-----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, UlgHyL7yp9iYPi2fheGTgYINWG1PTVmuLFu5REUM4KfeJ4WX1wU2cKCIKh7hY/51 wZDj+AJt/4FKZ20NiG2Bcw== 0000950147-97-000513.txt : 19970808 0000950147-97-000513.hdr.sgml : 19970808 ACCESSION NUMBER: 0000950147-97-000513 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970807 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: 97653074 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 QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 10-Q (Mark One) X Quarterly Report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 For the Quarter Ended June 30, 1997 or Transition report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 For the transition period from to . ---------------- ----------- Commission File Number 0-11370 --------- CERPROBE CORPORATION (Exact name of registrant as specified in its charter) Delaware 86-0312814 ------------------------------ ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1150 North Fiesta Boulevard, Gilbert, Arizona 85233 - ---------------------------------------------- ---------------------- (Address of principal executive offices) (Zip Code) (602) 333-1500 ---------------------------------------------------- (Registrant's telephone number, including area code) 600 South Rockford Drive, Tempe, Arizona 85281 ---------------------------------------------- (Former address, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 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 ----- ----- As of July 31, 1997, there were 6,371,580 shares of the Registrant's common stock outstanding. CERPROBE CORPORATION QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements: Condensed Consolidated Balance Sheets - June 30, 1997 and December 31, 1996................................3 Condensed Consolidated Statements of Operations - Three and Six Months Ended June 30, 1997 and 1996..................4 Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 1997 and 1996............................5 Notes to Condensed Consolidated Financial Statements...............7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...............................13 PART II - OTHER INFORMATION Item 2. Changes in Securities.............................................19 Item 4. Submission of Matters to Vote of Security Holders.................19 Item 6. Exhibits and Reports on Form 8-K..................................19 Signatures ..................................................................21 2 CERPROBE CORPORATION Condensed Consolidated Balance Sheets
June 30, December 31, ASSETS 1997 1996 ------------ ------------- (unauadited) Current assets: Cash and cash equivalents $ 1,482,445 $ 5,564,557 Accounts receivable, net of allowance of $218,278 in 1997 and $223,000 in 1996 9,718,798 5,564,203 Inventories, net 6,525,933 3,862,753 Note receivable -- 250,000 Prepaid expenses 230,344 377,003 Income taxes receivable -- 214,097 Deferred tax asset 220,676 202,476 ------------ ------------ Total current assets 18,178,196 16,035,089 Property, plant and equipment, net 13,769,965 11,446,291 Intangibles, net 2,481,121 2,602,812 Other assets 1,802,681 1,326,592 ------------ ------------ Total assets $ 36,231,963 $ 31,410,784 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,532,211 $ 2,739,064 Accrued expenses 3,124,388 1,600,120 Demand note payable 1,000,000 1,030,000 Current portion of notes payable 2,135,585 128,180 Current portion of capital leases 581,760 634,755 ------------ ------------ Total current liabilities 11,373,944 6,132,119 Notes payable, less current portion 452,312 278,645 Capital leases, less current portion 1,139,279 1,462,799 Other liabilities 477,485 394,011 ------------ ------------ Total liabilities 13,443,020 8,267,574 ------------ ------------ Minority interest -- 12,851 ------------ ------------ Commitments and contingencies Stockholders' equity: Preferred stock, $.05 par value; authorized 10,000,000 shares; issued and outstanding 330 shares of Series A Convertible Preferred Stock, liquidation preference of $10,875 per share 16 16 Common stock, $.05 par value; authorized, 10,000,000 shares; issued and outstanding 6,353,047 shares at June 30, 1997 and 6,027,714 at December 31, 1996 317,652 301,386 Additional paid-in capital 23,654,605 20,652,290 Retained earnings (accumulated deficit) (1,199,634) 2,105,674 Foreign currency translation adjustment 16,304 70,993 ------------ ------------ Total stockholders' equity 22,788,943 23,130,359 ------------ ------------ Total liabilities and stockholders' equity $ 36,231,963 $ 31,410,784 ============ ============
See accompanying notes to condensed consolidated financial statements. 3 CERPROBE CORPORATION Condensed Consolidated Statement of Operations
Three Months Ended June 30, Six Months Ended June 30, ------------------------------ ------------------------------ 1997 1996 1997 1996 ------------------------------ ------------------------------ Net sales $ 18,683,829 $ 9,659,883 $ 34,582,921 $ 19,359,822 Costs of goods sold 11,008,957 5,174,844 20,403,329 10,347,795 ------------ ------------ ------------ ------------ Gross margin 7,674,872 4,485,039 14,179,592 9,012,027 ------------ ------------ ------------ ------------ Expenses: Selling, general and administrative 4,954,862 2,666,893 9,127,311 5,274,831 Engineering and product development 164,455 275,583 617,774 378,267 Acquisition related costs -- -- 6,164,156 -- ------------ ------------ ------------ ------------ Total expenses 5,119,317 2,942,476 15,909,241 5,653,098 ------------ ------------ ------------ ------------ Operating income (loss) 2,555,555 1,542,563 (1,729,649) 3,358,929 ------------ ------------ ------------ ------------ Other income (expense): Interest income 32,504 108,751 67,664 168,243 Interest expense (162,242) (57,601) (296,853) (116,457) Other income, net 55,955 46,624 114,846 87,482 ------------ ------------ ------------ ------------ Total other income (expense) (73,783) 97,774 (114,343) 139,268 ------------ ------------ ------------ ------------ Income (loss) before income taxes and minority interest 2,481,772 1,640,337 (1,843,992) 3,498,197 Minority interest share of (income) loss 41,554 36,927 28,985 62,288 ------------ ------------ ------------ ------------ Income (loss) before income taxes 2,523,326 1,677,264 (1,815,007) 3,560,485 Provision for income taxes (934,000) (816,000) (1,490,300) (1,693,000) ------------ ------------ ------------ ------------ Net income (loss) $ 1,589,326 $ 861,264 $ (3,305,307) $ 1,867,485 ============ ============ ============ ============ Net income (loss) per common and common equivalent share: Primary $ 0.24 $ 0.16 $ (0.52) $ 0.35 ============ ============ ============ ============ Weighted average number of common and common equivalent shares outstanding 6,546,069 5,393,166 6,321,399 5,262,320 ============ ============ ============ ============ Fully diluted $ 0.24 $ 0.15 $ (0.52) $ 0.32 ============ ============ ============ ============ Weighted average number of common and common equivalent shares outstanding 6,645,677 5,878,399 6,321,399 5,797,680 ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements. 4 CERPROBE CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, ---------------------------- 1997 1996 ---------------------------- Cash flows from operating activities: Net income (loss) $(3,305,307) $ 1,867,485 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,657,746 854,628 Purchased research and development 5,664,156 -- Loss on sale of fixed assets 426 -- Tax benefit from stock options excercised -- 182,000 Deferred income taxes 72,819 111,465 Provision for losses on accounts receivable, net (14,605) 2,000 Provision for obsolete inventory, net 167,132 31,000 Compensation expense -- 51,398 Income (loss) applicable to minority interest in consolidated subsidiaries (28,985) (62,288) Changes in operating assets and liabilities, net of effects of acquisitions: Accounts receivable (3,255,550) (1,472,922) Inventories 528,436 (630,129) Prepaid expenses 175,651 151,241 Other assets (233,125) 36,366 Income taxes receivable 539,904 -- Accounts payable and accrued expenses 820,689 (204,403) Accrued income taxes 60,329 272,762 Other liabilities 48,240 6,996 ----------- ----------- Net cash provided by operating activities 2,897,956 1,197,599 ----------- ----------- Cash flows from investing activities: Purchase of property, plant and equipment (3,195,310) (2,091,021) Purchase of marketable securities -- (2,279,188) Investment in CRPB Investors, L.L.C (607) -- Investment in Upsys-Cerprobe, L.L.C (21,892) -- Supplemental acquisition costs for CompuRoute (80,102) -- Purchase of SVTR, net of cash acquired (2,565,697) -- Proceeds from sale of equipment 71,183 -- Decrease in note receivable 250,000 -- ----------- ----------- Net cash used in investing activities (5,542,425) (4,370,209) ----------- ----------- Cash flows from financing activities: Principal payments on notes payable and capital leases (3,539,072) (178,322) Net proceeds from note payable 2,001,788 -- Net proceeds from issuance of convertible preferred stock -- 9,400,000 Net proceeds from issuance of common stock -- 528,574 Net proceeds from stock options exercised 154,332 -- ----------- ----------- Net cash provided by (used in) financing activities (1,382,952) 9,750,252 ----------- ----------- Effect of exchange rates on cash and cash equivalents (54,691) 26,913 ----------- ----------- Net increase (decrease) in cash and cash equivalents (4,082,112) 6,604,555 Cash and cash equivalents, beginning of period 5,564,557 263,681 ----------- ----------- Cash and cash equivalents, end of period $ 1,482,445 $ 6,868,236 =========== ===========
See accompanying notes to condensed consolidated financial statements. 5 CERPROBE CORPORATION Condensed Consolidated Statements of Cash Flows (Unaudited) Supplemental schedule of noncash investing and financing activities: Conversion of subordinated debentures to common stock $ -- $ 110,000 ----------- ----------- Conversion of preferred stock to common stock $ -- $ 64,000 ----------- ----------- Equipment acquired under capital leases and issuances of notes payable $ 4,144 $ -- ----------- ----------- Supplemental disclosures of cash flow information: Interest paid $ 296,853 $ 93,833 ----------- ----------- Income taxes paid $ 1,315,096 $ 1,128,016 ----------- ----------- Supplemental disclosures of noncash investing activities: The Company acquired Silicon Valley Test & Repair, Inc. for $5.7 million in the period ended March 31, 1997. The purchase price was allocated to the assets acquired and liabilities assumed based on their fair values as indicated in notes to the consolidated financial statements. A summary of the acquisition is as follows: Purchase price $ 5,715,263 Less cash acquired (285,316) Common stock issued (2,864,250) -- ----------- Cash invested $ 2,565,697 ===========
See accompanying notes to condensed consolidated financial statements. 6 CERPROBE CORPORATION Notes to Condensed Consolidated Financial Statements (Unaudited) (1) Basis of Preparation The accompanying condensed consolidated financial statements as of June 30, 1997 and for the six months ended June 30, 1997 and June 30, 1996 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of financial position and operating results for the interim periods. The condensed consolidated balance sheet as of December 31, 1996 was derived from the audited consolidated financial statements at such date. Pursuant to accounting requirements of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the accompanying condensed consolidated financial statements and notes do not include all disclosures required by generally accepted accounting principles for complete financial statements. Accordingly, these statements should be read in conjunction with Cerprobe Corporation's (the "Company") annual financial statements and notes thereto included in the Company's Annual Report on Form 10-KSB for the year ended December 31, 1996. Results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries: CompuRoute, Inc. ("CompuRoute"), Cerprobe Europe Limited, and Cerprobe Asia Holdings PTE LTD. Cerprobe Asia Holdings PTE LTD together with Asian investors, formed Cerprobe Asia PTE LTD in 1995. Cerprobe Asia Holdings PTE LTD is a 70% owner of Cerprobe Asia PTE LTD. Cerprobe Asia PTE LTD created wholly-owned subsidiaries, Cerprobe Singapore PTE LTD and Cerprobe Taiwan Co. LTD, to operate full service sales and manufacturing plants. Singapore became operational in April of 1996 and Taiwan in January of 1997. All significant intercompany transactions have been eliminated in consolidation. On January 15, 1997, the Company acquired all of the outstanding stock of Silicon Valley Test & Repair, Inc. ("SVTR"), a company that refurbishes, reconfigures, and services wafer probing equipment. Accordingly, the condensed consolidated financial statements as of June 30, 1997 and for the six months ended June 30, 1997 include SVTR's activities since the date of acquisition. On June 2, 1997, the Company entered into a joint venture with Upsys Reseau Eurisys ("Upsys"), a French company owned by IBM and GAME, a French test and engineering company. The joint venture, called Upsys-Cerprobe, L.L.C., will assemble and repair the Cobra Probe in Arizona for distribution by Cerprobe throughout the U.S. and Asia. Cerprobe owns 55% of the joint venture and Upsys owns 45%. 7 The Company manages the joint venture and established a wholly owned subsidiary called Cobra Venture Management, Inc. to function as manager of Upsys-Cerprobe, L.L.C. Accordingly, the condensed consolidated financial statements as of June 30, 1997 and for the six months ended June 30, 1997 include the activities of both organizations. (2) Inventories Inventories consist of the following: June 30, December 31, 1997 1996 ------------- ------------- Raw materials $ 5,747,767 $ 3,328,422 Work-in-process 1,058,158 615,360 Finished goods 98,010 47,971 Reserve for obsolete inventory (378,002) (129,000) ------------- ------------ Total $ 6,525,933 $ 3,862,753 ============= ============ (3) Property, Plant and Equipment Property, plant and equipment consist of the following: June 30, December 31, 1997 1996 ----------- ------------ Land $ 364,017 $ 359,253 Building 1,973,704 1,947,877 Manufacturing tools and equipment 10,551,767 8,789,140 Office furniture and equipment 1,697,900 1,063,547 Leasehold improvements 1,770,813 1,112,576 Construction in progress 567,727 483,591 Computer hardware and software 2,823,245 2,402,551 Accumulated depreciation and amortization (5,979,208) (4,712,244) ------------ ------------ Total $13,769,965 $11,446,291 ============ ============ (4) Intangibles Goodwill from the acquisition of Fresh Test Technology and CompuRoute, is $2,120,505 and $969,235, respectively. 8 (5) Related Party Transactions Effective May 1, 1991, the Company entered into an agreement with a former director and officer of the Company, whereby this officer left the employ of the Company and agreed not to compete with the Company for a two-year period. The agreement required the Company to pay $3,125 per month from May 1, 1991 through April 30, 1993 and to provide certain other benefits to this individual. This agreement was extended for an additional year, through April 30, 1994, and is presently on a month-to-month basis. Beginning July 1, 1997 the monthly payment will be reduced to $1,563 and the agreement will terminate on December 31, 1997, except for certain life insurance and health care benefits which will continue under the terms of the original agreement. (6) Commitments and Contingencies Lease Line of Credit In May of 1997, Cerprobe entered into a $3,000,000 lease line of credit, which matures February 28, 1998, with Banc One Leasing Corporation. The maximum term for each lease schedule will not exceed 60 months. Pricing will be indexed to like term treasuries plus 170 basis points. The advances will be collateralized by the underlying leased manufacturing equipment, furniture, fixtures, software and/or hardware. Convertible Preferred Stock If the holders of all outstanding shares of convertible preferred stock had elected to convert their shares on June 30, 1997, Cerprobe estimates that it would have been required to pay approximately $3,600,000 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. The Company has received a notice of conversion from the holders of the remaining issued and outstanding shares of Convertible Preferred Stock. The Company has sent notices of redemption to such holders. A dispute has arisen between the Company and such holders regarding the redemption price and redemption date with respect to the remaining issued and outstanding shares of Convertible Preferred Stock. The Company does not believe that the amount in dispute is material to the financial condition of the Company. Upsys On June 2, 1997, Cerprobe Corporation entered into a joint venture with Upsys Reseau Eurisys ("Upsys"), a French company owned by IBM and GAME, a French test and engineering company. The joint venture, managed by Cerprobe, assembles and repairs the Cobra Probe in Arizona for distribution by Cerprobe throughout the U.S. and Asia. Cerprobe owns 55% of the joint venture and Upsys owns 45%. The joint venture is operational. 9 (7) Acquisitions CompuRoute, Inc. On December 27, 1996, the Company acquired all of the outstanding stock of CompuRoute, Inc., a manufacturer of printed circuit boards, for $7,037,797. The purchase price consisted of $4,437,797 in cash and 400,000 shares of common stock. The acquisition has been accounted for by the purchase method of accounting. Accordingly, the purchase price has been allocated to the assets acquired and the liabilities assumed based upon the fair value at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was $969,235 and has been recorded as goodwill, which is being amortized on a straight-line basis over eight years. The results of operations of CompuRoute are included in the Company's financial statements since the date of acquisition. At acquisition, the state of the research and development products was not yet at a technologically or commercially viable stage. The Company did not believe that the research and development products had any future alternative use because if these products were not finished and brought to ultimate product completion, they would have no other value. Therefore, consistent with generally accepted accounting principles, the Company recorded a one-time charge of $4,584,000 on December 27, 1996 for the full value of the purchased in-process research and development. Silicon Valley Test & Repair, Inc. On January 15, 1997, the Company acquired all of the outstanding stock of SVTR. The purchase price paid by the Company consisted of $2,753,217 in cash and 300,000 shares of common stock. Under the terms of the acquisition, the Company has agreed to pay up to an additional $500,000 in cash and up to 50,000 additional shares of common stock if certain sales and operating profit targets for calendar year 1997 are achieved by SVTR. The acquisition has been accounted for using the purchase method. Accordingly, the purchase price has been allocated to assets acquired and liabilities assumed based upon their estimated fair values at the date of acquisition. 10 The purchase price of $5,617,467 plus acquisition costs of $97,796 was allocated as follows. Purchase price: Cash $ 2,753,217 Common stock 2,864,250 Costs of acquisition 97,796 ------------ $ 5,715,263 ============ Assets acquired and liabilities assumed: Current assets $ 4,979,145 Property, plant and equipment 651,781 Other assets 185,007 Purchased research and development 5,664,156 Current liabilities (4,795,473) Noncurrent liabilities (969,353) ============ $ 5,715,263 ============ At acquisition, the state of the research and development products was not yet at a technologically or commercially viable stage. The Company does not believe that the research and development products have any future alternative use because if these products are not finished and brought to ultimate product completion, they have no other value. Therefore, consistent with generally accepted accounting principles, the Company recorded a one-time charge of $5,664,156 on January 15, 1997 for the full value of the purchased research and development. 11 Pro forma Results The following summary, prepared on a pro forma basis, excluding the charges for purchased research and development, presents the results of operations as if the acquisitions of CompuRoute and SVTR had occurred January 1, 1996: Six months ended June 30, ------------------------------- 1997 1996 ------------------------------- (unaudited) Net sales $ 34,636,301 $ 34,075,886 Net income $ 2,218,781 $ 2,598,523 Primary net income per share $ .35 $ .44 Fully diluted net income per share $ .35 $ .40 The pro forma results are not necessarily indicative of what the actual consolidated results of operations might have been if the acquisitions had been effective at the beginning of 1996 or as a projection of future results. (8) Recent Accounting Pronouncements In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" (statement 128). This Statement establishes standards for computing and presenting earnings per share ("EPS"), and supersedes APB Opinion No. 15. The Statement replaces primary EPS with basic EPS and requires dual presentation of basic and diluted EPS. The Statement is effective for both interim and annual periods ending after December 15, 1997. Earlier application is not permitted. After adoption, all prior-period EPS data shall be restated to conform to Statement 128. Basic and diluted EPS, as calculated under Statement No. 128 would have been $.25 and $.24 for the fiscal three months ended June 30, 1997 and $(.52) and $(.52) for the six months ended June 30, 1997. 12 CERPROBE CORPORATION Management's Discussion and Analysis of Financial Condition and Results of Operations Introduction and General Development of Business Cerprobe was incorporated in California in 1976 and reincorporated in Delaware in May 1987. The Company designs, manufactures, markets, and services high performance products and equipment for use in the testing of integrated circuits ("ICs") for the semiconductor industry. Cerprobe's products and services enable semiconductor manufacturers to test the integrity of their ICs during the batch fabrication stage of the manufacturing process used in manufacturing ICs in wafer form. The Company has grown substantially over the last three years as the Company has benefited from the substantial growth in the worldwide demand for ICs. Net sales have increased from $14.3 million for 1994, to $26.1 million for 1995, and to $37.3 million for 1996. Similarly, the Company's net income has increased from $1.2 million for 1994, to $2.4 million for 1995, and to $3.2 million for 1996 (before a one-time charge for purchased in-process research and development of $4.6 million, resulting in a net loss of $1.4 million). This growth resulted primarily from internal product development and strategies. However, the Company also benefited from its acquisition in April 1995 of Fresh Test Technology Corporation, whose complementary products contributed approximately $4.0 million to 1995 net sales, approximately $7.0 million to 1996 net sales and approximately $3.6 million to net sales for the first six months of 1997. To further expand its semiconductor test product and service offerings, Cerprobe acquired CompuRoute, Inc. ("CompuRoute"), a company engaged in the design, manufacture, and marketing of complex, multilayer printed circuit boards ("PCBs") primarily for use in semiconductor testing applications, in December 1996 and Silicon Valley Test & Repair, Inc. ("SVTR"), a company that refurbishes, reconfigures, and services wafer probers, in January 1997. Together, these recent acquisitions contributed approximately $8.6 million to net sales for the first six months of 1997. Continuing this expansion, on June 2, 1997, the Company entered into a joint venture with Upsys Reseau Euresys ("Upsys"), a French company owned by IBM and GAME, a French test and engineering company. The joint venture, called Upsys-Cerprobe, L.L.C., will assemble and repair the Cobra Probe for distribution by Cerprobe in the U.S. and Asia. The Company believes that it is positioned to continue its growth as a result of its strength in designing, producing, and delivering, on a timely and cost-efficient basis, a broad range of custom or customized, high quality test products and services for semiconductor manufacturers in the U.S., Europe, and Asia. The Company maintains regional full service facilities in Arizona, California, and Texas as well as sales offices in Oregon, Colorado, Florida, and Massachusetts to service the U.S. market for its products and services. The Company maintains a full service facility in Scotland to serve the European market, and opened full service facilities in Singapore and Taiwan in April 1996 and January 1997, respectively, to serve the Southeast Asia market. Each of the Company's facilities is located in proximity to semiconductor manufacturing centers. 13 Results of Operations Three Months Ended June 30, 1997 Compared to Three Months Ended June 30, 1996. Net sales for the three months ended June 30, 1997 were $18,683,829, an increase of 93% over net sales of $9,659,883 for the three months ended June 30, 1996. This increase in net sales is a result of Cerprobe's two recent acquisitions, higher order rates for Cerprobe's probe card and interface products, and increased sales from Cerprobe's international operations. For the three months ended June 30, 1997, the gross margin was $7,674,872, an increase of 71% over the gross margin of $4,485,039 for the same period in 1996. Gross margin as a percentage of sales decreased from 46% for the three months ended June 30, 1996 to 41% for the same period in 1997. The decrease in gross margin, as a percentage of sales, is primarily a result of a change in product mix due to the recent acquisitions. Approximately 25% of net sales within the period were attributed to ATE test boards from the Company's CompuRoute subsidiary and wafer prober products and services from the Company's SVTR subsidiary. Both product lines currently have lower gross margins than the Company's core products of probe cards and ATE interfaces. Selling, general and administrative expenses were $4,954,862, or 27% of sales, for the three months ended June 30, 1997 as compared to $2,666,893, or 28% of sales, for the same period in 1996, an increase of 86%. The increase in selling, general and administrative expenses resulted primarily from the two recent acquisitions, the start up of the joint venture with Upsys, and the continued domestic and international facilities expansion. Of the increase, $1,370,223, or 60%, was attributable to CompuRoute, SVTR, and the Upsys-Cerprobe, L.L.C. start up. Engineering and product development expenses were $164,455 for the three months ended June 30, 1997, a decrease of 40% over $275,583 for the same period in 1996. This decrease resulted from the offset of engineering and product development costs by project funding receipts from Cerprobe's collaboration with certain customers and the re-assignment of personnel and other resources to Upsys-Cerprobe, L.L.C. Cerprobe intends to replace these re-assigned resources and continue to emphasize engineering and product development in an effort to anticipate and address technological advances in semiconductor testing. Interest income was $32,504 for the three months ended June 30, 1997 as compared to $108,751 for the same period in 1996. The decrease was a result of utilizing the net proceeds of the Convertible Preferred Stock offering for the CompuRoute and SVTR acquisitions in the fourth quarter of 1996 and in the first quarter of 1997, respectively. Interest expense was $162,242 for the three months ended June 30, 1997 as compared to $57,601 for the same period in 1996, an increase of 182%. The majority of the 1997 increase in interest expense was due to the debt acquired in the acquisition of CompuRoute and SVTR. The minority interest share of loss from operations of $41,554, for the three months ended June 30, 1997, represents the Company's joint venture partners' share (30%) of the income from Cerprobe Asia PTE LTD of $8,174 and the Company's joint venture partner's share (45%) of the loss from Upsys-Cerprobe, L.L.C. of $49,728. 14 The provision for income taxes was $934,000, which represents an effective tax rate of 37% for the three months ended June 30, 1997, versus $816,000, which represents an effective rate of 49% for the same period in 1996. The decreased effective tax rate resulted from the benefit of CompuRoute's net operating loss carryforward of $140,000 and partial use of previous nondeductible losses from foreign subsidiaries. Net income for the three months ended June 30, 1997 was $1,589,326, an increase of $728,062, or 85%, from the net income of $861,264 for the same period in 1996. This increase is due to the increase in sales resulting from Cerprobe's two recent acquisitions, higher order rates for Cerprobe's probe card and interface products, and increased sales from Cerprobe's international operations. Six Months Ended June 30, 1997 Compared to Six Months Ended June 30, 1996. Net sales for the six months ended June 30, 1997 were $34,582,921, an increase of 79% over net sales of $19,359,822 for the six months ended June 30, 1996. This increase in net sales is a result of Cerprobe's two recent acquisitions, higher order rates for Cerprobe's probe card and interface products, and increased sales from Cerprobe's international operations. For the six months ended June 30, 1997, the gross margin was $14,179,592, an increase of 57% over the gross margin of $9,012,027 for the same period in 1996. Gross margin as a percentage of sales decreased from 47% for the six months ended June 30, 1996 to 41% for the same period in 1997. The decrease in gross margin, as a percentage of sales, is primarily a result of a change in product mix due to the recent acquisitions. Approximately 25% of net sales within the period were attributed to ATE test boards from the Company's CompuRoute subsidiary and wafer prober products and services from the Company's SVTR subsidiary. Both product lines currently have lower gross margins than the Company's core products of probe cards and ATE interfaces. Selling, general and administrative expenses were $9,127,311, or 26% of sales, for the six months ended June 30, 1997 as compared to $5,274,831, or 27% of sales, for the same period in 1996. The increase of $3,852,480 or 73% resulted primarily from the two recent acquisitions, the start up of the joint venture with Upsys, and the continued domestic and international facilities expansion. Of the increase, $2,316,723, or 60%, was attributable to CompuRoute, SVTR, and the joint venture with Upsys. Engineering and product development expenses were $617,774 for the six months ended June 30, 1997, an increase of 63% over $378,267 for the same period in 1996. This increase resulted from Cerprobe's recent acquisitions and from Cerprobe's continued emphasis on engineering and product development in an effort to anticipate and address technological advances in semiconductor testing. Acquisition related costs totaled $6,164,156 and are related to the acquisition of SVTR on January 15, 1997. The acquisition was accounted for using the purchase method of accounting. Accordingly, the purchase price was allocated to the assets acquired and the liabilities assumed based upon their estimated fair values. The value of the purchased research and development in connection with the acquisition was $5,664,156. The current state of the research and 15 development products/processes is not yet at a technologically feasible or commercially viable stage. Cerprobe does not believe that the research and development products/processes have any future alternative use because if they are not finished and brought to ultimate product or process completion they have no value. Therefore, consistent with generally accepted accounting principles, Cerprobe took a one-time charge for the full value of the purchased research and development. The remaining $500,000 of acquisition related costs is the estimated cost to move SVTR's manufacturing operations to Arizona during 1997. Interest income was $67,664 for the six months ended June 30, 1997 as compared to $168,243 for the same period on 1996. The decrease was a result of utilizing the net proceeds of the Convertible Preferred Stock offering in the CompuRoute and SVTR acquisitions in the fourth quarter of 1996 and in the first quarter of 1997, respectively. Interest expense was $296,853 for the six months ended June 30, 1997 as compared to $116,457 for the same period in 1996, an increase of 155%. The majority of the 1997 increase in interest expense was due to the debt acquired in the acquisition of CompuRoute and SVTR. The minority interest share of loss from operations of $28,985 for the six months ended June 30, 1997, represents the Company's joint venture partners' share (30%) of the income from Cerprobe Asia PTE LTD of $20,743 and the Company's joint venture partner's share (45%) of the loss from Upsys-Cerprobe, L.L.C. of $49,728. The provision for income taxes was $1,490,300, which represents an effective tax rate of 39%, excluding the acquisition costs of $6,164,156, for the six months ended June 30, 1997, versus $1,693,000, which represents an effective rate of 48% for 1996. The decreased effective tax rate, as adjusted for 1997, resulted from the benefit of CompuRoute's net operating loss carryforward of $140,000 and partial use of previous nondeductible losses from foreign subsidiaries. Net loss for the six months ended June 30, 1997 was $3,305,307, a decrease of $5,172,792, or 277%, from the net income of $1,867,485 for the same period in 1996. This decrease is primarily due to the recording of approximately $500,000 of costs associated with the relocation of SVTR's manufacturing operations and the write-off of the purchased research and development of $5,664,156 from the SVTR acquisition. Excluding the acquisition related expenses, net income for the six months ended June 30, 1997 would have been $2,658,849 or 8% of net sales as compared to 10% of net sales for the six months ended June 30, 1996. Liquidity and Capital Resources Cerprobe has financed its operations and capital requirements primarily through cash flow from operations, equipment lease financing arrangements, and sales of equity securities. In January 1996, Cerprobe completed a private placement of Convertible Preferred Stock, which raised net proceeds of $9,400,000. The net proceeds have been used in domestic and international expansion and acquisition of companies and/or technologies. At June 30, 1997, cash and cash equivalents were $1,482,445, compared to $5,564,557 at December 31, 1996. Cerprobe generated $2,897,956 in cash flow from operating activities for the six months ended June 30, 1997. Accounts receivable increased by $4,154,595, or 75%, to $9,718,798 at June 30, 16 1997. Of this increase, $884,440 resulted from the acquisition of SVTR with the balance a result of increased sales. Inventories increased $2,663,180, or 69%, over December 31, 1996 to $6,525,933 at June 30, 1997. The increase resulted primarily from the acquisition of SVTR. Accounts payable and accrued expenses increased $3,317,415, or 76%, to $7,656,599 at June 30, 1997. The increase resulted from the acquisition of SVTR and Cerprobe's continued expansion activities. The current portions of notes payable and capital leases increased to $2,717,345 at June 30, 1997 from $762,935 at December 31, 1996, primarily as a result of Cerprobe's recent acquisition of SVTR. Cerprobe borrowed approximately $2 million from its revolving line of credit during the second quarter to payoff notes payable and capital lease obligations of CompuRoute and SVTR whose obligation interest rates were higher than Cerprobe's borrowing rate. Working capital decreased $3,098,718, or 31%, to $6,804,252 at June 30, 1997 from December 31, 1996. The current ratio decreased from 2.6 to 1 at December 31, 1996 to 1.6 to 1 at June 30, 1997. These decreases were due to the use of the net proceeds from the private placement of the Convertible Preferred Stock in the two recent acquisitions. The acquisition of CompuRoute and SVTR used $4,437,797 and $2,753,217, respectively. Cerprobe increased its investment in property, plant, and equipment during the six months ended June 30, 1997 by $2,323,674, or 20%, to $13,769,965. This increase was attributable to the acquisition of SVTR and the Company's efforts to expand capacity to meet customer demand for its products. These capital expenditures were funded from cash flow from operations and proceeds from the private placement of the Convertible Preferred Stock. If the holders of all outstanding shares of Convertible Preferred Stock had elected to convert their shares on June 30, 1997, Cerprobe estimates that it would have been required to pay approximately $3,600,000 to have redeemed all shares of Convertible Preferred Stock, that if converted, would have resulted in the issuance of more than 800,000 shares of Cerprobe common stock. The Company has received a notice of conversion from the holders of the remaining issued and outstanding shares of Convertible Preferred Stock. The Company has sent notices of redemption to such holders. A dispute has arisen between the Company and such holders regarding the redemption price and redemption date with respect to the remaining issued and outstanding shares of Convertible Preferred Stock. The Company does not believe that the amount in dispute is material to the financial condition of the Company. In February 1997, Cerprobe entered into a $10,000,000 unsecured revolving line of credit, which matures August 15, 1998, with its primary lender, Wells Fargo Bank. Advances under the revolving line may be made as prime rate advances, which accrue interest payable monthly, at the Bank's prime lending rate, or as LIBOR rate advances, which bear interest at 175 basis points in excess of the LIBOR base rate. At June 30, 1997, Cerprobe had approximately $2,000,000 outstanding from LIBOR rate advances with an interest rate of 7.625%. 17 In May 1997, Cerprobe entered into a $3,000,000 lease line of credit, which matures February 28, 1998, with Banc One Leasing Corporation. The maximum term for each lease schedule will not exceed 60 months. Pricing will be indexed to like term treasuries plus 170 basis points. The advances will be collateralized by the underlying leased manufacturing equipment, furniture, fixtures, software and/or hardware. At June 30, 1997, no advances had been made under the agreement. Cerprobe believes that its working capital, together with the loan commitments described above and anticipated cash flow from operations, will provide adequate sources to fund operations for at least the next 12 months. Cerprobe anticipates that any additional cash requirements for operations or capital expenditures will be financed through cash flow from operations, by borrowing from Cerprobe's primary lender, by lease financing arrangements, or by sales of equity securities. "Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995 Statements in this section regarding the Company's prospects for continued growth and the adequacy of sources of capital are forward-looking statements. Words such as "intends," "adequate," "believes," and "anticipates," also identify forward-looking statements. Actual results, however, could differ materially from those anticipated for a number of reasons, including product demand and development, technological advancements, impact of competitive products and pricing, growth in targeted markets and other factors identified under "Special Considerations" of the Company's 1996 Form 10-KSB as filed with the Securities and Exchange Commission, as well as those reasons identified in the Company's 1997 press releases. 18 PART II - OTHER INFORMATION Item 4 Submission of Matters to Vote of Security Holders a. An annual meeting of stockholders of the Company was held on June 4, 1997. b. The name of each director elected at the meeting is as follows: Ross J. Mangano, C. Zane Close, Kenneth W. Miller, Donald F. Walter, and William A. Fresh. c. The matters voted upon and the results of the voting were as follows: 1. The following five persons were elected as Directors at the annual meeting pursuant to the following vote: Vote For Votes Withheld Ross J. Mangano 5,440,171 101,260 C. Zane Close 5,440,896 100,535 Kenneth W. Miller 5,440,171 101,260 Donald F. Walter 5,250,071 291,360 William A. Fresh 5,432,771 103,660 2. Amendments to and Restatement of the Company's 1995 Stock Option Plan were approved at the annual meeting pursuant to the following vote: Votes for 4,779,921 Votes Against 609,426 Votes Abstaining 70,780 3. The appointment of KPMG Peat Marwick LLP as the independent auditors of the Company was ratified at the annual meeting pursuant to the following vote: Votes for 5,501,451 Votes Against 16,162 Votes Abstaining 22,818 Item 6 Exhibits and Reports on Form 8-K a. Exhibits 10(aaa) Master Lease Agreement between the Company and Banc One Leasing Corporation, dated May 16, 1997. 10(bbb) Lease Agreement between Silicon Valley Test and Repair, Inc. and Reynolds Development Company, dated May 29, 1997. 10(ccc) Amended and Restated Operating Agreement, by and between the Company and Upsys, dated February 12, 1997. 10(ddd) Distribution Agreement by and among Upsys-Cerprobe, L.L.C., the Company, and Upsys, dated June 2, 1997. 19 10(eee) Supply Agreement by and among Upsys Reseau Euresys, Upsys-Cerprobe, L.L.C., and the Company, dated June 2, 1997. 10(ll) 1995 Stock Option Plan, as amended through February 18, 1997. (11) Statement regarding computation of net earnings (loss) per share. (27) Financial Data Schedule. b. No reports on Form 8-K were filed by the Company during the quarter ended June 30, 1997 20 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 undersigning thereunto duly authorized. CERPROBE CORPORATION /s/Randal L. Buness ----------------------------------- Randal L. Buness Vice President - Chief Financial Officer July 31, 1997 21 EX-10.AAA 2 MASTER LEASE AGREEMENT MASTER LEASE AGREEMENT BANKONE THIS MASTER LEASE AGREEMENT is made, entered, and dated as of May 16, 1997 , by and between: LESSOR: LESSEE: Banc One Leasing Corporation Cerprobe Corporation 2400 Corporate Exchange Dr. 600 S. Rockford Dr. Columbus, OH 43231 Tempe, AZ 85281 1. LEASE OF EQUIPMENT: Lessor leases to Lessee, and Lessee leases from Lessor, all the property described in the Lease Schedules which are signed from time to time by Lessor and Lessee. 2. CERTAIN DEFINITIONS: "Schedule" means each Lease Schedule signed by Lessee and Lessor which incorporates the terms of this Master Lease Agreement, together with all exhibits, riders, attachments and addenda thereto. "Equipment" means the property described in each Schedule, together with all attachments, additions, accessions, parts, repairs, improvements, replacements and substitutions thereto. "Lease", "herein", "hereunder", "hereof" and similar words mean this Master Lease Agreement and all Schedules, together with all exhibits, riders, attachments and addenda to any of the foregoing, as the same may from time to time be amended, modified or supplemented. "Prime Rate" means the prime rate of interest announced from time to time as the prime rate by Bank One, Columbus, NA; provided, that the parties acknowledge that the Prime Rate is not intended to be the lowest rate of interest charged by said bank in connection with extensions of credit. "Lien" means any security interest, lien, mortgage, pledge, encumbrance, judgment, execution, attachment, warrant, writ, levy, other judicial process or claim of any nature whatsoever by or of any person. "Fair Market Value" means the amount which would be paid for an item of Equipment by an informed and willing buyer (other than a used equipment or scrap dealer) and an informed and willing seller neither under a compulsion to buy or sell. "Lessor's Cost" means the invoiced price of any item of Equipment plus any other cost to Lessor of acquiring an item of Equipment. All terms defined in the Lease are equally applicable to both the singular and plural form of such terms. 3. LEASE TERM AND RENT: The term of the lease of the Equipment described in each Schedule ("Lease Term") commences on the date stated in the Schedule and continues for the term stated therein. As rent for the Equipment described in each Schedule, Lessee shall pay Lessor the rent payments and all other amounts stated in such Schedule, payable on the dates specified therein. All payments due under the Lease shall be made in United States dollars at Lessor's office stated in the opening paragraph or as otherwise directed by Lessor in writing. 4. ORDERING, DELIVERY, REMOVAL AND INSPECTION OF EQUIPMENT: If an event of default occurs or if for any reason Lessee does not accept, or revokes its acceptance of, equipment covered by a purchase order or purchase contract or if any commitment or agreement of Lessor to lease equipment to Lessee expires, terminates or is otherwise canceled, then automatically upon notice from Lessor, any purchase order or purchase contract and all obligations thereunder shall be assigned to Lessee and Lessee shall pay and perform all obligations thereunder. Lessee agrees to pay, defend, indemnify and hold Lessor harmless from any liabilities, obligations, claims, costs and expenses (including reasonable attorney fees and expenses) of whatever kind imposed on or asserted against Lessor in any way related to any purchase orders or purchase contracts. Lessee shall make all arrangements for, and Lessee shall pay all costs of, transportation, delivery, installation and testing of Equipment. The Equipment shall be delivered to Lessee's premises stated in the applicable Schedule and shall not be removed without Lessor's prior written consent. Lessor has the right upon reasonable notice to Lessee to inspect the Equipment wherever located. Lessor may enter upon any premises where Equipment is located and remove it immediately, without notice or liability to Lessee, upon the expiration or other termination of the Lease Term. 5. MAINTENANCE AND USE: Lessee agrees it will, at its sole expense: (a) repair and maintain the Equipment in good condition and working order and supply and install all replacement parts or other devices when required to so maintain the Equipment or when required by applicable law or regulation, which parts or devices shall automatically become part of the Equipment; (b) use and operate the Equipment in a careful manner in the normal course of its business and only for the purposes for which it was designed in accordance with the manufacturer's warranty requirements, and comply with all laws and regulations relating to the Equipment, and obtain all permits or licenses necessary to install, use, or operate the Equipment; and (c) make no alterations, additions, subtractions, upgrades, or improvements to the Equipment without Lessor's prior written consent, but any such alterations, additions, upgrades, or improvements shall automatically become part of the Equipment. The Equipment will not be used or located outside of the United States. 6. NET LEASE; NO EARLY TERMINATION: The Lease is a net lease. Lessee's obligation to pay all rent and all other amounts payable under the Lease is absolute and unconditional under any and all circumstances and shall not be affected by any circumstances of any character including, without limitation, (a) any setoff, claim, counterclaim, defense, or reduction which Lessee may have at any time against Lessor or any other party for any reason, or (b) any defect in the condition, design, or operation of, any lack of fitness for use of, any damage to or loss of, or any lack of maintenance or service for any of the Equipment. Each Schedule is a noncancellable lease of the Equipment described therein, and Lessee's obligation to pay rent and perform all other obligations thereunder and under the Lease are not subject to cancellation or termination by Lessee for any reason. 7. NO WARRANTIES BY LESSOR: LESSOR LEASES THE EQUIPMENT AS-IS, WHERE-IS, AND WITH ALL FAULTS. LESSOR MAKES NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, OF ANY KIND AS TO THE EQUIPMENT INCLUDING, WITHOUT LIMITATION: ITS MERCHANTABILITY; ITS FITNESS FOR ANY PARTICULAR PURPOSE; ITS DESIGN, CONDITION, QUALITY, CAPACITY, DURABILITY, CAPABILITY, SUITABILITY OR WORKMANSHIP; ITS NON-INTERFERENCE WITH OR NON-INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT OR OTHER INTELLECTUAL PROPERTY RIGHT; OR ITS COMPLIANCE WITH ANY LAW, RULE, SPECIFICATION, PURCHASE ORDER OR CONTRACT PERTAINING THERETO. Lessor hereby assigns to Lessee the benefit of any assignable manufacturer's or supplier's warranties, but Lessor, at Lessee's written request, will cooperate with Lessee in pursuing any remedies Lessee may have under such warranties. Any action taken with regard to warranty claims against any manufacturer or supplier by Lessor will be at Lessee's sole expense. LESSOR MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF ANY KIND AS TO THE FINANCIAL CONDITION OR FINANCIAL STATEMENTS OF ANY PARTY OR AS TO THE TAX OR ACCOUNTING TREATMENT OR CONSEQUENCES OF THE LEASE, THE EQUIPMENT, OR THE RENTAL PAYMENTS. 8. INSURANCE: Lessee at its sole expense shall at all times keep each item of Equipment insured against all risks of loss or damage from every cause whatsoever for an amount not less than the greater of the full replacement value or the Lessor's Cost of such item of Equipment. Lessee at its sole expense shall at all times carry public liability and property damage insurance in amounts satisfactory to Lessor protecting Lessee and Lessor from liabilities for injuries to persons and damage to property of others relating in any way to the Equipment. All insurers shall be reasonably satisfactory to Lessor. Lessee shall deliver to Lessor satisfactory evidence of such coverage. Proceeds of any insurance covering damage or loss of the Equipment shall be payable to Lessor as loss payee and shall, at Lessor's option, be applied toward (a) the replacement, restoration or repair of the Equipment, or (b) payment of the obligations of Lessee under the Lease. Proceeds of any public liability or property insurance shall be payable first to Lessor as additional insured to the extent of its liability, then to Lessee. If an event of default occurs and is continuing, or if Lessee fails to make timely payments due under Section 9 hereof, then Lessee automatically appoints Lessor as Lessee's attorney-in-fact with full power and authority in the place of Lessee and in the name of Lessee or Lessor to make claim for, receive payment of, and sign and endorse all documents, checks, or drafts for loss or damage under any such policy. Each insurance policy will require that the insurer give Lessor at least 30 days prior written notice of any cancellation of such policy and will require that Lessor's interests remain insured regardless of any act, error, omission, neglect, or misrepresentation of Lessee. The insurance maintained by Lessee shall be primary without any right of contribution from insurance which may be maintained by Lessor. 9. LOSS AND DAMAGE: (a) Lessee bears the entire risk of loss, theft, damage, or destruction of Equipment in whole or in part from any reason whatsoever ("Casualty Loss"). No Casualty Loss to Equipment shall relieve Lessee from the obligation to pay rent or from any other obligation under the Lease. Page 1 of 4 9. LOSS AND DAMAGE (continued): In the event of Casualty Loss to any item of Equipment, Lessee shall immediately notify Lessor of the same and Lessee shall, if so directed by Lessor, immediately repair the same. If Lessor determines that any item of Equipment has suffered a Casualty Loss beyond repair ("Lost Equipment"), then Lessee, at the option of Lessor, shall: (1) Immediately replace the Lost Equipment with similar equipment in good repair, condition, and working order free and clear of any Liens and deliver to Lessor a bill of sale covering the replacement equipment, in which event such replacement equipment shall automatically be Equipment under the Lease; or (2) On the rent payment date which is at least 30 but no more than 60 days after the date of the Casualty Loss, pay to Lessor all amounts then due and payable by Lessee under the Lease for the Lost Equipment plus the Stipulated Loss Value for such Lost Equipment as of the date of the Casualty Loss. Upon payment by Lessee of all amounts due under the above clause (2), the lease of the Lost Equipment will terminate and Lessor shall transfer to Lessee all of Lessor's right, title and interest in such Equipment on an "as-is, where-is" basis with all faults, without recourse, and without representation or warranty of any kind, express or implied. (b) "Stipulated Loss Value" of any item of Equipment during its Lease Term equals the present value discounted in arrears to the applicable date at the applicable SLV Discount Rate of (1) the remaining rents and all other amounts [including, without limitation, any balloon payment and, as to a terminal rental adjustment clause ("TRAC") lease, the TRAC value stated in the Schedule, and any other payments required to be paid by Lessee at the end of the applicable Lease Term] payable under the Lease for such item on and after such date to the end of the applicable Lease Term and (2) an amount equal to the Economic Value of the Equipment. For any item of Equipment, "Economic Value" means the Fair Market Value of the Equipment at the end of the applicable Lease Term as originally anticipated by Lessor at the Commencement Date of the applicable Schedule; provided, that Lessee agrees that such value shall be determined by the books of Lessor as of the Commencement Date of the applicable Schedule. After the payment of all rent due under the applicable Schedule and the expiration of the Lease Term of any item of Equipment, the Stipulated Loss Value of such item equals the Economic Value of such item. Stipulated Loss Value shall also include any Taxes payable by Lessor in connection with its receipt thereof. For any item of Equipment, "SLV Discount Rate" means an interest rate equal to the Prime Rate in effect on the Commencement Date of the Schedule for such item minus two percentage points. 10. TAX BENEFITS INDEMNITY: (a) The Lease has been entered into on the basis that Lessor shall be entitled to such deductions, credits, and other tax benefits as are provided by federal, state, and local income tax law to an owner of the Equipment (the "Tax Benefits") including, without limitation: (1) modified accelerated cost recovery deductions on each item of Equipment under Section 168 of the Code (as defined below) in an amount determined commencing with the taxable year in which the Commencement Date of the applicable Schedule occurs, using the maximum allowable depreciation method available under Section 168 of the Code, using a recovery period (as defined in Section 168 of the Code) reasonably determined by Lessor, and using an initial adjusted basis which is equal to the Lessor's Cost of such item; (2) amortization of the expenses paid by Lessor in connection with the Lease on a straight-line basis over the term of the applicable Schedule; and (3) Lessor's federal taxable income will be subject to the maximum rate on corporations in effect under the Code as of the Commencement Date of the applicable Schedule. (b) If on any one or more occasions (1) Lessor shall lose, shall not have or shall lose the right to claim all or any part of the Tax Benefits, (2) there shall be reduced, disallowed, recalculated or recaptured all or any part of the Tax Benefits, or (3) all or any part of the Tax Benefits is reduced by a change in law or regulation (each of the events described in subparagraphs 1, 2, or 3 of this paragraph (b) will be referred to as a "Tax Loss"), then, upon 30 days written notice by Lessor to Lessee that a Tax Loss has occurred, Lessee shall pay Lessor an amount which, in the reasonable opinion of Lessor and after the deduction of all taxes required to be paid by Lessor with respect to the receipt of such amount, will provide Lessor with the same after-tax net economic yield which was originally anticipated by Lessor as of the Commencement Date of the applicable Schedule. (c) Tax Loss shall occur upon the earliest of: (1) the happening of any event (such as disposition or change in use of an item of Equipment) which may cause such Tax Loss; (2) Lessor's payment to the applicable taxing authority of the tax increase resulting from such Tax Loss; or (3) the adjustment of Lessor's tax return to reflect such Tax Loss. (d) Lessor shall not be entitled to payment under this section for any Tax Loss caused solely by one or more of the following events: (1) a disqualifying sale or disposition of an item of Equipment by Lessor prior to any default by Lessee; (2) Lessor's failure to timely or properly claim the Tax Benefits in Lessor's tax return; (3) a disqualifying change in the nature of Lessor's business or liquidation thereof; (4) a foreclosure by any person holding through Lessor a security interest on an item of Equipment which foreclosure results solely from an act of Lessor; or (5) Lessor's failure to have sufficient taxable income or tax liability to utilize the Tax Benefits. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended. For the purposes of this section 10, the term "Lessor" shall include any affiliate group (within the meaning of section 1504 of the Code) of which Lessor is a member for any year in which a consolidated income tax return is filed for such affiliated group. Lessee's obligations under this section shall survive the expiration, cancellation, or termination of the Lease. 11. GENERAL TAX INDEMNITY: Lessee will pay, and will defend, indemnify, and hold Lessor harmless on an after-tax basis from, any and all Taxes (as defined below) and related audit and contest expenses on or relating to (a) any of the Equipment, (b) the Lease, (c) purchase, acceptance, ownership, lease, possession, use, operation, transportation, return, or other disposition of any of the Equipment, and (d) rentals or earnings relating to any of the Equipment or the Lease. "Taxes" means present and future taxes or other governmental charges that are not based on the net income of Lessor, whether they are assessed to or payable by Lessee or Lessor, including, without limitation (i) sales, use, excise, licensing, registration, titling, franchise, business and occupation, gross receipts, stamp and personal property taxes, (ii) levies, imposts, duties, assessments, charges and withholdings, (iii) penalties, fines, and additions to tax and (iv) interest on any of the foregoing. Unless Lessor elects otherwise, Lessor will prepare and file all reports and returns relating to any Taxes and will pay all Taxes to the appropriate taxing authority. Lessee will reimburse Lessor for all such payments promptly on request. On or after any applicable assessment/levy/lien date for any personal property Taxes relating to any Equipment, Lessee agrees that upon Lessor's request Lessee shall pay to Lessor the personal property Taxes which Lessor reasonably anticipates will be due, assessed, levied or otherwise imposed on any Equipment during its Lease Term. If Lessor elects in writing, Lessee will itself prepare and file all such reports and returns, pay all such Taxes directly to the taxing authority, and send Lessor evidence thereof. Lessee's obligations under this section shall survive the expiration, cancellation, or termination of the Lease. 12. GENERAL INDEMNITY: Lessee assumes all risk and liability for, and shall defend, indemnify and keep Lessor harmless on an after-tax basis from, any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs and expenses, including reasonable attorney fees and expenses, of whatsoever kind and nature imposed on, incurred by, or asserted against Lessor, in any way relating to or arising out of the manufacture, purchase, acceptance, rejection, ownership, possession, use, selection, delivery, lease, operation, condition, sale, return or other disposition of the Equipment or any part thereof (including, without limitation, any claim under any environmental protection or hazardous waste law and any claim for patent, trademark, or copyright infringement). Lessee will not indemnify Lessor under this section for loss or liability arising from events which occur after the Equipment has been returned to Lessor or for loss or liability caused directly and solely by the gross negligence or willful misconduct of Lessor. In this section, "Lessor" also includes any director, officer, employee, agent, successor, or assign of Lessor. Lessee's obligations under this section shall survive the expiration, cancellation, or termination of the Lease. 13. PERSONAL PROPERTY: Lessee represents and agrees that the Equipment is, and shall at all times remain, separately identifiable personal property. Upon Lessor's request, Lessee shall furnish Lessor a landlord's and/or mortgagee's waiver and consent to remove all Equipment. Lessor may display notice of its interest in the Equipment by any reasonable identification. Lessee shall not alter or deface any such indicia of Lessor's interest. 14. DEFAULT: Each of the following events shall constitute an event of default under the Lease: (a) Lessee fails to pay any rent or other amount due under the Lease within ten days of its due date; or (b) Lessee fails to perform or observe any of its obligations in Sections 8, 18, or 22 hereof; or (c) Lessee fails to perform or observe any of its other obligations in the Lease for more than 30 days after Lessor notifies Lessee of such failure; or (d) Lessee or any Lessee affiliate defaults in the payment, performance, or observance of any obligation under any loan, credit agreement or other lease in which Lessor or any subsidiary (direct or indirect) of Banc One Corporation (which is Lessor's ultimate parent corporation) is the creditor or lessor; or (e) any statement, representation or warranty made by Lessee in the Lease, in any Schedule or in any document, certificate or financial statement in connection with the Lease proves at any time to have been untrue or misleading in any material respect as of the time when made; or (f) Lessee becomes insolvent or bankrupt, or Lessee admits its inability to pay its debts as they mature, or Lessee makes an assignment for the benefit of creditors, or Lessee applies for, institutes or consents to the appointment of a receiver, trustee or similar official for Lessee or any substantial part of its property or any such official is appointed without Lessee's consent, or Lessee applies for, institutes, or consents to any bankruptcy, insolvency, reorganization, debt moratorium, liquidation, or similar proceeding relating to Lessee or any substantial part of its property under the laws of any jurisdiction or any such proceeding is instituted against Lessee without stay or dismissal for more than 30 days, or Lessee commences any act amounting to a business failure or a winding up of its affairs, or Lessee ceases to do business as a going concern; or (g) with respect to any guaranty, letter of credit, pledge agreement, security agreement, mortgage, deed of trust, debt subordination agreement, or other credit enhancement or credit support agreement (whether now existing or hereafter arising) signed or issued by any party in connection with all or any part of Lessee's obligations under the Lease, the party signing or issuing any such agreement defaults in its obligations thereunder or any such agreement shall cease to be in full force and effect or shall be declared to be null, void, invalid, or unenforceable by the party signing or issuing it; or (h) there shall occur in Lessor's reasonable opinion any material adverse change in the financial condition, business, or operations of Lessee. Page 2 of 4 14. DEFAULT (continued): As used in this section 14, the term "Lessee" also includes any guarantor (whether now existing or hereafter arising) of all or any part of Lessee's obligations under the Lease and/or any issuer of a letter of credit (whether now existing or hereafter arising) relating to all or any part of Lessee's obligations under the Lease, and the term "Lease" also includes any guaranty or letter of credit (whether now existing or hereafter arising) relating to all or any part of Lessee's obligations under the Lease. 15. REMEDIES: If any event of default exists, Lessor may exercise in any order one or more of the remedies described in the lettered subparagraphs of this section, and Lessee shall perform its obligations imposed thereby: (a) Lessor may require Lessee to return any or all Equipment as provided in the Lease. (b) Lessor or its agent may repossess any or all Equipment wherever found, may enter the premises where the Equipment is located and disconnect, render unusable and remove it, and may use such premises without charge to store or show the Equipment for sale. (c) Lessor may sell any or all Equipment at public or private sale, with or without advertisement or publication, may re-lease or otherwise dispose of it or may use, hold or keep it. (d) Lessor may require Lessee to pay to Lessor on a date specified by Lessor, with respect to any or all Equipment (i) all accrued and unpaid rent, late charges and other amounts due under the Lease on or before such date, plus (ii) as liquidated damages for loss of a bargain and not as a penalty, and in lieu of any further payments of rent, the Stipulated Loss Value of the Equipment on such date, plus (iii) interest at the Overdue Rate on the total of the foregoing ("Overdue Rate" means an interest rate per annum equal to the higher of 18% or 2% over the Prime Rate, but not to exceed the highest rate permitted by applicable law). The parties acknowledge that the foregoing money damage calculation reasonably reflects Lessor's anticipated loss with respect to the Equipment and the related Lease resulting from the event of default. If an event of default under section 14 (f) of this Master Lease Agreement exists, then Lessee will be automatically liable to pay Lessor the foregoing amounts as of the next rent payment date unless Lessor otherwise elects in writing. (e) Lessee shall pay all costs, expenses and damages incurred by Lessor because of the event of default or its actions under this section, including, without limitation any collection agency and/or attorney fees and expenses, any costs related to the repossession, safekeeping, storage, repair, reconditioning, or disposition of the Equipment and any incidental and consequential damages. (f) Lessor may terminate the Lease and/or any or all Schedules, may sue to enforce Lessee's performance of its obligations under the Lease and/or may exercise any other right or remedy then available to Lessor at law or in equity. Lessor is not required to take any legal process or give Lessee any notice before exercising any of the above remedies. None of the above remedies is exclusive, but each is cumulative and in addition to any other remedy available to Lessor. Lessor's exercise of one or more remedies shall not preclude its exercise of any other remedy. No action taken by Lessor shall release Lessee from any of its obligations to Lessor. No delay or failure on the part of Lessor to exercise any right hereunder shall operate as a waiver thereof, nor as an acquiescence in any default, nor shall any single or partial exercise of any right preclude any other exercise thereof or the exercise of any other right. After any default, Lessor's acceptance of any payment by Lessee under the Lease shall not constitute a waiver by Lessor of such default, regardless of Lessor's knowledge or lack of knowledge at the time of such payment, and shall not constitute a reinstatement of the Lease if the Lease has been declared in default by Lessor, unless Lessor has agreed in writing to reinstate the Lease and to waive the default. If Lessor actually repossesses any Equipment, then it will use commercially reasonable efforts under the then current circumstances to attempt to mitigate its damages; provided, that Lessor shall not be required to sell, or re-lease or otherwise dispose of any Equipment prior to Lessor enforcing any of the remedies described above. Lessor may sell or re-lease the Equipment in any manner it chooses, free and clear of any claims or rights of Lessee and without any duty to account to Lessee with respect thereto, except as provided below. If Lessor actually sells or re-leases the Equipment, it will credit the net proceeds of any sale of the Equipment, or the net present value (discounted at the then current Prime Rate) of the rents payable under any new lease of the Equipment, against and up to (but not exceeding) the Stipulated Loss Value of the Equipment and any other amounts Lessee owes Lessor, or will reimburse Lessee for and up to (but not exceeding) Lessee's payment thereof. The term "net" as used above shall mean such amount after deducting the costs and expenses described in clause (e) above of this section. If Lessor elects in writing not to sell or re-lease any Equipment, it will similarly credit or reimburse Lessee for Lessor's reasonable estimate of such Equipment's Fair Market Value. 16. LESSOR'S RIGHT TO PERFORM: If Lessee fails to make any payment under the Lease or fails to perform any of its other agreements in the Lease (including, without limitation, its agreement to provide insurance coverage as stated in the Lease), Lessor may itself make such payment or perform such agreement, and the amount of such payment and the amount of the expenses of Lessor incurred in connection with such payment or performance shall be deemed to be additional rent, payable by Lessor on demand. 17. FINANCIAL REPORTS: Lessee agrees to furnish to Lessor: (a) annual financial statements setting forth the financial condition and results of operation of Lessee (financial statements shall include the balance sheet, income statement and changes in financial position and all notes thereto) within 120 days of the end of each fiscal year of Lessee; (b) quarterly financial statements setting forth the financial condition and results of operation of Lessee within 60 days of the end of each of the first three fiscal quarters of Lessee; and (c) such other financial information as Lessor may from time to time reasonably request including, without limitation, financial reports filed by Lessee with federal or state regulatory agencies. All such financial information shall be prepared in accordance with generally accepted accounting principles. If Lessee fails to furnish the annual financial statements to Lessor within 30 days of Lessor's written request, then Lessor may, at its option, charge Lessee a non-performance fee equal to all the rentals due under the Lease for the then current month (unless otherwise prohibited by law) and such fees shall be deemed to be additional rent, payable by Lessee on demand. 18. NO CHANGES IN LESSEE: Lessee shall not: (a) liquidate, dissolve or suspend business; (b) sell, transfer or otherwise dispose of all or a majority of its assets, except that Lessee may sell its inventory in the ordinary course of its business; (c) enter into any merger, consolidation or similar reorganization unless it is the surviving corporation; (d) transfer all or any substantial part of its operations or assets outside of the United States of America; or (e) without 30 days advance written notice to Lessor, change its name or chief place of business. Lessee shall at all times maintain a tangible net worth which is no less than the greater of 75% of its tangible net worth as of the date of the Master Lease Agreement or 75% of its highest tangible net worth thereafter. 19. LATE CHARGES: If any rent or other amount payable under the Lease is not paid when due, then as compensation for the administration and enforcement of Lessee's obligation to make timely payments, Lessee shall pay with respect to each overdue payment on demand an amount equal to the greater of fifteen dollars ($15.00) or five percent (5%) of each overdue payment (but not to exceed the highest late charge permitted by applicable law) plus any collection agency fees and expenses. 20. NOTICES; POWER OF ATTORNEY: (a) Service of all notices under the Lease shall be sufficient if given personally or couriered or mailed to the party involved at its respective address set forth herein or at such other address as such party may provide in writing from time to time. Any such notice mailed to such address shall be effective three days after deposit in the United States mail with postage prepaid. (b) With respect to any power of attorney covered by the Lease, the powers conferred on Lessor thereby: are powers coupled with an interest; are irrevocable; are solely to protect Lessor's interests under the Lease; and do not impose any duty on Lessor to exercise such powers. Lessor shall be accountable solely for amounts it actually receives as a result of its exercise of such powers. 21. ASSIGNMENT BY LESSOR: Lessor and any assignee of Lessor, with or without notice to or consent of Lessee, may sell, assign, transfer or grant a security interest in all or any part of Lessor's rights, obligations, title or interest in the Equipment, the Lease, any Schedule or the amounts payable under the Lease or any Schedule to any entity ("transferee"). The transferee shall succeed to all of Lessor's rights in respect to the Lease (including, without limitation, all rights to insurance and indemnity protection described in the Lease). Lessee agrees to sign any acknowledgment and other documents reasonably requested by Lessor or the transferee in connection with any such transfer transaction. Lessee, upon receiving notice of any such transfer transaction, shall comply with the terms and conditions thereof. Lessee agrees that it shall not assert against any transferee any claim, defense, setoff, deduction or counterclaim which Lessee may now or hereafter be entitled to assert against Lessor. Unless otherwise agreed in writing, the transfer transaction shall not relieve Lessor of any of its obligations to Lessee under the Lease and Lessee agrees that the transfer transaction shall not be construed as being an assumption of such obligations by the transferee. 22. NO ASSIGNMENT, SUBLEASE OR LIEN BY LESSEE: LESSEE SHALL NOT, DIRECTLY OR INDIRECTLY, (a) MORTGAGE, ASSIGN, SELL, TRANSFER, OR OTHERWISE DISPOSE OF THE LEASE OR ANY INTEREST THEREIN OR THE EQUIPMENT OR ANY PART THEREOF, OR (b) SUBLEASE, RENT, LEND OR TRANSFER POSSESSION OR USE OF THE EQUIPMENT OR ANY PART THEREFOR TO ANY PARTY, OR (c) CREATE, INCUR, GRANT, ASSUME OR ALLOW TO EXIST ANY LIEN ON THE LEASE, ANY SCHEDULE, THE EQUIPMENT OR ANY PART THEREOF. Page 3 of 4 23. EXPIRATION OF LEASE TERM: (a) At least 90 days (or earlier if otherwise specified), but no more than 270 days prior to expiration of the Lease Term of each Schedule, Lessee shall give Lessor written notice of its electing one of the following options for all (but not less than all) of the Equipment covered by such Schedule: return the Equipment under clause (b) below; or purchase the Equipment under clause (c) below. The election of an option shall be irrevocable. If Lessee fails to give timely notice of its election, it shall be deemed to have elected to return the Equipment. (b) If Lessee elects or is deemed to have elected to return the Equipment at the expiration of the Lease Term of a Schedule, or if Lessee is obligated at any time to return the Equipment, then Lessee shall, at its sole expense and risk, deinstall, disassemble, pack, crate, insure, and return the Equipment to Lessor (all in accordance with applicable industry standards) at any location in the continental United States of America selected by Lessor. The Equipment shall be in the same condition as when received by Lessee, reasonable wear, tear, and depreciation resulting from normal and proper use excepted (or, if applicable, in the same condition as when received by Lessee, reasonable wear, tear and depreciation resulting from normal and proper use excepted (or, if applicable, in the condition set forth in the Lease or the Schedule), shall be in good operating order and maintenance as required by the Lease, shall be certified as being eligible for any available manufacturer's maintenance program, shall be free and clear of any Liens as required by the Lease, shall comply with all applicable laws and regulations and shall include all manuals, specifications, repair and maintenance records and similar documents. Until Equipment is returned as required above, all terms of the Lease shall remain in full force and effect including, without limitation, obligations to pay rent and insure the Equipment; provided, that after the expiration of any Schedule and before Lessee has completed its return of the Equipment or its purchase option (if elected), the term of the lease of the Equipment covered by such Schedule shall be month-to-month or such shorter period as may be specified by Lessor. (c) If Lessee gives Lessor timely notice of its election to purchase Equipment, then on the expiration date of the applicable Schedule Lessee shall purchase all (but not less than all) of the Equipment and shall pay to Lessor the Fair Market Value of the Equipment plus all Taxes (other than income taxes on Lessor's gains on such sale), costs and expenses incurred or paid by Lessor in connection with such sale plus all accrued but unpaid amounts due with respect to the Equipment and/or the Schedule. The Stipulated Loss Value or Economic Value of any item of Equipment shall have no bearing or influence on the determination of Fair Market Value under this clause (c). Upon payment in full of the above amounts, and if no default has occurred and is continuing under the Lease, Lessor shall transfer title to such Equipment to Lessee "as-is, where-is" with all faults and without recourse to Lessor and without any representation or warranty of any kind whatsoever by Lessor, express or implied. (d) For purposes of the purchase option of the Lease, the determination of the Fair Market Value of any Equipment shall be determined (1) without deducting any costs of dismantling or removal from the location of use, (2) on the assumption that the Equipment is in the condition required by the applicable return and maintenance provisions of the Lease and is free and clear of any Liens as required by the Lease, and (3) shall be determined by mutual agreement of Lessee and Lessor or, if Lessor and Lessee are not able to agree on such value, by the Appraisal Procedure. "Appraisal Procedure" means the determination of Fair Market Value by an independent appraiser acceptable to Lessor and Lessee, or, if the parties are unable to agree on an acceptable appraiser, by averaging the valuation (disregarding the one which differs the most from the other two) of three independent appraisers, the first appointed by Lessor, the second appointed by Lessee, and the third appointed by the first two appraisers. For purposes of the "Remedies" section of the Lease, the Fair Market Value shall be determined by Lessor in good faith and any such valuation shall be on an "as- is, where is" basis without regard to the first sentence of this clause (d). Lessee, at its sole expense, shall pay all fees, costs and expenses of the above described appraisers. 24. GOVERNING LAW: THE INTERPRETATION, CONSTRUCTION AND VALIDITY OF THE LEASE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF OHIO. WITH RESPECT TO ANY ACTION BROUGHT BY LESSOR AGAINST LESSEE TO ENFORCE ANY TERM OF THE LEASE, LESSEE HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT IN THE FRANKLIN COUNTY, OHIO, WHERE LESSOR HAS ITS PRINCIPAL PLACE OF BUSINESS AND WHERE PAYMENTS ARE TO BE MADE BY LESSEE. 25. MISCELLANEOUS: (a) Subject to the limitations herein, the Lease shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, administrators, successors and assigns. (b) This Master Lease Agreement and each Schedule may be executed in any number of counterparts, which together shall constitute a single instrument. Only one counterpart of each Schedule shall be marked "Lessor's Original" and all other counterparts shall be marked "Duplicate". A security interest in any Schedule may be created through transfer and possession only of the counterpart marked "Lessor's Original." (c) Section and paragraph headings in this Master Lease Agreement and the Schedules are for convenience only and have no independent meaning. (d) The terms of the Lease shall be severable and if any term thereof is declared unconscionable, invalid, illegal or void, in whole or in part, the decision so holding shall not be construed as impairing the other terms of the Lease and the Lease shall continue in full force and effect as if such invalid, illegal, void or unconscionable term were not originally included herein. (e) All indemnity obligations of Lessee under the Lease and all rights, benefits, and protections provided to Lessor by warranty disclaimers shall survive the cancellation, expiration or termination of the Lease. (f) Lessor shall not be liable to Lessee for any indirect, consequential, or special damages for any reason whatsoever. (g) Each payment made by Lessee shall be applied by Lessor in such manner as Lessor determines in its discretion which may include, without limitation, application as follows: first, to accrued late charges; second, to accrued rent; and third, the balance to any other amounts then due and payable by Lessee under the Lease. (h) If the Lease is signed by more than one Lessee, each of such Lessees shall be jointly and severally liable for payment and performance of all of Lessee's obligations under the Lease. 26. ENTIRE AGREEMENT: THE LEASE REPRESENTS THE FINAL, COMPLETE AND ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO. THERE ARE NO ORAL OR UNWRITTEN AGREEMENTS OR UNDERSTANDINGS AFFECTING THE LEASE OR THE EQUIPMENT. Lessee agrees that Lessor is not the agent of any manufacturer or supplier, that no manufacturer or supplier is an agent of Lessor, and that any representation, warranty, or agreement made by a manufacturer, supplier, or their employees, sales representatives, or agents shall not be binding on Lessor. 27. JURY WAIVER: ALL PARTIES TO THIS MASTER LEASE AGREEMENT WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY ON ANY MATTER WHATSOEVER ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY RELATED TO THIS MASTER LEASE AGREEMENT. CERPROBE CORPORATION BANC ONE LEASING CORPORATION ----------------------------------------- (Name of Lessee) Lessor By: By: /s/ Randal L. Buness ----------------------------- -------------------------------------- Title: Title: Vice President & Chief Financial -------------------------- ----------------------------------- Officer Lessee's Witness:/s/ Roseann L. Tavarozzi ------------------------ Regardless of any prior, present or future oral agreement or course of dealing, no term or condition of the Lease may be amended, modified, waived, discharged, cancelled or terminated except by a written instrument signed by the party to be bound; except Lessee authorizes Lessor to complete the Acceptance Date of each Schedule and the serial numbers of any Equipment. CERPROBE CORPORATION ---------------------------------------- (Name of Lessee) By: /s/ Randal L. Buness ------------------------------------- Title: Vice President & Chief Financial ---------------------------------- Officer Page 4 of 4 CORPORATE MASTER LEASE ACKNOWLEDGMENT State of Arizona : -------------------- : ss County of Maricopa : ------------------- The above mentioned foregoing instrument, was acknowledged before me this 5/16, 1997 by (Officers' Name) Randal L. Buness, (Officer's Title) V.P. & C.F.O., of CERPROBE CORPORATION, a DELAWARE corporation, on behalf of the corporation. /s/ Laura M. Back ---------------------------------- Notary Public Commission Expires July 14, 1997 EX-10.BBB 3 LEASE AGREEMENT INDUSTRIAL LEASE --NET--NET--NET 1. PARTIES. This lease, dated, for reference purposes only May 29 , 19 97 , is made by and between Jerome A. & Cathy E. Reynolds dba REYNOLDS DEVELOPMENT COMPANY,(herein called "Landlord") and SILICON VALLEY TEST & REPAIR INC. (SVTR), a wholly owned subsidiary of Cerprobe Corporation, a Delaware Corporation, (herein called "Tenant"). 2. PREMISES. Landlord hereby leases to Tenant and Tenant leases from Landlord for the term, at the rental, and upon all of the conditions set forth herein, that certain real property situated in the City of Tempe, County of Maricopa, State of Arizona, commonly known as 600 S. Rockford Drive and described as 30,000 Sq. Ft. Industrial Building on 2.1312 acres, more or less, per legal description attached hereto as "Exhibit A". Said real property, including the land and all improvements thereon, is herein called "the Premises". 3. TERM. 3.1 Term. The term of this Lease shall be for 7 Years and 0 Months, commencing on October 1, 1997 and ending on September 30, 2004, unless sooner terminated pursuant to any provision hereof. 3.2 Delay in Commencement. Notwithstanding said commencement date, if for any reason Landlord cannot deliver possession of the Premises to Tenant on said date, Landlord shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease or the obligations of Tenant hereunder or extend the term hereof, but in such case Tenant shall not be obligated to pay rent until possession of the Premises is tendered to Tenant; provided, however, that if Landlord shall not have delivered possession of the Premises within ninety (90) days from said commencement date, Tenant may, at Tenant's option, by notice in writing to Landlord within ten (10) days thereafter, cancel this Lease. If Landlord shall not have delivered possession of the Premises within one (1) year from said commencement date, Landlord may, by notice in writing to the Tenant within ten (10) days thereafter, cancel the Lease. If either party cancels as hereinabove provided, Landlord shall return any monies previously deposited by Tenant and the parties shall be discharged from all obligations hereunder. 3.3 Early Possession. In the event that Landlord shall permit Tenant to occupy the Premises prior to the commencement date of the term, such occupancy shall be subject to all of the provisions of this Lease. Said early possession shall not advance the termination date of this Lease. 3.4 Delivery of Possession. Tenant shall be deemed to have take possession of the Premises when any of the following occur: (a) Landlord delivers possession of the Premises to Tenant and a Certificate of Occupancy is granted by the proper governmental agency or (b) upon a Certificate from the Landlord's architect or contractor that the Premises are ready for occupancy. 4. RENT. 4.1 Tenant shall pay to Landlord as rent for the Premises equal monthly installments of See Addendum Attached ($ ----) Dollars, in advance, on the first day of each month of the term (Page 1 NET--NET--NET) hereof. Tenant shall pay Landlord upon the execution hereof the sum of Twenty Thousand Seven Hundred ($20,700.00) Dollars as rent for October 1, 1997 through October 31, 1997. Rent for any period during the term hereof which is for less than one month shall be a pro rata portion of the monthly installment. Rent shall be payable without notice or demand and without any deduction, offset, or abatement in lawful money of the United States of America to Landlord at the address stated herein or to such other persons or at such other places as Landlord may designate in writing. 4.2 Additional Charges. This Lease is what is commonly called a "net lease", it being understood that Landlord shall receive the rent set forth in Article 4.1 free and clear of any and all impositions, taxes, real estate taxes, liens, charges or expenses of any nature whatsoever in connection with the ownership and operation of the Premises. In addition to the rent reserved by Article 4.1, Tenant shall pay to the parties respectively entitled thereto all impositions, insurance premiums, operating charges, maintenance charges, construction costs, and any other charges, costs, and expenses which arise or may be contemplated under any provisions of this Lease during the term hereof. All of such charges, costs, and expenses shall constitute additional charges, and upon the failure of Tenant to pay any of such costs, charges, or expenses, Landlord shall have the same rights and remedies as otherwise provided in this Lease for the failure of Tenant to pay rent. It is the intention of the parties hereto that this Lease shall not be terminable for any reason by the Tenant and that the Tenant shall in no event be entitled to any abatement of or reduction in rent payable hereunder, except as herein expressly provided. Any present or future law to the contrary shall not alter this agreement of the parties. 5. SECURITY DEPOSIT. Tenant shall deposit with Landlord upon execution hereof the sum of Twenty Thousand Seven Hundred ($20,700.00) Dollars as security for Tenant's faithful performance of Tenant's obligations hereunder. If Tenant fails to pay rent or other charges due hereunder, or otherwise defaults with respect to any provision of this Lease, Landlord may use, apply, or retain all or any portion of said deposit for the payment of any rent or other charge in default or for the payment of any other sum to which Landlord may become obligated by reason of Tenant's default, or to compensate Landlord for any loss or damage which Landlord may suffer thereby. If Landlord so uses or applies all or any portion of said deposit, Tenant shall within ten (10) days after written demand therefor deposit cash with Landlord in an amount sufficient to restore said deposit to the full amount hereinabove stated and Tenant's failure to do so shall be a breach of this Lease, and Landlord may at his option terminate this Lease. Landlord shall not be required to keep said deposit separate from its general accounts. If Tenant performs all of Tenant's obligations hereunder, said deposit or so much thereof as had not theretofore been applied by Landlord, shall be returned, without payment of interest or other increment for its use, to Tenant (or, at Landlord's option, to the last assignee, if any, of Tenant's interest hereunder) within fifteen (15) days after the expiration of the term hereof, or after Tenant has vacated the Premises, whichever is later. (See Paragraph 23). 6. USE. 6.1 Use. The Premises shall be used and occupied only for General Office and Manufacturing or Assembly. 6.2 Compliance with Law. Tenant shall, at Tenant's expense, comply promptly with all applicable statutes, ordinances, rules, regulations, orders, and requirements in effect during the term or any part of the term hereof regulating the use by Tenant of the Premises. Tenant shall not use or permit the use of the Premises in any manner that will tend to create waste or a nuisance, or, if (Page 2 NET--NET--NET) there shall be more than one tenant of the building containing the Premises, which shall tend to unreasonably disturb such other tenants. 6.3 Condition of Premises. Tenant hereby accepts the Premises in their condition existing as of the date of the possession hereunder, subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises, and accepts this Lease subject thereto and to all matters disclosed thereby and by any exhibits attached hereto. Tenant acknowledges that neither Landlord nor Tenant's agent has made any representation or warranty as to the suitability of the premises for the conduct of Tenant's business. 6.4 Insurance Cancellation. Notwithstanding the provisions of Article 6.1 hereinabove, no use shall be made or permitted to be made of the Premises nor acts done which will cause the cancellation of any insurance policy covering said Premises or any building of which the Premises may be a part, and if Tenant's use of the Premises causes an increase in said insurance rates, Tenant shall pay any such increase. 7. MAINTENANCE, REPAIRS AND ALTERATIONS. 7.1 Tenant's Obligations. Tenant shall, during the term of this Lease, keep in good order, condition, and repair, the Premises and every part thereof, non-structural, and all adjacent sidewalks, landscaping, driveways, parking lots, fences and signs located in the areas which are adjacent to and included with the Premises. Landlord shall incur no expense nor have any obligation of any kind whatsoever in connection with maintenance of the Premises, and Tenant expressly waives the benefits of any statute now or hereafter in effect which would otherwise afford Tenant the right to make repairs at Landlord's expense or to terminate this Lease because of Landlord's failure to keep the Premises in good order, condition, and repair. 7.2 Surrender. On the last day of the term hereof, or on any sooner termination, Tenant shall surrender the Premises to Landlord in good condition, broom clean, ordinary wear and tear excepted. Tenant shall repair any damage to the Premises occasioned by its use thereof, or by the removal of Tenant's trade fixtures, furnishings and equipment pursuant to Article 7.4(c), which repair shall include the patching and filling of holes and repair of structural damage. 7.3 Landlord's Rights. If Tenant fails to perform Tenant's obligations under this Article 7, Landlord may at its option (but shall not be required to) enter upon the Premises, after ten (10) days' prior written notice to Tenant, and put the same in good order, condition and repair, and the cost thereof together with interest thereon at the rate of ten (10%) percent per annum shall become due and payable as additional rental to Landlord together with Tenant's next rental installment. 7.4 Alterations and Additions. (a) Tenant shall not, without Landlord's prior written consent, make any alterations, improvements, or additions, in, on, or about the Premises, except for non-structural alterations not exceeding $1,000 in cost. As a condition to giving such consent, Landlord may require that Tenant remove any such alterations, improvements, additions, or utility installations at the expiration of the term, and to restore the Premises to their prior condition. (b) Before commencing any work relating to alterations, additions, and improvements affecting the Premises, Tenant shall notify Landlord in writing of the expected date of commencement thereof. Landlord shall then have the right at any time and from time to time, to post and maintain on the Premises such notices as Landlord reasonably deems necessary to protect (Page 3 NET--NET--NET) the Premises and Landlord from mechanics' liens, materialmen's liens, or any other liens. In any event, Tenant shall pay, when due, all claims for labor or materials furnished to or for Tenant at or for use in the Premises. Tenant shall not permit any mechanics' or materialmen's liens to be levied against the Premises for any labor or material furnished to Tenant or claimed to have been furnished to Tenant or to Tenant's agents or contractors in connection with work of any character performed or claimed to have been performed on the Premises by or at the direction of Tenant. ( c) Unless Landlord requires their removal, as set forth in Article 7.4(a), all alterations, improvements, or additions which may be made on the Premises, shall become the property of Landlord and remain upon and be surrendered with the Premises at the expiration of the term. Notwithstanding the provisions of this Article 7.4(c), Tenant's machinery, equipment, and other trade fixtures other than that which is affixed to the Premises so that it cannot be removed without material damage to the Premises, shall remain in the property of Tenant and may be removed by Tenant subject to the provisions of Article 7.2 (d) See Addendum Attached. 8. INSURANCE; INDEMNITY. 8.1 Insuring Party. As used in this Article 8, the term "insuring party" shall mean the party who has the obligation to obtain the insurance required hereunder. The insuring party in this case shall be designated in Article 20. Whether the insuring party is the Landlord or the Tenant, Tenant shall, as additional rent for the Premises, pay the cost of all insurance required hereunder. If Landlord is the insuring party, Tenant shall, within ten (10) days following demand by Landlord, reimburse Landlord for the cost of the insurance so obtained. 8.2 Liability Insurance. the Tenant shall obtain and keep in force during the term of this Lease a policy of comprehensive public liability insurance insuring Landlord and Tenant against any liability arising out of the ownership, use, occupancy, or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be in an amount of not less than $1,000,000 combined single limit for injury to or death of one person in any one accident or occurrence and in an amount of not less than $1,000,000 for injury to or death of more than one person in any one accident or occurrence. Such insurance shall further insure Landlord and Tenant against liability for property damage of at least $50,000. The limits of said insurance shall not, however, limit the liability of Tenant hereunder. In the event that the Premises constitute a part of a larger property, said insurance shall have a Landlord's Protective Liability endorsement attached thereto. If the Tenant shall fail to procure and maintain said insurance, the Landlord may, but shall not be required to, procure and maintain the same, but at the expense of Tenant. 8.3 Property Insurance. The insuring party shall obtain and keep in force during the term of this Lease a policy or policies of insurance covering loss or damage to the Premises, in the amount of the full replacement value thereof, providing protection against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, special extended perils (all risk) and sprinkler leakage. Said insurance shall provide for payment for loss thereunder to Landlord or to the holder of a first mortgage or deed of trust on the Premises. If the insuring party shall fail to procure and maintain said insurance, the other party may, but shall not be required to procure and maintain the same, but at the expense of Tenant. 8.4 Insurance Policies. Insurance required hereunder shall be in companies rated A+ AAA or better in "Best's Insurance Guide." The insuring party shall deliver prior to possession to the other party copies of policies of such insurance or certificates evidencing the existence and amounts (Page 4 NET--NET--NET) of such insurance with loss payable clauses satisfactory to Landlord. No such policy shall be cancellable except after ten (10) days' prior written notice to Landlord. If Tenant is the insuring party, Tenant shall, within ten (10) days prior to the expiration of such policies, furnish Landlord with renewals or "binders" thereof, or Landlord may order such insurance and charge the cost thereof to Tenant, which amount shall be payable by Tenant upon demand. Tenant shall not do or permit to be done anything which shall invalidate the insurance policies referred to in Article 8.3. Tenant shall forthwith, upon Landlord's demand, reimburse Landlord for any additional premiums attributable to any act or omission or operation of Tenant causing such increase in the cost of insurance. If Landlord is the insuring party, and if the insurance policies maintained hereunder cover other improvements in addition to the Premises, Landlord shall deliver to Tenant a written statement setting forth the amount of any such insurance cost increase and showing in reasonable detail the manner in which it has been computed. 8.5 Waiver of Subrogation. Tenant and Landlord each waives any and all rights of recovery against the other, or against the officers, employees, agents, and representatives of the other, for loss of or damage to such waiving party or its property or the property of others under its control, where such loss or damage is insured against under any insurance policy in force at the time of such loss or damage. Tenant and Landlord shall, upon obtaining the policies of insurance required hereunder, given notice to the insurance carriers that the foregoing mutual waiver of subrogation is contained in this Lease. 8.6 Hold Harmless. Tenant shall indemnify, defend, and hold Landlord harmless from any and all claims arising from Tenant's use of the Premises or from the conduct of its business or from any activity, work or things which may be permitted or suffered by Tenant in or about the Premises and shall further indemnify, defend, and hold Landlord harmless from and against any and all claims arising from any breach or default in the performance of any obligation on Tenant's part to be performed under the provision of this Lease or arising from any negligence of Tenant or any of its agents, contractors, employees or invitees and from any and all costs, attorneys' fees, expenses and liabilities incurred in the defense of any such claim or any action or proceeding brought thereon. Tenant hereby assumes all risk of damage to property or injury to persons in or about the Premises from any cause, and Tenant hereby waives all claims in respect thereof against Landlord, excepting where said damage arises out of negligence of Landlord. 8.7 Exemption of Landlord from Liability. Tenant hereby agrees that Landlord shall not be liable for injury to Tenant's business or any loss of income therefrom or for damage to the goods, wares, merchandise, or other property of Tenant, Tenant's employees, invitees, customers, or any other person in or about the Premises; nor, unless through its negligence, shall Landlord be liable for injury to the person of Tenant, Tenant's employees, agents or contractors and invitees, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction, or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether the said damage or injury results from conditions arising upon the Premises or upon other portions of the building of which the Premises are a part, or from other sources or places, and regardless of whether the cause of such damage or injury or the means of repairing the same is inaccessible to Landlord or Tenant. Landlord shall not be liable for any damages arising from any act or neglect of any other tenant, if any, of the building in which the Premises are located. 9. DAMAGE OR DESTRUCTION 9.1 In the event the improvements on the Premises are damaged or destroyed, partially or totally, from any cause whatsoever, whether or not such damage or destruction is covered by any (Page 5 NET--NET--NET) insurance required to be maintained under Article 8, the Tenant shall repair, restore, and rebuild the Premises to their condition existing immediately prior to such damage or destruction and this Lease shall continue in full force and effect. Such repair, restoration, and rebuilding (all of which are herein called the "repair") shall be commenced within a reasonable time after such damage or destruction and shall be diligently prosecuted to completion. There shall be no abatement of rent or of any other obligation of Tenant hereunder by reason of such damage or destruction. The proceeds of any insurance maintained under Article 8.3 shall be made available to Tenant for payment of the cost and expense of the repair, provided, however, that such proceeds may be made available to Tenant subject to reasonable conditions including, but not limited to, architect's certification of costs and retention of a percentage of such proceeds pending final notice of completion. In the event that such proceeds are not made available to Tenant within ninety (90) days after such damage or destruction, Tenant shall have the option for thirty (30) days, commencing on the expiration of such ninety (90) day period of canceling this Lease. If Tenant shall exercise such option, Tenant shall have no further obligation hereunder and shall have no further claim against Landlord; provided, however, that Landlord shall return to Tenant so much of Tenant's security deposit as has not theretofore been applied by Landlord. Tenant shall exercise such option by written notice to Landlord within said thirty (30) day period. In the event that the insurance proceeds are insufficient to cover the cost of the repair, then any amount in excess thereof required to complete the repair shall be paid by Tenant. 9.2 Damage Near End of Term. If the Premises are partially destroyed or damaged during the last six (6) months of the term of this lease, Landlord may, at Landlord's option, cancel and terminate this Lease as of the date of occurrence of such damage by giving written notice to Tenant of Landlord's election to do so within thirty (30) days after the date of occurrence of such damage. 9.3 Prorations. Upon termination of this Lease pursuant to this Article 9, a pro rata adjustment of rent based upon a thirty (30) day month shall be made. Landlord shall, in addition, return to Tenant so much of Tenant's security deposit as has not theretofore been applied by Landlord. 10. REAL PROPERTY TAXES. 10.1 Payment of Taxes. Tenant shall pay all real property taxes applicable to the Premises during the term of this Lease. All such payments shall be made at least ten (10) days prior to the delinquency date of such payment. Tenant shall promptly furnish Landlord with satisfactory evidence that such taxes have been paid. If any such taxes paid by Tenant shall cover any period of time prior to or after the expiration of the term hereof, Tenant's share of such taxes shall be equitably prorated to cover only the period of time within the tax fiscal year during which this lease shall be in effect, and Landlord shall reimburse Tenant to the extent required. If Tenant shall fail to pay any such taxes, Landlord shall have the right to pay the same, in which case Tenant shall repay such amount to Landlord with Tenant's next rent installment together with interest at the rate of ten (10%) percent per annum. 10.2 Definition of "Real Property" Taxes. As used herein, the term "real property tax" shall include any form of assessment, license fee, rent tax, levy, penalty, or tax (other than inheritance or estate taxes), imposed by any authority having the direct or indirect power to tax, including any city, county, state, or federal government, or any school, agricultural, lighting, drainage or other improvement district thereof, as against any legal or equitable interest of Landlord in the Premises or in the real property of which the Premises are a part, as against Landlord's right to rent or other income therefrom, or as against Landlord's business of leasing the Premises, and, Tenant shall pay (Page 6 NET--NET--NET) any and all charges and fees which may be imposed by the EPA or other similar government regulations or authorities. 10.3 Joint Assessment. If the Premises are not separately assessed, Tenant's liability shall be an equitable proportion of the real property taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be determined by Landlord from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available. Landlord's reasonable determination thereof, in good faith, shall be conclusive. 10.4 Personal Property Taxes. (a) Tenant shall pay prior to delinquency, all taxes assessed against and levied upon leasehold improvements, trade fixtures, furnishings, equipment, and all other personal property of Tenant contained in the Premises or elsewhere. Tenant shall cause said leasehold improvements, trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Landlord. (b) If any of Tenant's said personal property shall be assessed with Landlord's real property, Tenant shall pay Landlord the taxes attributable to Tenant within ten (10) days after receipt of a written statement setting forth the taxes applicable to Tenant's property. 11. COMMON AREAS. When, in fact, there are Common Areas, then the following shall apply: 11.1 Definitions. The phrase "Common Areas" means all areas and facilities outside the Premises that are provided and designated for general use and convenience of Tenant and other tenants and their respective officers, agents and employees, customers, and invitees. Common Areas include (but are not limited to) pedestrian sidewalks, landscaped areas, roadways, parking areas and railroad tracks, if any. Landlord reserves the right from time to time to make changes in the shape, size, location, number, and extent of the land and improvements constituting the Common Areas. Landlord may designate from time to time additional parcels of land for use as a part thereof; and any additional land so designated by Landlord for such use shall be included until such designation is revoked by Landlord. 11.2 Maintenance. During the term of this Lease, Landlord shall operate, manage, and maintain the Common Areas so that they are clean and free from accumulations of debris, filth, rubbish, and garbage. The manner in which such Common Areas shall be so maintained, and the expenditures for such maintenance, shall be at the sole discretion of Landlord, and the use of the Common Areas shall be subject to such reasonable regulations and changes therein as Landlord shall make from time to time, including (but not by way of limitation) the right to close from time to time, if necessary, all or any portion of the Common Areas to such extent as may be legally sufficient, in the opinion of Landlord's counsel, to prevent a dedication thereof or the accrual of rights of any person or of the public therein, or to close temporarily all or any portion of such Common Areas for such purposes. 11.3 Tenant's Rights and Obligations. Landlord hereby grants to Tenant, during the term of this Lease, the license to use, for the benefit of Tenant and its officers, agents, employees, customers, and invitees, in common with the others entitled to such use, the Common Areas as they from time to time exist, subject to the rights, powers, and privileges herein reserved to Landlord. Storage, either permanent or temporary, of any materials, supplies, or equipment in the Common Area is strictly prohibited. Should Tenant violate this provision of the Lease, then in such event, (Page 7 NET--NET--NET) Landlord may, at his option, either terminate this Lease or, without notice to Tenant, remove said materials, supplies, or equipment from the Common Area and place such items in storage, the cost thereof to be reimbursed by Tenant within ten (10) days from receipt of a statement submitted by Landlord. All subsequent costs in connection with the storage of said items shall be paid to Landlord by Tenant as accrued. Failure of Tenant to pay these charges within ten (10) days from receipt of statement shall constitute a breach of this lease. Tenant and its officers, agents, employees, customers, and invitees shall park their motor vehicles only in areas designated by Landlord for that purpose from time to time. Within five (5) days after request from Landlord, Tenant shall furnish to Landlord a list of the license numbers assigned to its motor vehicles, and those of its officers, agents and employees. Tenant shall not at any time park or permit the parking of motor vehicles, belonging to it or to others, so as to interfere with the pedestrian sidewalks, roadways, and loading areas, or in any portion of the parking areas not designed by Landlord for such use by Tenant. Tenant agrees that receiving and shipping of goods and merchandise and all removal of refuse shall be made only by way of the loading areas constituting part of the Premises. Tenant shall repair, at its cost, all deteriorations or damages to the Common Areas, occasioned by its lack of ordinary care. 11.4 Construction. Landlord, while engaged in constructing improvements or making repairs or alterations in or about the Premises or in their vicinity, shall have the right to make reasonable use of the Common Areas. 12. UTILITIES. Tenant shall pay for all water, gas, heat, light, power, telephone and other utilities and services supplied to the Premises, together with any taxes thereon. If any such services are not separately metered to Tenant, Tenant shall pay a reasonable proportion to be determined by Landlord of all charges jointly metered with other premises. 13. ASSIGNMENT AND SUBLETTING. 13.1 Landlord's Consent Required. Tenant shall not voluntarily or by operation of law assign, transfer, mortgage, sublet, or otherwise transfer or encumber all or any part of Tenant's interest in this Lease or in the Premises without Landlord's prior written consent, which Landlord shall not unreasonably withhold. Any attempted assignment, transfer, mortgage, encumbrance, or subletting without such consent shall be void and shall constitute a breach of the Lease. 13.2 No Release of Tenant. Regardless of Landlord's consent, no subletting or assignment shall release Tenant of Tenant's obligation to pay the rent and to perform all other obligations to be performed by Tenant hereunder for the term of this Lease. The acceptance of rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting. 14. DEFAULTS; REMEDIES. 14.1 Defaults. The occurrence of any one or more of the following events shall constitute a default and breach of this Lease by Tenant: (a) The vacating or abandonment of the Premises by Tenant. (Page 8 NET--NET--NET) (b) The failure by Tenant to make any payment of rent or any other payment required to be made by Tenant hereunder, as and when due, where such failure shall continue for a period of three (3) days after written notice thereof from Landlord to Tenant. (c) The failure by Tenant to observe or perform any of the covenants, conditions, or provisions of this Lease to be observed or performed by Tenant, other than described in Paragraph (b) above, where such failure shall continue for a period of thirty (30) days after written notice thereof rom Landlord to Tenant; provided, however, that if the nature of Tenant's default is such that more than thirty (30) days are reasonably required for its cure, then Tenant shall not be deemed to be in default if Tenant commenced such cure within said thirty (30) day period and thereafter diligently prosecutes such cure to completion. (d) (i) The making by Tenant of any general assignment, or general arrangement for the benefit of creditors; (ii) the filing by or against Tenant of a petition to have Tenant adjudged a bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Tenant, the same is dismissed within sixty (60) days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where possession is not restored to Tenant within thirty (30) days; or (iv) the attachment, execution or other judicial seizure of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where such seizure is not discharged within thirty (30) days. 14.2 Remedies in Default. In the event of any such default or breach by Tenant, Landlord may at any time thereafter, with or without notice or demand, and without limiting Landlord in the exercise of any right or remedy which Landlord may have by reason of such default or breach: (a) Terminate Tenant's right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Tenant shall immediately surrender possession of the Premises to Landlord. In such event Landlord shall be entitled to recover from Tenant all damages incurred by Landlord by reason of Tenant's default including, but not limited to, the cost of recovering possession of the Premises; expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorney's fees, and any real estate commission actually paid; the worth at the time of the award by the court having jurisdiction thereof of the amount by which the unpaid rent for the balance of the term after the time of such award exceeds the amount of such rental loss for the same period that Tenant proves could be reasonably avoided; and that portion of the leasing commission paid by Landlord applicable to the unexpired term of this Lease. Unpaid installments of rent or other sums shall bear interest from the date due at the rate of ten (10% percent per annum). In the event Tenant shall have abandoned the Premises, Landlord shall have the option of (I) retaking possession of the Premises and recovering from Tenant the amount specified in this Article 14.2(a), or (ii) proceeding under Article 14.2(b). (b) Maintain Tenant's right to possession, in which case this Lease shall continue in effect whether or not Tenant shall have abandoned the Premises. In such event, Landlord shall be entitled to enforce all of Landlord's rights and remedies under this Lease, including the right to recover the rent as it becomes due hereunder. ( c) Pursue any other remedy now or hereafter available to Landlord under the laws or judicial decisions of the State in which the Premises are located. 14.3 Default by Landlord. Landlord shall not be in default unless Landlord fails to perform obligations required of Landlord within a reasonable time, but in no event later than thirty (30) days after written notice by Tenant to Landlord and to the holder of any first mortgage or deed of trust (Page 9 NET--NET--NET) covering the Premises whose name and address shall have theretofore been furnished to Tenant in writing, specifying wherein Landlord has failed to perform such obligation; provided, however, that if the nature of Landlord's obligation is such that more than thirty (30) days are required for performance then Landlord shall not be in default if Landlord commences performance within such thirty (30) day period and thereafter diligently prosecutes the same to completion. 14.4 Late Charges. Tenant hereby acknowledges that late payment by Tenant to Landlord of rent and other sums due hereunder will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed on Landlord by the terms of any mortgage or trust deed covering the Premises. Accordingly, if any installment of rent or any other sum due from Tenant shall not be received by Landlord or Landlord's designee within ten (10) days after written notice that said amount is past due, then Tenant shall pay to Landlord a late charge equal to ten (10%) percent of such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the cost Landlord will incur by reason of late payment by Tenant. Acceptance of such late charge by Landlord shall in no event constitute a waiver of Tenant's default with respect to such overdue amount, nor prevent Landlord from exercising any of the other rights and remedies granted hereunder. 15. CONDEMNATION. If the Premises or any portion thereof are taken under the power of eminent domain, or sold by Landlord under the threat of the exercise of said power (all of which is herein referred to as "condemnation"), this Lease shall terminate as to the part so taken as of the date the condemning authority takes title or possession, whichever occurs first. If more than twenty-five (25%) percent of the floor area of any buildings on the Premises, or more than twenty-five (25%) percent of the land area of the Premises not covered with buildings, is taken by condemnation, either Landlord or Tenant may terminate this Lease as of the date the condemning authority takes possession by notice in writing of such election within twenty (20) days after Landlord shall have notified Tenant of the taking or, in the absence of such notice, then within twenty (20) days after the condemning authority shall have taken possession. If this Lease is not terminated by either Landlord or Tenant then it shall remain in full force and effect as to the portion of the Premises remaining, provided the rental shall be reduced in proportion to the floor area of the buildings taken within the Premises as bears to the total floor area of all buildings located on the Premises. In the event this Lease is not so terminated then Landlord agrees, at Landlord's sole cost, to as soon as reasonably possible restore the Premises to a complete unit of like quality and character as existed prior to the condemnation. All awards for the taking of any part of the Premises or any payment made under the threat of the exercise of power of eminent domain shall be the property of Landlord, whether made as compensation for diminution of value of the leasehold or for the taking of the fee or as severance damages; provided, however, that Tenant shall be entitled to any award for loss of or damage to Tenant's trade fixtures and removable personal property. 16. GENERAL PROVISIONS. 16.1 Offset Statement. (a) Tenant shall at any time upon not less than ten (10) days prior written notice from Landlord execute, acknowledge and deliver to Landlord a statement in writing (I) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) and the date to (Page 10 NET--NET--NET) which the rent, security deposit, and other charges are paid in advance, if any, and (ii) acknowledging that there are not, to Tenant's knowledge, any uncured defaults on the part of Landlord hereunder, or specifying such defaults, if any, which are claimed. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrancer of the Premises. (b) Tenant's failure to deliver such statement within such time shall be conclusive upon Tenant (I) that this Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) that there are no uncured defaults in Landlord's performance, and (iii) that not more than one (1) month's rent has been paid in advance. ( c) If Landlord desires to finance or refinance the Premises, or any part thereof, Tenant hereby agrees to deliver to any lender designated by Landlord such financial statements of Tenant as many be reasonably required by such lender. Such statements shall include the past three (3) years' financial statements of Tenant. All such financial statements shall be received by Landlord in confidence and shall be used only for the purposes herein set forth. 16.2 Landlord's Interests. The term "Landlord" as used herein shall mean only the owner or owners at the time in question of the fee title or a tenant's interest in a ground lease of the Premises. In the event of any transfer of such title or interest, Landlord herein named (and in case of any subsequent transfers the then grantor) shall be relieved from and after the date of such transfer of all liability as respects Landlord's obligations thereafter to be performed, provided that any funds in the hands of Landlord or the then grantor at the time of such transfer, in which Tenant has an interest, shall be delivered to the grantee. The obligations contained in this Lease to be performed by Landlord shall, subject as aforesaid, be binding on Landlord's successors and assigns, only during their respective periods of ownership. 16.3 Severability. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof. 16.4 Time of Essence. Time is of the essence. 16.5 Captions. Article and paragraph captions are not a part hereof. 16.6 Incorporation of Prior Agreements; Amendments. This Lease contains all agreements of the parties with respect to any matter mentioned herein. No prior agreement or understanding pertaining to any such matter shall be effective. This Lease may be modified in writing only, signed by the parties in interest at the time of the modification. 16.7 Waivers. No waiver by Landlord of any provision hereof shall be deemed a waiver of any other provision hereof or of any subsequent breach by Tenant of the same or any other provision. Landlord's consent to or approval of any act shall not be deemed to render unnecessary the obtaining of Landlord's consent to or approval of any subsequent act by Tenant. The acceptance of rent hereunder by Landlord shall not be a waiver of any preceding breach by Tenant of any provision hereof, other than the failure of Tenant to pay the particular rent so accepted, regardless of Landlord's knowledge of such preceding breach at the time of acceptance of such rent. 16.8 Recording. Tenant shall not record this Lease. Any such recordation shall be a breach under this Lease. 16.9 Holding Over. If Tenant remains in possession of the Premises or any part thereof after the expiration of the term hereof with the express written consent of Landlord, such occupancy (Page 11 NET--NET--NET) shall be a tenancy from month-to-month at a rental in the amount of the last monthly rental plus all other charges payable hereunder, and up on the terms hereof applicable to month-to-month tenancy. 16.10 Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive, but shall wherever possible, be cumulative with all other remedies at law or in equity. 16.11 Covenants and Conditions. Each provision of this Lease performable by Tenant shall be deemed both a covenant and a condition. 16.12 Binding Effect; Choice of Law. Subject to any provisions hereof restricting assignment or subletting by Tenant and subject to the provisions of Article 16.2, this Lease shall bind the parties, their personal representatives, successors and assigns. This Lease shall be governed by the laws of the state where the Premises are located. 16.13 Subordination. (a) This Lease, at Landlord's option, shall be subordinate to any ground lease, mortgage, deed of trust, or any other hypothecation for security now or hereafter placed upon the real property of which the Premises are a part and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding such subordination, Tenant's right to quiet possession of the Premises shall not be disturbed if Tenant is not in default and so long as Tenant shall pay the rent and observe and perform all of the provisions of this Lease, unless this Lease is otherwise terminated pursuant to its terms. If any mortgagee, trustee or ground lessor shall elect to have this Lease prior to the lien of its mortgage, deed of trust or ground lease, and shall give written notice thereof to Tenant, this Lease shall be deemed prior to such mortgage, deed of trust, or ground lease, whether this Lease is dated prior to subsequent to the date of said mortgage, deed of trust or ground lease or the date of recording thereof. (b) Tenant agrees to execute any documents required to effectuate such subordination or to make this Lease prior to the lien of any mortgage, deed of trust or ground lease, as the case may be, and failing to do so within ten (10) days after written demand, does hereby make, constitute and irrevocably appoint Landlord as Tenant's attorney in fact and in Tenant's name, place and stead, to do so. 16.14 Attorney's Fees. If either party named herein brings an action to enforce the terms hereof or declare rights hereunder, the prevailing party in any such action, on trial or appeal, shall be entitled to his reasonable attorney's fees to be paid by the losing party as fixed by the court. 16.15 Landlord's Access. Landlord and Landlord's agents shall have the right to enter the Premises at reasonable times for the purpose of inspecting the same, showing the same to prospective purchasers, or lenders. Landlord may at any time place on or about the Premises any ordinary "For Sale" signs and Landlord may at any time during the last one hundred eighty (180) days of the term hereof place on or about the Premises any ordinary "For Sale or Lease" signs, all without rebate of rent or liability to Tenant. 16.16 Auctions. Tenant shall not place any auction sign upon the Premises or conduct any auction thereon without Landlord's prior written consent. 16.17 Merger. The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Landlord, terminate all or any (Page 12 NET--NET--NET) existing subtenancies or may, at the option of Landlord, operate as an assignment to Landlord of any or all of such subtenancies. 16.18 Corporate Authority. If Tenant is a corporation, each individual executing this Lease on behalf of said corporation represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation in accordance with a duly adopted resolution of the Board of Directors of said corporation or in accordance with the Bylaws of said corporation, and that this Lease is binding upon said corporation in accordance with its terms. 16.19 Landlord's Liability. If Landlord is a limited partnership, the liability of the partners of the Landlord pursuant to this Lease shall be limited to the assets of the partnership; and Tenant, its successors and assigns hereby waive all rights to proceed against any of the partners, or the officers, shareholders, or directors of any corporate partner of Landlord except to the extent of their interest in the partnership. The term "Landlord", as used in this Article, shall mean only the owner or owners at the time in question of the fee title or its interest in a ground lease of the Premises, and in the event of any transfer or such title or interest, Landlord herein named (and in case of any subsequent transfers the then grantor) shall be relieved from and after the date of such transfer of all liability as respects Landlord's obligations thereafter to be performed, provided that any funds in the hands of Landlord or the then grantor at the time of such transfer, in which Tenant has an interest, shall be delivered to the grantee. The obligations contained in this Lease to be performed by Landlord shall, subject as aforesaid, be binding on Landlord's successors and assigns, only during their respective periods of ownership. 17. PERFORMANCE BOND. At any time Tenant either desires to or is required to make any repairs, alterations, additions, improvements or utility installation thereon, pursuant to Articles 7.5 or 9.2 herein, or otherwise, Landlord may at his sole option require Tenant, at Tenant's sole cost and expense, to obtain and provide to Landlord a lien and completion bond in an amount equal to one and one-half (1-1/2) times the estimated cost of such improvements, to insure Landlord against liability for mechanics' and materialmen's liens and to insure completion of the work. 18. BROKERS. The parties hereto acknowledge that NONE were the real estate brokers that represented the parties herein, and that no other commissions are due to any brokers whatsoever, other than the above-named brokers. 19. NOTICES. Whenever under this Lease provision is made for any demand, notice or declaration of any kind, or where it is deemed desirable or necessary by either party to give or serve any such notice, demand or declaration to the other party, it shall be in writing and served either personally or sent by United States mail, postage prepaid, addressed at the addresses set forth hereinbelow: To Landlord at: P.O. Box 2609 Sedona, Arizona 86336 (602) 282-2328 To Tenant at: 600 S. Rockford Drive Tempe, Arizona 85281 (602) 967-7885 20. INSURING PARTY. The insuring party under this Lease shall be the Tenant. (Page 13 NET--NET--NET) 21. PROPERTY INSURANCE ADDITION. In addition to paragraph 8.3 hereinabove, all such policies shall also contain a provision or endorsement insuring that, in the event of an insured casualty, the rent payable under paragraph 4 herein shall be paid by the insurer to the extent the Leased premises are rendered unusable to Tenant during the period of repairing or rebuilding the Leased premises. 22. OPTION TO EXTEND. If Tenant shall not be in default under this Lease, Tenant shall have the right and option to extend the term of this Lease for ONE (1) FIVE (5) year period. Tenant may exercise such option only by giving Landlord written notice thereof not less than SIX (6) months prior to the expiration of the then running term of this Lease. The covenants and conditions between Landlord and Tenant during such extension period shall be the same as contained in this Lease, except that the monthly rent provided for herein shall be subject to adjustment at the then current market rates for comparable space in the same vicinity; however, such monthly rent shall be not less than the last month's rent of this Lease plus THREE (3) percent. The rent shall be subject to an annual increase of THREE (3) percent for each year of the extended term. 23. SECURITY DEPOSIT. Lessee shall, upon execution of this Lease, pay $4,500.00 to Lessor, which sum, when added to the $16,200.00 Security Deposit which Lessor is in possession of from a prior lease with Cerprobe, equals a total of $20,700.000 as the Security Deposit referred to herein on Page 1 of this Lease. The parties hereto have executed this Lease at the place and on the dates specified immediately adjacent to their respective signatures. Executed at Sedona, Arizona ------------------------- ---------------------------------------- on May 29, 1997 By -------------------------------- -------------------------------------- Jerome A. Reynolds, "LANDLORD" By -------------------------------------- Cathy E. Reynolds "LANDLORD" Executed at Gilbert, Arizona Silicon Valley Test & Repair, Inc. ------------------------ --------------------------------------- a Delaware Corporation on May 29, 1997 By -------------------------------- -------------------------------------- By Kevin M. Kurtz, President -------------------------------------- "TENANT" Cerprobe Corporation, ---------------------------------------- a Delaware Corporation By -------------------------------------- By C. Zane Close -------------------------------------- "GUARANTOR" (Page 14 NET--NET--NET) ADDENDUM TO LEASE DATED May 29, 1997 by and between Silicon Valley Test & Repair, a Delaware Corporation, as "Tenant" and Jerome A. & Cathy E. Reynolds, as "Landlord." 4. RENT (Continued). RENT SCHEDULE
PERIOD BASE RENT - MONTHLY Oct. 1, 1997 thru Sept. 30, 1999 .................................................................... $ 20,700.00 Oct. 1, 1999 thru Sept. 30, 2002 .................................................................... 21,300.00 Oct. 1, 2002 thru Sept. 30, 2004 .................................................................... 21,900.00
7.4 ALTERATIONS AND ADDITIONS (Continued) Lessee herein shall have installed, at Lessee's sole cost and expense, a complete, new, "fully-insulated metal roof," including all new flashing throughout upon entire building. Lessee, prior to beginning work on said roof, shall supply Lessor with complete plans, specifications, and warranties for Lessor's approval in accordance with Paragraph 7.4(a) of this Lease. Lessee shall have the roofing work completed within twelve (12) months from October 1, 1997. Landlord's Initials: Date: 5/29/97 ---------------------------------------- Tenants' Initials: Date: 5/29/97 ---------------------------------------- (Page 15 NET--NET--NET) EXHIBIT "A" LEGAL DESCRIPTION: Parcel 1 That portion of TRACT A of EATON UNIVERSITY INDUSTRIAL PARK; a subdivision recorded in Book 174 of Maps, Page 48, Maricopa County Records, and located in the Southeast quarter of Section 13, Township 1 North, Range 4 East of the Gila and Salt River Base and Meridian, Maricopa County, Arizona, more particularly described as follows: Commencing at a point on the North line of said TRACT A, from which the Northwest corner of said TRACT A bears South 89(degree) 45' 49" West (recorded South 89(degree) 45' 28" West) 340.00 feet, said point being the True Point of Beginning; thence South 0(degree) 10' 46" East (recorded South 0(degree) 10' 18" East) parallel with the West line of said TRACT A, 179.53 feet; thence East parallel with the South line of said TRACT A, 48.0 feet; thence North 0(degree) 10' 46" West (recorded North 0(degree) 10' 18" West) 19.16 feet; thence East parallel with the South line of said TRACT A, 441.69 feet; thence South 54(degree) 09' 24" East 25.67 feet to a point on the East line of said TRACT A, said point also being on the Westerly right-of-way line of Rockford Drive; thence North 35(degree) 50' 36" East (recorded North 35(degree) 53' 32" East) along said right-of-way, 12.88 feet to a point on the arc of a circle the center of which bears North 54(degree) 09' 24" West 621.05 feet (recorded 620.0 feet); thence Northeasterly along the arc of said curve through a central angel of 16(degree) 51' 32", a distance of 182.74 feet to the Northeast corner of said TRACT A; thence North 71(degree) 00' 56" West (recorded North 71(degree)00' 00" West) along the North line of said TRACT A, 17.64 feet, (recorded 17.30 feet); thence continuing along the said North line, South 89(degree) 45' 49" West (recorded South 89(degree) 45' 28" West) 585.70 feet to the True Point of Beginning. Described property being in and forming a part of the City of Tempe and comprising an area of 2.1312 acres more or less. (Page 16 NET--NET--NET) EX-10.CCC 4 AMENDED AND RESTATED OPERATING AGREEMENT AMENDED AND RESTATED OPERATING AGREEMENT OF UPSYS-CERPROBE, L.L.C. by and between CERPROBE CORPORATION a Delaware corporation and UPSYS a French corporation (societe anonyme) as Members Dated as of February 12, 1997 - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- Page No ARTICLE I Formation . . . . . . . . . . . . . . . . . . . . . . . . . .1 1.1 Formation . . . . . . . . . . . . . . . . . . . . . . .1 1.2 Intent . . . . . . . . . . . . . . . . . . . . . . . .1 1.3 Definitions . . . . . . . . . . . . . . . . . . . . . .2 1.4 Effective Date. . . . . . . . . . . . . . . . . . . . .2 ARTICLE II General Provisions 2 2.1 Name. . . . . . . . . . . . . . . . . . . . . . . . . .2 2.2 Principal Office and Place of Business. . . . . . . . .2 2.3 Company Purposes. . . . . . . . . . . . . . . . . . . .2 2.4 The Products. . . . . . . . . . . . . . . . . . . . . .2 2.5 Term. . . . . . . . . . . . . . . . . . . . . . . . . .3 2.6 Agent for Service of Process. . . . . . . . . . . . . .3 2.7 Territory . . . . . . . . . . . . . . . . . . . . . . .3 ARTICLE III Capital Contributions. . . . . . . . . . . . . . . . . . . . .3 3.1 Capital Contributions by the Members. . . . . . . . . .3 3.2 Additional Capital Contributions. . . . . . . . . . . .3 3.3 Member Loans. . . . . . . . . . . . . . . . . . . . . .3 3.4 Debt/Equity Ratio . . . . . . . . . . . . . . . . . . .4 ARTICLE IV Source and Uses of Cash Flow . . . . . . . . . . . . . . . . .4 4.1 Amount and Time of Distributions. . . . . . . . . . . .4 4.2 Distributions of Available Cash Flow. . . . . . . . . .5 4.3 Distribution Upon Withdrawal. . . . . . . . . . . . . .5 4.4 Return of Capital . . . . . . . . . . . . . . . . . . .5 ARTICLE V Profits and Losses . . . . . . . . . . . . . . . . . . . . . .5 5.1 Profit and Loss Allocations . . . . . . . . . . . . . .5 5.2 Special Tax Allocations . . . . . . . . . . . . . . . .5 5.3 Recharacterization of Fees or Distributions . . . . . .6 -i- TABLE OF CONTENTS (continued) Page No 5.4 Allocation of Profits and Losses and Distributions in Respect of Transferred Interest. . . . . . . . . .7 5.5 Knowledge of Tax Consequences . . . . . . . . . . . . .7 ARTICLE VI Management . . . . . . . . . . . . . . . . . . . . . . . . . .7 6.1 Manager-Managed . . . . . . . . . . . . . . . . . . . .7 6.2 Rights and Powers of the Manager. . . . . . . . . . . .7 6.3 Duties and Responsibilities of the Manager. . . . . . .9 6.4 Actions Requiring a Vote. . . . . . . . . . . . . . . .10 6.5 Related Agreements; Legal Opinion . . . . . . . . . . .12 6.6 Consents and Approvals. . . . . . . . . . . . . . . . .12 6.7 Filing of Documents . . . . . . . . . . . . . . . . . .12 6.8 Indemnification and Liability . . . . . . . . . . . . .12 ARTICLE VII The Members. . . . . . . . . . . . . . . . . . . . . . . . . .14 7.1 Meetings of the Members . . . . . . . . . . . . . . . .14 7.2 Voting of the Members . . . . . . . . . . . . . . . . .14 7.3 Other Business Interests of the Members . . . . . . . .15 7.4 Transaction With Members or Affiliates. . . . . . . . .15 7.5 Rights and Obligations of Members . . . . . . . . . . .15 7.6 Defaulting Member . . . . . . . . . . . . . . . . . . .15 7.7 NonCompetition. . . . . . . . . . . . . . . . . . . . .16 ARTICLE VIII Books, Records, Reports and Accounting . . . . . . . . . . . .16 8.1 Records . . . . . . . . . . . . . . . . . . . . . . . .16 8.2 Fiscal Year and Accounting. . . . . . . . . . . . . . .16 8.3 Statements and Reports. . . . . . . . . . . . . . . . .17 8.4 Preparation of Tax Returns. . . . . . . . . . . . . . .17 8.5 Tax Elections . . . . . . . . . . . . . . . . . . . . .17 8.6 Tax Controversies . . . . . . . . . . . . . . . . . . .17 8.7 Withholding and Tax Advances. . . . . . . . . . . . . .18 -ii- TABLE OF CONTENTS (continued) Page No ARTICLE IX Transfers, Withdrawals, Deadlock . . . . . . . . . . . . . . .19 9.1 Transfers . . . . . . . . . . . . . . . . . . . . . . .19 9.2 Withdrawal of a Member. . . . . . . . . . . . . . . . .19 9.3 Deadlock. . . . . . . . . . . . . . . . . . . . . . . .19 9.4 Consequences of a Deadlock. . . . . . . . . . . . . . .20 ARTICLE X Liquidation and Winding Up . . . . . . . . . . . . . . . . . .20 10.1 Dissolution . . . . . . . . . . . . . . . . . . . . . .20 10.2 Penalty in the Event of Breach of the Agreement . . . .21 10.3 Effects of Dissolution. . . . . . . . . . . . . . . . .21 10.4 Continuation of the Business of the Company After Dissolution . . . . . . . . . . . . . . . . . .22 10.5 Filing Upon Dissolution . . . . . . . . . . . . . . . .22 10.6 Liquidation . . . . . . . . . . . . . . . . . . . . . .22 10.7 Reasonable Time for Winding Up. . . . . . . . . . . . .23 10.8 Deficit Capital Account . . . . . . . . . . . . . . . .23 10.9 Articles of Termination . . . . . . . . . . . . . . . .23 ARTICLE XI Change of Control. . . . . . . . . . . . . . . . . . . . . . .23 ARTICLE XII Intellectual Property. . . . . . . . . . . . . . . . . . . . .24 12.1 Ownership . . . . . . . . . . . . . . . . . . . . . . .24 12.2 Proprietary Protection. . . . . . . . . . . . . . . . .24 12.3 Confidential Information; Nondisclosure . . . . . . . .25 12.4 Research and Development. . . . . . . . . . . . . . . .26 ARTICLE XIII Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . .26 13.1 Governing Law, Jurisdiction and Venue . . . . . . . . .26 13.2 Notices . . . . . . . . . . . . . . . . . . . . . . . .26 13.3 Severability. . . . . . . . . . . . . . . . . . . . . .26 13.4 Binding Effect. . . . . . . . . . . . . . . . . . . . .27 13.5 Titles and Captions . . . . . . . . . . . . . . . . . .27 13.6 Pronouns and Plurals. . . . . . . . . . . . . . . . . .27 -iii- TABLE OF CONTENTS (continued) Page No 13.7 No Third Party Rights . . . . . . . . . . . . . . . . .27 13.8 Time is of Essence. . . . . . . . . . . . . . . . . . .27 13.9 Further Assurances. . . . . . . . . . . . . . . . . . .27 13.10 Estoppel Certificates . . . . . . . . . . . . . . . . .27 13.11 Schedules Included in Exhibits; Incorporation by Reference. . . . . . . . . . . . . . . . . . . . .27 13.12 Amendments. . . . . . . . . . . . . . . . . . . . . . .27 13.13 Creditors . . . . . . . . . . . . . . . . . . . . . . .27 13.14 Representations . . . . . . . . . . . . . . . . . . . .27 13.15 Entire Agreement. . . . . . . . . . . . . . . . . . . .28 13.16 Construction. . . . . . . . . . . . . . . . . . . . . .28 13.17 Remedies Cumulative . . . . . . . . . . . . . . . . . .28 13.18 Arbitration . . . . . . . . . . . . . . . . . . . . . .28 ARTICLE XIV Definitions. . . . . . . . . . . . . . . . . . . . . . . . . .29 -iv- AMENDED AND RESTATED OPERATING AGREEMENT OF UPSYS-CERPROBE, L.L.C. THIS OPERATING AGREEMENT is made and entered into as of the 12th day of February, 1997, by and between CERPROBE CORPORATION, a Delaware corporation ("Cerprobe"), and UPSYS, a French corporation (societe anonyme) ("Upsys"), as Members. RECITALS A. Upsys is a world leader in the manufacturing and sale of advanced test probe technology through a line of products known as the Upsys Cobra Probe. B. Upsys is engaged in, among other things, the design, engineering and manufacture of the Products using the Upsys Technology. C. Cerprobe is a leading manufacturer of probe cards and the present exclusive distributor for the Products in the United States and the non-exclusive distributor of the Products in Asia. D. Cerprobe and Upsys wish to form a joint company in order to engage exclusively in the assembly, testing, repair and distribution of all versions of the Products in the Territory, as defined hereafter. E. Cerprobe and Upsys entered into an operating agreement dated as of February 12, 1997 relating to the Company and want to amend and restate the operating agreement. ARTICLE I Formation 1.1 Formation. Cerprobe, on behalf of the parties to this Agreement, will form the Company by filing Articles of Organization pursuant to the Arizona Limited Liability Company Act (the "Act"), within five (5) days of the Effective Date of this Agreement, and the parties will operate the Company in accordance with the terms and conditions of this Agreement. Upon the request of the Manager or as required by law, the parties shall promptly execute all amendments of the Articles of Organization and all other documents that are needed to enable the Manager to accomplish all filing, recording, publishing and other acts necessary or appropriate to comply with all requirements for the formation and operation of the Company under the Act. 1.2 Intent. 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 operated 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. 1.3 Definitions. Capitalized terms used in this Agreement are defined in Article XIV. 1.4 Effective Date. This Agreement will become effective (the "Effective Date") upon the occurrence, on or before May 30, 1997, of both of the following: (1) approval by each party of the royalty conditions proposed by IBM for the Products assembled, sold, or repaired by the Company; and (2) approval by each party of the First Approved Plan and Budget. The parties shall evidence such agreements in a letter signed by each party. If the foregoing approvals do not occur on or before May 30, 1997, this Agreement shall terminate and be of no further force or effect, all without any liability of either party to the other in connection herewith. ARTICLE II General Provisions 2.1 Name. The name of the Company shall be "Upsys-Cerprobe, L.L.C." or such other name as the Members unanimously from time to time shall select. 2.2 Principal Office and Place of Business. The Principal Office and place of business of the Company shall be located at 600 South Rockford Drive, Tempe, Arizona 85281, or such other place as the Members unanimously from time to time shall determine. 2.3 Company Purposes. The Company is being formed to assemble, test, repair and distribute the Products, designed and manufactured by Upsys, in the American Territory and in the Asian Territory, under the terms of Article 2.7 hereafter. 2.4 The Products. The Products utilize Upsys Technology and consist of three elements: (i) the probes formed in an arc, (ii) space transformers and (iii) printed circuit boards, used in probing semiconductor wafers (the "Product Components"). Upsys shall exclusively be responsible for the design, engineering and manufacture of the Products and Product Components as a function of client demands. Certain elements of the Products and Product Components (in particular, custom-designed space transformers and the printed circuit boards) may be supplied to Upsys by Cerprobe or by other suppliers, or may be provided to Upsys by the clients as agreed to by Upsys, after consultation with Cerprobe, as a function of the client's needs. -2- 2.5 Term. The term of the Company shall commence on the filing of the Articles of Organization, the form of which is set forth in Exhibit A, and shall continue until dissolved in accordance with Section 10.1 of this Agreement. 2.6 Agent for Service of Process. The name and business address of the Agent for Service of Process for the Company is John B. Furman, Esq., O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, P.A., One East Camelback Road, Suite 1100, Phoenix, Arizona 85012, or such other person as the Members shall appoint from time to time. 2.7 Territory. The Company shall assemble the Products in the American Territory and shall have the right to distribute the Products only as provided in the Supply Agreement and Distribution Agreement. Due to the rapid expansion of the market in the Asian Territory, the parties agree that it may be necessary for the requirements of the Company's business that a separate structure be established in the Asian Territory. The parties agree that if it is determined during the term of this Agreement that such a separate structure is necessary in the Asian Territory, they shall enter into discussions with a local partner. The parties agree that in such case, the Supply Agreement and the Distribution Agreement shall be modified accordingly. ARTICLE III Capital Contributions 3.1 Capital Contributions by the Members. Within fifteen (15) days of the Effective Date, the Members shall make initial Capital Contributions to the Company as follows: Member Amount ------ ------ Cerprobe ________________________ US$122,100 Upsys ________________________ US$100,000 3.2 Additional Capital Contributions. The Members shall make additional Capital Contributions pro rata based upon their Participating Percentages as unanimously agreed to by the Members on a case-by-case basis. 3.3 Member Loans. 3.4 (a) Initial Member Loan. Upon the formation of the Company, the Members shall collectively lend to the Company a total of $200,000 (the "Initial Member Loan"). Each Member shall advance an amount equal to the total loan amount multiplied by such Member's Participating Percentage. -3- (b) Terms of Initial Member Loan. Unless the Members otherwise agree, the Initial Member Loan shall bear interest at the Prime Rate plus two percentage points, but not to exceed 12 percent per annum, shall compound annually, shall be fully recourse, shall have a term not to exceed three years, shall be prepayable in whole or part at any time without a penalty, and shall be evidenced by a promissory note executed by the Manager on behalf of the Company which shall contain such other terms and conditions as are commercially reasonable and agreed to by the Members. (c) Repayment of Member Loans. Unless otherwise agreed by the Members, the amount of principal and interest payable on the Initial Member Loan shall be paid from available funds prior to any distribution to the Members pursuant to Section 4.2. All payments with respect to the Initial Member Loan shall be treated as first reducing accrued interest and then principal. The Company shall make payments to the Members in proportion to the amount of principal that each Member has advanced with respect to the Initial Member Loan. 3.4 Debt/Equity Ratio. The Members will try to assure that the Company's debt to equity ratio does not exceed 1:1. If such debt to equity ratio exceeds 1:1, the Members will meet and try to establish a plan to reduce the ratio. ARTICLE IV Source and Uses of Cash Flow 4.1 Amount and Time of Distributions. Distributions of Available Cash Flow shall be made from time to time as the Members deem proper, but not less frequently than annually, as set forth in Section 4.2. Unless the Members otherwise agree, no Available Cash Flow shall be distributed until all Member Loans are repaid in full. "Available Cash Flow" means the gross cash proceeds of the Company from any source less principal and interest payments on all Company debt (including Member Loans), capital improvements, replacements and contingencies, reasonable reserves for future expenses, as specifically agreed to by each of the Members, and any other ordinary and necessary fees, costs and expenses associated with the Company's business, including without limitation, inventory costs, lease payments, taxes, utilities, maintenance and security for the Company's space at Cerprobe's facility, salaries and fringe benefit costs for Company employees, professional and accounting services, and other administrative costs, all as set forth in a budget approved by the Members. Available Cash Flow shall not be reduced by depreciation, amortization or other similar non-cash allowances, and shall be increased by any reductions in reserves which, when previously established, reduced Available Cash Flow. -4- 4.2 Distributions of Available Cash Flow. The Available Cash Flow shall be distributed to the Members, pro rata, based upon their Participating Percentages. 4.3 Distribution Upon Withdrawal. No withdrawing Member shall be entitled to receive any distribution or the value of such Member's Interest in the Company as a result of withdrawal from the Company prior to the liquidation of the Company, except as specifically provided in this Agreement. 4.4 Return of Capital. No Member shall be entitled to the return of, or interest on, that Member's Capital Contributions except as provided in this Agreement. ARTICLE V Profits and Losses 5.1 Profit and Loss Allocations. For each Fiscal Year, the Profits or Losses of the Company shall be allocated to the Members, pro rata, based upon their Participating Percentages. 5.2 Special Tax Allocations. (a) Qualified Income Offset. In the event any Member unexpectedly receives any adjustment, allocation or distribution described in paragraph (4), (5) or (6) of Treasury Regulation section 1.704-1(b)(2)(ii)(d), or any other event creates a deficit balance in such Member's Capital Account in excess of such Member's share of the Company's minimum gain, items of Company income and gain shall be specially allocated to the Members in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the Adjusted Capital Account Deficit of that Member as quickly as possible. "Adjusted Capital Account Deficit" means with respect to any Member, the deficit balance, if any, in that Member's Capital Account as of the end of the relevant Fiscal Year, after given effect to the following adjustments: (i) credit to that Capital Account the amount by which that Member is obligated to restore or is deemed to be obligated to restore pursuant to the penultimate sentences of Treasury Regulation sections 1.704- 2(g)(1) and 1.704-2(i)(5), and (ii) debit to that Capital Account the items described in paragraphs (4), (5) and (6) of Treasury Regulation section 1.704-1(b)(2)(ii)(d). This definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Treasury Regulation section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. Any special allocations of items of income and gain pursuant to this Article 5.2(a) will be taken into account in computing subsequent allocations of income and gain pursuant to this Article V so that the net amount of any item so allocated and the income, gain and losses allocated to each Member pursuant to this Article V will, to the extent possible, be equal to the net amount that would have -5- been allocated to each such Member pursuant to this Article 5.2(a) if such unexpected adjustments, allocations or distributions had not occurred. (b) Nonrecourse Deductions. The allocations set forth in Section 5.1 are intended generally to comply with requirements of Treasury Regulation sections 1.704-1(b) and 1.704-2. If the Company incurs "nonrecourse deductions" or "partner nonrecourse deductions" or if there is any change in the Company's "minimum gain," as those terms are defined in such Treasury Regulations, the allocation of Profits, Losses and items thereof to the Members shall be modified as deemed reasonably necessary or advisable by the Members to comply with such Treasury Regulations. (c) Curative Allocation. The allocations set forth in Sections 5.2(a) and (b) (the "Regulatory Allocations") are intended to comply with certain requirements of Treasury Regulation sections 1.704-1(b) and 1.704-2. Notwithstanding any other provision of this Article V (other than the Regulatory Allocations), the Regulatory Allocations shall be taken into account in allocating other items of income, gain, loss and deduction among the Members so that, to the extent possible, the net amount of such allocation of other items and the Regulatory Allocations to each Member should be equal to the net amount that would have been allocated to each such Member if the Regulatory Allocations had not occurred. (d) Built-in Gain Allocation. If necessary or required under Code section 704(c) or Treasury Regulation section 1.704-1(b)(2)(iv)(f), the Members shall make special tax allocations to account for the variation, if any, between the adjusted tax basis of an asset and its Gross Asset Value. Any elections or decisions relating to the allocations under this Section 5.2(d) shall be made by the Members in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section 5.2(d) are solely for purposes of federal, state and local taxes and shall not affect or in any way be taken into account in computing any Member's Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement. 5.3 Recharacterization of Fees or Distributions. In the event that a guaranteed payment to a Member is ultimately recharacterized (as the result of an audit of the Company's return or otherwise) as a distribution for federal income tax purposes, and if such recharacterization has the effect of disallowing a deduction or reducing the adjusted basis of any asset of the Company, then an amount of Company gross income equal to such disallowance or reduction shall be allocated to the recipient of such payment. In the event that a distribution to a Member is ultimately recharacterized (as a result of an audit of the Company's return or otherwise) as a guaranteed payment for federal income tax purposes, and if any such recharacterization gives rise to a deduction, such deduction shall be allocated to the recipient of the distribution. -6- 5.4 Allocation of Profits and Losses and Distributions in Respect of Transferred Interest. If any Interest is transferred, or is increased or decreased by reason of the admission of a new Member or otherwise, during any Fiscal Year of the Company, each item of income, gain, loss, deduction or credit of the Company for such Fiscal Year will be assigned pro rata to each day in the particular period of such Year to which such item is attributable (i.e., the day on or during which it is accrued or otherwise incurred) and the amount of each such item so assigned to any such day will be allocated to the Member based upon his or her respective Interest at the close of the day. However, for the purpose of accounting convenience and simplicity, the Company will treat a transfer of, or an increase or decrease in, an Interest which occurs at any time during a semi-monthly period (commencing with the semi-monthly period that includes the date of this Agreement) as having been consummated on the last day of such semi-monthly period, regardless of when during such semi-monthly period such transfer, increase or decrease actually occurs (e.g., sales and dispositions made during the first fifteen (15) days of any month will be deemed to have been made on the fifteenth (15th) day of the month). Notwithstanding any provision above to the contrary, gain or loss of the Company realized in connection with a sale or disposition of any of the assets of the Company will be allocated solely to the parties owning Interests as of the date such sale or other disposition occurs. 5.5 Knowledge of Tax Consequences. The Members are aware of the income tax consequences of the allocations made by this Article V and the economic impact of the allocations on the amounts receivable by them under this Agreement. The Members hereby agree to be bound by the provisions of this Article V in reporting their share of Company income and loss for income tax purposes. ARTICLE VI Management 6.1 Manager-Managed. The Members agree that the management of the Company shall be vested in a Manager. The Members agree that a wholly-owned Cerprobe subsidiary shall be the Manager ("Cerprobe Subsidiary"). 6.2 Rights and Powers of the Manager. (a) Exclusive Rights in Manager. Except as otherwise provided in this Agreement or the Related Agreements, the Manager shall have full, exclusive and complete power to manage and control the business and affairs of the Company and shall have all of the rights and powers provided to a manager of a limited liability company by law, including the power to execute instruments and documents and to take any other actions on behalf of the Company; provided, however, that such actions are -7- consistent with an Approved Plan and Budget, this Operating Agreement and the Articles of Organization. (b) Approved Plan and Budget. The Manager shall establish, subject to the unanimous written approval of the Members, a business plan and a budget for each Fiscal Year as long as not inconsistent with this Agreement or the Related Agreements (the "Agreements"). The Manager may take any action consistent with the Approved Plan and Budget and the Agreements. Within 45 days prior to the expiration of any Approved Plan and Budget, or if the Manager proposes to take any action that deviates from the Approved Plan and Budget, the Manager shall prepare and submit to the Members for review and approval a revised or new plan and budget. Within 21 days after receiving such new or revised plan and budget from the Manager, the Members shall, by written notice to the Manager, either approve the new or revised plan and budget or state the reasons for not approving the new or revised plan and budget. If any Member fails to approve or disapprove a revised or new plan and budget within the time period mentioned hereabove, then such Member's approval shall be presumed. If any Member disapproves of any new or revised plan and budget, then the Members shall meet within 10 days after such notice that such plan and budget was not approved and seek in good faith to agree upon acceptable revisions to the new or revised plan and budget. If the Members cannot agree on a revised plan and budget, the Manager may take only those actions or incur those obligations that are consistent with the existing plan and budget. If the Members cannot agree upon a new plan and budget and the existing plan and budget has expired, the Manager may take only those actions or incur those obligations that are consistent with the prior plan and budget, until such time as a new plan and budget has been approved; provided, however, that any existing plan and budget deemed in effect shall automatically be adjusted for increases, if any, in Non-discretionary Expenditures. "Non-discretionary Expenditures" shall mean expenditures to third parties (other than Affiliates of a Member), that are beyond the reasonable control of the Manager, including, but not limited to, required debt service, taxes, utilities and insurance. Should the Members not be able to agree on a new plan or budget after two consecutive meetings on the subject, it will be considered a Deadlock under the terms of Articles 9.3 and 9.4 of this Agreement. (c) Reliance by Third Parties. Any third party shall be entitled to rely on all actions of the Manager and shall be entitled to deal with the Manager as if it was the sole party in interest therein, both legally and beneficially. Every instrument purporting to be the action of the Company and executed by the Manager shall be conclusive evidence in favor of any person relying thereon or claiming thereunder that, at the time of delivery thereof, this Agreement was in full force and effect and that the execution and delivery of that instrument is duly authorized by such Manager and the Company. -8- (d) Banking Resolution. The Members hereby unanimously authorize the Manager to open all banking accounts as its deems necessary and to enter into any deposit agreements as are required by the financial institution at which such accounts are opened. The Manager and any of its representatives designated in writing shall have signing authority with respect to such banking accounts. Checks shall be drawn upon the Company account or accounts only for the purposes of the Company and shall be signed by duly authorized representatives of the Company designated by the Manager with the approval of the Members. All checks of an amount of USD $ 10,000 or more must be signed jointly by two authorized representatives of the Company. The funds of the Company shall not be commingled with the funds of any other individual or legal entity. Funds deposited into such accounts shall be used only for the business of the Company. 6.3 Duties and Responsibilities of the Manager. The Manager shall devote all of its time to the Company and may not engage in businesses or ventures which are competitive with that of the Company. The Manager shall be responsible for implementing or causing to be implemented the following: (a) Performing all normal business functions and otherwise operating and managing the business and affairs of the Company in accordance with and as limited by this Agreement and the Related Agreements; (b) Protecting the interests of the Company and its property, improvements and other assets; (c) Preparing a proposed business plan and budget for each Fiscal Year; (d) To the extent that funds of the Company are available, paying all taxes, assessments, rents and other impositions applicable to the Company's property; (e) Causing all books of account and other records of the Company to be kept in accordance with the terms of this Agreement; (f) Preparing and delivering to each Member all reports required by the terms of this Agreement; (g) To the extent that funds of the Company are available, paying all debts and other obligations of the Company as they come due; (h) Maintaining all funds of the Company in a Company account in a bank or banks, and being the signatory to such account or accounts; -9- (i) Making distributions periodically to the Members in accordance with the provisions of this Agreement; (j) Undertaking such actions as are necessary or desirable so that the Company, within reason, promptly complies with all material present and future laws, ordinances, orders, rules, regulations and requirements of all governmental authorities having jurisdiction which may be applicable to the Company, its property, and the operations and management of the Company; and (k) Performing all other duties required by this Agreement and the Related Agreements to be performed by the Manager. 6.4 Actions Requiring a Vote. The Manager shall not undertake any of the following acts ("Major Decisions") without the unanimous written approval of the Members: (a) Making any direct or consequential change in a Member's rights under this Agreement or any Related Agreement between the Company and a Member or its Affiliate; (b) Implementing any significant changes in the organization of the Company; (c) Appointing or terminating key officers and executives of the Company or determining the remuneration of such officers and executives; (d) Dissolving the Company pursuant to Section 10.1(b); (e) Amending the Articles of Organization, this Operating Agreement or the Related Agreements; (f) Changing the Company's Fiscal Year or accounting period, accounting method or the nomination or replacement of the external auditors; (g) Changing the business or purpose of the Company as set forth in Section 2.3, including, but not limited to, the expansion into new markets outside of the Territory; (h) Approving any proposed business plan or budget, or approving quarterly updates, the annual accounts, or modifying or revising any Approved Plan and Budget; (i) Selling, transferring or exchanging substantial assets of the Company other than in the ordinary course of business; (j) Incurring any liabilities by the Company extending for a period in excess of one year; -10- (k) Incurring any liabilities by the Company, for any period of time, in an amount exceeding $25,000 other than in the ordinary course of business and within the Approved Plan and Budget; (l) Making loans on behalf of the Company or causing the Company to guarantee the obligations of others; (m) Creating any mortgage, pledge, security interest, charge, lien or other encumbrance upon all or part of the Company's property or assets; (n) Entering into or modifying any licensing, sub-licensing or distribution agreements; (o) Modifying the purchase price and/or general conditions of sales, including the payment terms, of the Products provided in the Distribution Agreement; (p) Making or giving any warranties by the Company other than in the ordinary course of business; (q) Initiating any suit or judicial, administrative or arbitration proceeding in the Company's name, or abandoning or settling any claim of the Company, except with respect to labor or commercial matters arising in the ordinary course of business; (r) Purchasing, acquiring or owning the shares or any other capital or equity interest in, or the debt securities of, any other Person; (s) Making any capital investment or improvement in an amount exceeding $25,000 other than an investment or improvement contained in the Approved Plan and Budget for the Fiscal Year in which it is made; (t) Entering into or amending any contracts or agreements between the Company and any Member or any Affiliate of a Member, including, but not limited to, determining or varying the consideration provided for therein; (u) Entering into or amending any contracts or agreements between the Company and any other Person providing for the distribution of the Products in any country inside or outside of the Territory, including, but not limited to, determining or varying the consideration provided for therein; (v) Approving any retirement, deferred compensation or pension plans for employees of the Company; -11- (w) Executing any bond in the Company's name other than in the ordinary course of business; (x) Using the Company's funds or capital in any way other than for the business and purpose of the Company as set forth in Section 2.3; (y) Commingling any Company funds or capital with the funds of any other Person; (z) Making any publications or press releases with respect to the Company, the Company's business or any transactions, communications or disputes between the Members; or (aa) Taking any other action which this Agreement or any Related Agreement specifically requires to be unanimously approved in writing by the Members. 6.5 Related Agreements; Legal Opinion. Within five (5) days of the Effective Date, the Members and the Company shall enter into those Related Agreements to which they are a party and Cerprobe will cause the Legal Opinion to be delivered to Upsys substantially in the form provided in Exhibit E. 6.6 Consents and Approvals. Except as otherwise provided herein, consent or approval by a Member with respect to actions of the Manager shall not be unreasonably withheld, and any request or consent or approval or refusal to consent or approve shall be in writing and shall specify with particularity the reasons therefor. The Manager shall provide timely written notice to each Member of each proposed action requiring the consent or approval of the Members, which notice shall specify with reasonable particularity the decisions to be made by the Members, the recommendation of the Manager with respect thereto, and a summary of the reasons supporting the Manager's recommendation. 6.7 Filing of Documents. The Manager shall file or cause to be filed all certificates or documents as may be determined by such Manager to be necessary or appropriate for the formation, continuation, qualification and operation of a limited liability company in the State of Arizona and any other state in the Territory in which the Company may elect to do business. To the extent that the Manager determines the action to be necessary or appropriate, such Manager shall do all things to maintain the Company as a limited liability company under the laws of the State of Arizona and any other state in the Territory in which the Company may elect to do business. 6.8 Indemnification and Liability. (a) Company Indemnification. The Manager, and the Members (each of the foregoing being referred to herein as an "Indemnitee"), shall be indemnified, defended and held harmless by the Company for, from and against any and all losses, claims, damages, -12- liabilities, expenses (including attorneys' fees and costs), judgments, fines, settlements, demands, actions, or suits relating to or arising out of the business of the Company, or the exercise by the Member of any authority conferred on it hereunder or the performance by the Member of any of its duties and obligations hereunder. Notwithstanding anything contained in this Agreement to the contrary, no Indemnitee shall be entitled to indemnification hereunder with respect to any claim, issue or matter: (i) in respect of which it (or the Company as the result of an act or omission of it) has been adjudged liable for fraud, negligence or wilful and wanton misconduct; or (ii) based upon or relating to a material breach by it of any term or provision of this Agreement or any Related Agreement. (b) Liability. The Members shall not be liable, responsible, accountable in damages or otherwise to the Company or the Members for any act or failure to act in connection with the Company and its business unless the act or omission is attributed to negligence, wilful and wanton misconduct or fraud or constitutes a material breach by such Manager or Member of any term or provision of this Agreement or any Related Agreement. (c) Terms of Indemnification. Each indemnity provided for under this Agreement shall be subject to the following provisions: (i) The indemnity shall cover the costs and expenses of the indemnitee, including reasonable attorneys' fees and court costs, related to any actions, suits or judgments incident to any of the matters covered by such indemnity as provided in Section 6.8(a) hereabove. (ii) The indemnitee shall notify the indemnitor of any claim against the indemnitee covered by the indemnity within 45 days after the indemnitee has notice of such claim, but failure to notify the indemnitor shall in no case prejudice the rights of the indemnitee under this Agreement unless the indemnitor shall be prejudiced by such failure and then only to the extent the indemnitor shall be prejudiced by such failure. The indemnitor will inform the indemnitee of its action with respect to any claim. Should the indemnitor fail to discharge or undertake to defend the indemnitee against such liability within sixty (60) days, upon learning of the same, then the indemnitee may settle such liability, and the liability of the indemnitor hereunder shall be conclusively established by such settlement, which amount of such liability shall include both the settlement consideration and the reasonable costs and expenses, including attorneys' fees, incurred by the indemnitee in effecting such settlement. (iii) No indemnity hereunder shall be construed to limit or diminish the coverage of any Manager or any Member under any insurance obtained by the -13- Company. Payment shall not be a condition precedent to any indemnification provided in this Agreement. ARTICLE VII The Members 7.1 Meetings of the Members. The Members will meet at least twice per calendar year. Each Member will appoint two delegates to such meetings, it may change delegates at any time at its sole option upon notification to the other Member and to the Company. Upsys's initial delegates will be Jean-Claude Gery and Philippe Oudot, and Cerprobe's initial delegates will be C. Zane Close and Michael K. Bonham. Meetings of the Members will also be held on the call of any Member; provided that at least seven days' notice shall be given to all Members with respect to any meeting, including an annual meeting; and further provided that any Member may require that such meeting be held by telephone. A waiver of any required notice shall be equivalent to the giving of such notice if such waiver is in writing and signed by the Person entitled to such notice, whether before, at or after the time stated therein. The Members may make use of telephones and other electronic devices to hold meetings, provided that each Member may simultaneously participate with the other Members with respect to all discussions and votes of the Members. The Members may act without a meeting if the action taken is reduced to writing (either prior to or thereafter) and approved and signed by the required vote of Members in accordance with the other voting provisions of this Agreement. Written minutes shall be taken at each meeting of the Members. 7.2 Voting of the Members. (a) Number of Votes. The total number of votes to be cast on any issue requiring a vote of the Members shall be 100, with each Member entitled, in the aggregate, to the number of votes equal to such Member's Participating Percentage multiplied by 100. (b) Required Vote. Unless the specific language of this Agreement expressly states otherwise, all votes, actions, approvals, elections and consents required in this Agreement to be made by "the Members" shall be effective when approved by a Majority Vote. If all or any portion of an Interest is transferred to an assignee who does not become a Member, the Member from whom the Interest is transferred shall no longer be entitled to vote the Interest transferred nor shall the transferred Interest be considered outstanding for any purpose pertaining to meetings or voting. All voting rights of a Member shall immediately cease upon the Withdrawal Event of that Member. -14- 7.3 Other Business Interests of the Members. This Agreement shall not be construed to grant any right, privilege or option to a Member to participate in any manner in any other business, corporation, partnership or investment in which the other Member may participate, including those which may be the same as or similar to the Company's business or in direct competition therewith. Each Member expressly waives the doctrine of corporate opportunity (or any analogous doctrine) with respect to any other such business, corporation, partnership or investment of any other Member or Affiliate. Each Member hereby acknowledges that a Member may engage in businesses or activities in the Territory that may be in direct competition with the Company's business, except as concerns products that use the same Upsys Technology as the Products and as provided in Article 7.7 hereafter. 7.4 Transaction With Members or Affiliates. A Member or Affiliate thereof shall have the right to contract or otherwise deal with the Company in connection with the sale of goods or services by the Member or its Affiliate to the Company only where the compensation paid or promised for such goods or services is reasonable and the terms for the furnishing of such goods or services is at least as favorable to the Company as would be attainable in an arm's-length transaction with third parties. 7.5 Rights and Obligations of Members. (a) Limitation of Liability. Each Member's liability for the debts and obligations of the Company shall be limited as set forth in the Act and other applicable law. (b) List of Members. Upon written request of any Member, the Manager shall provide a list showing the names and last known addresses of all Members in the Company. (c) Company Records. Upon written request, each Member shall have the right, during ordinary business hours, to inspect and copy the Company records required to be maintained by the Manager at the Company's Principal Office as set forth in Section 8.1 hereof as well as any other documents pertinent to the activity of the Company. 7.6 Defaulting Member. (a) Events of Default. The occurrence of any of the following events shall constitute an event of default and the Member so defaulting (herein referred to as the "Defaulting Member") shall (except as otherwise provided in Section 7.6(a)(iv) hereof) thereafter be deemed to be in default without any further action whatsoever on the part of the Company or the other Member: (i) attempted dissolution of the Company by any Member other than pursuant to the provisions contained elsewhere in this Agreement; (ii) the Bankruptcy of a Member; (iii) a Withdrawal Event of a Member; or (iv) failure of any Member to perform any obligation, act or acts required of that Member by the provisions of this Agreement, which shall be necessary for or in connection with the fulfillment of the purposes of the Company, or a violation or a -15- breach of any of the other terms or provisions of this Agreement; provided, however, that a Member shall not be deemed to be in default of this Section 7.6(a)(iv) until after 30 days' written notice thereof, and, if such default is a nonmonetary default and cannot reasonably, with due diligence and in good faith, be cured within said 30-day period, and if the Defaulting Member immediately commences and proceeds to complete the cure of such default with due diligence and in good faith, the 30-day period with respect to such default shall be extended to 60 days to cure such default. (b) Remedies on Default. Upon the occurrence of a default by a Member, the non-Defaulting Member shall have all the rights and remedies available at law and equity and may institute arbitration against the Defaulting Member with respect to any damages or losses incurred by the non-Defaulting Member in addition to the termination rights as per Article 10.1(h). 7.7 Non-Competition. Each Member agrees and undertakes not to, either directly or indirectly via its Affiliates, manage or carry or otherwise conduct or acquire a share holding in excess of 5% in any business in competition with the business of the Company in the Territory (defined for the purposes of this Article 7.7 as the manufacture, marketing, distribution, repair or sale of products that use the same Upsys Technology as the Products), so long as such Member or its Affiliates shall hold Shares of the Company. ARTICLE VIII Books, Records, Reports and Accounting 8.1 Records. The Manager shall keep or cause to be kept at the Principal Office of the Company the following: (a) a current list of the full name and last known business, residence or mailing address of each Member, (b) a copy of the initial articles of organization and all amendments thereto, (c) copies of all written agreements and all amendments to the agreements, including any prior written agreements no longer in effect, (d) copies of any written and signed promises by a Member to make Capital Contributions to the Company, (e) copies of the Company's federal, state and local income tax returns and reports, if any, for the three most recent years, (f) copies of any prepared financial statements of the Company for the three most recent years, and (g) minutes of every meeting of the Members as well as any written consents of Members or actions taken by Members without a meeting. Any such records maintained by the Company may be kept on or be in the form of any information storage device, provided that the records so kept are convertible into legible written form within a reasonable period of time. 8.2 Fiscal Year and Accounting. The Fiscal Year of the Company shall be the calendar year. All amounts computed for the purposes of this Agreement and all applicable questions concerning the rights of Members shall be determined using the method of accounting -16- unanimously agreed to by the Members, as provided in Article 6.4 hereabove. All decisions as to other accounting matters, including the selection of the Company's independent auditors and accountants, shall be made by the unanimous decision of the Members. 8.3 Statements and Reports. (a) Annual Reports. Within 15 days after the close of each Fiscal Year, the Manager shall cause to be furnished to the Members, reports containing unaudited financial statements of the Company for the Fiscal Year, presented in accordance with generally accepted accounting principles or tax accounting principles, consistently applied. Within 45 days after the close of each Fiscal Year, the Manager shall cause to be furnished to the Members as of the last day of that Fiscal Year reports containing audited financial statements of the Company for the Fiscal Year, presented in accordance with generally accepted accounting principles or tax accounting principles, consistently applied. (b) Quarterly Reports. Within 10 days after the close of each fiscal quarter, the Manager shall cause to be furnished to the Members as of the last day of that fiscal quarter, reports containing unaudited financial statements of the Company for such fiscal quarter, presented in accordance with generally accepted accounting principles or tax accounting principles, consistently applied. (c) Monthly Reports. Within 10 days after the end of each month, the Manager shall cause to be furnished to the Members, unaudited, monthly operating statements for the applicable month. 8.4 Preparation of Tax Returns. The Manager shall arrange for the preparation and timely filing of all returns of Company income, gains, deductions, losses and other items necessary for federal and state income tax purposes and shall cause to be furnished to the Members the tax information reasonably required for foreign, federal state and local income tax reporting purposes. The classification, realization and recognition of income, gain, losses and deductions and other items, for federal income tax purposes, shall be on that method of accounting as agreed to by the Members. 8.5 Tax Elections. The Members shall determine whether to make any available elections pursuant to the Code. 8.6 Tax Controversies. Subject to the provisions hereof, the Cerprobe is designated the Tax Matters Member, and is authorized and required to represent the Company (at the Company's expense) in connection with all examinations of the Company's affairs by tax authorities, including resulting administrative and judicial proceedings, and to expend Company funds for professional services and costs associated therewith. The Members agree to cooperate with the Tax Matters Member and to do or refrain from doing any or all things reasonably -17- required by the Tax Matters Member to conduct those proceedings. The Tax Matters Member agrees to promptly notify the other Member upon the receipt of any correspondence from any foreign, federal, state or local tax authorities relating to any examination of the Company's affairs. The Tax Matters Member shall be prohibited from entering into any settlement or arrangement on behalf of the Company with respect to any foreign, federal, state or local tax authorities without the express written approval of the other Member. 8.7 Withholding and Tax Advances. (a) Authority to Withhold. To the extent the Company is required by law to withhold or to make tax payments on behalf of or with respect to a Member (e.g., (i) backup withholding, (ii) withholding with respect to Members that are neither citizens nor residents of the United States, or (iii) withholding with respect to Members that are not residents of the State of Arizona) ("Tax Advances"), the Company may withhold such amounts and make such tax payments as may be required. (b) Repayment of Tax Advances. All Tax Advances made on behalf of a Member will, at the option of the concerned Member, either be (i) promptly paid to the Company by that Member, or (ii) repaid by reducing the amount of the current or next succeeding distribution or distributions which would otherwise have been made to that Member (or, if such distributions are not sufficient for that purpose, by so reducing the proceeds of liquidation otherwise payable to that Member). Whenever the Manager selects option (ii) pursuant to the preceding sentence for repayment of a Tax Advance by a Member, for all other purposes of this Agreement such Member will be treated as having received all distributions (whether before or upon liquidation) unreduced by the amount of such Tax Advance. (c) Indemnification. Each Member hereby agrees to indemnify and hold harmless the Company and the Manager for, from and against any liability with respect to Tax Advances made on behalf of or with respect to such Member. However, the Company and the Manager shall remain fully responsible as concerns the tax return preparations, elections, representation of the Company for controversies and withholding obligations as provided in this Section 8.7. (d) Certification. Each Member will promptly give the Company any certification or affidavit that the Manager may request in connection with this Section 8.7. -18- ARTICLE IX Transfers, Withdrawals, Deadlock 9.1 Transfers. (a) Restrictions. A Member shall not make any direct or indirect Transfer of all or any portion of its Interest including, without limitation, a Transfer of a right to Profits, Losses or distributions to a Transferee unless the requirements of Section 9.1(b) hereof have been complied with. If a Member purports to transfer its Interest in breach of this Section 9.1, such purported Transfer shall be void and of no effect. (b) Requirements for Transferee Becoming a Substituted Member. No Transferee, including an Affiliate, shall become a substituted Member in the Company unless the following conditions precedent are satisfied: (i) each Member, in their sole discretion, shall have consented in writing to the Transferee becoming a Member; (ii) the Transferee shall have assumed any and all of the obligations under this Agreement and the Related Agreements with respect to the Interest to which the Transfer relates; (iii) all reasonable expenses required in connection with the Transfer shall have been paid by or for the account of the Transferee; and (iv) all agreements, articles, minutes, written consents and all other necessary documents and instruments shall have been executed and filed and all other acts shall have been performed which the other Member deems necessary to make the Transferee a substitute Member of the Company and to preserve the status of the Company as a limited liability company. 9.2 Withdrawal of a Member. A Member shall not have the right to withdraw from the Company. If a Member withdraws from the Company in breach of this Agreement ("Withdrawn Member"), that Member shall not be entitled to receive the value of its Interest; rather, the Company shall have the right to admit a new Member and continue the Company, and the Withdrawn Member shall be treated as an assignee of its Interest and shall have no Member rights except the right to continue to receive distributions pursuant to Articles IV and X to the extent the Company is continued pursuant to Section 10.1(d); provided, however, that any damages incurred by the Company or the other Member as a result of a Withdrawal Event of a Member shall be offset against any amounts distributable by the Company to the Withdrawn Member. 9.3 Deadlock. (a) For the purposes hereof, the term "Deadlock" shall mean a fundamental and protracted failure of the Members to agree on a common course of action for the Company after two consecutive meetings of the Members which disagreement -19- threatens the fundamental interest of one of the Members or a Major Decision as listed in Article 6.4 above and which cannot be resolved in good faith by mutual agreement within thirty (30) days of the first meeting of the Members at which the issue is voted upon. (b) It is expressly agreed that the term Deadlock shall include: (i) the failure of either Member to have at least one of its delegates be present or represented at two consecutive meetings of the Members; or (ii) the failure of the Members to agree on a Major Decision. 9.4 Consequences of a Deadlock. In the event of the occurrence of a Deadlock, the Company shall be liquidated and wound up in accordance with this Agreement, the Articles of Organization and the Act, and the Company shall not be continued as would otherwise be permitted by Section 10.4 of this Agreement. ARTICLE X Liquidation and Winding Up 10.1 Dissolution. The Company shall dissolve only upon: (a) December 31, 2046; (b) the unanimous written consent of the Members; (c) upon the acquisition by one Person of all of the outstanding Interests, except as allowed under Section 10.4; (d) upon any Withdrawal Event of a Member, unless the business of the Company is continued by the consent of all remaining Members given within 90 days after the discovery by one or more such remaining Members of such Withdrawal Event; (e) the occurrence of any event which makes it unlawful for the business of the Company to be carried on or for the Members to carry on that business in the Company; (f) the sale or other disposition of all or substantially all of the Company's assets and properties and the collection of all notes received in connection with such sale or other disposition; -20- (g) the Bankruptcy of any Member; (h) the breach of this Agreement or any Related Agreement by a Member, but only after written notice by the non-breaching Member to the breaching Member and only if such breach is not remedied within 60 days after written notice of such breach; (i) at any time after 18 months from the execution of this Agreement, by any Member upon six months' prior written notice to the other Members; (j) Deadlock; (k) should the Company not be considered by the federal or Arizona tax authorities as qualifying as a partnership; or (l) should IBM terminate the License Agreement with Upsys. 10.2 Penalty in the Event of Breach of the Agreement. The Members expressly agree that the material breach of this Agreement would cause a considerable prejudice to the non-breaching Member which would be difficult to evaluate; the Members therefore agree that, in addition to the right to dissolve the Company as per Section 10.1 hereabove, any material breach of this Agreement by either of the Members during the term thereof, will oblige the breaching Member, without the need for the non-breaching Member to prove any other act other than material breach, to pay the non-breaching Member a penalty equal to the Capital Contribution of the non-breaching Member as well as the non-reimbursed amounts of any loans by such Member to the Company, which had been unanimously approved as provided in Section 6.4(t) hereabove. This penalty is in addition to any other remedies under the terms of this Agreement. 10.3 Effects of Dissolution. If the Company is dissolved for any reason set forth in Section 10.1, the dissolution shall give rise to following events: (a) Termination of Related Agreements. All Related Agreements shall automatically terminate. (b) Return of Inventory. The Company may return to Upsys the inventory of standard unused and non-obsolete Product Components purchased from Upsys, but such returned inventory shall be limited to 45 days of inventory of such components measured by the average inventory for the prior six months of operations and the refund payable or creditable by Upsys for such returned inventory shall be an amount equal to 85 percent of the purchase price originally paid by the Company for such items. -21- (c) Completion of Pending Orders. Notwithstanding the automatic termination of the Related Agreements, the Company is authorized to finish orders it is in the process of filling for a time period to be agreed upon by the Members, which time period shall not be less than 60 days. (d) Use of Upsys Intellectual Property Rights. Neither the Company nor Cerprobe shall have the right to use the Upsys Technology in the Territory or elsewhere. Nothing in this Agreement or in any of the Related Agreements shall be interpreted to prohibit Cerprobe from utilizing any information contained in U.S. Patent No. 4,027,935, dated June 7, 1977, regarding Contact for an Electrical Contactor Assembly. 10.4 Continuation of the Business of the Company After Dissolution. If the Withdrawal Event of a Member leaves only one remaining Member, that remaining Member shall have the right within 90 days of the discovery of such Withdrawal Event to admit an additional Member (or to re-admit the Withdrawn Member or its successor-in-interest) to the Company, and that newly admitted (or re-admitted) Member along with the remaining Member may elect to continue the business of the Company as set forth in Section 10.1(d) hereof. 10.5 Filing Upon Dissolution. As soon as possible following the dissolution of the Company, the liquidating trustee of the Company shall execute and file a Notice of Winding Up with the Arizona Corporation Commission as required by the Act. Upon the dissolution of the Company, the Company shall cease to carry on its business, except insofar as may be necessary for the winding up of its business, but its separate existence shall continue until the Articles of Termination have been filed with the Arizona Corporation Commission as required by the Act or until a decree dissolving the Company has been entered by a court of competent jurisdiction. 10.6 Liquidation. Upon dissolution of the Company, the business and affairs of the Company shall be wound up and liquidated as rapidly as business circumstances permit, the Manager shall act as the liquidating trustee, and the assets of the Company shall be liquidated and the proceeds thereof shall be paid (to the extent permitted by applicable law) in the following order: (a) first, to creditors, including Members that are creditors, in the order of priority as required by applicable law and by this Agreement; (b) second, to a reserve for contingent liabilities to be distributed at the time and in the manner as the liquidating trustee determines in its discretion; and (c) thereafter, to the Members, pro rata, based upon their positive Capital Account balances. -22- 10.7 Reasonable Time for Winding Up. A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Company and the liquidation of its assets pursuant to Section 10.6 to minimize any losses otherwise related to that winding up. A reasonable time shall include the time necessary for the completion of pending orders as provided in Section 10.3(c) hereof. 10.8 Deficit Capital Account. Upon liquidation, each Member shall look solely to the assets of the Company for the return of that Member's Capital Contribution. No Member shall be personally liable for a deficit Capital Account balance of that Member, it being expressly understood that the distribution of liquidation proceeds shall be made solely from existing Company assets. 10.9 Articles of Termination. When all debts, liabilities and obligations have been paid and discharged or adequate provisions have been made therefore and all of the remaining property and assets have been distributed to Members, Articles of Termination shall be executed and filed with the Arizona Corporation Commission as required by the Act. ARTICLE XI Change of Control If at any time during the time the signatories hereto are Members of the Company, more than fifty percent (50%) of the share capital or equity interest of a Member is proposed to be sold or otherwise transferred to a buyer or group of buyers which is a direct competitor of the Company or the other Member, therefore constituting a change of Control ("Change of Control"), the other Member shall have a right to either cause the dissolution of the Company or buy such Member's Interest, according to the procedures set forth herebelow: 11.1 The value of the Interest shall be the fair market value being the value of the Interest determined by an expert appointed for that purpose by the Members on a going concern basis as at the end of the fiscal quarter for which the most recent financial statements of the Company are available, without taking into consideration the effect of the proposed sale or transfer. 11.2 If the parties cannot jointly agree on an expert, each shall name an investment or merchant bank of international standing as an expert and the two experts shall chose a third. 11.3 The expert or experts shall determine the valuation based on standard procedures used to value businesses similar to the Company on the world market. -23- ARTICLE XII Intellectual Property; Research and Development 12.1 Ownership. (a) Except as otherwise provided herein, or in the Related Agreements, the Intellectual Property Rights of the Members shall not be transferred to the Company, but shall remain the property of such Members. Should the Company make any improvements in the Products or the Product Components or in the process of assembly, testing, or repairs of the Products, the Company transfers all related Intellectual Property Rights to Upsys and will have a nontransferable, non-exclusive right to use such Intellectual Property Rights. (b) Each Member further acknowledges and agrees that by this Agreement neither Member nor the Company acquire any right, use, title, or interest in the Intellectual Property Rights of the other Member. Any unauthorized use of the Intellectual Property Rights owned by one of the Members will constitute an infringement of such Member's rights. 12.2 Proprietary Protection. (a) Each Member agrees that, except as is specifically provided in the Related Agreements, it will not, and that it will cause the Company to not, directly or indirectly, at any time during the term of this Agreement or thereafter: (i) represent that it has any ownership interest in or rights to the Intellectual Property Rights owned by the other Member or the Company or (ii) register or attempt to register or use in any manner whatsoever such Intellectual Property Rights, without such Member's or the Company's specific prior written consent. (b) If a Member or any of its directors, officers, employees or Affiliates registers any Intellectual Property Rights belonging to the other Member or the Company, the respective Member hereby agrees to cause the assignment of such to the other Member or the Company, as applicable, immediately upon request, and without charge therefor. (c) Upon the termination of this Agreement for any reason, or the replacement of a Member under the terms of Article IX, each Member and the Company shall immediately return to the other Member or the Company, as appropriate, all originals and any copies of Intellectual Property Rights belonging to such Member or the Company in its possession or control. -24- 12.3 Confidential Information; Nondisclosure. (a) The Members agree that, except to the extent necessary to comply with applicable law and regulatory and supervisory requirements, including the filing of tax returns, each Member shall keep, and cause their respective Affiliates to keep, the terms and conditions of this Agreement and the transactions contemplated by this Agreement confidential. In no event shall any publication or press release be made by any Member or any Affiliate thereof, with respect to the Company, the Company's business, or any transactions, communications or disputes between the Members, without the prior written consent of each Member, which consent may be given or denied in the sole discretion of such Member. (b) Both prior to and during the term of this Agreement, the Members have received and will receive certain trade secrets and confidential information relating to each Member's business and operations ("Confidential Information"). The Members shall hold in strictest confidence and not disclose to any third party any such Confidential Information designated in writing or which by its nature should reasonably be deemed confidential. Further, none of the Members shall use or permit the use of any such Confidential Information in any manner other than in furtherance of the purposes hereof. (c) Notwithstanding the foregoing, the Members will be permitted to make use of or disclose Confidential Information: (i) which is in or comes into the public domain other than through the default of a Member; (ii) which was already in the possession of a Member prior to disclosure by the disclosing Member hereto as evidenced by documentation in such Member's possession; (iii) which is lawfully acquired from a third party who did not obtain it directly or indirectly from the disclosing Member; (iv) which is required to be disclosed by or to a court or governmental agency, but only to the extent and for the purpose so required; and (v) with a Member's financial advisors, attorneys, accountants or any other third party engaged by it to the extent strictly necessary to effect the purposes and intent of this Agreement, it being understood that, in the case of any such disclosure, the Member shall have made such third parties aware of the duty of confidentiality undertaken herein, and shall cause such third parties to respect such undertakings. -25- (d) The Members acknowledge and agree that the unauthorized use or disclosure of such Confidential Information would constitute, inter alia, an act of unfair competition and cause irreparable harm to the non disclosing Member, its competitive position and goodwill, and each Member acknowledges responsibility for damages caused to the others by such unauthorized use or disclosure. (e) This obligation of confidentiality shall remain in effect during the term of this Agreement and for five (5) years thereafter. 12.4 Research and Development. The Company shall not engage in any research or development concerning the Products or Product Components without the express, unanimous consent of the parties. ARTICLE XIII Miscellaneous 13.1 Governing Law, Jurisdiction and Venue. This Agreement and all questions relating to its validity, interpretation, performance and enforcement, will be governed by and construed, interpreted, and enforced in accordance with the laws of the State of Arizona, notwithstanding any conflict of laws rules to the contrary and in accordance with the United States Arbitration Act, 9 U.S.C. Sections 1 et seq. Subject to the mandatory arbitration provision in Section 13.18 below, the exclusive jurisdiction and venue of any action relating to this Agreement will be the United States District Court for the Southern District of New York and each of the parties to this Agreement submits to the exclusive jurisdiction and venue of such courts for the purpose of any such action. 13.2 Notices. Notices may be delivered either by private messenger service or mail. Any notice or document required or permitted hereunder to a Member shall be in writing and shall be deemed to be given on the date received by the Member; provided, however, that all notices and documents mailed to a Member, postage prepaid, certified mail, return receipt requested, addressed to the Member at its respective address as shown in the records of the Company, shall be deemed to have been received seven days (168 hours) after mailing. The address of each of the Members shall for all purposes be as set forth in the Company's Articles of Organization unless otherwise changed by the applicable Member by notice to the other Members and the Manager as provided herein. 13.3 Severability. If any provision of this Agreement shall be conclusively determined by a court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement shall not be affected thereby. -26- 13.4 Binding Effect. Except as otherwise provided herein, this Agreement shall inure to the benefit of and be binding upon the Members and their respective successors and, where permitted, assigns. 13.5 Titles and Captions. All article, section and paragraph titles and captions contained in this Agreement are for convenience only and are not a part of the context hereof. 13.6 Pronouns and Plurals. All pronouns and any variations thereof are deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the appropriate Person(s) may require. 13.7 No Third Party Rights. This Agreement is intended to create enforceable rights between the parties hereto only, and creates no rights in, or obligations to, any other Persons whatsoever. 13.8 Time is of Essence. Time is of the essence in the performance of each and every obligation herein imposed. 13.9 Further Assurances. The parties hereto shall execute all further instruments and perform all acts which are or may become necessary to effectuate and to carry on the business contemplated by this Agreement. 13.10 Estoppel Certificates. The Members hereby agree that, at the request of any Member, the other Member will execute and deliver an estoppel certificate stating that this Agreement is in full force and effect and that to the best of such Member's knowledge and belief there are no defaults by such Member (or that certain defaults exist), as the case may be, under this Agreement. 13.11 Schedules Included in Exhibits; Incorporation by Reference. Any reference to an Exhibit to this Agreement contained herein shall be deemed to include any Schedules to such Exhibit. Each of the Exhibits referred to in this Agreement, and each Schedule to such Exhibits, is hereby incorporated by reference in this Agreement as if such Schedules and Exhibits were set out in full in the text of this Agreement. 13.12 Amendments. This Agreement may not be amended except by unanimous written agreement of all of the Members. 13.13 Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Company. 13.14 Representations. Each Member, for itself and for its representatives and Affiliates, hereby represents and warrants that (a) this Agreement affords the Members significant legal power and control over Company matters and the Member is capable of intelligently exercising -27- such powers, (b) the Member is experienced and knowledgeable in business affairs generally and in the business and affairs to be conducted by the Company, and (c) the Member is not so dependent upon the entrepreneurial or management ability of the other Member that the Member cannot replace the other Member or otherwise exercise meaningful Company powers. 13.15 Entire Agreement. This Agreement contains the entire agreement between the parties hereto and supersedes any and all prior agreements, arrangements or understandings between the parties relating to the subject matter hereof. No oral understandings, oral statements, oral promises or oral inducements exist. No representations, warranties, covenants or conditions, express or implied, whether by statute or otherwise, other than as set forth herein, have been made by the parties hereto. 13.16 Construction. Each Member acknowledges and agrees that it has participated in the drafting and negotiation of this Agreement and that this Agreement has been reviewed by its legal counsel 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, the Company, any Member or the Manager shall be drawn from the fact that any one or more of them has drafted any portion hereof. 13.17 Remedies Cumulative. Except as specifically set forth herein to the contrary, the remedies of the parties hereto under this Agreement are cumulative and will not preclude the recovery, award or grant of any other remedies to which any party may be lawfully entitled. 13.18 Arbitration. If any dispute arises under this Agreement, upon written notice of either party, the parties will immediately seek to resolve the dispute by good faith negotiations. If the parties are unable to resolve the dispute in writing within ten (10) business days from the commencement of such good faith negotiations, then without the necessity of further notice or agreement between the parties, such dispute will be finally settled in accordance with the Commercial Arbitration Rules of the American Arbitration Association and its Supplementary Procedures for International Commercial Arbitration, as in effect as of the date of this Agreement. The language for such arbitration will be English and the site will be New York, New York. The number of arbitrators will be three (3) (the "Arbitrators"). If the parties agree on the persons to be the Arbitrators at the time the dispute is submitted to arbitration, then those persons shall be the Arbitrators. Otherwise, each party will select one (1) of the Arbitrators, and those Arbitrators will select the third arbitrator. Failing an agreement on the third Arbitrator, the president of the American Arbitration Association will be the sole appointing authority for the third Arbitrator. The decision of the Arbitrators will be final and non-appealable as between the parties to this Agreement. Either party may, at its option, seek injunctive relief or other provisional remedies against the other party from any court of appropriate jurisdiction. Each party to the dispute will bear its respective expenses incurred in respect of the dispute and the costs of the Arbitrators will be borne equally by both parties. -28- ARTICLE XIV Definitions The following terms used in this Agreement shall have the meanings described below: "Act" shall mean the Arizona Limited Liability Company Act. "Adjusted Basis" shall have the meaning given such term in Code section 1011. "Adjusted Capital Account Balance" shall mean, with respect to each Member, the balance of such Member's Capital Account at the end of the Fiscal Year increased by any amount which the Member is deemed to be obligated to restore pursuant to penultimate sentences of Treasury Regulation sections 1.704-2(g)(1) and 1.704-2(i)(5). "Adjusted Capital Account Deficit" shall have the meaning set forth in Section 5.2(a). "Affiliate" shall mean a Person who, with respect to any other Person, directly or indirectly controls, is controlled by, or is under common control with such other Person. For purposes of this definition, "control" shall mean any one or more of the following: (a) ownership or control (whether directly or otherwise) of more than 50 percent of the equity share capital, voting capital or other equity interest of such other Person; (b) ownership of the equity share capital, voting capital or other equity interest by contract or otherwise, control of, power to control the composition of, or power to appoint more than 50 percent of the members of the board of directors, board of management or other equivalent or analogous body of such other Person; (c) entitlement to receive by virtue of its ownership or control of any interest in such other Person more than 50 percent of any (but not necessarily every) income or capital distribution made by such other Person (either on liquidation, winding-up, dissolution or otherwise). "Agreement" shall mean this Operating Agreement, as it may be amended from time to time, complete with all exhibits and schedules hereto. "Agreements" shall have the meaning given such term in Section 6.2(b). "American Territory" shall mean the United States of America, and its territories. -29- "Approved Plan and Budget" shall mean the Company's business plan and budget for each Fiscal Year, which shall be proposed by the Manager and subject to the unanimous written approval of the Members. "Articles of Organization" shall mean the Articles of Organization of the Company as may be amended from time to time. "Asian Territory" shall mean the Asian countries of South Korea, Japan, Singapore, Malaysia and Taiwan. "Available Cash Flow" shall have the meaning set forth in Section 4.1. "Bankruptcy" shall mean, with respect to a Person, the happening of any of the following: (a) the making by such Person of a general assignment for the benefit of creditors; (b) the filing by such Person of a voluntary petition in bankruptcy or the filing of a pleading in any court of record admitting in writing an inability to pay debts as they become due; (c) the entry of an order, judgment or decree by any court of competent jurisdiction adjudicating such Person to be bankrupt or insolvent; (d) the filing of a petition or answer seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation; (e) the filing of an answer or other pleading admitting the material allegations of, or consenting to, or defaulting in answering, a bankruptcy petition filed against such Person in any bankruptcy proceeding; (f) the filing of an application or other pleading or any action otherwise seeking, consenting to or acquiescing in the appointment of a liquidating trustee, receiver or other liquidator of all or any substantial part of such Person's properties; (g) the commencement against such Person of any proceeding seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any statute, law or regulation which has not been quashed or dismissed within 180 days; or (h) the appointment without the consent or acquiescence of such Person of a liquidating trustee, receiver or other liquidator of all or any substantial part of such Person's properties without such appointment being vacated or stayed within 90 days and, if stayed, without such appointment being vacated within 90 days after the expiration of any such stay. -30- "Capital Account" shall mean the accounting record of each Member's capital interest in the Company. There shall be credited to each Member's Capital Account (a) the amount of any contribution of cash by that Member, (b) the Gross Asset Value of property contributed by that Member, (c) that Member's allocable share of Profits and any items in the nature of income or gain that are specially allocated to that Member pursuant to Section 5.2 hereof (not including Section 5.2(d) hereof) and (d) the amount of any Company liabilities that the Member assumes or takes subject to under Code section 752. There shall be debited against each Member's Capital Account (i) the amount of all distributions of cash to that Member unless a distribution to the Member is a loan, a repayment of a loan, or is deemed a payment under Code section 707(c), (ii) the Gross Asset Value of property distributed to that Member by the Company, (iii) that Member's allocable share of Losses and any items in the nature of expenses or losses which are specially allocated pursuant to Section 5.2 hereof (not including Section 5.2(d) hereof), and (iv)the amount of any liabilities of that Member that the Company assumes or takes subject to under Code section 752. The transferee of all or a portion of the Interest shall succeed to that portion of the transferor Member's Capital Account that is allocable to the portion of the Interest transferred. This definition of Capital Account and the other provisions herein relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulation sections 1.704-1(b) and 1.704-2 and shall be interpreted and applied in a manner consistent with those Treasury Regulation sections. In the event the Manager determines that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities that are secured by contributed or distributed property or which are assumed by the Company or the Members), are computed in order to comply with that Treasury Regulation, the Manager may make such modification. The Manager shall also make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Treasury Regulation sections 1.704-1(b) and 1.704-2. "Capital Contribution" shall mean, with respect to any Member, the amount of money contributed by that Member to the Company and, if property other than money is contributed, the initial Gross Asset Value of such property, net of liabilities assumed or taken subject to by the Company. "Cerprobe Subsidiary" shall have the meaning set forth in Section 6.1. "Code" shall mean the Internal Revenue Code of 1986 (or successor thereto), as amended from time to time. "Company" shall mean the limited liability company formed pursuant to this Agreement, as such company may from time to time be constituted. "Deadlock" shall have the meaning set forth in Section 9.3. "Defaulting Member" shall mean a Member that has committed an event of default as described in Section 7.6 hereof. -31- "Depreciation" shall mean, for each Fiscal Year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for that year or other period, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of the Fiscal Year or other period, Depreciation shall be an amount which bears the same ratio to that different Gross Asset Value (as originally computed) as the federal income tax depreciation, amortization, or other cost recovery deduction for that Fiscal Year or other period bears to the adjusted tax basis (as originally computed); provided, however, that if the federal income tax depreciation, amortization or other cost recovery deduction for the applicable year or period is zero, Depreciation shall be determined with reference to the Gross Asset Value (as originally computed) using any reasonable method selected by the Members. "Distribution Agreement" shall mean the Distribution Agreement, by and among the Company, Cerprobe, and Upsys, and entered into in accordance with Section 6.5 of this Agreement. "Effective Date" shall have the meaning set forth in Section 1.4. "Fiscal Year" shall mean the year on which the accounting and federal income tax records of the Company are kept. The first Fiscal Year shall start on the Effective Date, and the last Fiscal Year shall end on the termination of the Company. "Gross Asset Value" shall mean with respect to any Company asset, the asset's Adjusted Basis, except as follows: (a) the initial Gross Asset Value of any asset contributed by a Member to the Company shall be the gross fair market value of that asset, as determined by the contributing Member and the Manager; (b) the Gross Asset Value of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Manager, as of the date upon which any of the following occurs: (i) the acquisition of an additional interest in the Company after the Effective Date by any new or existing Member, in exchange for more than a de minimis Capital Contribution or the distribution by the Company to a Member of more than a de minimis amount of Company property as consideration for an interest in the Company, if the Manager determines that such adjustment is necessary or appropriate to reflect the relative economic interest of the Members of the Company; and (ii)the liquidation of the Company within the meaning of Treasury Regulation section 1.704-1(b)(2)(ii)(g); (c) the Gross Asset Value of any Company asset distributed to any Member shall be the gross fair market value of that asset on the date of distribution, as determined by the Member receiving that distribution and the Manager; and -32- (d) if an election under Code section 754 has been made, the Gross Asset Value of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of the assets pursuant to Code section 734(b) or Code section 743(b), but only to the extent that those adjustments are taken into account in determining Capital Accounts pursuant to Treasury Regulation section 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Value shall not be adjusted pursuant to this subsection (d) to the extent that the Manager determines that an adjustment pursuant to subsection (b) hereof is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subsection (d). If the Gross Asset Value of an asset has been determined or adjusted hereby, that Gross Asset Value shall thereafter be further adjusted by the Depreciation, if any, taken into account with respect to that asset for purposes of computing Profits and Losses. "Initial Member Loan" shall have the meaning set forth in Section 3.3. "Intellectual Property Rights" shall mean patents, design patents, industrial designs, utility models, trademarks, trade dress, proprietary designs, logos, company names, trade names, copyrights and copyrightable works, software, trade secrets, license rights, know-how, processes and all other intellectual property rights or proprietary information, and in each case, together with associated goodwill. "Interest" shall mean the interest of a Member in the Company as a Member representing such Member's rights, powers and privileges as specified in this Agreement. "Legal Opinion" shall mean the legal opinion of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears in the form set forth in Exhibit E hereto. "Major Decisions" shall mean those decisions requiring the unanimous written approval of the Members as set forth in Section 6.4 of this Agreement. "Majority Vote" shall mean a majority of the votes eligible to be cast by the Members. "Management Agreement" shall mean the Management Agreement, by and between Cerprobe Subsidiary and the Company, and entered into in accordance with Section 6.5 of this Agreement. "Manager" shall mean that person designated as such pursuant to Section 6.1 of this Agreement. "Member" shall mean any Person that executes this Agreement as a Member, and any other Person admitted to the Company as an additional or substituted Member, that has not made a disposition of such Person's entire Interest. -33- "Member Loan" shall mean a loan to the Company from a Member in accordance with Section 3.3 hereof. "Non Discretionary Expenditures" shall have the meaning set forth in Section 6.2(b). "Participating Percentage" shall mean 55 percent as to Cerprobe and 45 percent as to Upsys, except if otherwise modified by agreement of both Members. "Person" shall mean an individual, firm, corporation, partnership, limited liability company, association, estate, trust, pension or profit-sharing plan, or any other entity. "Principal Office" shall mean the registered Arizona office of the Company at which the records of the Company are kept as required under the Act. "Products" shall have the meaning set forth in Section 2.4. "Product Components" shall have the meaning set forth in Section 2.4. "Profits" and "Losses" shall mean for each Fiscal Year or other period, an amount equal to the Company's taxable income or loss for that year or period, determined in accordance with Code section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code section 703(a)(1) shall be included in taxable income or loss), with the following adjustments: (a) any income of the Company exempt from federal income tax not otherwise taken into account in computing Profits or Losses shall be added to that taxable income or loss; (b) any expenditures of the Company described in Code section 705(a)(2)(B) or treated as Code section 705(a)(2)(B) expenditures pursuant to Treasury Regulation section 1.704- 1(b)(2)(iv)(i), shall be subtracted from that taxable income or loss; (c) in the event the Gross Asset Value of any Company asset is adjusted as required by the definition of Gross Asset Value, the amount of that adjustment shall be taken into account as gain or loss from the disposition of that asset (assuming the asset was disposed of just prior to the adjustment) for purposes of computing Profits or Losses in the Fiscal Year of adjustment; (d) gain or loss resulting from any disposition of Company property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the Adjusted Basis of that property may differ from its Gross Asset Value; -34- (e) depreciation, amortization and other cost recovery deductions taken into account in computing the taxable income or loss shall be based on the Gross Asset Value of the assets; and (f) any items of income, gain, loss or deduction that are specially allocated pursuant to Section 5.2 hereof shall not be taken into account in computing Profits or Losses. "Related Agreements" shall mean the Supply Agreement, the Management Agreement, and the Distribution Agreement, final forms of which are attached hereto as Exhibits B, C and D, respectively. "Supply Agreement" shall mean the Supply Agreement, by and among Upsys, Cerprobe and the Company, and entered into in accordance with Section 6.5 of this Agreement. "Tax Matters Member" shall mean the "tax matters partner" as defined in Code section 6231(a)(7). "Territory" shall mean collectively the American Territory and the Asian Territory. "Transfer" shall mean to sell, assign, transfer, give, donate, pledge, deposit, alienate, bequeath, devise or otherwise dispose of or encumber to any Person other than the Company. "Transferee" shall mean a Person to whom a Transfer is made. "Treasury Regulations" shall mean pronouncements, as amended from time to time, or their successor pronouncements, which clarify, interpret and apply the provisions of the Code, and which are designated as "Treasury Regulations" by the United States Department of the Treasury. "Upsys Technology" shall mean the Intellectual Property Rights of Upsys relating to vertical probing using cobra shaped types of probes. "Withdrawal Event" shall mean those events or circumstances listed in A.R.S. 29-733, with the exception of the Bankruptcy of a Member. "Withdrawn Member" shall have the meaning set forth in Section 9.2 hereof. -35- IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the day and year first above written. CERPROBE CORPORATION By: /s/ C. Zane Close ---------------------------------------- Name: C. Zane Close Its: President and Chief Executive Officer UPSYS By: /s/ Jean-Claude Gery ---------------------------------------- Name: Jean-Claude Gery Its: General Manager EX-10.DDD 5 DISTRIBUTION AGREEMENT DISTRIBUTION AGREEMENT THIS DISTRIBUTION AGREEMENT (the "Distribution Agreement") is made and entered into as of June 2, 1997, by and among UPSYS-CERPROBE, L.L.C., an Arizona limited liability company (the "Company"), CERPROBE CORPORATION, a Delaware corporation (the "Distributor"), and UPSYS, a French corporation ("Upsys"). RECITALS A. The Company was formed by Upsys and the Distributor, pursuant to an operating agreement signed on February 12, 1997, (the "Operating Agreement"), to engage in the assembly, testing, repair and distribution of all versions of the Cobra Probe (the "Products"). B. Upsys is engaged in, among other things, the design, engineering and manufacture of the Products involving certain Upsys technology described in the Operating Agreement (the "Upsys Technology"). C. Until the date of this Distribution Agreement, Upsys and Distributor were parties to a distribution agreement dated June 12, 1995 concerning the Products in the Territory which the present agreement replaces. D. The Products consist of three main component parts ("Product Components"): (i) the probes formed in an arc, (ii) space transformers and (iii) printed circuit boards, used in probing semiconductor wafers. E. Concurrently with the execution of this Distribution Agreement, the Company has entered into a Supply Agreement with Upsys (the "Supply Agreement"). Pursuant to this Agreement and the Supply Agreement: (i) Upsys has granted the Company the exclusive right to assemble and repair the Products in the Territory, (ii) Upsys has granted the Company the right to sell the Products exclusively to Upsys, (iii) for its needs in the Territory, Upsys has agreed to purchase Products exclusively from the Company, and (iv) Upsys has agreed to purchase from the Company all Products ordered by Distributor pursuant to this Agreement and assembled or purchased by the Company. F. Upsys desires to engage Distributor as the exclusive distributor of the Products to customers throughout the Territory (as hereinafter defined) and Distributor desires to accept such engagement on the terms and conditions set forth in this Distribution Agreement. AGREEMENT NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows: 1. Appointment of Distributor. Subject to and in accordance with the terms and conditions of this Distribution Agreement, Upsys appoints Distributor as the sole exclusive distributor of the Products for the Company in the Territory during the term of this Distribution Agreement, and Distributor accepts such appointment and agrees to act as the exclusive distributor of the Products in the Territory. 2. Territory. The "American Territory" is defined for purposes of this Distribution Agreement as the United States of America (including territories thereof), and the "Asian Territory" as South Korea, Japan, Singapore, Malaysia and Taiwan. The American Territory and the Asian Territory are collectively referred to as the "Territory". Upsys and the Company will forward, and will cause all of their respective employees, agents and representatives to forward, to the Distributor all leads and inquiries with respect to the distribution of the Products received from entities located in the Territory. 3. Exclusive Nature of Distributorship. The distributorship granted hereunder shall be exclusive in the American Territory during the term of this Distribution Agreement, and in the Asian Territory from the date of this Distribution Agreement through March 31, 1998. The existence of and the nature of the distributorship in the Asian Territory beginning April 1, 1998 and thereafter shall depend upon the decision of Upsys under the terms of Section 1(b) of the Supply Agreement. Upsys will promptly notify the Company and the Distributor of its decision concerning the Asian Territory. Upon notification thereof, the Distributor's right to distribute in the Asian Territory shall be modified. Should Upsys and Distributor agree during the term of this Agreement that a separate structure is necessary in the Asian Territory, they shall enter into discussions with a local partner and, if necessary, the terms of this Agreement shall be modified accordingly. For the purposes of this Agreement, "Exclusive" shall mean that Upsys will not knowingly permit the establishment of a distributor other than Distributor in the American and Asian Territories, as defined above. In conformity with U.S. and other applicable national or international anti-trust laws, Upsys does not guarantee that there will be no competition with the Distributor from third parties. 4. Ordering Procedures; Annual Service Fee. All orders by Distributor for the Products pursuant to this Distribution Agreement shall, automatically and without further action on the part of Upsys, simultaneously constitute (i) an order by Upsys to the Company for such Products, and (ii) an order by Distributor to Upsys for such Products, in each case subject to the terms and conditions set forth in this Agreement and in Exhibit A. Distributor will communicate all of its orders for Products to the Company. Upon receipt by the Company of an order from Distributor in accordance with this Distribution Agreement (1) the 2 Company will forward a copy of the order to Upsys, (2) Upsys will be deemed to have ordered from the Company the same Products described in the order subject to the terms of this Distribution Agreement, (3) the Company will satisfy such order by transfer of title as provided below, and (4) on behalf of Upsys, the Company will deliver the Products described in the order to Distributor. The Company will (A) receive payment of the Distributor Purchase Price (as defined below) from Distributor on behalf of Upsys for the sale of such Products by Upsys to Distributor, (B) deduct from such payments and retain for itself the Upsys Purchase Price (as defined below) for the sale of such Products by the Company to Upsys, and (C) pay to Upsys on or prior to the fifteenth day following the end of each of the Company's fiscal years the accumulated balance of the Distributor Purchase Prices (i.e., the accumulated sum of the difference between the Distributor Purchase Prices and the Upsys Purchase Prices) payable by Distributor to Upsys for Products sold to Distributor by Upsys during such fiscal year. On or prior to the fifteenth day following the end of each of the Company's fiscal years, Upsys shall pay to the Company as consideration for its order and delivery services hereunder a fee equal to $10,000 for the first year and, for subsequent years, an amount to be agreed between Upsys and the Company in consideration of the volume of Products sold by Upsys to Distributor during such fiscal year. 5. Purchase Price; Payment Terms. The purchase price that Distributor will pay to Upsys (the "Distributor Purchase Price") for each unit of any of the Products shall be a per unit purchase price for that Product based on Exhibit B attached hereto, as amended or superseded from time to time as provided herein, and other relevant factors determined by Upsys. The purchase price that Upsys will pay to the Company (the "Upsys Purchase Price") for each unit of any of the Products will be equal to 99.9% of the Distributor Purchase Price actually received by Upsys. The Company may increase or decrease the respective per unit purchase prices payable by Distributor (and therefore by Upsys) for any or all the Products by written notice to Distributor. The parties agree that the prices set forth in Exhibit B will be reviewed annually on the basis of currency fluctuations, inflation and change in any of the applicable price indexes for raw materials used in the Product Components. The Company shall notify the Distributor of the price revisions forty-five days (45) prior to the implementation of such revisions. Any change in the purchase price shall only apply to orders received from Distributor following lapse of such 45-day notification period. The price for any Products ordered by Distributor shall be the price on the date the Company receives the order for that Product. Except as otherwise expressly agreed in writing by the parties hereto, all payments for the Products (whether by Distributor or Upsys) shall be made in United States dollars in an amount adequate to cover the full purchase price plus all other charges, if any, incurred by the Company for the account of Distributor (in the case of payments by Distributor) or Upsys (in the case of payments by Upsys), and such payment shall be due and payable in full within thirty (30) days after notice to Distributor of the availability of the Products at the Company's assembly facilities. All such other charges shall be retained by the Company. Any late payments shall be subject to interest payments, per day of late payment, at a rate of twelve percent (12%) per annum. All such late payments shall be retained by the Company. 3 6. Pricing and Responsibility for Costs. All prices for the Products to be sold hereunder are and shall be prices EX-WORKS, as defined in the 1990 Incoterms (except that delivery will occur when the Distributor's carrier takes possession of the goods), from the Company's assembly facility. All Products shall be packaged by the Company as necessary for protection against handling. All costs of preservation, waterproofing or other special packaging shall be paid by the Distributor to the Company, and the Company shall be entitled to retain all such amounts. The Distributor shall contract directly with the carrier to pay all shipping costs. 7. Title and Risk of Loss. Upon payment by Distributor, title to the Products shall pass first to Upsys and then immediately to Distributor. Risk of loss to the Products shall pass directly from Company to Distributor upon delivery to Distributor's carrier at the Company's assembly facility. If the Company delays in so delivering the Products to Distributor's carrier due to any action or request of Distributor, Distributor shall pay to the Company (and the Company shall retain) all reasonable storage and insurance charges incurred by the Company. Distributor agrees to indemnify and hold the Company harmless for, from and against any and all loss of or damage to the Products sustained while risk of loss remains upon Distributor. The Company agrees to indemnify and hold Distributor and Upsys harmless for, from and against any and all loss of or damage to the Products sustained while risk of loss remains upon the Company. 8. Warranty. (a) The Company warrants to Distributor that all Products will be free of defects in design, manufacturing and raw materials for a period of three (3) months from the date of delivery of such Products to Distributor by the Company. Upsys makes no warranty to Distributor. Distributor will make any warranty claims only against the Company and not against Upsys. (b) All claims under the warranty rights in this Section 8 must be received by the Company before the expiration of the three (3) month warranty period, accompanied by written notice (each a "Warranty Notice") giving a reasonably detailed description of the defect in goods. Within fifteen (15) days of receiving a Warranty Notice, the Company will, at its option, (i) cause the defective goods to be repaired or replaced (with shipping and insurance for the account and risk of the Company), or issue a credit or refund for the defective goods or (ii) request a return of the goods in question, in which case the Distributor will return the goods in question within five (5) days of the request of the Company (with shipping and insurance for the account and risk of the Company). The Company will inspect the returned goods and if the goods are nonconforming, the Company will issue a credit or refund for the defective goods. If the Company reasonably believes the goods are conforming, the Company will communicate its findings to the Distributor and the Company and the Distributor 4 will take appropriate actions to resolve such dispute (including good faith discussions between the parties). (c) The Company shall have no liability whatsoever under this limited product warranty or otherwise if the defect or failure to conform to specifications is due to transportation conditions, improper storage, handling or conditions of use of the Products by Distributor or by any third party. (d) This limited warranty is extended by the Company solely to Distributor and applies only to the Products which were manufactured and delivered by the Company. The Company hereby disclaims and excludes all other warranties, express or implied, or any liability whatsoever with respect to assembled equipment integrating the Products. (e) Any warranty replacement of a part cannot have the effect of extending the initial warranty period. (f) The Company declines any liability for any Product or Product Component not delivered by or on behalf of itself and, in particular, for other products or components used by the Distributor and integrated into an assembly. The Company cannot be liable if the failure of one of its Products is caused by other neighboring components or by components to which they are linked by the Distributor or a third party. (g) Under no circumstances shall the Company, Upsys, or Distributor be liable to the other for any special, incidental, consequential, indirect or exemplary losses or damages pertaining in any way to the products or product components under this Distribution Agreement. 9. Duties of Distributor. (a) Purchasing Obligation. Distributor is obliged, to the extent allowed under the local or international antitrust rules and regulations, to exclusively purchase the Products and any Product Components from Upsys. Distributor shall neither purchase from or distribute for any Person other than Upsys any products using the Upsys Technology without the express written approval of Upsys. Sales Efforts. The Distributor shall vigorously and diligently promote the sale of the Products. To that end, the Distributor shall: 5 (i) Maintain in the Territory, directly or through other distributors, as specifically approved by Upsys, an appropriate sales organization in order to adequately solicit the clientele. (ii) Convey to the Company upon its request all information concerning the Distributor's sales policy and participate with the Company in market planning, analysis, research and sales forecasting. (c) Reporting. Within thirty (30) days following the end of each calendar quarter, the Distributor shall provide the Company with sales performance data for the previous quarter, and projections for the following quarter, such projections to include the reasonably expected volume of future orders of Products. None of such projections shall be deemed purchase orders or commitments, nor shall the Distributor have any liability for failure to meet any such projections. (d) Intellectual Property Rights. (i) The Distributor agrees that, except as is specifically provided herein, it will not, directly or indirectly, at any time during the term of this Distribution Agreement or thereafter: (a) represent that it has any ownership interest in or rights to the intellectual property rights owned by Upsys (i.e., trademarks, trade names, license and other intellectual property used in conjunction with the Products and Product Components in the Territory), ("Intellectual Property Rights") or (b) register or attempt to register or use in any manner whatsoever such Intellectual Property Rights, without such party's specific prior written consent. (ii) If the Distributor or any of its directors, officers, employees or Affiliates registers any Intellectual Property belonging to Upsys, the Distributor hereby agrees to cause the assignment of such to Upsys immediately upon request, and without charge. (iii) Should the Distributor become aware of a potential third party infringement of any of the Intellectual Property Rights of Upsys, it shall immediately inform Upsys who shall, at its sole discretion, determine whether or not to proceed against such potential infringement. (iv) The Distributor's use of Upsys Intellectual Property Rights shall be expressly limited to the distribution and sale of the Products and Product Components under the terms provided in this Distribution Agreement. (v) Upon the termination of this Distribution Agreement for any reason, the Distributor shall immediately return to Upsys, all originals and any copies of 6 Intellectual Property Rights belonging to Upsys in its possession or control and immediately stop using such Intellectual Property. 10. Nondisclosure and Limited Use of Confidential or Proprietary Information. (a) The Parties agree that, except to the extent necessary to comply with applicable law and regulatory and supervisory requirements, each Party shall keep, and cause their respective Affiliates to keep, the terms and conditions of this Agreement and the transactions contemplated by this Agreement confidential. (b) During the term of this Agreement, the Parties will receive certain trade secrets and confidential information relating to each Party's business and operations ("Confidential Information"). The Parties shall hold in strictest confidence and not disclose to any third party any such Confidential Information designated in writing or which by its nature should reasonably be deemed confidential. Further, neither of the Parties shall use or permit the use of any such Confidential Information in a manner detrimental to the other or in any manner other than in furtherance of the purposes hereof. (c) Notwithstanding any provision in this Agreement or a related agreement to the contrary, the parties agree that for as long as this Agreement is in force, the Distributor shall use the same care and discretion (but not less than reasonable care and discretion) to avoid disclosure, publication or dissemination of any Confidential Information within the scope of the Upsys Technology as the Distributor uses with its own similar information that the Distributor does not wish to disclose, publish or disseminate. (d) To the extent that they do not use the Confidential Information of the parties hereto, information, be it technical or not, concerning the activity of the Company, created by an employee of the Company or by a seconded employee of one of the parties hereto, along or in collaboration, are considered as information belonging to the Company, and it alone. (e) Each party shall take all necessary measures concerning its seconded employees so that they abstain from disclosing the Confidential Information of the Company. (f) No Confidential Information can be exchanged between the Company and a party through a seconded employee except with the prior agreement of the party to whom the Confidential Information belongs. The Confidential Information will be considered by the Party which receives it as confidential and treated by such party in the manner described above. 7 (g) Notwithstanding the foregoing, the Parties will be permitted to make use of or disclose Confidential Information: (i) which is in or comes into the public domain other than through the default of a Party; (ii) which was already in the possession of a Party prior to disclosure by the disclosing Party hereto as evidenced by documentation in such Party's possession; (iii) which is lawfully acquired from a third party who did not obtain it directly or indirectly from the disclosing Party; (iv) which is required to be disclosed by or to a court or governmental agency, but only to the extent and for the purpose so required (it being understood that the Party being required to disclose such Confidential Information will endeavor to (but shall not be liable for failure to) notify the other Party of such requirement so that the other Party may take steps to legally protect its interests); or (v) with a Party's financial advisors, attorneys, accountants or any other third party engaged by it to the extent strictly necessary to effect the purposes and intent of this Agreement, it being understood that, in the case of any such disclosure, the Party shall previously have obtained from such third parties satisfactory written undertakings of confidentiality and either obtained for itself from such third parties or ensured that such third parties have given to the provider of such Confidential Information written undertakings not to disclose or use such Confidential Information for any purpose other than the fulfillment of this Agreement, and shall cause such third parties to respect such undertakings. (h) The Parties acknowledge and agree that the unauthorized use or disclosure of such Confidential Information would constitute, inter alia, an act of unfair competition and cause irreparable harm to the non disclosing Party, its competitive position and goodwill, and each Party acknowledges responsibility for damages caused to the others by such unauthorized use or disclosure. (I) This obligation of confidentiality shall remain in effect during the term of this Agreement and for five (5) years thereafter. 11. Advertising and Promotion. During the term of this Agreement, Distributor shall have the right to advertise and to promote the Products and Product Components by telephone, mail, newspaper, magazine, radio, television and any other lawful means, as specifically agreed 8 to by the Company upon proposition by the Distributor. All use of Upsys' trademarks for the Products and Product Components, are subject to Distributor submitting all proposed uses of such trademarks to Upsys for approval prior to such use. Upsys will not unreasonably withhold its agreement to any such proposal referred to in this Section 11. Upsys will respond promptly to any such proposal, and any such proposal shall be deemed approved if not reasonably disapproved by Upsys within thirty (30) days of its receipt of the proposal. The use of any such trademarks, symbols, tradenames, corporate names or other Intellectual Property Rights shall not give Distributor any proprietary rights therein. 12. Term of Agreement. Subject to Sections 3 and 13 hereof, the term of this Agreement shall be for a period of eighteen (18) months from date of this Agreement and shall be extended to the extent the Operating Agreement is still in force between the Upsys and Distributor for additional consecutive one-year periods as specifically agreed to by the parties, except as otherwise agreed. 13. Termination. (a) Generally. Except as otherwise provided for in this Distribution Agreement, if any party defaults in the performance of any of its obligations under this Distribution Agreement or if an event of default as described below occurs, the nondefaulting party may defer deliveries, payments, orders for Products or receipt of deliveries without incurring additional costs until the default is cured. If the default is not cured within thirty (30) business days of the giving of written notice thereof to the defaulting party, at the option of the non-defaulting party exercised in writing to the defaulting party, this Distribution Agreement shall terminate at the end of the thirty (30) business day period. (b) Dissolution of the Company. Upon dissolution of the Company for any reason whatsoever or should Upsys or Distributor no longer be a Member of the Company, this Agreement shall automatically terminate. (c) Termination of the Supply Agreement. Should the Supply Agreement between Upsys and the Company terminate for any reason, this Distribution Agreement shall automatically terminate. (d) Right to Sell. After the termination or the expiration of this Agreement, the Distributor may return to the Company the inventory of unused and non-obsolete Products and standard Product Components purchased from Upsys by the Distributor, limited to forty-five (45) days of inventory of such Products measured by the average inventory for the prior six months of operations for 85% of the purchase price originally paid by the Distributor for such items. No remaining inventory may be sold with Upsys' trademarks or tradenames after termination of this Distribution Agreement without the approval of Upsys. 9 (e) Survival of Certain Obligations. Notwithstanding any termination or expiration of this Agreement, the Distributor shall fill all orders for Products ordered prior to termination and shipped or delivered before or after termination, and the Company shall not be relieved of its warranty and indemnification obligations concerning such Products under the terms set forth herein. Distributor shall fulfill the customer orders which have been received prior to termination in the sixty (60) days following termination. (f) Events of Default. The occurrence of any of the following events shall be considered an event of default hereunder: (i) with respect to any Party, the filing of any voluntary or involuntary petition for bankruptcy or upon any agreement (oral or written) in respect of any arrangement of creditors; (ii) with respect to the Company, the Company's decision to discontinue the manufacture, sale or distribution of the Products or Product Components necessary for the assembly of the Products, without proposing an acceptable alternative. 14. Force Majeure. (a) None of the Distributor, Upsys, or the Company shall be responsible for any breach or non-observance of any term or condition of this Distribution Agreement (except payment obligations) in case of Force Majeure. (b) "Force Majeure" includes, but is not limited to: (i) compliance with any law, ruling, order, regulation, requirement or instruction of any government or any department or agency thereof; (ii) acts of God; and (iii) fires, strikes, labor slowdowns, embargoes, war or riot. (c) Any delay resulting from any of such causes shall extend performance accordingly or excuse performance in whole or in part, as may be necessary. Any party shall have the right to terminate this Agreement upon thirty (30) days prior notice if any party is unable to fulfill its obligation under this Distribution Agreement due to Force Majeure and if such inability continues for a period of one hundred and twenty (120) days. (d) The party claiming Force Majeure shall notify the other parties by registered mail within fifteen (15) days of the occurrence of Force Majeure and shall send within forty-five (45) days thereafter by registered mail, proof of the force majeure event. 10 15. Independent Contractor. Distributor, Upsys, and the Company each acknowledges and agrees that Distributor is an independent contractor and that under this Distribution Agreement none of Distributor, Upsys, or the Company shall be considered for any purpose to be the agent, franchisor, or franchisee of the others. None of the Company, Upsys, or Distributor will have any obligation or responsibility to act on behalf of or in the name of the others, or the power or authority to bind the others in any manner whatsoever. 16. Indemnification. The Distributor agrees to indemnify, defend and hold the Company and Upsys, and the Company agrees to indemnify, defend and hold the Distributor (the indemnifying party being referred to herein as the "Indemnifying Party"), harmless for, from and against any and all damages, losses, liabilities (absolute and contingent), fines, penalties, costs and expenses (including, without limitation, reasonable attorney's fees and costs and expenses), incurred ("Damages") with respect to or arising out of any demand, claim, proceeding, action and/or cause of action that any indemnified party (an "Indemnitee") may suffer or incur by reason of or arising out of (i) if the Indemnifying Party is the Distributor, any claim by any third party in respect to infringement of the intellectual property rights of any third party arising solely out of the distribution and sale of any of the Products by Distributor contrary to the terms of this Distribution Agreement, (ii) if the Indemnifying Party is the Company, any claim by any third party in respect to the infringement of intellectual property rights of any third party arising solely out of the assembly, repair, sale or distribution by the Company of any of the Products contrary to the terms of this Distribution Agreement, or (iii) if the Indemnifying Party is the Distributor or the Company, the nonperformance by such Indemnifying Party of any obligation or agreement of such Indemnifying Party under this Distribution Agreement, or any breach of a representation or warranty made by such Indemnifying Party in this Distribution Agreement. The indemnification obligation set forth above is limited by the following: (i) The Indemnitee shall notify the Indemnifying Party within thirty (30) days of: (i) its receiving actual notice of a demand, claim, proceeding, action or cause of action from a third party, or (ii) in any other case, its becoming aware of (or, in the case of any Indemnitee that is not a natural person, its executive officers or supervisory personnel becoming aware of) a potential demand, claim, proceeding, action or cause of action (provided that the failure to notify the Indemnifying Party shall in no case prejudice the rights of an Indemnitee under this Agreement unless the Indemnifying Party shall be prejudiced by such failure and then only to the extent the Indemnifying Party has been prejudiced by such failure). The Indemnifying Party shall solely determine whether or not to settle a given claim (provided that the Indemnifying Party shall obtain the consent of the Distributor or Upsys to settlement of any nonmonetary claim against the Distributor or Upsys or their respective officers, directors, employees, agents or representatives). 11 (ii) The above indemnification does not apply if the Products are used or combined with another item by the Indemnitee and such use or combination is not permitted by this Agreement and is what gives right to the infringement. (iii) The above indemnification does not apply to any Damages that arise subsequent to a demand by the Indemnifying Party for the Indemnitee to cease delivery of a particular Product or to begin delivery of a non-infringing substitute. (iv) An Indemnifying Party's indemnification obligation shall terminate with respect to any demand, claim, proceeding, action or cause of action for which an Indemnitee has not given notice hereunder within (A) in the cause of clause (i) or (ii) of the first paragraph of this Section 16, the expiration of all applicable legal statutes of limitations and similar laws, or (B) in the case of clause (iii) of the first paragraph of this Section 16, two (2) years following termination of this Agreement for any reason. 17. No Restriction on Competition. The parties hereto acknowledge and agree that no provision of this Distribution Agreement shall create, and no provision contained in or relationship created by this Distribution Agreement shall be deemed to create, any obligation on the parties hereto to refrain from competing with one another or from developing products or services in competition with the products or services of the other except as concerns products directly in competition with the Products that use the Upsys Technology. This competition restriction shall apply during the term of this Distribution Agreement. 18. General Provisions. (a) Upsys' Obligations. Upsys' obligations hereunder shall be limited to those obligations that are specifically mentioned herein. In no case shall Upsys be considered the guarantor of any of the obligations of the Company. (b) Authority to Enter into Agreement. Each of the parties hereby covenants and represents in respect of itself that it is authorized to, and that all necessary corporate or company action has been taken on its behalf to, enter into this Distribution Agreement and that in so doing it is not in violation of the terms and conditions of any contract or other agreement to which it may be a party. (c) Further Assurances. Each of the parties hereto shall execute and deliver all such other instruments and take all such actions as either party may reasonably request from time to time in order to effectuate the purposes of this Distribution Agreement and the transactions provided for herein. 12 (d) Notices. All notices, requests, demands and other communications required or permitted under this Distribution Agreement shall be in writing and shall be deemed to have been duly given, made and received when delivered against receipt, twelve (12) hours after being sent by telecopy, or three (3) days after being sent by registered or certified mail, postage prepaid, return receipt requested, addressed to the recipient's address as set forth below: If to Distributor: ------------------ Cerprobe Corporation 600 South Rockford Drive Tempe, Arizona 85281 Fax Number: 1-602-967-4636 Attn: C. Zane Close If to the Company: ------------------ Upsys-Cerprobe, L.L.C. 600 South Rockford Drive Tempe, Arizona 85281 Fax Number: 1-602-967-4636 Attn: C. Zane Close If to Upsys: ------------ Upsys 283, boulevard John Kennedy 91100 Corbeil-Essonnes France Fax Number: 011-33-16-089-5202 Attn: Jean-Claude Gery Any party may alter the address to which communications are to be sent by giving notice of the change of address in conformity with the provisions of this paragraph for the giving of notice. (e) Binding Nature of Agreement; Assignment. This Distribution Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that neither party hereto may assign or transfer its rights or obligations under this Distribution Agreement without prior written consent of the other, and any such assignment or transfer without such approval shall constitute a breach hereof and shall be null and void and of no force or effect, and shall not convey any rights to or interest in this Distribution Agreement. This 13 Distribution Agreement may only be amended or modified by written agreement signed by both of the parties hereto. (f) Entire Agreement. This Distribution Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes and is in lieu of all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof, including, without limitation, the terms of the distribution agreement dated June 12, 1995 between Upsys and the Distributor. The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof. (g) Governing Law, Jurisdiction and Venue. This Agreement and all questions relating to its validity, interpretation, performance and enforcement, will be governed by and construed, interpreted, and enforced in accordance with the laws of the State of New York, notwithstanding any conflict of laws rules to the contrary and in accordance with the United States Arbitration Act, 9 U.S.C. Sections 1 et seq. Subject to the mandatory arbitration provision in Section 18(h) below, the exclusive jurisdiction and venue of any action relating to this Agreement will be the United States District Court for the Southern District of New York and each of the parties to this Agreement submits to the exclusive jurisdiction and venue of such courts for the purpose of any such action. (h) Arbitration. If any dispute arises under this Agreement, upon written notice of either party, the parties will immediately seek to resolve the dispute by good faith negotiations. If the parties are unable to resolve the dispute in writing within ten (10) business days from the commencement of such good faith negotiations, then without the necessity of further notice or agreement between the parties, such dispute will be finally settled in accordance with the Commercial Arbitration Rules of the American Arbitration Association and its Supplementary Procedures for International Commercial Arbitration, as in effect as of the date of this Agreement. The language for such arbitration will be English and the site will be New York, New York. The number of arbitrators will be three (3) (the "Arbitrators"). If the parties agree on the persons to be the Arbitrators at the time the dispute is submitted to arbitration, then those persons shall be the Arbitrators. Otherwise, each party will select one (1) of the Arbitrators, and those Arbitrators will select the third arbitrator. Failing an agreement on the third Arbitrator, the president of the American Arbitration Association will be the sole appointing authority for the third Arbitrator. The decision of the Arbitrators will be final and non-appealable as between the parties to this Agreement. Either party may, at its option, seek injunctive relief or other provisional remedies against the other party from any court of appropriate jurisdiction. Each party to the dispute will bear its respective expenses incurred in 14 respect of the dispute and the costs of the Arbitrators will be borne equally by both parties. (i) Remedies Cumulative. Except as specifically set forth herein to the contrary, the remedies of the parties hereto under this Distribution Agreement are cumulative and will not preclude the recovery, award or grant of any other remedies to which any party may be lawfully entitled. (j) Indulgences Not Waivers. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Distribution Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. (k) Severability. If any provision of this Agreement shall be conclusively determined by a court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement shall not be affected thereby. (l) Numbers of Days. In computing the numbers of days for purposes of this Distribution Agreement, all days shall be counted, including Saturdays, Sundays and holidays in the State of Arizona and in France; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday, then the final day shall be deemed to be the next day that is not a Saturday, Sunday or holiday. (m) Attorneys' Fees. If any action is brought to enforce the provisions of this Distribution Agreement, the prevailing party in the action shall be entitled, in addition to any other relief, to recover reasonable attorneys' fees and other costs and expenses incurred in the action in an amount to be fixed and determined by the arbitrator(s) agreed upon by the parties or by the court. (n) Construction. The parties hereto acknowledge and agree that each party has participated in the drafting of this Distribution Agreement and that this document has been reviewed by the respective legal counsel for the parties hereto and that the rule of construction to the effect that any ambiguities are to be resolved against the drafting party will not be applied to the interpretation of this Distribution Agreement. No inference in favor of, or against, any party shall be drawn from the fact that one party has drafted any portion hereof. 15 (o) Definitions. All capitalized expressions not otherwise defined in this Agreement will have the meanings given such respective expressions in the Operating Agreement. (p) Amendment. This Agreement may only be amended or modified by written agreement signed by all of the parties hereto. IN WITNESS WHEREOF, the parties have caused this Distribution Agreement to be executed and delivered by their proper and duly authorized representatives as of the date first above written. UPSYS-CERPROBE, L.L.C., an Arizona limited liability company Cobra Venture Management, Inc. its Manager By: /s/ Michael K. Bonham ------------------------------------- Name: Michael K. Bonham ----------------------------------- Its: Vice President ------------------------------------ CERPROBE CORPORATION, a Delaware corporation By: /s/ C. Zane Close ------------------------------------- Name: C. Zane Close ----------------------------------- Its: President and Chief Executive Officer ------------------------------------ UPSYS, a French corporation (societe anonyme) By: /s/ Jean Claude Gary ------------------------------------- Name: Jean Claude Gary ----------------------------------- Its: General Manager ------------------------------------ EX-10.EEE 6 SUPPLY AGREEMENT SUPPLY AGREEMENT THIS SUPPLY AGREEMENT (this "Agreement") is made and entered into as of June 2, 1997, by and among UPSYS, a corporation formed under the laws of France ("Manufacturer"), UPSYS-CERPROBE, L.L.C., an Arizona limited liability company ("Purchaser" or "Company"), and CERPROBE CORPORATION, a Delaware Corporation ("Cerprobe"). RECITALS A. Purchaser was formed by Manufacturer and Cerprobe, pursuant to an operating agreement signed on February 12, 1997, (the "Operating Agreement"), to engage exclusively in the assembly, testing, repair and sale to Manufacturer of all versions of the Upsys Cobra Probe (the "Products") based on the Upsys Technology, as defined below, and its component parts ("Product Components") as more specifically described in Exhibit A, which may be updated or amended from time to time. B. Manufacturer is engaged in, among other things, the design, engineering and manufacture of the Products, involving certain UPSYS technology described in the Operating Agreement (the "Upsys Technology"). C. The Products consist of three main Product Components: (i) the probes formed in an arc, (ii) space transformers and (iii) printed circuit boards, used in probing semiconductor wafers. D. Manufacturer and Purchaser desire that Purchaser assemble the Products and act as the exclusive assembly and repair facility for the Products in the Territory (as hereinafter defined), and that Manufacturer supply Purchaser with the Product Components, the first complete Products (i.e., a complete set of cards), training and engineering, all as set forth in this Agreement. E. Manufacturer and Purchaser also desire that Purchaser be granted the right to distribute the Products exclusively to Manufacturer and that Purchaser, concurrently with the execution of this Supply Agreement, enter into a distribution agreement with Cerprobe and Manufacturer, whereby Manufacturer shall grant to Cerprobe the exclusive right to distribute the Products in the Territory (the "Distribution Agreement"). A copy of the Distribution Agreement is attached as Exhibit B. AGREEMENT NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows: 1. Appointment of Purchaser; Assembly, Testing, Maintenance and Repair Facilities and Distribution. (a) Subject to and in accordance with the terms and conditions of this Agreement, Manufacturer hereby appoints Purchaser as its Exclusive (as defined below in this section) authorized assembly and repair facility for the Products in the Territory, as defined below. Purchaser shall establish assembly and repair facilities initially in Cerprobe's facility in Arizona. (b) Subject to and in accordance with the terms and conditions of this Agreement, Manufacturer hereby appoints Purchaser as its Exclusive authorized assembly and repair facility for the Products in the Asian Territory, as defined below, through March 31, 1998. The continuation and the nature of the assembly and repair rights in the Asian Territory beginning April 1, 1998 and thereafter shall be determined by Manufacturer prior to such date taking into consideration the Company's production capacity and Cerprobe's sales performance in the Asian Territory. (c) Subject to and in accordance with the terms and conditions of this Agreement and the Distribution Agreement: (i) Manufacturer grants Purchaser the right to sell the Products exclusively to Manufacturer, (ii) for its needs in the Territory, Manufacturer agrees to purchase Products exclusively from Purchaser, and (iii) Manufacturer agrees to purchase from Purchaser all Products ordered by Cerprobe pursuant to the Distribution Agreement and assembled or purchased by Purchaser. Pursuant to the terms of the Distribution Agreement, the parties agree that Manufacturer will grant to Cerprobe the Exclusive right to distribute Products in the Territory. (d) During the term of this Agreement, Manufacturer shall not directly or indirectly enter into any agreement or arrangement other than this Agreement and the Distribution Agreement for the assembly, repair, or distribution of the Products in the American Territory, nor shall Manufacturer establish its own facilities to provide such services, or itself conduct assembly, repair or distribution activities, within the Territory. Manufacturer shall further refer, and cause all of its employees, agents, and representatives to refer, to Purchaser or Cerprobe all persons and entities within the American Territory that require or request repair or assembly and distribution, respectively, of Products. -2- (e) During the term of this Agreement, depending on Manufacturer's decision under Section 1(b) above, Manufacturer shall not directly or indirectly enter into any agreement or arrangement, other than this Agreement and the Distribution Agreement, for the assembly, repair or distribution of the Products in the Asian Territory or to provide such services for customers within the Asian Territory, nor shall Manufacturer establish its own facilities to provide such services, or itself conduct assembly, repair or distribution activities, within the Asian Territory. Manufacturer shall further refer, and cause all of its employees, agents and representatives to refer, to Purchaser or Cerprobe all persons and entities within the Asian Territory that require or request repair or assembly and distribution, respectively, of Products. (f) For the purposes of this Agreement, "Exclusive" shall mean that Manufacturer will not knowingly permit the establishment of an assembly, testing or repair facility other than Purchaser or a distributor other than Cerprobe in the American and Asian Territories, as defined below. In conformity with U.S. and other applicable national or international anti-trust laws, Manufacturer does not guarantee that there will be no competition with Purchaser from third parties. 2. Territory. The "American Territory" is defined for purposes of this Agreement as the United States of America (including territories thereof), and the "Asian Territory" as South Korea, Japan, Singapore, Malaysia and Taiwan. The American Territory and the Asian Territory are collectively referred to as the "Territory." 3. Supply by Manufacturer. (a) Manufacturer shall exclusively be responsible for the design, engineering and manufacture of the Products and Product Components. For each initial order for a customer, Purchaser shall order and Manufacturer shall provide an initial example of the assembled Product to Purchaser (the "First Set"). Purchaser shall then be responsible for the assembly of the Products in conformity with the First Set. (b) Certain elements of the Products and Product Components (in particular, the custom designed space transformers and the printed circuit boards) may be provided to Manufacturer by Cerprobe or other suppliers, or may be provided to Manufacturer by the customers as agreed to by Manufacturer after consultation with Cerprobe on a case-by-case basis. (c) Subject to Sections 1(b) and 1 (d) above, the provisions of the Distribution Agreement, and applicable antitrust rules and regulations, Manufacturer will not sell or supply the Products or Product Components to any person or entity (other than Purchaser or Cerprobe) located in the Territory or, to the best of its knowledge, to -3- a person or entity (other than Purchaser or Cerprobe) that intends to ship them into the Territory for sale. (d) Manufacturer agrees to provide improvements on the Products and manufacturing process to Purchaser from time to time in function of the evolution of the Upsys Technology. 4. Tooling and Equipment. Manufacturer shall also supply Purchaser with all tooling and equipment agreed to between the parties as reasonably necessary for Purchaser to perform its obligations under this Agreement, including, but not limited to, the tooling and equipment described in Exhibit C (the "Upsys Equipment"). The Upsys Equipment shall be either purchased or leased by Purchaser from Manufacturer at the prices and rates set forth in Exhibit C. The parties agree that such prices and rates will be reviewed annually on the basis of currency fluctuations, inflation, changes in prices and changes in interest and leasing rates. 5. Ordering Procedures, Delivery and Acceptance. (a) Ordering Procedures. All orders for Products and Product Components pursuant to this Agreement shall be subject to the terms and conditions set forth in Exhibit D, notwithstanding any other terms specified in any purchase order. (b) Delivery. Manufacturer will use its best efforts to deliver Products and Product Components to Purchaser's carrier at the Manufacturing Facilities (as defined below) on the dates requested by Purchaser as set forth in any purchase orders. (c) Firm Orders. All purchase orders are firm. Should any purchase orders change after acceptance thereof by Manufacturer, any and all costs related to such change in the purchase order shall be at Purchaser's expense. (d) Acceptance. Once accepted, Products and Product Components may not be returned or exchanged except in such cases and under such terms and conditions as set forth in Article 15 or under the terms and conditions of Section 10.3(b) of the Operating Agreement. 6. Purchase Price. (a) Product Component Pricing. The purchase price for Products and Product Components shall be as set forth in Exhibit A. The parties agree that the prices set forth in Exhibit A will be reviewed annually on the basis of currency fluctuations, increases in inflation and change in any of the applicable price indexes for raw materials used in the Product Components. Manufacturer shall notify Purchaser of the price revisions forty-five days (45) prior to the implementation of such revisions. -4- Any change in the purchase price shall only apply to orders received by Manufacturer following lapse of such 45-day notification period. (b) First Set Price. The price of the First Set of each Product shall be determined by Manufacturer upon request for a quotation by Purchaser. (c) Shipping Costs. The purchase prices established hereunder for Products and Product Components are and shall be prices EX WORKS as defined in the INCOTERMS 1990 (except that delivery will occur when Purchaser's carrier takes possession of the goods) from any of Manufacturer's manufacturing facilities whether in Corbeil, France or otherwise (the "Manufacturing Facilities"). All Products and Product Components shall be packaged by Manufacturer for shipment by a carrier of Purchaser's choice. All Products and Product Components shall be packaged by Manufacturer as necessary for protection against damage during shipping and handling. All costs of preservation, waterproofing or other special packaging shall be paid by Purchaser. All charges incurred subsequent to the delivery of Products and Product Components for shipment, including without limitation, freight, insurance, customs, duties, demurrage charges and turnover, sales, excise and other foreign, federal, state or local taxes, shall be borne by Purchaser or, if paid or incurred by Manufacturer, shall be reimbursed by Purchaser to Manufacturer including a twenty percent (20%) additional fee. Purchaser will contract directly with the carrier to pay all shipping costs. (d) Emergency Deliveries. If Purchaser, from time to time, requires emergency delivery of Products and/or Product Components, all extra costs for air freight for such emergency delivery shall be borne by Purchaser. (e) Payment of IBM Royalties. Manufacturer represents that it is presently a party to an IBM technology license agreement (the "IBM Technology Agreement") and a license agreement related to the French patent number 7,715,179 (the "License") between Manufacturer and International Business Machines Corporation ("IBM") related to the use of the Upsys Technology and patent for the manufacture and sale of the Products, and Manufacturer is required to pay IBM royalties (the "IBM Royalties") as set forth in Exhibit E. The IBM Royalties shall be paid in the following manner: (i) Manufacturer shall be responsible for the payment to IBM of all IBM Royalties relating to the sale of Products, Product Components, and related goods and services pursuant to this Agreement or the Distribution Agreement, and, as among the parties hereto, Manufacturer shall be solely responsible (without right of reimbursement) for IBM Royalties due on the selling price of Products and Product Components sold by Manufacturer to Purchaser pursuant to this Agreement (the "Upsys Selling Price"); -5- (ii) Purchaser will reimburse Manufacturer for the IBM Royalties due on or arising from: (1) the difference between the Upsys Selling Price and the selling price of the assembled Products sold by Purchaser to Manufacturer for distribution under the Distribution Agreement, (2) the difference between the selling price of the assembled Products sold by Purchaser to Manufacturer and the selling price of the Products from Manufacturer to Cerprobe, and (3) associated non-warranty repair services from Purchaser to Cerprobe for distribution under the Distribution Agreement. Purchaser will make such reimbursement of IBM Royalties to Manufacturer within 15 days following invoice therefor by Manufacturer. Such invoices shall be submitted to Purchaser within 15 days following the end of each quarter, and shall be accompanied by supporting documentation. 7. Payment for Product Components. Except as otherwise expressly agreed in writing by the parties, payment for Products and Product Components shall be made in United States dollars, calculated at the French Franc/US Dollar exchange rate, as reflected in the French "Journal Officiel" for the date of acceptance of the purchase order, in an amount adequate to cover the full purchase price plus all other charges, if any, incurred by Manufacturer for the account of Purchaser, and such payment shall be due and payable in full within thirty (30) days after the date the Products and Product Components were put at the disposal of Purchaser's carrier. Any late payments will bear interest at a rate of twelve percent (12%) per annum. 8. Title and Risk of Loss. Title and risk of loss to Products and Product Components shall pass to Purchaser upon delivery to Purchaser's carrier at the Manufacturing Facilities. If Manufacturer delays in so delivering the Products or the Product Components to Purchaser's carrier, due to any action or request of Purchaser, Purchaser shall pay all reasonable storage and insurance charges incurred by Manufacturer. Purchaser agrees to indemnify and hold Manufacturer harmless for, from and against any and all loss of or damage to the Products or the Product Components sustained while risk of loss remains upon Purchaser. Manufacturer agrees to indemnify and hold Purchaser harmless for, from and against any and all loss of or damage to Products or the Product Components sustained while risk of loss remains upon Manufacturer. 9. Representations, Warranties and Covenants by Manufacturer. Manufacturer represents and warrants to Purchaser and Cerprobe as follows: (a) Generally. Manufacturer is a corporation duly organized, validly existing and in good standing under the laws of France, with the full right, power and authority, corporate and otherwise, to design, manufacture and sell the Products and Product Components to Purchaser according to the terms of this Agreement and to carry on its business in all jurisdictions and countries as it is now being conducted and as -6- intended to be conducted in the performance of this Agreement. The execution and delivery of this Agreement, the timely consummation of the transactions contemplated hereby and the complete and timely fulfillment of the terms hereof have been duly and validly authorized by all necessary action on the part of Manufacturer, and this Agreement constitutes the legal, valid and binding obligation of Manufacturer, fully enforceable against Manufacturer in the United States. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will conflict with, violate or result in a breach of or default under (with or without the giving of notice or the passage of time, or both): (i) the incorporation documents or corporate by-laws or regulations of Manufacturer; (ii) any license, instrument, contract or agreement to which Manufacturer is a party or by which Manufacturer is bound; or (iii) any law, order, rule, regulation, writ, injunction or decree that is applicable to Manufacturer. (b) Intellectual Property. Manufacturer holds the rights to use all patents, trade secrets, information, proprietary rights and processes necessary for the manufacture and sale to Purchaser of the Products and Product Components as provided in this Agreement, without, to the best of its knowledge after due inquiry, any conflict with or infringement of the rights of others. Manufacturer has not received any written notice alleging that Manufacturer has violated or, by selling any of the Products or Product Components, would violate any patents, trade secrets or other proprietary or intellectual property rights of any other person or entity. However, Manufacturer is not the registered owner of the "Cobra" trademark or trade name and does not make any representations concerning this trademark or trade name. (c) No Others Authorized in Territory. Manufacturer has not licensed or authorized any other entities doing business in the Territory to assemble, repair or distribute Products, nor shall Manufacturer do so during the term of this Agreement, subject to Article 1 (b) above. 10. Representations and Warranties by Purchaser. (a) Generally. Purchaser represents and warrants to Manufacturer that (i) Purchaser is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Arizona, with the full right, power and authority, corporate and otherwise, to engage in any lawful business in accordance with the Operating Agreement, including the purchase of the Products and the Product Components under the terms of this Agreement, and to carry on its business in all jurisdictions and countries as it is now being conducted and as intended to be conducted in the performance of this Agreement, (ii) the execution and delivery of this Agreement the timely consummation of the transactions contemplated hereby and the complete and timely fulfillment of the terms hereof have been duly and validly authorized by all necessary action on the part of Purchaser and its Members, -7- (iii) this Agreement constitutes the legal, valid and binding obligation of Purchaser, fully enforceable against Purchaser in accordance with its terms, and (iv) neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will conflict with, violate or result in a breach of or default under (with or without the giving of notice or the passage of time, or both): (A) the incorporation documents or Operating Agreement or regulations of Purchaser; (B) any license, instrument, contract or agreement to which Purchaser is a party or by which Purchaser is bound; or (C) any law, order, rule, regulation, writ, injunction or decree that is applicable to Purchaser. 11. Duties of Manufacturer. (a) Indemnification. Manufacturer agrees to indemnify, defend and hold Purchaser, Cerprobe, and its and their officers, directors, employees, agents and representatives (each, an "Indemnitee") harmless for, from and against any and all damages, losses, liabilities (absolute and contingent), fines, penalties, costs and expenses, including, without limitation, reasonable attorney's fees and costs and expenses incurred, ("Damages") with respect to or arising out of any demand, claim, proceeding, action and/or cause of action that any of the Indemnitees may suffer or incur by reason of or arising out of (i) the inaccuracy or untruth of any of the representations or warranties of Manufacturer contained in this Agreement, (ii) any claim by any third party in respect to infringement of the intellectual property rights of any third party arising out of the design, manufacture, distribution or sale of any of the Products or Product Components. (b) Indemnification Limitations. The indemnification obligation set forth above is limited by the following: (i) The Indemnitee shall notify Manufacturer within thirty (30) days of: (i) its receiving actual notice of a demand, claim, proceeding, action or cause of action from a third party, or (ii) in any other case, its becoming aware of (or, in the case of any Indemnitee that is not a natural person, its executive officers or supervisory personnel becoming aware of) a potential demand, claim, proceeding, action or cause of action (provided that the failure to notify Manufacturer shall in no case prejudice the rights of an Indemnitee under this Agreement unless Manufacturer shall be prejudiced by such failure and then only to the extent Manufacturer has been prejudiced by such failure). Manufacturer shall solely determine whether or not to settle a given claim (provided that Manufacturer shall obtain the consent of Cerprobe to settlement of any nonmonetary claim against Cerprobe or its officers, directors, employees, agents or representatives). -8- (ii) Manufacturer shall be solely responsible for the defense of its Intellectual Property Rights, and Purchaser shall provide all reasonably requested support to Manufacturer. (iii) The above indemnification obligation shall only apply to the extent the Product Components were not modified by Purchaser. (iv) The above indemnification does not apply if the Products or Product Components are used or combined with another item by the Indemnitee and such use or combination is not permitted by this Agreement and is what gives rise to the infringement. (v) The above indemnification does not apply to any Damages that arise subsequent to a demand by Manufacturer for the Indemnitee to cease delivery of a particular Product or Product Component, or to begin delivery of a non-infringing substitute. (vi) Manufacturer's indemnification obligation shall terminate with respect to any demand, claim, proceeding, action or cause of action for which an Indemnitee has not given notice hereunder within (A) in the case of clause (i) of Section 11(a), 2 years following the termination of this Agreement for any reason, or (B) in the case of clause (ii) of Section 11(a), the expiration of all applicable legal statutes of limitations and similar laws. (c) Intellectual Property Rights. During the term of this Agreement, Manufacturer shall maintain its registered trademarks, as listed in Exhibit F, and shall not act in any way as to invalidate or render unenforceable any of its trademarks, trade names, license and other intellectual property used in conjunction with the Products and Product Components in the Territory ("Intellectual Property Rights") and shall use its commercially reasonable efforts to enforce infringement by third parties in the American and Asian Territories, under the terms provided in Article 12(d)(3) hereof. (d) Training; Instructions; Demonstrations. Following the date hereof, Manufacturer shall make readily available detailed assembly and repair instructions and demonstrations of the Products and Product Components to Purchaser's technical assembly and repair staff as agreed to between Purchaser and Manufacturer. The initial training to be provided by Manufacturer to Purchaser shall be at the cost set forth herein on Exhibit G. Such training and demonstrations shall be provided at Manufacturer's facilities in Corbeil, France. Purchaser shall be responsible for all its own costs and expenses incurred by their staff in traveling to and from training sites. Subsequent training shall be provided with the frequency agreed to between the parties. The fees for such subsequent training shall depend upon the daily rate at such time for the appropriate technician. An indication of the 1997 prices is -9- provided in Exhibit G. Such prices are subject to change. Manufacturer shall notify Purchaser of such modifications. All costs and expenses incurred by Manufacturer's staff for training, including travel, shall be paid for by Purchaser. (e) Technical Assistance. Upon the request of Purchaser, Manufacturer will provide Purchaser with reasonably requested prompt and timely technical assistance with respect to the assembly and repair of the Products and the use and assembly of Product Components under the terms agreed to by the parties. An indication of the 1997 prices is provided in Exhibit H. Such prices are subject to change. Manufacturer shall notify Purchaser of such modifications. 12. Duties of Purchaser. (a) Purchasing Obligation. Purchaser is obliged, to the extent allowed under the local or international antitrust rules and regulations, to purchase Products and Product Components as well as the engineering, design and related tooling for the Products exclusively from Manufacturer. Purchaser shall not distribute any products, other than the Products, without the express written approval of Manufacturer. (b) Reporting. Within thirty (30) days following the end of each calendar quarter, Purchaser shall provide Manufacturer with assembly and repair performance data for the previous quarter, and projections for the following quarter, such projections to include the reasonably expected volume of future orders of Product Components. None of such projections shall be deemed purchase orders or commitments, nor shall the Company have any liability for failure to meet any such projections. (c) Intellectual Property Rights. (i) Purchaser agrees that, except as is specifically provided herein, it will not, directly or indirectly, at any time during the term of this Agreement or thereafter: (a) represent that it has any ownership interest in or rights to the Intellectual Property Rights owned by Manufacturer or (b) register or attempt to register or use in any manner whatsoever such Intellectual Property Rights, without Manufacturer's specific prior written consent. (ii) If Purchaser or any of its directors, officers, employees or Affiliates registers any Intellectual Property belonging to Manufacturer, Purchaser will cause the assignment of such to Manufacturer immediately upon request, and without charge. (iii) Should Purchaser become aware of a potential third party infringement of any of the Intellectual Property Rights of Manufacturer, it shall immediately inform Manufacturer who shall, at its sole discretion, determine whether or -10- not to proceed against such potential infringement after consultation with the Company. (iv) Purchaser's use of Manufacturer's Intellectual Property Rights shall be expressly limited to the assembly, testing, maintenance, repair, distribution and sale of the Products and Product Components under the terms provided in this Agreement. (v) Upon the termination of this Agreement for any reason, Purchaser shall immediately return to Manufacturer, all originals and any copies of Intellectual Property Rights belonging to Manufacturer in its possession or control and immediately stop using such Intellectual Property and the Upsys Technology. (d) Marking of Products. Purchaser agrees that all Products may be exclusively marked by Manufacturer "Upsys" or such other marking that Manufacturer shall request. Purchaser will not take action to mark any Products with any trade name, trademark or similar marking without the prior consent of Manufacturer. (e) Indemnification. Purchaser agrees to indemnify, defend and hold Manufacturer, and its officers, directors, employees, agents and representatives (each an "Indemnitee") harmless for, from and against any and all damages, losses, liabilities (absolute and contingent), fines, penalties, costs and expenses, including, without limitation, reasonable attorney's fees and costs and expenses incurred, with respect to or arising out of any demand, claim, proceeding, action and/or cause of action that any of the Indemnities may suffer or incur by reason of or arising out of (i) the inaccuracy or untruth of any of the representations or warranties of Purchaser contained in this Agreement, (ii) any claim by any third party in respect to infringement of the intellectual property rights of any third party arising solely out of the assembly, distribution, sale or repair by Purchaser of any of the Products or Product Components in breach of this Agreement. (f) Indemnification Limitations. The indemnification obligation set forth above is limited by the following: (i) The Indemnitee shall notify Purchaser within thirty (30) days of: (A) its receiving actual notice of a demand, claim, proceeding or action from a third party, or (B) in any other case, its becoming aware of (or, in the case of any Indemnitee that is not a natural person, its executive officers or supervisory personnel becoming aware of) a potential demand, claim, proceeding, action or cause of action (provided that the failure to notify Purchaser shall in no case prejudice the rights of an Indemnitee under this Agreement unless Purchaser shall be prejudiced by such failure and then only to the extent -11- Purchaser has been prejudiced by such failure). Purchaser shall solely determine whether or not to settle a given claim (provided that Purchaser shall obtain the consent of Manufacturer to settlement of any nonmonetary claim against Manufacturer or its officers, directors, employees, agents or representatives). (ii) Purchaser's indemnification obligation shall terminate with respect to any demand, claim, proceeding, action or cause of action for which an Indemnitee has not given notice hereunder within (A) in the case of clause (i) of Section 12(e), 2 years following the termination of this Agreement for any reason, or (B) in the case of clause (ii) of Section 12(e), the expiration of all applicable legal statutes of limitations and similar laws. 13. Nondisclosure and Limited Use of Confidential and Proprietary Information. (a) The parties agree that, except to the extent necessary to comply with applicable law and regulatory and supervisory requirements, each party shall keep, and cause their respective Affiliates to keep, the terms and conditions of this Agreement and the transactions contemplated by this Agreement confidential. (b) During the term of this Agreement, the parties will receive certain trade secrets and confidential information relating to each party's business and operations ("Confidential Information"). The parties shall hold in strictest confidence and not disclose to any third party any such Confidential Information designated in writing or which by its nature should reasonably be deemed confidential. Further, neither of the parties shall use or permit the use of any such Confidential Information in a manner detrimental to the other or in any manner other than in furtherance of the purposes hereof. (c) Notwithstanding any provision in this Agreement or a related agreement to the contrary, the parties agree that for as long as this Agreement is in force, Purchaser shall use the same care and discretion (but not less than reasonable care and discretion) to avoid disclosure, publication or dissemination of any Confidential Information within the scope of the Upsys Technology as Purchaser uses with its own similar information that Purchaser does not wish to disclose, publish or disseminate. (d) To the extent that they do not use the Confidential Information of the parties hereto, information, be it technical or not, concerning the activity of the Company, created by an employee of the Company or by a seconded employee of one of the parties hereto, along or in collaboration, are considered as information belonging to the Company, and it alone. -12- (e) Each party shall take all necessary measures concerning its seconded employees so that they abstain from disclosing the Confidential Information of the Company. (f) No Confidential Information can be exchanged between the Company and a party through a seconded employee except with the prior agreement of the party to whom the Confidential Information belongs. The Confidential Information will be considered by the party which receives it as confidential and treated by such party in the manner described above. (g) Notwithstanding the foregoing, either party will be permitted to make use of or disclose Confidential Information: (i) which is in or comes into the public domain other than through the default of a party; (ii) which was already in the possession of a party prior to disclosure by the disclosing party hereto as evidenced by documentation in such party's possession; (iii) which is lawfully acquired from a third party who did not obtain it directly or indirectly from the disclosing party; (iv) which is required to be disclosed by or to a court or governmental agency, but only to the extent and for the purpose so required (it being understood that the party being required to disclose such Confidential Information will endeavor to (but shall not be liable for failure to) notify the other party of such requirement so that the other party may take steps to legally protect its interests); and (v) with a party's financial advisors, attorneys, accountants or any other third party engaged by it to the extent strictly necessary to effect the purposes and intent of this Agreement, it being understood that, in the case of any such disclosure, the party shall previously have obtained from such third parties satisfactory written undertakings of confidentiality and either obtained for itself from such third parties or ensured that such third parties have given to the provider of such Confidential Information written undertakings not to disclose or use such Confidential Information for any purpose other than the fulfillment of this Agreement, and shall cause such third parties to respect such undertakings. (h) The parties acknowledge and agree that the unauthorized use or disclosure of such Confidential Information would constitute, inter alia, an act of unfair competition -13- and cause irreparable harm to the non disclosing party, its competitive position and goodwill, and each party acknowledges responsibility for damages caused to the others by such unauthorized use or disclosure. (j) This obligation of confidentiality shall remain in effect during the term of this Agreement and for five (5) years thereafter. 14. Advertising and Promotion. Purchaser shall have the right to advertise and to promote the Products and Product Components by telephone, mail, newspaper, magazine, radio, television and any other lawful means, as specifically agreed to by Manufacturer upon proposition by Purchaser. All use of Manufacturer's trade names and trademarks for the Products and Product Components, are subject to Purchaser submitting all proposed uses of such trademarks to Manufacturer for approval prior to such use. Manufacturer agrees that it will not unreasonably withhold its agreement to any such proposal referred to in this Section 14. Manufacturer further agrees to respond promptly to any such proposal, and that any such proposal shall be deemed approved if not reasonably disapproved by Manufacturer within thirty (30) days of its receipt of the proposal. The use of any such trademarks, symbols, trade names, corporate names or other Intellectual Property Rights shall not give Purchaser any proprietary rights therein. 15. Inspection and Warranty. 15.1 Manufacturer warrants that all Product Components and Products will be free of defects in design, manufacturing and raw materials for a period of three (3) months from the date of receipt of such Product Components and Products by Purchaser at its facilities. 15.2 Purchaser will inspect the Product Components or Products at Purchaser's facilities. If Purchaser finds that any such Product Component or First Set does not conform to the relevant accepted purchase order, Purchaser will notify Manufacturer within ten (10) days of its receipt of such goods at its facilities. 15.3 All claims under the inspection and warranty rights in this Article 15 must be received by Manufacturer before the expiration of the ten (10) day inspection period or the three (3) month warranty period, respectively, accompanied by written notice (each a "Warranty Notice") giving a reasonably detailed description of the nonconformity or defect in goods, respectively. Within fifteen (15) days of receiving a Warranty Notice, Manufacturer will, at its option, (i) repair or replace the defective goods (with shipping and insurance for Manufacturer's account and at its risk), or issue a credit or refund for the defective goods or (ii) request a return of the goods in question, in which case Purchaser will return the goods in question within five (5) days of Manufacturer's request (with shipping and insurance for Manufacturer's account and at its risk). Manufacturer will inspect the returned goods and if the -14- goods are nonconforming, Manufacturer will issue a credit or refund for the defective goods. If Manufacturer reasonably believes the goods are conforming, Manufacturer will communicate its findings to Purchaser and Manufacturer and Purchaser will take appropriate actions to resolve such dispute (including good faith discussions between the parties). 15.4 Manufacturer shall have no liability whatsoever under this limited product warranty or otherwise if the defect or failure to conform to specifications is due to transportation conditions, improper storage, handling or conditions of use of the Product Components or Products by Purchaser or by any third party. 15.5 This limited warranty is extended by Manufacturer solely to Purchaser and applies only to the Product Components and Products which were manufactured and delivered by Manufacturer. Manufacturer hereby disclaims and excludes all warranties, express or implied, or any liability whatsoever with respect to assembled Products integrating the Product Components, other than First Sets. 15.6 Any warranty replacement of a part cannot have the effect of extending the initial warranty period. 15.7 Manufacturer declines any liability for any Product or Product Component not delivered by itself and, in particular, for other products or components used by Purchaser and integrated into an assembly. Manufacturer will not be liable if the failure of one of its Product Components is caused by other neighboring components or by components to which it is linked by Purchaser or a third party. 15.8 Under no circumstances shall Manufacturer or Purchaser be liable to the other for any special, incidental, consequential, indirect or exemplary losses or damages pertaining in any way to the products or product components under this Agreement. 16. Term of Agreement. Subject to Sections 1(b) and 17 hereof, the term of this Agreement shall be for a period of eighteen (18) months from the date of signature of this Agreement; and shall be extended to the extent the Operating Agreement is still in force between Manufacturer and Cerprobe for additional consecutive one-year periods as specifically agreed to by the parties, except as otherwise agreed. 17. Termination. (a) Generally. Except as otherwise provided for in this Agreement, if either party defaults in the performance of any of its obligations under this Agreement or if an event of default as described below occurs, the non-defaulting party may defer shipments, payments, orders for Product Components or receipt of deliveries without incurring additional costs until the default is cured. If the default is not cured within -15- thirty (30) business days of the giving of written notice thereof to the defaulting party, at the option of the non-defaulting party exercised in writing to the defaulting party, this Agreement shall terminate at the end of the thirty (30) business day period. (b) Dissolution of Purchaser. Upon dissolution of Purchaser for any reason whatsoever, or should Manufacturer no longer be a Member of the Company, this Agreement shall automatically terminate. (c) Right to Sell. After the termination or the expiration of this Agreement, Purchaser may return to Manufacturer the inventory of unused and non-obsolete standard Product Components purchased from Manufacturer by Purchaser, limited to forty-five (45) days of inventory of such Product Components measured by the average inventory for the prior six months of operations for 85% of the purchase price originally paid by Purchaser for such items. No remaining inventory may be sold with the Upsys trademarks or trade names after termination of this Agreement, without the approval of Manufacturer. (d) Survival of Certain Obligations. Notwithstanding any termination or expiration of this Agreement, Manufacturer shall fill all orders within 60 days of termination. Purchaser shall not be relieved of its obligation to pay for all Product Components ordered prior to termination and shipped or delivered before or after termination, and Manufacturer shall not be relieved of its warranty and indemnification obligations concerning such Product Components under the terms set forth herein. (e) Use of Manufacturer's Intellectual Property. Upon termination or expiration of this Agreement, the Company shall not have the right to continue to use the Upsys Technology in the Territory or elsewhere. (f) Events of Default. The occurrence of any of the following events shall be considered an event of default hereunder: (i) the filing of any voluntary or involuntary petition for bankruptcy or upon any agreement (oral or written) in respect of any arrangement of creditors; (ii) the sale, transfer, conveyance or other disposition of either the capital stock or beneficial interest in Purchaser resulting in a "change of control" of such party, or of substantially all of the assets of such party; or (iii) with respect to Manufacturer, Manufacturer's decision to discontinue the manufacture, sale or distribution of the Products or Product Components necessary for the assembly of the Products, without proposing an acceptable alternative. -16- 18. Force Majeure. (a) Neither Purchaser nor Manufacturer shall be responsible for any breach or non observance of any term or condition of this Agreement (except payment obligations) in case of Force Majeure. (b) Force Majeure includes, but is not limited to: (i) compliance with any law, ruling, order, regulation, requirement or instruction of any government or any department or agency thereof; (ii) acts of God; (iii) fires, strikes, labor slowdowns, embargoes, war or riot. (c) Any delay resulting from any of such causes shall extend performance accordingly or excuse performance in whole or in part, as may be necessary. Either party shall have the right to terminate this Agreement upon thirty (30) days prior notice if either party is unable to fulfill its obligation under this Agreement due to any of the above mentioned causes and if such inability continues for a period of one hundred and twenty (120) days. (d) The party claiming Force Majeure shall notify the other party by registered mail within fifteen (15) days of the occurrence of Force Majeure and shall send within forty-five (45) days thereafter by registered mail, proof of the Force Majeure event. 19. Independent Contractor. Purchaser and Manufacturer acknowledge and agree that Manufacturer is an independent contractor and that under this Agreement neither Purchaser nor Manufacturer shall be considered for any purpose to be the agent, franchisor, or franchisee of the other. Nor shall Manufacturer or Purchaser have any obligation or responsibility to act on behalf of or in the name of the other, or the power or authority to bind the other in any manner whatsoever. Any representation to the contrary by Purchaser or by Manufacturer, or the employees or agents of either, shall be a breach of this Agreement by the other party hereto. 20. General Provisions. (a) Representations and Warranties. Each of the representations and warranties of the parties respectively shall be true and correct as of the date hereof and throughout the term of this Agreement, and, except as expressly limited in this Agreement, shall survive the termination or expiration of this Agreement. -17- (b) Further Assurances. Each of the parties hereto shall execute and deliver all such other instruments and take all such action as either party may reasonably request from time to time in order to effectuate the purposes of this Agreement and the transactions provided for herein. (c) Notices. All notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received when delivered against receipt, twelve (12) hours after being sent by telecopy, or three (3) days after being sent by registered or certified mail, postage prepaid, return receipt requested, addressed to the recipient's address as set forth below: Upsys 283, boulevard John Kennedy 91100 Corbeil Essonnes France Fax Number: (33) (1) 60895202 Attn: Jean-Claude Gery Upsys-Cerprobe, L.L.C. or Cerprobe 600 South Rockford Drive Tempe, Arizona 8528 Fax Number: (602) 967-4636 Attn: C. Zane Close Either party may alter the address to which communications are to be sent by giving notice of the change of address in conformity with the provisions of this paragraph for the giving of notice (d) Binding Nature of Agreement; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that neither party hereto may assign or transfer its rights or obligations under this Agreement without prior written consent of the other, and any such assignment or transfer without such approval shall constitute a breach hereof and shall be null and void and of no force or effect, and shall not convey any rights to or interest in this Agreement. (e) Entire Agreement. This Agreement contains the entire agreement and understanding between the parties hereto with respect to the subject matter hereof, and supersedes and is in lieu of all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter hereof. The express terms hereof control and supersede any course of performance or usage of the trade inconsistent with any of the terms hereof -18- (f) Governing Law, Jurisdiction and Venue. This Agreement and all questions relating to its validity, interpretation, performance and enforcement, will be governed by and construed, interpreted, and enforced in accordance with the laws of the State of New York, notwithstanding any conflict of laws rules to the contrary and in accordance with the United States Arbitration Act, 9 U.S.C. Sections 1 et seq. Subject to the mandatory arbitration provision in Section 20(g) below, the exclusive jurisdiction and venue of any action relating to this Agreement will be the United States District Court for the Southern District of New York and each of the parties to this Agreement submits to the exclusive jurisdiction and venue of such courts for the purpose of any such action. (g) Arbitration. If any dispute arises under this Agreement, upon written notice of either party, the parties will immediately seek to resolve the dispute by good faith negotiations. If the parties are unable to resolve the dispute in writing within ten (10) business days from the commencement of such good faith negotiations, then without the necessity of further notice or agreement between the parties, such dispute will be finally settled in accordance with the Commercial Arbitration Rules of the American Arbitration Association and its Supplementary Procedures for International Commercial Arbitration, as in effect as of the date of this Agreement. The language for such arbitration will be English and the site will be New York, New York. The number of arbitrators will be three (3) (the "Arbitrators"). If the parties agree on the persons to be the Arbitrators at the time the dispute is submitted to arbitration, then those persons shall be the Arbitrators. Otherwise, each party will select one (1) of the Arbitrators, and those Arbitrators will select the third arbitrator. Failing an agreement on the third Arbitrator, the president of the American Arbitration Association will be the sole appointing authority for the third Arbitrator. The decision of the Arbitrators will be final and non-appealable as between the parties to this Agreement. Either party may, at its option, seek injunctive relief or other provisional remedies against the other party from any court of appropriate jurisdiction. Each party to the dispute will bear its respective expenses incurred in respect of the dispute and the costs of the Arbitrators will be borne equally by both parties. (h) Remedies Cumulative. Except as specifically set forth herein to the contrary, the remedies of the parties hereto under this Agreement are cumulative and will not preclude the recovery, award or grant of any other remedies to which any party may be lawfully entitled. (i) Indulgences Not Waivers. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any right, -19- remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver. (j) Severability. If any provision of this Agreement shall be conclusively determined by a court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement shall not be affected thereby. (k) Numbers of Days. In computing the numbers of days for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays in the State of Arizona and France; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday, then the final day shall be deemed to be the next day that is not a Saturday, Sunday or holiday. (l) Attorneys' Fees. If any action is brought to enforce the provisions of this Agreement, the prevailing party in the action shall be entitled, in addition to any other relief, to recover reasonable attorneys' fees and other costs and expenses incurred in the action in an amount to be fixed and determined by the arbitrator(s) agreed upon by the parties or by the court. (m) 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 rule of construction to the effect that any ambiguities are to be resolved against the drafting party will 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. (n) Definitions. All capitalized expressions not otherwise defined in this Agreement will have the meanings given such respective expressions in the Operating Agreement. (o) Amendment. This Agreement may only be amended or modified by written agreement signed by all of the parties hereto. -20- IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their proper and duly authorized representatives as of the date first above written. UPSYS By: /s/ Jean Claude Gary ------------------------------------- Name: Jean Claude Gary ----------------------------------- Its: General Manager ------------------------------------ UPSYS-CERPROBE, L.L.C. Cobra Venture Management, Inc. its Manager By: /s/ Michael K. Bonham ------------------------------------- Name: Michael K. Bonham ----------------------------------- Its: Vice President ------------------------------------ CERPROBE CORPORATION (as concerns specific obligations hereunder) By: /s/ C. Zane Close ------------------------------------- Name: C. Zane Close ----------------------------------- Its:President and Chief Executive Officer ------------------------------------ EX-10.LL 7 1995 STOCK OPTION PLAN APPENDIX A ---------- CERPROBE CORPORATION 1995 STOCK OPTION PLAN (as amended through February 18, 1997) ARTICLE I General 1.1 Purpose of Plan; Term (a) Adoption. On May 9, 1995, the Board of Directors (the "Board") of Cerprobe Corporation, a Delaware corporation (the "Company"), adopted this stock option plan to be known as the 1995 Stock Option Plan (the "Original Plan"). The Original Plan was approved by the stockholders of the Company on June 27, 1995. On February 18, 1997, the Board adopted a newly Amended and Restated 1995 Stock Option Plan (the "Revised Plan") whereby additional shares of Stock were authorized to be issued under the Plan and certain other technical changes were made. The Revised Plan must be approved by the stockholders of the Company within one year of the date of its adoption by the Board. If not approved by the stockholders, the Original Plan shall continue in effect. If the Revised Plan is not timely approved by the stockholders, any Options or Awards issued after the date of the adoption of the Revised Plan shall remain valid and unchanged to the extent that such Options or Awards contain terms such that they could have been issued under the Original Plan. This Amended and Restated Stock Option Plan shall be known as the Cerprobe Corporation 1995 Stock Option Plan (the "Plan"). Any Options or Awards outstanding prior to the adoption by the Board of the Revised Plan shall remain valid and unchanged. When applicable, the term "Plan" shall include the Original Plan and/or the Revised Plan. (b) Defined Terms. All initially capitalized terms used hereby shall have the meaning set forth in Article V hereto. (c) General Purpose. The Plan shall be divided into two programs: the Discretionary Grant Program and the Automatic Grant Program. (i) Discretionary Grant Program. The purpose of the Discretionary Grant Program is to further the interests of the Company and its stockholders by encouraging key persons associated with the Company (or Parent or Subsidiary Corporations) to acquire shares of the Company's Stock, thereby acquiring a proprietary interest in its business and an increased personal interest in its continued success and progress. Such purpose shall be accomplished by providing for the discretionary granting of options to acquire the Company's Stock ("Discretionary Options"), the direct granting of the Company's Stock ("Stock Awards"), the granting of stock appreciation rights ("SARs"), or the granting of other cash awards ("Cash Awards") (Stock Awards, SARs, and Cash Awards shall be collectively referred to herein as "Awards"). (ii) Automatic Grant Program. The purpose of the Automatic Grant Program is to promote the interests of the Company by providing non-employee members of the Company's Board of Directors (the "Board") the opportunity to acquire a proprietary interest, or otherwise increase their proprietary interest, in the Company and to thereby have an increased personal interest in its continued success and progress. Such purpose shall be accomplished by providing for the automatic grant of options to acquire the Company's Stock ("Automatic Options"). A-1 (d) Character of Options. Discretionary Options granted under this Plan to employees of the Company (or Parent or Subsidiary Corporations) that are intended to qualify as "incentive stock options" as defined in Code ss. 422 ("Incentive Stock Options") will be specified in the applicable stock option agreement. All other Options granted under this Plan will be nonqualified options. (e) Rule 16b-3 Plan. With respect to persons subject to Section 16 of the Securities Exchange Act of 1934, as amended ("1934 Act"), the Plan is intended to comply with all applicable conditions of Rule 16b-3 (and all subsequent revisions thereof) promulgated under the 1934 Act. In such instance, to the extent any provision of the Plan or action by a Plan Administrator fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by such Plan Administrator. In addition, the Board may amend the Plan from time to time as it deems necessary in order to meet the requirements of any amendments to Rule 16b-3 without the consent of the stockholders of the Company. (f) Duration of Plan. The term of the Original Plan is 10 years commencing on the date of adoption of the Plan by the Board as specified in Section 1.1(a) hereof. No Option or Award shall be granted under the Plan unless granted within 10 years of the adoption of the Plan by the Board, but Options or Awards outstanding on that date shall not be terminated or otherwise affected by virtue of the Plan's expiration. 1.2 Stock and Maximum Number of Shares Subject to Plan. (a) Description of Stock and Maximum Shares Allocated. The stock subject to the provisions of the Plan and issuable upon the grant of Stock Awards or upon the exercise of SARs or Options granted under the Plan is shares of the Company's common stock, $.05 par value per share (the "Stock"), which may be either unissued or treasury shares, as the Board may from time to time determine. Subject to adjustment as provided in Section 4.1 hereof, the aggregate number of shares of Stock covered by the Plan and issuable hereunder shall be 800,000 shares of Stock. (b) Calculation of Available Shares. For purposes of calculating the maximum number of shares of Stock which may be issued under the Plan: (i) the shares issued (including the shares, if any, withheld for tax withholding requirements) upon exercise of an Option shall be counted, and (ii) the shares issued (including the shares, if any, withheld for tax withholding requirements) as a result of a grant of a Stock Award or an exercise of a SAR shall be counted. (c) Restoration of Unpurchased Shares. If an Option or SAR expires or terminates for any reason prior to its exercise in full and before the term of the Plan expires, the shares of Stock subject to, but not issued under, such Option or SAR shall, without further action or by or on behalf of the Company, again be available under the Plan. 1.3 Approval; Amendments. (a) Approval by Stockholders. The Revised Plan shall be submitted to the stockholders of the Company for their approval at a regular or special meeting to be held within 12 months after the adoption of the Revised Plan by the Board. Stockholder approval shall be evidenced by the affirmative vote of the holders of a majority of the shares of the Company's Common Stock A-2 present in person or by proxy and voting at the meeting. The date such stockholder approval has been obtained shall be referred to herein as the "Effective Date." (b) Commencement of Programs. The Automatic Grant Program, as revised herein, shall commence immediately. The Discretionary Grant Program, as revised herein, shall commence immediately, subject to the terms set forth in Section 1.1(a). (c) Amendments to Plan. The Board may, without action on the part of the Company's stockholders, make such amendments to, changes in and additions to the Plan as it may, from time to time, deem necessary or appropriate and in the best interests of the Company; provided, the Board may not, without the consent of the applicable Optionholder, take any action which disqualifies any Discretionary Option previously granted under the Plan for treatment as an Incentive Stock Option or which adversely affects or impairs the rights of the Optionholder of any Discretionary Option outstanding under the Plan, and further provided that, except as provided in Article IV hereof, the Board may not, without the approval of the Company's stockholders, (i) increase the aggregate number of shares of Stock subject to the Plan, (ii) reduce the exercise price at which Discretionary Options may be granted or the exercise price at which any outstanding Discretionary Option may be exercised, (iii) extend the term of the Plan, (iv) change the class of persons eligible to receive Discretionary Options or Awards under the Plan, or (v) materially increase the benefits accruing to participants under the Plan. Notwithstanding the foregoing, Discretionary Options or Awards may be granted under this Plan to purchase shares of Stock in excess of the number of shares then available for issuance under the Plan if (A) an amendment to increase the maximum number of shares issuable under the Plan is adopted by the Board prior to the initial grant of any such Option or Award and within one year thereafter such amendment is approved by the Company's stockholders and (B) each such Discretionary Option or Award granted is not to become exercisable or vested, in whole or in part, at any time prior to the obtaining of such stockholder approval. ARTICLE II Discretionary Grant Program 2.1 Participants; Administration. (a) Eligibility and Participation. Discretionary Options and Awards may be granted only to persons ("Eligible Persons") who at the time of grant are (i) key personnel (including officers and directors) of the Company or Parent or Subsidiary Corporations, or (ii) consultants or independent contractors who provide valuable services to the Company or Parent or Subsidiary Corporations; provided that (A) Incentive Stock Options may only be granted to key personnel of the Company (or its Parent or Subsidiary Corporations) who are also employees of the Company (or its Parent or Subsidiary Corporations), and (B) the maximum number of shares of Stock with respect to which Options, Awards, or any combination thereof, may be granted to any employee during the term of the Plan shall not exceed 50 percent of the shares of Stock covered by and issuable under the Plan. A Plan Administrator shall have full authority to determine which Eligible Persons in its administered group are to receive Discretionary Option grants under the Plan, the number of shares to be covered by each such grant, whether or not the granted Discretionary Option is to be an Incentive Stock Option, the time or times at which each such Discretionary Option is to become exercisable, and the maximum term for which the Discretionary Option is to be outstanding. A Plan Administrator shall also have full authority to determine which Eligible Persons in such group are to receive Awards under the Discretionary Grant Program and the conditions relating to such Award. A-3 (b) General Administration. Unless otherwise expressly provided in this Plan, the power to administer the Discretionary Grant Program shall be vested exclusively with a committee (the "Senior Committee"). The membership of the Senior Committee shall be constituted so as to comply at all times with the applicable requirements of Rule 16b-3 and Code ss.162(m); provided, however, that if, at any time Rule 16b-3 and Code ss.162(m) and any implementing regulations (and any successor provisions thereof) so permit without adversely affecting the ability of the Plan to comply with the conditions for exemption from Section 16 of the Exchange Act (or any successor provision) provided by Rule 16b-3 and the exemption from the limitations on deductibility of certain executive compensation provided by Code ss.162(m), the Board may delegate the administration of the Plan, in whole or in part, on such terms and conditions, and to such other person or persons as it may determine in its discretion; provided further, however, that the Board may at any time appoint a committee (the "Employee Committee") of two or more persons who are members of the Board and delegate to such Employee Committee the power to administer the Discretionary Grant Program with respect to Eligible Persons that are not Affiliates. For purposes of this Plan, the term "Affiliates" shall mean all "officers" (as that term is defined in Rule 16a-1(f) promulgated under the 1934 Act), all "covered persons" (as that term is defined in Code ss. 162(m)), directors of the Company, and all persons who own 10 percent or more of the Company's issued and outstanding equity securities. (c) Plan Administrators. The Board, the Senior Committee, and/or the Employee Committee, and/or any other committee allowed hereunder, whichever is applicable, shall be each referred to herein as a "Plan Administrator." Each Plan Administrator shall have the authority and discretion, with respect to its administered group, to select which Eligible Persons shall participate in the Discretionary Grant Program, to grant Discretionary Options or Awards under the Discretionary Grant Program, to establish such rules and regulations as they may deem appropriate with respect to the proper administration of the Discretionary Grant Program and to make such determinations under, and issue such interpretations of, the Discretionary Grant Program and any outstanding Discretionary Option or Award as they may deem necessary or advisable. Unless otherwise required by law or specified by the Board with respect to any committee, decisions among the members of a Plan Administrator shall be by majority vote. Decisions of a Plan Administrator shall be final and binding on all parties who have an interest in the Discretionary Grant Program or any outstanding Discretionary Option or Award. The Senior Committee, the Employee Committee, and/or any other committee allowed hereunder, in their respective sole discretion, may make specific grants of Discretionary Options or Awards conditioned on approval of the Board. The Board may establish an additional committee or committees of persons who are members of the Board and delegate to such other committee or committees the power to administer all or a portion of the Discretionary Grant program with respect to all or a portion of the Eligible Persons. Members of the Senior Committee, Employee Committee, or any other committee allowed hereunder shall serve for such period of time as the Board may determine and shall be subject to removal by the Board at any time. The Board may at any time terminate all or a portion of the functions of the Senior Committee, the Employee Committee, or any other committee allowed hereunder and reassume all or a portion of powers and authority previously delegated to such committee. (d) Guidelines for Participation. In designating and selecting Eligible Persons for participation in the Discretionary Grant Program, a Plan Administrator shall consult with and give consideration to the recommendations and criticisms submitted by appropriate managerial and executive officers of the Company. A Plan Administrator also shall take into account the duties and responsibilities of the Eligible Persons, their past, present and potential\contributions to the success of the Company and A-4 such other factors as a Plan Administrator shall deem relevant in connection with accomplishing the purpose of the Plan. 2.2 Terms and Conditions of Options (a) Allotment of Shares. A Plan Administrator shall determine the number of shares of Stock to be optioned from time to time and the number of shares to be optioned to any Eligible Person (the "Optioned Shares"). The grant of a Discretionary Option to a person shall neither entitle such person to, nor disqualify such person from, participation in any other grant of Options or Stock Awards under this Plan or any other stock option plan of the Company. (b) Exercise Price. Upon the grant of any Discretionary Option, a Plan Administrator shall specify the option price per share, which may not be less than 100 percent of the fair market value per share of the Stock on the date the Discretionary Option is granted (110 percent if the Discretionary Option is intended to qualify as an Incentive Stock Option and is granted to a stockholder who at the time the Discretionary Option is granted owns or is deemed to own stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary Corporation). The determination of the fair market value of the Stock shall be made in accordance with the valuation provisions of Section 4.5 hereof. (c) Individual Stock Option Agreements. Discretionary Options granted under the Plan shall be evidenced by option agreements in such form and content as a Plan Administrator from time to time approves, which agreements shall substantially comply with and be subject to the terms of the Plan, including the terms and conditions of this Section 2.2. As determined by a Plan Administrator, each option agreement shall state (i) the total number of shares to which it pertains, (ii) the exercise price for the shares covered by the Option, (iii) the time at which the Options vest and become exercisable, and (iv) the Option's scheduled expiration date. The option agreements may contain such other provisions or conditions as a Plan Administrator deems necessary or appropriate to effectuate the sense and purpose of the Plan, including covenants by the Optionholder not to compete and remedies for the Company in the event of the breach of any such covenant. (d) Option Period. No Discretionary Option granted under the Plan that is intended to be an Incentive Stock Option shall be exercisable for a period in excess of 10 years from the date of its grant (five years if the Discretionary Option is granted to a stockholder who at the time the Discretionary Option is granted owns or is deemed to own stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary Corporation), subject to earlier termination in the event of termination of employment, retirement or death of the Optionholder. A Discretionary Option may be exercised in full or in part at any time or from time to time during the term of the Discretionary Option or provide for its exercise in stated installments at stated times during the Option's term. (e) Vesting; Limitations. The time at which the Optioned Shares vest with respect to an Optionholder shall be in the discretion of that Optionholder's Plan Administrator. Notwithstanding the foregoing, to the extent a Discretionary Option is intended to qualify as an Incentive Stock Option, the aggregate fair market value (determined as of the respective date or dates of grant) of the Stock for which one or more Options granted to any person under this Plan (or any other option plan of the Company or any Parent or Subsidiary Corporation) may for the first time become exercisable as Incentive Stock Options during any one calendar year shall not exceed the sum of $100,000 (referred to herein as A-5 the "$100,000 Limitation"). To the extent that any person holds two or more Options which become exercisable for the first time in the same calendar year, the foregoing limitation on the exercisability as an Incentive Stock Option shall be applied on the basis of the order in which such Options are granted. (f) No Fractional Shares. Options shall be exercisable only for whole shares; no fractional shares will be issuable upon exercise of any Discretionary Option granted under the Plan. (g) Method of Exercise. In order to exercise a Discretionary Option with respect to any vested Optioned Shares, an Optionholder (or in the case of an exercise after an Optionholder's death, such Optionholder's executor, administrator, heir or legatee, as the case may be) must take the following action: (i) execute and deliver to the Company a written notice of exercise signed in writing by the person exercising the Discretionary Option specifying the number of shares of Stock with respect to which the Discretionary Option is being exercised; (ii) pay the aggregate Option Price in one of the alternate forms as set forth in Section 2.2(h) below; and (iii) furnish appropriate documentation that the person or persons exercising the Discretionary Option (if other than the Optionholder) has the right to exercise such Option. As soon as practicable after the Exercise Date, the Company shall mail or deliver to or on behalf of the Optionholder (or any other person or persons exercising this Discretionary Option in accordance herewith) a certificate or certificates representing the Stock for which the Discretionary Option has been exercised in accordance with the provisions of this Plan. In no event may any Discretionary Option be exercised for any fractional shares. (h) Payment of Option Price. The aggregate Option Price shall be payable in one of the alternative forms specified below: (i) Full payment in cash or check made payable to the Company's order; or (ii) Full payment in shares of Stock held for the requisite period necessary to avoid a charge to the Company's reported earnings and valued at fair market value on the Exercise Date (as determined in accordance with Section 4.5 hereof); or (iii) If a cashless exercise program has been implemented by the Board, full payment through a sale and remittance procedure pursuant to which the Optionholder (A) shall provide irrevocable written instructions to a designated brokerage firm to effect the immediate sale of the Optioned Shares to be purchased and remitted to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the Optioned Shares to be purchased, and (B) shall concurrently provide written directives to the Company to deliver the certificates for the Optioned Shares to be purchased directly to such brokerage firm in order to complete the sale transaction. A-6 (i) Repurchase Right. The Plan Administrator may, in its sole discretion, set forth other terms and conditions upon which the Company (or its assigns) shall have the right to repurchase shares of Stock acquired by an Optionholder pursuant to a Discretionary Option. Any repurchase right of the Company shall be exercisable by the Company (or its assignees) upon such terms and conditions as the Plan Administrator may specify in the Stock Repurchase Agreement evidencing such right. The Plan Administrator may also, in its discretion, establish as a term and condition of one or more Discretionary Options granted under the Plan that the Company shall have a right of first refusal with respect to any proposed sale or other disposition by the Optionholder of any shares of Stock issued upon the exercise of such Discretionary Options. Any such right of first refusal shall be exercisable by the Company (or its assigns) in accordance with the terms and conditions set forth in the Stock Repurchase Agreement. (j) Termination of Incentive Stock Options (i) Termination of Service. If any Optionholder ceases to be in Service to the Company for a reason other than death, the Optionholder's vested Incentive Stock Options on the date of termination of such Service shall remain exercisable only for 30 days after the date of termination of such Service or until the stated expiration date of the Optionholder's Option, whichever occurs first; provided, that (i) if Optionholder is discharged for Cause, or (ii) if after the Service of the Optionholder is terminated, the Optionholder commits acts detrimental to the Company's interests, then the Incentive Stock Option shall thereafter be void for all purposes. "Cause" shall be limited to a termination of Service for (A) commission of a crime by the Optionholder or for reasons involving moral turpitude; (B) an act by the Optionholder which tends to bring the Company into disrepute; or (C) negligent, fraudulent or willful misconduct by the Optionholder. Notwithstanding the foregoing, if any Optionholder ceases to be in Service to the Company by reason of permanent disability within the meaning of section 22(e)(3) of the Code (as determined by the applicable Plan Administrator), the Optionholder shall have 180 days after the date of termination of Service, but in no event after the stated expiration date of the Optionholder's Incentive Stock Options, to exercise Incentive Stock Options that the Optionholder was entitled to exercise on the date the Optionholder's Service terminated as a result of such disability. (ii) Death of Optionholder. If an Optionholder dies while in the Company's Service, the Optionholder's vested Incentive Stock Options on the date of death shall remain exercisable only for 90 days after the date of death or until the stated expiration date of the Optionholder's Option, whichever occurs first, and may be exercised only by the person or persons ("successors") to whom the Optionholder's rights pass under a will or by the laws of descent and distribution. A Discretionary Option may be exercised and payment of the Option Price made in full by the successors only after written notice to the Company specifying the number of shares to be purchased. Such notice shall state that the Option Price is being paid in full in the manner specified in Section 2.2 hereof. As soon as practicable after receipt by the Company of such notice and of payment in full of the Option Price, a certificate or certificates representing the Optioned Shares shall be registered in the name or names specified by the successors in the written notice of exercise and shall be delivered to the successors. (k) Termination of Nonqualified Options. Any Options which are not Incentive Stock Options and which are outstanding at the time an Optionholder dies while in Service to the Company or otherwise ceases to be in Service to the Company shall remain exercisable for such period of time thereafter as determined by the Plan Administrator at the time of grant and set forth in the documents evidencing such Options; provided, that no Option shall be exercisable after the Option's stated expiration date, and provided further, that if the Optionholder is discharged for Cause or, if after A-7 the Optionholder's Service to the Company is terminated, the Optionholder commits acts detrimental to the Company's interests, then the Option will thereafter be void for all purposes. (l) Other Plan Provisions Still Applicable. If a Discretionary Option is exercised upon the termination of Service or death of an Optionholder under this Section 2.2, the other provisions of the Plan shall still be applicable to such exercise, including the requirement that the Optionholder or its successor may be required to enter into a Stock Repurchase Agreement. (m) Definition of "Service." For purposes of this Plan, unless it is evidenced otherwise in the option agreement with the Optionholder, the Optionholder shall be deemed to be in "Service" to the Company so long as such individual renders continuous services on a periodic basis to the Company (or to any Parent or Subsidiary Corporation) in the capacity of an employee, director, or an independent consultant or advisor. In the discretion of a Plan Administrator, an Optionholder shall be considered to be rendering continuous services to the Company even if the type of services change, e.g., from employee to independent consultant. The Optionholder shall be considered to be an employee for so long as such individual remains in the employ of the Company or one or more of its Parent or Subsidiary Corporations. 2.3 Terms and Conditions of Stock Awards (a) Eligibility. All Eligible Persons shall be eligible to receive Stock Awards. The Plan Administrator of each administered group shall determine the number of shares of Stock to be awarded from time to time to any Eligible Person in such group. The grant of a Stock Award to a person shall neither entitle such person to, nor disqualify such person from participation in, any other grant of options or awards by the Company, whether under this Plan or under any other stock option or award plan of the Company. (b) Award for Services Rendered. Stock Awards shall be granted in recognition of an Eligible Person's past services to the Company. The grantee of any such Stock Award shall not be required to pay any consideration to the Company upon receipt of such Stock Award, except as may be required to satisfy any applicable Delaware corporate law, employment tax, and/or income tax withholding or other legal requirements. (c) Conditions to Award. All Stock Awards shall be subject to such terms, conditions, restrictions, or limitations as the applicable Plan Administrator deems appropriate, including, by way of illustration but not by way of limitation, restrictions on transferability, requirements of continued employment, individual performance or the financial performance of the Company, or payment by the recipient of any applicable employment or withholding taxes. Such Plan Administrator may modify or accelerate the termination of the restrictions applicable to any Stock Award under circumstances that it deems appropriate. (d) Award Agreements. A Plan Administrator may require as a condition to a Stock Award that the recipient of such Stock Award enter into an award agreement in such form and content as that Plan Administrator from time to time approves. A-8 2.4 Terms and Conditions of SARs (a) Eligibility. All Eligible Persons shall be eligible to receive SARs. The Plan Administrator of each administered group shall determine the SARs to be awarded from time to time to any Eligible Person in such group. The grant of a SAR to a person shall neither entitle such person to, nor disqualify such person from participation in, any other grant of options or awards by the Company, whether under this Plan or under any other stock option or award plan of the Company. (b) Award of SARs. Concurrently with or subsequent to the grant of any Discretionary Option to purchase one or more shares of Stock, a Plan Administrator may award to the Optionholder with respect to each share of Stock underlying the Option, a related SAR permitting the Optionholder to be paid the appreciation on the Stock underlying the Discretionary Option in lieu of exercising the Option. In addition, a Plan Administrator may award to any Eligible Person a SAR permitting the Eligible Person to be paid the appreciation on a designated number of shares of the Stock, whether or not such Shares are actually issued. (c) Conditions to SAR. All SARs shall be subject to such terms, conditions, restrictions or limitations as the applicable Plan Administrator deems appropriate, including, by way of illustration but not by way of limitation, restrictions on transferability, requirements of continued employment, individual performance, financial performance of the Company, or payment by the recipient of any applicable employment or withholding taxes. Such Plan Administrator may modify or accelerate the termination of the restrictions applicable to any SAR under circumstances that it deems appropriate. (d) SAR Agreements. A Plan Administrator may require as a condition to the grant of a SAR that the recipient of such SAR enter into a SAR agreement in such form and content as that Plan Administrator from time to time approves. (e) Exercise. An Eligible Person who has been granted a SAR may exercise such SAR subject to the conditions specified by the Plan Administrator in the SAR agreement. (f) Amount of Payment. The amount of payment to which the grantee of a SAR shall be entitled upon the exercise of each SAR shall be equal to the amount, if any, by which the fair market value of the specified shares of Stock on the exercise date exceeds the fair market value of the specified shares of Stock on the date the Discretionary Option related to the SAR was granted or became effective, or, if the SAR is not related to any Option, on the date the SAR was granted or became effective. (g) Form of Payment. The SAR may be paid in either cash or Stock, as determined in the discretion of the applicable Plan Administrator and set forth in the SAR agreement. If the payment is in Stock, the number of shares to be delivered to the participant shall be determined by dividing the amount of the payment determined pursuant to Section 2.4(f) by the fair market value of a share of Stock on the exercise date of such SAR. As soon as practicable after exercise, the Company shall deliver to the SAR grantee a certificate or certificates for such shares of Stock. (h) Termination of Employment; Death. Section 2.2(j), applicable to Incentive Stock Options, and Section 2.2(k), applicable to nonqualified options, shall apply equally to SARs issued in tandem with such Options. A-9 2.5 Terms and Conditions of Cash Awards (a) In General. The Plan Administrator of each administered group shall have the discretion to make other awards of cash to Eligible Persons in such group ("Cash Awards"). Such Cash Awards may relate to existing Options or to the appreciation in the value of the Stock or other Company securities. (b) Conditions to Award. All Cash Awards shall be subject to such terms, conditions, restrictions, and limitations as the applicable Plan Administrator deems appropriate, and such Plan Administrator may require as a condition to such Cash Award that the recipient of such Cash Award enter into an award agreement in such form and content as the Plan Administrator from time to time approves. ARTICLE III Automatic Grant Program 3.1 Eligible Persons under the Automatic Grant Program. The persons eligible to participate in the Automatic Grant Program shall be limited to Board members who are not employed by the Company, whether or not such persons qualify as Non-Employee directors as defined herein ("Eligible Directors"). Persons who are eligible under the Automatic Grant Program may also be eligible to receive Discretionary Options or Awards under the Discretionary Grant Program or option grants or direct stock issuances under other plans of the Company. 3.2 Terms and Conditions of Automatic Option Grants (a) Amount and Date of Grant. During the term of this Plan, Automatic Grants shall be made to each Eligible Director ("Optionholder") as follows: (i) Annual Grants. Each year on the Annual Grant Date an Automatic Option to acquire 2,000 shares of Stock shall be granted to each Eligible Director for so long as there are shares of Stock available under Section 1.2 hereof. The "Annual Grant Date" shall be the date of the Company's annual stockholders meeting commencing as of the next annual meeting occurring after the annual meeting held on the Effective Date. Any Person that was granted an Automatic Option under Section 3.2(a)(ii) hereof within 30 days of an Annual Grant Date shall be ineligible to receive an Automatic Option grant pursuant to this Section 3.2(a)(i) on such Annual Grant Date. (ii) Initial New Director Grants. On the Initial Grant Date, every new member of the Board who is an Eligible Director and has not previously received an Automatic Option grant under this Section 3.2(a)(ii) shall be granted an Automatic Option to acquire 20,000 shares of Stock for so long as there are shares of Stock available under Section 1.2 hereof. The "Initial Grant Date" shall be the date that an Eligible Director is first appointed or elected to the Board. Any Eligible Person that was granted an Automatic Option pursuant to Section 3.2(a)(iii) shall be ineligible to receive an Automatic Option grant pursuant to this Section 3.2(a)(ii). (iii) Initial Existing Director Grants. On the date the Original Plan was approved by the Company's stockholders, each Eligible Director was granted an Automatic Option to acquire 2,000 shares of Stock. A-10 (b) Exercise Price. The exercise price per share of Stock subject to each Automatic Option Grant shall be equal to 100 percent of the fair market value per share of the Stock on the date the Automatic Option was granted as determined in accordance with the valuation provisions of Section 4.5 hereof (the "Option Price"). (c) Vesting. Each Automatic Option Grant shall become exercisable and vest in a series of three equal and successive yearly installments, with each annual installment to become exercisable on the day before the Company's annual stockholders' meeting occurring in the applicable year. Each installment of an Automatic Option shall only vest and become exercisable if the Optionholder has not ceased serving as a Board member as of such vesting date. (d) Method of Exercise. In order to exercise an Automatic Option with respect to any vested Optioned Shares, an Optionholder (or in the case of an exercise after an Optionholder's death, such Optionholder's executor, administrator, heir or legatee, as the case may be) must take the following action: (i) execute and deliver to the Company a written notice of exercise signed in writing by the person exercising the Automatic Option specifying the number of shares of Stock with respect to which the Automatic Option is being exercised; (ii) pay the aggregate Option Price in one of the alternate forms as set forth in Section 3.2(e) below; and (iii) furnish appropriate documentation that the person or persons exercising the Automatic Option (if other than the Optionholder) has the right to exercise such Option. As soon as practicable after the Exercise Date, the Company shall mail or deliver to or on behalf of the Optionholder (or any other person or persons exercising the Automatic Option in accordance herewith) a certificate or certificates representing the Stock for which the Automatic Option has been exercised in accordance with the provisions of this Plan. In no event may any Automatic Option be exercised for any fractional shares. (e) Payment of Option Price. The aggregate Option Price shall be payable in one of the alternative forms specified below: (i) full payment in cash or check made payable to the Company's order; or (ii) full payment in shares of Stock held for the requisite period necessary to avoid a charge to the Company's reported earnings and valued at fair market value on the Exercise Date (as determined in accordance with Section 4.5 hereof); or (iii) if a cashless exercise program has been implemented by the Board, full payment through a sale and remittance procedure pursuant to which the Optionholder (A) shall provide irrevocable written instructions to a designated brokerage firm to effect the immediate sale of the Optioned Shares to be purchased and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate exercise price payable for the Optioned Shares to be purchased and (B) shall concurrently provide written directives to the Company to deliver the A-11 certificates for the Optioned Shares to be purchased directly to such brokerage firm in order to complete the sale transaction. (f) Term of Option. Each Automatic Option shall expire on the tenth anniversary of the date on which an Automatic Option Grant was made ("Expiration Date"). Except as provided in Section 4.4 hereof, should an Optionholder's service as a Board member cease prior to the Expiration Date for any reason while an Automatic Option remains outstanding and unexercised, then the Automatic Option term shall immediately terminate and the Automatic Option shall cease to be outstanding in accordance with the following provisions: (i) The Automatic Option shall immediately terminate and cease to be outstanding for any shares of Stock which were not vested at the time of Optionholder's cessation of Board service. (ii) Should an Optionholder cease, for any reason other than death, to serve as a member of the Board, then the Optionholder shall have 30 days measured from the date of such cessation of Board service in which to exercise the Automatic Options which vested prior to the time of such cessation of Board service. In no event, however, may any Automatic Option be exercised after the Expiration Date of such Automatic Option. (iii) Should an Optionholder die while serving as a Board member or within 30 days after cessation of Board service, then the personal representative of the Optionholder's estate (or the person or persons to whom the Automatic Option is transferred pursuant to the Optionholder's will or in accordance with the laws of descent and distribution) shall have a 90 day period measured from the date of the Optionholder's cessation of Board service in which to exercise the Automatic Options which vested prior to the time of such cessation of Board service. In no event, however, may any Automatic Option be exercised after the Expiration Date of such Automatic Option. ARTICLE IV Miscellaneous 4.1 Capital Adjustments. The aggregate number of shares of Stock subject to the Plan, the number of shares covered by outstanding Options and Awards, and the price per share stated in such Options and Awards shall be proportionately adjusted for any increase or decrease in the number of outstanding shares of Stock of the Company resulting from a subdivision or consolidation of shares or any other capital adjustment or the payment of a stock dividend or any other increase or decrease in the number of such shares effected without the Company's receipt of consideration therefor in money, services or property. 4.2 Mergers, Etc. If the Company is the surviving corporation in any merger or consolidation (not including a Corporate Transaction), any Option or Award granted under the Plan shall pertain to and apply to the securities to which a holder of the number of shares of Stock subject to the Option or Award would have been entitled prior to the merger or consolidation. Except as provided in Section 4.3 hereof, a dissolution or liquidation of the Company shall cause every Option or Award outstanding hereunder to terminate. 4.3 Corporate Transaction. In the event of stockholder approval of a Corporate Transaction, (a) all unvested Automatic Options shall automatically accelerate and immediately vest so A-12 that each outstanding Automatic Option shall, one week prior to the specified effective date for the Corporate Transaction, become fully exercisable for all of the Optioned Shares, and (b) the Plan Administrator shall have the discretion and authority, exercisable at any time, to provide for the automatic acceleration of one or more of the outstanding Discretionary Options or Awards granted by it under the Plan. Upon the consummation of the Corporate Transaction, all Options shall, to the extent not previously exercised, terminate and cease to be outstanding. 4.4 Change in Control (a) Automatic Grant Program. In the event of a Change in Control, all unvested Automatic Options shall automatically accelerate and immediately vest so that each outstanding Automatic Option shall, immediately prior to the effective date of such Change in Control, become fully exercisable for all of the Optioned Shares. Thereafter, each Automatic Option shall remain exercisable until the Expiration Date of such Automatic Option. (b) Discretionary Grant Program. In the event of a Change in Control, a Plan Administrator shall have the discretion and authority, exercisable at any time, whether before or after the Change in Control, to provide for the automatic acceleration of one or more outstanding Discretionary Options or Awards granted by it under the Plan upon the occurrence of such Change in Control. A Plan Administrator may also impose limitations upon the automatic acceleration of such Options or Awards to the extent it deems appropriate. Any Options or Awards accelerated upon a Change in Control will remain fully exercisable until the expiration or sooner termination of the Option term. 4.5 Calculation of Fair Market Value of Stock. The fair market value of a share of Stock on any relevant date shall be determined in accordance with the following provisions: (i) If the Stock is not at the time listed or admitted to trading on any stock exchange but is traded in the over-the-counter market, the fair market value shall be the mean between the highest bid and lowest asked prices (or, if such information is available, the closing selling price) per share of Stock on the date in question in the over-the-counter market, as such prices are reported by the National Association of Securities Dealers through its Nasdaq system or any successor system. If there are no reported bid and asked prices (or closing selling price) for the Stock on the date in question, then the mean between the highest bid price and lowest asked price (or the closing selling price) on the last preceding date for which such quotations exist shall be determinative of fair market value. (ii) If the Stock is at the time listed or admitted to trading on any stock exchange, then the fair market value shall be the closing selling price per share of Stock on the date in question on the stock exchange determined by the Board to be the primary market for the Stock, as such price is officially quoted in the composite tape of transactions on such exchange. If there is no reported sale of Stock on such exchange on the date in question, then the fair market value shall be the closing selling price on the exchange on the last preceding date for which such quotation exists. (iii) If the Stock at the time is neither listed nor admitted to trading on any stock exchange nor traded in the over-the-counter market, then the fair market value shall be determined by the Board after taking into account such factors as the Board shall deem appropriate, including one or more independent professional appraisals. A-13 4.6 Use of Proceeds. The proceeds received by the Company from the sale of Stock pursuant to the exercise of Options or Awards hereunder, if any, shall be used for general corporate purposes. 4.7 Cancellation of Options. Each Plan Administrator shall have the authority to effect, at any time and from time to time, with the consent of the affected Optionholders, the cancellation of any or all outstanding Discretionary Options granted under the Plan by that Plan Administrator and to grant in substitution therefore new Discretionary Options under the Plan covering the same or different numbers of shares of Stock as long as such new Discretionary Options have an exercise price per share of Stock no less than the minimum exercise price as set forth in Section 2.2(b) hereof on the new grant date. 4.8 Regulatory Approvals. The implementation of the Plan, the granting of any Option or Award hereunder, and the issuance of Stock upon the exercise of any such Option or Award shall be subject to the procurement by the Company of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, the Options or Awards granted under it and the Stock issued pursuant thereto. 4.9 Indemnification. Each and every member of a Plan Administrator, in addition to such other available rights of indemnification as they may have, the members of a Plan Administrator shall be indemnified and held harmless by the Company, to the extent permitted under applicable law, for, from and against all costs and expenses reasonably incurred by them in connection with any action, suit, legal proceeding to which any member thereof may be a party by reason of any action taken, failure to act under or in connection with the Plan or any rights granted thereunder and against all amounts paid by them in settlement thereof or paid by them in satisfaction of a judgment of any such action, suit or proceeding, except a judgment based upon a finding of bad faith. 4.10 Plan Not Exclusive. This Plan is not intended to be the exclusive means by which the Company may issue options or warrants to acquire its Stock, stock awards or any other type of award. To the extent permitted by applicable law, any such other option, warrants or awards may be issued by the Company other than pursuant to this Plan without stockholder approval. 4.11 Company Rights. The grants of Options shall in no way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 4.12 Privilege of Stock Ownership. An Optionholder shall not have any of the rights of a stockholder with respect to Optioned Shares until such individual shall have exercised the Option and paid the Option Price for the Optioned Shares. No adjustment will be made for dividends or other rights for which the record date is prior to the date of such exercise and full payment for such Optioned Shares. 4.13 Assignment. The right to acquire Stock or other assets under the Plan may not be assigned, encumbered, or otherwise transferred by any Optionholder except as specifically provided herein. Except as may be specifically allowed by the Plan Administrator at the time of grant and set forth in the documents evidencing a Discretionary Option or Award, no Option or Award granted under the Plan or any of the rights and privileges conferred thereby shall be assignable or transferable by an Optionholder or grantee other than by will or the laws of descent and distribution, and such Option or Award shall be exercisable during the Optionholder's or grantee's lifetime only by the Optionholder or grantee. Notwithstanding the foregoing, no Incentive Stock Option granted under the Plan or any of the rights and privileges conferred thereby shall be assignable or transferable by an Optionholder or grantee A-14 other than by will or the laws of descent and distribution, and such Incentive Stock Option shall be exercisable during the Optionholder's or grantee's lifetime only by the Optionholder or grantee. The provisions of the Plan shall inure to the benefit of, and be binding upon, the Company and its successors or assigns, and the Optionholders, the legal representatives of their respective estates, their respective heirs or legatees and their permitted assignees. 4.14 Securities Restrictions (a) Legend on Certificates. All certificates representing shares of Stock issued upon exercise of Options or Awards granted under the Plan shall be endorsed with a legend reading as follows: THE SHARES OF COMMON STOCK EVIDENCED BY THIS CERTIFICATE HAVE BEEN ISSUED TO THE REGISTERED OWNER IN RELIANCE UPON WRITTEN REPRESENTATIONS THAT THESE SHARES HAVE BEEN PURCHASED SOLELY FOR INVESTMENT. THESE SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED UNLESS IN THE OPINION OF THE COMPANY AND ITS LEGAL COUNSEL SUCH SALE, TRANSFER OR ASSIGNMENT WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER. (b) Private Offering for Investment Only. The Options and Awards are and shall be made available only to a limited number of present and future key personnel who have knowledge of the Company's financial condition, management and its affairs. The Plan is not intended to provide additional capital for the Company, but to encourage ownership of Stock among the Company's key personnel. By the act of accepting an Option or Award, each grantee agrees (i) that, any shares of Stock acquired pursuant to any Option or Award will be solely for investment and not with any intention to resell or redistribute those shares and, (ii) such intention will be confirmed by an appropriate certificate at the time the Stock is acquired if requested by the Company. The neglect or failure to execute such a certificate, however, shall not limit or negate the foregoing agreement. (c) Registration Statement. If a Registration Statement covering the shares of Stock issuable upon exercise of Options granted under the Plan is filed under the Securities Act of 1933, as amended, and is declared effective by the Securities Exchange Commission, the provisions of Sections 4.14(a) and (b) shall terminate during the period of time that such Registration Statement, as periodically amended, remains effective. 4.15 Tax Withholding (a) General. The Company's obligation to deliver Stock upon the exercise of Options under the Plan shall be subject to the satisfaction of all applicable federal, state and local income tax withholding requirements. (b) Shares to Pay for Withholding. The Board may, in its discretion and in accordance with the provisions of this Section 4.15(b) and such supplemental rules as it may from time to time adopt, provide any or all Optionholders with the right to use shares of Stock in satisfaction of all or part of the federal, state and local income tax liabilities ("Taxes") incurred by such Optionholders in A-15 connection with the exercise of their Options. Such right may be provided to any such Optionholder in either or both of the following formats: (i) Stock Withholding. The Plan Administrator may, in its discretion, provide the Optionholder with the election to have the Company withhold, from the Stock otherwise issuable upon the exercise of an Option, a portion of those shares of Stock with an aggregate fair market value equal to the percentage (not to exceed 100 percent) of the applicable Taxes designated by the Optionholder. (ii) Stock Delivery. The Plan Administrator may, in its discretion, provide the Optionholder with the election to deliver to the Company, at the time the Option is exercised, one or more shares of Stock previously acquired by such individual (other than pursuant to the transaction triggering the Taxes) with an aggregate fair market value equal to the percentage (not to exceed 100 percent) of the Taxes incurred in connection with such Option exercise as designated by the Optionholder. 4.16 Governing Law. The Plan shall be governed by and all questions hereunder shall be determined in accordance with the laws of the State of Arizona, without regard to conflicts of laws principles. ARTICLE V Definitions The following capitalized terms used in this Plan shall have the meaning described below: "Affiliates" shall mean all "executive officers" (as that term is defined in Rule 16a-1(f) promulgated under the 1934 Act) and directors of the Company and all persons who own ten percent or more of the Company's issued and outstanding Stock. "Annual Grant Date" shall mean the date of the Company's annual stockholder meeting. "Automatic Grant Program" shall mean that program set forth in Article III of this Agreement pursuant to which Eligible Directors, as defined herein, are automatically granted Options upon certain events. "Automatic Option Grant" shall mean those automatic option grants made on the Annual Grant Date and on the Initial Grant Date. "Automatic Options" shall mean those Options granted pursuant to the Automatic Grant Program. "Award" shall mean a Stock Award, SAR or Cash Award. "Board" shall mean the Board of Directors of the Company. "Cash Award" shall mean an award to be paid in cash and granted under Section 2.5 hereunder. "Change in Control" shall mean and include the following transactions or situations (i) a person or related group of persons, other than the Company or a person that directly or indirectly controls, is A-16 controlled by, or under common control with the Company, acquires ownership of 40 percent or more of the Company's outstanding common stock pursuant to a tender or exchange offer which the Board of Directors recommends that the Company's stockholders not accept, or (ii) the change in the composition of the Board occurs such that those individuals who were elected to the Board at the last stockholders' meeting at which there was not a contested election for Board membership subsequently ceased to comprise a majority of the Board by reason of a contested election. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Company" shall mean Cerprobe Corporation, a Delaware corporation. "Corporate Transaction" shall mean (a) a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purposes of which is to change the state in which the Company is incorporated; (b) the sale, transfer of or other disposition of all or substantially all of the assets of the Company and complete liquidation or dissolution of the Company, or (c) any reverse merger in which the Company is the surviving entity but in which the securities possessing more than 50 percent of the total combined voting power of the Company's outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger. "Discretionary Grant Program" shall mean the program described in Article II of this Plan pursuant to which certain Eligible Directors are granted Options or Awards in the discretion of the Plan Administrator. "Discretionary Options" shall mean Options granted under the Discretionary Grant Program. "Effective Date" shall mean the date that the Plan has been approved by the stockholders as set forth in Section 1.3(a) hereof. "Eligible Director" shall mean, with respect to the Automatic Grant Program, those Board members who are not employed by the Company, whether or not such members are Non-Employee Directors as defined herein. "Eligible Persons" shall mean (a) with respect to the Discretionary Grant Program, those persons who, at the time that the Discretionary Option or Award is granted, are (i) key personnel (including officers and directors) of the Company or Parent or Subsidiary Corporations, or (ii) consultants or independent contractors who provide valuable services to the Company or Parent or Subsidiary Corporations; and (b) with respect to the Automatic Grant Program, the Eligible Directors. "Employee Committee" shall mean that committee appointed by the Board to administer the Plan with respect to the Non-Affiliates and comprised of two or more persons who are members of the Board. "Exercise Date" shall be the date on which written notice of the exercise of an Option is delivered to the Company in accordance with the requirements of the Plan. "Expiration Date" shall be the 10-year anniversary of the date on which an Automatic Option Grant was made. A-17 "Incentive Stock Option" shall mean a Discretionary Option that is intended to qualify as an "incentive stock option" under Code ss. 422. "Initial Grant Date" shall mean the date that an Eligible Director is first appointed or elected to the Board. "Non-Affiliates" shall mean all persons who are not Affiliates. "Non-Employee Directors" shall mean those Directors who satisfy the definition of "Non- Employee Director" under Rule 16b-3(b)(3)(i) promulgated under the 1934 Act. "$100,000 Limitation" shall mean the limitation pursuant to which the aggregate fair market value (determined as of the respective date or dates of grant) of the Stock for which one or more Options granted to any person under this Plan (or any other option plan of the Company or any Parent or Subsidiary Corporation) may for the first time be exercisable as Incentive Stock Options during any one calendar year shall not exceed the sum of $100,000. "Optionholder" shall mean an Eligible Person or Eligible Director to whom Options have been granted. "Optioned Shares" shall be those shares of Stock to be optioned from time to time to any Eligible Director. "Option Price" shall mean (i) with respect to Discretionary Options, the exercise price per share as specified by the Plan Administrator pursuant to Section 2.2(b) hereof, and (ii) with respect to Automatic Options, the exercise price per share as specified by Section 3.2(b) hereof. "Options" shall mean options to acquire Stock granted under the Plan. "Parent Corporation" shall mean any corporation in the unbroken chain of corporations ending with the employer corporation, where, at each link of the chain, the corporation and the link above owns at least 50 percent of the combined total voting power of all classes of the stock in the corporation in the link below. "Plan" shall mean this stock option plan for Cerprobe Corporation. "Plan Administrator" shall mean (a) either the Board, the Senior Committee, or any other committee, whichever is applicable, with respect to the administration of the Discretionary Grant Program as it relates to Affiliates, and (b) either the Board, the Employee Committee, or any other committee, whichever is applicable, with respect to the administration of the Discretionary Grant Program as it relates to Non-Affiliates and with respect to the Automatic Grant Program. "SAR" shall mean stock appreciation rights granted pursuant to Section 2.4 hereunder. "Senior Committee" shall mean that committee appointed by the Board to administer the Discretionary Grant Program with respect to the Affiliates and comprised of two or more Disinterested Directors. A-18 "Service" shall have the meaning set forth in Section 2.2(m) hereof. "Stock" shall mean shares of the Company's common stock, $.05 par value per share, which may be unissued or treasury shares, as the Board may from time to time determine. "Stock Awards" shall mean Stock directly granted under the Discretionary Grant Program. "Subsidiary Corporation" shall mean any corporation in the unbroken chain of corporations starting with the employer corporation, where, at each link of the chain, the corporation and the link above owns at least 50 percent of the combined voting power of all classes of stock in the corporation below. EXECUTED as of the __th day of _________, 1997. CERPROBE CORPORATION By:_____________________________________ Name:___________________________________ ATTESTED BY: Its:____________________________________ __________________________________ Secretary A-19 EX-11 8 COMPUTATION OF NET EARNINGS (LOSS) PER SHARE Cerprobe Corporation Computation of Net earnings (Loss) Per Share Exhibit 11 (Unaudited)
Three Months Ended Six Months ended June 30, 1997 June 30, 1997 --------------------------- ---------------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Net income (loss) $ 1,589,326 $ 861,264 $(3,305,307) $ 1,867,485 =========== =========== =========== =========== Weighted average common shares outstanding 6,353,047 4,367,332 6,321,399 4,259,960 Common equivalent shares: Shares issuable upon exercise of stock options (1) 193,022 330,332 -- 276,929 Convertible preferred stock -- 695,502 -- 725,431 ----------- ----------- ----------- ----------- Total weighted average shares-primary 6,546,069 5,393,166 6,321,399 5,262,320 ----------- ----------- ----------- ----------- Fully diluted incremental shares: Stock options (calculated using the higher of end of period or average market value) 99,608 233 -- 2,971 Convertible subordinated debentures -- 485,000 -- 532,389 ----------- ----------- ----------- ----------- Total weighted average shares-fully diluted 6,645,677 5,878,399 6,321,399 5,797,680 ----------- ----------- ----------- ----------- Primary net income per common and common equivalent share $ 0.24 $ 0.16 $ (0.52) $ 0.35 ----------- ----------- ----------- ----------- Fully diluted net income per common and common equivalent share $ 0.24 $ 0.15 $ (0.52) $ 0.32 ----------- ----------- ----------- -----------
(1) Amount calculated under the treasury stock method and fair market values for stock EX-27 9 FINANCIAL DATA SCHEDULE
5 This Schedule contains summary financial information extracted from the Condensed Consolidated Balance Sheet at June 30, 1997 and the Condensed Consolidated Statements of Operations and is qualified in its entirety by reference to such financial statements. 1 U.S. Dollars 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 1 1,482,445 0 9,937,076 218,278 6,525,933 18,178,196 19,749,173 5,979,208 36,231,963 11,373,944 1,591,591 16 0 317,652 22,471,275 36,231,963 34,582,921 34,582,921 20,403,329 36,312,570 296,853 0 296,853 (1,843,992) 1,490,300 (3,305,307) 0 0 0 (3,305,307) (0.52) (0.52)
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