landscape Tract No. 3 of CONTINENTAL TECH CENTER, according to Book 308 of Maps, page 17, records of Maricopa County, Arizona; and Landscape Tract No. 9 of CONTINENTAL TECH CENTER PARCEL 5C, according to Book 320 of Maps, page 21, records of Maricopa County, Arizona (as defined in that certain Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 86-419846, as amended by that certain First Amendment to Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 88-494774, re-recorded in Instrument No. 88-516441 and Instrument No. 89-312262, and as assigned and assumed by that certain Assignment and Assumption of Declarant's Rights Under the Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 92-0420403, that certain Assignment and Assumption of Declarant's Rights Under the Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 92-0420406 and that certain Assignment and Assumption of Declarant's Rights Under the Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 94-0889207). PARCEL NO. 4: A temporary license for and during the construction phase of the improvements on Parcel No. 1 hereinabove described, to enter upon the Landscape Tracts described as Landscape Tract No. 3 of CONTINENTAL TECH CENTER, according to Book 308 of maps, page 17, records of Maricopa County, Arizona; and Landscape Tract No. 9 of CONTINENTAL TECH CENTER PARCEL 5C, according to Book 320 of Maps, page 21, records of Maricopa County, Arizona (as defined in that certain Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 86-419846, as amended by that certain First Amendment to Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 88-494774, re-recorded in Instrument No. 88-516441 and Instrument No. 89-312262, and as assigned and assumed by that certain Assignment and Assumption of Declarant's Rights Under the Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 92-0420403, that certain Assignment and Assumption of Declarant's Rights Under the Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 92-0420406 and that certain Assignment and Assumption of Declarant's Rights Under the Declaration of Covenants, Conditions, Restrictions and Easements for CONTINENTAL TECH CENTER recorded in Instrument No. 94-0889207). SCHEDULE C Company Supporting Documents ---------------------------- Project Proposal Booklet Phase I Environmental Report Geotechnical Evaluation Report Seismic Study ALTA Land Title Survey Title Report Information in connection with the Property Lease Documentation and all exhibits Operating Agreement (attached herewith) Construction Loan Commitment from Guaranty Federal Bank and supporting documentation Construction Contract with MT Builders 26 EX-11 7 COMPUTATION OF PER SHARE EARNINGS Cerprobe Corporation Computation of Per Share Earnings Exhibit 11 (Unaudited) (in thousands, except EPS data)
Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 1996 1995 1996 1995 ------ ------ ------ ------ Common shares outstanding beginning of period 4,420 4,010 4,096 3,223 Effect of Weighting Shares: New shares issued 0 0 0 508 Exercised employee stock options 88 156 185 150 Outstanding employee stock options 173 239 113 142 Converted convertible preferred stock 97 0 32 0 Converted convertible subordinated debentures 0 0 78 0 ------ ------ ------ ------ Primary 4,778 4,405 4,504 4,023 ====== ====== ====== ====== Common shares outstanding beginning of period 4,420 4,010 4,096 3,223 Effect of Weighting Shares: New shares issued 0 0 0 508 Exercised employee stock options 88 156 185 150 Outstanding employee stock options 174 232 118 232 Converted convertible preferred stock 97 0 32 0 Outstanding convertible preferred stock 519 0 622 0 Outstanding convertible subordinated debentures 485 595 517 595 Converted convertible subordinated debentures 0 0 78 0 ------ ------ ------ ------ Fully diluted 5,783 4,993 5,648 4,708 ====== ====== ====== ====== Net income $ 663 $ 512 $2,531 $1,692 ====== ====== ====== ====== Net income per common and common common equivalent shares: Net income per share Primary 0.14 0.12 0.56 0.42 ====== ====== ====== ====== Fully diluted 0.11 0.10 0.45 0.36 ====== ====== ====== ======
EX-27 8 FINANCIAL DATA SCHEDULE
5 This Schedule contains summary financial information extracted from the Condensed Consolidated Balance Sheet at September 30, 1996 and the Condensed Consolidated Statements of Operations and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 7,232,995 2,260,063 5,347,219 178,000 3,811,354 19,312,590 10,883,656 4,201,728 29,137,720 3,992,752 957,277 26 0 245,464 23,507,708 29,137,720 28,159,069 28,159,069 15,285,366 23,879,986 167,194 0 167,194 4,609,075 2,162,000 2,530,884 0 0 0 2,530,884 0.56 0.45
-----END PRIVACY-ENHANCED MESSAGE-----