-----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, ETTbJqsV9gtwXvL/YXkUz5F/POQ1raMHOyS+5NClUEDsUiNXQWbbw/jBxsKEFA88 es069SklqlPtSw8mW8hGVw== 0000950153-98-000966.txt : 19980817 0000950153-98-000966.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950153-98-000966 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 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: 10-Q SEC ACT: SEC FILE NUMBER: 000-11370 FILM NUMBER: 98690012 BUSINESS ADDRESS: STREET 1: 1150 NORTH FIESTA BLVD CITY: GILBERT STATE: AZ ZIP: 85233-2237 BUSINESS PHONE: 6029677885 MAIL ADDRESS: STREET 1: 600 S ROCKFORD DR CITY: TEMPE STATE: AZ ZIP: 85281 10-Q 1 10-Q 1 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, 1998 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) 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 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 August 12, 1998, there were 8,127,728 shares of the registrant's common stock outstanding. 2 CERPROBE CORPORATION QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page ---- ITEM 1. FINANCIAL STATEMENTS: Condensed Consolidated Balance Sheets - June 30, 1998 and December 31, 1997...................................3 Condensed Consolidated Statements of Operations - Three and Six Months Ended June 30, 1998 and 1997.....................4 Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 1998 and 1997...............................5 Notes to Condensed Consolidated Financial Statements..................6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................9 PART II - OTHER INFORMATION ITEM 2. SALES OF UNREGISTERED SECURITIES.....................................15 ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS....................15 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.....................................16 SIGNATURE....................................................................17 2 3 CERPROBE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31, ASSETS 1998 1997 ------------ ------------ (UNAUDITED) Current assets: Cash and short-term investments $ 25,318,979 $ 30,347,173 Accounts receivable, net of allowance of $280,247 in 1998 and $292,000 in 1997 10,635,997 10,341,428 Inventories, net 10,476,668 8,483,141 Accrued interest receivable 79,207 202,939 Prepaid expenses 756,284 388,692 Income taxes receivable 1,002,299 624,574 Deferred tax asset 606,514 518,778 ------------ ------------ Total current assets 48,875,948 50,906,725 Property, plant and equipment, net 18,639,795 15,141,902 Intangibles, net 2,762,708 2,396,301 Other assets 735,848 1,009,916 ------------ ------------ Total assets $ 71,014,299 $ 69,454,844 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,863,467 $ 4,346,039 Accrued expenses 3,407,092 3,286,304 Current portion of notes payable 1,073,169 139,661 Current portion of capital leases 684,492 629,798 ------------ ------------ Total current liabilities 7,028,220 8,401,802 Notes payable, less current portion 71,491 148,985 Capital leases, less current portion 1,410,887 1,165,722 Deferred tax liability 423,179 377,701 Other liabilities 11,718 16,700 ------------ ------------ Total liabilities 8,945,495 10,110,910 ------------ ------------ Minority interest 332,973 132,437 Commitments and contingencies -- -- Stockholders' equity: Common stock, $.05 par value; authorized 25,000,000 shares; issued and outstanding 8,127,728 shares at June 30, 1998 and 8,097,979 shares at December 31, 1997 406,464 404,899 Additional paid-in capital 55,212,822 55,136,307 Retained earnings 6,813,849 4,001,642 Foreign currency translation adjustment (617,716) (331,351) ------------ ------------ 61,815,419 59,211,497 Less: Treasury stock (79,588) -- ------------ ------------ Total stockholders' equity 61,735,831 59,211,497 ------------ ------------ Total liabilities and stockholders' equity $ 71,014,299 $ 69,454,844 ============ ============
See accompanying notes to condensed consolidated financial statements. 3 4 CERPROBE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, ----------------------------- ----------------------------- 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Net sales $ 18,831,468 $ 18,683,829 $ 43,421,805 $ 34,582,921 Costs of goods sold 12,057,053 11,008,957 26,470,077 20,403,329 ------------ ------------ ------------ ------------ Gross profit 6,774,415 7,674,872 16,951,728 14,179,592 ------------ ------------ ------------ ------------ Expenses: Selling, general and administrative 5,615,591 4,954,862 11,271,351 9,127,311 Engineering and product development 796,149 164,455 1,626,236 617,774 Acquisition related expenses -- -- -- 6,164,156 ------------ ------------ ------------ ------------ Total expenses 6,411,740 5,119,317 12,897,587 15,909,241 ------------ ------------ ------------ ------------ Operating income (loss) 362,675 2,555,555 4,054,141 (1,729,649) ------------ ------------ ------------ ------------ Other income (expense): Interest income 452,113 32,504 736,848 67,664 Interest expense (61,655) (162,242) (122,588) (296,853) Other income 41,363 55,955 34,832 114,846 ------------ ------------ ------------ ------------ Total other income (expense) 431,821 (73,783) 649,092 (114,343) ------------ ------------ ------------ ------------ Income (loss) before income taxes and minority interest 794,496 2,481,772 4,703,233 (1,843,992) Minority interest share of (income) loss (43,123) 41,554 (25,393) 28,985 ------------ ------------ ------------ ------------ Income (loss) before income taxes 751,373 2,523,326 4,677,840 (1,815,007) Provision for income taxes (284,595) (934,000) (1,865,632) (1,490,300) ------------ ------------ ------------ ------------ Net income (loss) $ 466,778 $ 1,589,326 $ 2,812,208 $ (3,305,307) ============ ============ ============ ============ Net income (loss) per share: Basic $ 0.06 $ 0.25 $ 0.35 $ (0.52) ============ ============ ============ ============ Weighted average number of common shares outstanding 8,109,950 6,353,047 8,105,700 6,321,399 ============ ============ ============ ============ Diluted $ 0.06 $ 0.24 $ 0.33 $ (0.52) ============ ============ ============ ============ Weighted average number of common and common equivalent shares outstanding 8,386,794 6,596,069 8,432,402 6,321,399 ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements. 4 5 CERPROBE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, ----------------------------- 1998 1997 ------------ ------------ Cash flows from operating activities: Net income (loss) $ 2,812,208 $ (3,305,307) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 2,284,993 1,657,746 Purchased research and development -- 5,664,156 Loss on sale of equipment 144,484 426 Tax benefit from exercise of nonqualified stock options 71,000 -- Deferred income taxes (42,258) 72,819 Provision for losses on accounts receivable 12,000 (14,605) Provision for obsolete inventory 330,613 167,132 Income (loss) applicable to minority interest in consolidated subsidiaries 25,393 (28,985) Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (306,569) (3,255,550) Inventories (2,324,140) 528,436 Prepaid expenses and other assets 127,029 (57,474) Income taxes receivable (377,725) 539,904 Accounts payable and accrued expenses (2,253,136) 820,689 Accrued income taxes (108,648) 60,329 Other liabilities (4,982) 48,240 ------------ ------------ Net cash provided by operating activities 390,262 2,897,956 ------------ ------------ Cash flows from investing activities: -- Purchase of property, plant and equipment (5,917,413) (3,195,310) Investment in CRPB Investors, L.L.C 78,322 (607) Investment in Upsys-Cerprobe, L.L.C -- (21,892) Purchase of Upsys-Cerprobe, L.L.C (376,366) -- Supplemental acquisition costs for CompuRoute -- (80,102) Purchase of SVTR, net of cash acquired -- (2,565,697) Proceeds from sale of equipment -- 71,183 Payment of notes receivable -- 250,000 Purchase of treasury stock (284,638) -- ------------ ------------ Net cash used in investing activities (6,500,095) (5,542,425) ------------ ------------ Cash flows from financing activities: Issuance of (payments on) notes payable and capital leases 1,155,874 (1,537,284) Expenses from issuance of common stock (176,436) -- Net proceeds from employee stock purchase plan 203,703 -- Net proceeds from exercise of stock options 184,863 154,332 ------------ ------------ Net cash provided by (used in) financing activities 1,368,004 (1,382,952) ------------ ------------ Effect of exchange rates on cash and short-term investments (286,365) (54,691) ------------ ------------ Net decrease in cash and short-term investments (5,028,194) (4,082,112) Cash and short-term investments, beginning of period 30,347,173 5,564,557 ------------ ------------ Cash and short-term investments, end of period $ 25,318,979 $ 1,482,445 ============ ============ Supplemental schedule of non-cash financing activities Equipment acquired under capital leases $ 620,509 $ 4,144 ------------ ------------ Supplemental disclosures of cash flow information: Interest paid $ 122,588 $ 296,853 ------------ ------------ Income taxes paid $ 1,886,729 $ 1,315,096 ------------ ------------ Supplemental disclosures of non-cash investing activities: The Company acquired Silicon Valley Test & Repair, Inc. for $5.7 million in the period ended June 30, 1997. The purchase price was allocated to the assets acquired and the liabilities assumed based on their fair values as indicated in the notes to the condensed consolidated financial statements The Company acquired Upsys-Cerprobe. L.L.C for $376,366 in the period ended June 30, 1998 A summary of the acquisition is as follows: Purchase price $ 376,366 $ 5,715,263 Less cash acquired -- (285,316) Common stock issued -- (2,864,250) ------------ ------------ Cash invested $ 376,366 $ 2,565,697 ============ ============
See accompanying notes to condensed consolidated financial statements. 5 6 CERPROBE CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) BASIS OF PREPARATION The accompanying condensed consolidated financial statements as of June 30, 1998 and for the three and six months ended June 30, 1998, and 1997, are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of financial position and operating results for the interim periods. The condensed consolidated balance sheet as of December 31, 1997 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-K for the year ended December 31, 1997. Results of operations for interim periods are not necessarily indicative of those to be achieved for full fiscal years. PRINCIPLES OF CONSOLIDATION The condensed consolidated financial statements include the accounts of Cerprobe Corporation and its subsidiaries: Cerprobe Europe Limited, Cerprobe Asia Holdings PTE LTD, CompuRoute, Inc., SVTR, Inc., Upsys-Cerprobe, L.L.C., and Cobra Venture Management, Inc. Cerprobe Asia Holdings PTE LTD is a 60% (70% prior to August 18, 1997) owner of Cerprobe Asia PTE LTD; the balance is owned by Asian investors. Cerprobe Asia PTE LTD's wholly owned subsidiaries, Cerprobe Singapore PTE LTD and Cerprobe Taiwan Co. LTD, operate full service sales and manufacturing plants. All significant intercompany transactions have been eliminated in consolidation. On May 30, 1997, the Company entered into a joint venture with Upsys Reseau Eurisys ("Upsys"), a French company owned by IBM and GAME COGEMA Group, a French testing and engineering company. The joint venture, called Upsys-Cerprobe, L.L.C., assembled and repaired Upsys's vertical probe card that had been distributed by Cerprobe throughout the United States and Asia. Cerprobe owned 55% of the joint venture and Upsys owned 45%. Accordingly, the condensed consolidated financial statements include the activities of Upsys-Cerprobe, L.L.C. since the date of inception of the joint venture. On June 25, 1998, the Company terminated its distribution agreement with Upsys, and in connection therewith Upsys's 45% interest in Upsys-Cerprobe, L.L.C. was purchased. (See Note 6) 6 7 (2) COMMITMENTS AND CONTINGENCIES LETTER OF INTENT On April 20, 1998, Cerprobe Corporation signed a letter of intent to purchase the probe card operation of Upsys for approximately $8,000,000 in cash. On July 14, 1998, the Company terminated negotiations. EMPLOYEE STOCK PURCHASE PLAN On December 17, 1997, the Board of Directors approved the Employee Stock Purchase Plan (the "ESPP"). The ESPP provides for purchases by employees of up to 150,000 shares. The Company may from time to time purchase shares on the open market or through negotiated transactions, which shares would be held for purchases by employees under the ESPP. LEGAL CLAIM The Company is involved in various claims and legal actions arising in the ordinary course of business. In the opinion of management, ultimate disposition of these matters would not have a material adverse effect on the Company. (3) COMPREHENSIVE INCOME The Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130), effective January 1, 1998. SFAS 130 establishes standards for the reporting and presentation of comprehensive income and its components in financial statements. Comprehensive income encompasses net income and "other comprehensive income," which includes all other non-owner transactions and events which change stockholders' equity. The Company recognized comprehensive income of $2,640,389 for the six months ended June 30, 1998 and comprehensive loss of $(3,338,120) for the six months ended June 30, 1997 as follows:
Six months ended June 30, --------------------------- 1998 1997 ----------- ----------- Net income (loss) $ 2,812,208 $(3,305,307) Other comprehensive income (loss), net of tax: Foreign currency translation adjustment (286,365) (54,689) Tax benefit from foreign currency translation 114,546 21,876 ----------- ----------- Net other comprehensive loss (171,819) (32,813) ----------- ----------- Comprehensive income (loss) $ 2,640,389 $(3,338,120) =========== ===========
(4) NEW CAPITAL LEASES On May 7, 1998, the Company financed $389,290 of manufacturing equipment under its current $3 million lease line of credit with Banc One Leasing Corporation. The lease accrues interest at 7.2% annually with monthly payments for 60 months of principal and interest of $7,745. As of June 30, 1998, there was $383,881 outstanding under the capital lease obligation. 7 8 On June 17, 1998, the Company financed an additional $231,219 of manufacturing equipment with Banc One Leasing Corporation. The lease accrues interest at 7.24% annually with monthly payments for 60 months of principal and interest of $4,605. As of June 30, 1998, there was $228,010 outstanding under the capital lease obligation. (5) TREASURY STOCK In June 1998, the Company purchased on the open market 21,800 shares of its common stock at an average purchase price of $13.06 per share. The shares were held as common stock in treasury and were reserved to satisfy the Company's obligation under the ESPP. Of these shares, 18,259 were purchased by employees through the ESPP offering which ended June 30, 1998. The remaining 3,541 shares purchased, at $13.125, are being held to satisfy future obligations. In addition, a holder of the Company's warrants exercised 2,000 warrants in a cash-less transaction. This resulted in the Company receiving 1,551 shares of its common stock at a price of $21.35. A summary of treasury stock as of June 30, 1998, is as follows:
Number Of Shares Price Value --------- ----- ----- 3,541 $ 13.125 $ 46,475 1,551 21.350 33,113 ---------- $ 79,588 ==========
On August 5, 1998, the Company announced a stock repurchase program whereby up to 500,000 shares, or approximately 6%, of the Company's common stock may be purchased from time to time in the open market. The Company intends to utilize a portion of the reacquired shares for reissuance in connection with its newly adopted aforementioned Employee Stock Purchase Plan as well as to reduce dilution from the Company's existing stock option plans. 6) UPSYS-CERPROBE L.L.C. On June 25, 1998, Upsys's 45% interest in Upsys-Cerprobe L.L.C. was purchased by the Company. The acquisition resulted in $376,365 of Goodwill which will be amortized on a straight-line basis over eight years. 8 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the Selected Consolidated Financial Data and the Consolidated Financial Statements and related Notes thereto of the Company appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. OVERVIEW Cerprobe offers comprehensive solutions for semiconductor test integration and is a leading manufacturer of probe cards, ATE interface assemblies, and ATE test boards. The Company's products and services enable semiconductor manufacturers to test integrated circuits ("ICs") in wafer form and as packaged ICs. The Company has grown substantially over the last five years as the Company has increased its market share and has benefited from the substantial growth in the worldwide demand for ICs. Net sales have increased from $11.2 million for 1993 to $77.1 million for 1997. Similarly, the Company's net income has increased from $1.5 million for 1993 to $6.7 million for 1997 (before a one-time acquisition related expenses charge). Until 1995, substantially all of the Company's growth was from the existing probe card product line. Beginning with the April 1995 acquisition of Fresh Test Technology Corporation ("Fresh Test"), acquisitions have contributed to the Company's growth. Fresh Test expanded the Company's product line to include ATE interface assemblies. The Company acquired CompuRoute in December 1996, which enabled the Company to offer ATE test boards. The Company acquired SVTR in January 1997, which added wafer prober remanufacturing and upgrading services. Net sales from these acquired products and services together approximated $28 million, $7 million, and $4 million in 1997, 1996, and 1995, respectively. The Company believes that it is positioned to continue its long term growth as a result of its strength in designing, producing, and delivering, on a timely and cost-efficient basis, a broad range of custom or customized, high quality test products and services for semiconductor manufacturers in the United States, Europe, and Asia. Beginning in the second quarter of 1998, however, the worldwide demand for ICs fell dramatically due to excess inventory of older IC designs, and slower transition to new IC designs resulting generally from softening worldwide demand for end user products, especially personal computers. Current Asian economic instability exacerbated the semiconductor industry downturn. The Company's financial performance was negatively impacted by these industry conditions. Net sales fell from $24.6 million for the first quarter of 1998 to $18.8 million, or a decline of 23.6%, for the second quarter of 1998. Net income declined 79.7% from $2.3 million to $467,000. The more significant percentage decrease in net income was a result of excess production capacity and under-absorption of overhead costs. The Company is cautious about sales and net income for the balance of 1998 due to the continued uncertainty in the industry. The Company has reduced its workforce and has implemented other cost reduction measures to improve its profitability at the current sales levels. The Company maintains regional full service facilities in Arizona, California, and Texas as well as sales offices in Colorado, Florida, Massachusetts, and Oregon to service the U.S. market for its products and services. The Company continues to expand into international markets, and maintains a full service facility in Scotland to serve the European market and full service facilities in Singapore and Taiwan to serve the Southeast Asia market. Each of the Company's facilities is located in proximity to semiconductor manufacturing centers. 9 10 RESULTS OF OPERATIONS Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997. Net Sales. Net sales for the three months ended June 30, 1998 were $18.8 million, an increase of 0.5% over net sales of $18.7 million for the three months ended June 30, 1997. The flat second quarter 1998 sales were a result of the current softness in the worldwide demand for semiconductors along with weaker business conditions in Asia. Gross Profit. Gross profit for the three months ended June 30, 1998 was $6.8 million, a decrease of 11.7% from the gross profit of $7.7 million for the same period in 1997. Gross margin decreased to 36.2% for the three months ended June 30, 1998, from 41.2% for the same period of 1997. The decrease in gross margin was primarily a result of lower sales from the recent softness in the worldwide demand for semiconductors. The Company's production infrastructure was capable of higher production run rates, thereby resulting in over capacity and under-absorption of overhead. Revenues from the Company's core products, probe cards and interfaces, were 76.8% of sales. Approximately 23.2% of net sales were attributed to ATE test boards from the Company's CompuRoute subsidiary and wafer prober products and services from the Company's SVTR subsidiary. This product mix ratio was approximately the same for the period ended June 30, 1997. Selling, General and Administrative. Selling, general and administrative expenses were $5.6 million, or 29.8% of net sales, for the three months ended June 30, 1998 as compared to $5.0 million, or 26.7% of net sales, for the same period of 1997, an increase of $0.6 million. The increase in selling, general and administrative expenses resulted primarily from domestic expansion occurring in the latter part of 1997 and the first quarter of 1998. Engineering and Product Development. Engineering and product development expenses were $796,149 for the three months ended June 30, 1998, an increase of 384.1% over $164,455 for the same period of 1997. This increase resulted primarily from Cerprobe's continued emphasis on engineering and product development. Additionally, during the three months ended June 30, 1997, expenses were offset by increased project funding receipts from collaborations on engineering and product development with certain customers. Interest Income. Interest income was $452,113 for the three months ended June 30, 1998 as compared to $32,504 for the same period in 1997. The increase was due to the investment of the net proceeds of the Company's 1997 common stock offering. Interest Expense. Interest expense was $61,655 for the three months ended June 30, 1998 as compared to $162,242 for the same period in 1997, a decrease of 62.0%. A portion of the net proceeds from the Company's 1997 common stock offering was used to repay the Company's short-term debt. Minority Interest Share of (Income) Loss. The minority interest share of income from operations of $43,123 for the three months ended June 30, 1998 represents the Company's joint venture partners' share (40.0%) of the income from Cerprobe Asia PTE LTD and the Company's joint venture partner's share (45.0%) of the loss from Upsys-Cerprobe, L.L.C. For the three months ended June 30, 1997, the minority interest share of loss from operations of $41,554 represents the Company's joint venture partner's share (40.0%, 30.0% prior to August 18, 1997) of income from Cerprobe Asia PTE LTD and the Company's joint venture partner's share (45.0%) of the loss from Upsys-Cerprobe, L.L.C. 10 11 Provision for Income Taxes. The provision for income taxes was $284,595, which represents an effective tax rate of 37.9% for the three months ended June 30, 1998, compared to the provision for income taxes for the three months ended June 30, 1997 of $934,000, which represented an effective tax rate of 37.0%. Net Income. Net income for the three months ended June 30, 1998 was $466,778, a decrease of $1.1 million, or 68.8%, from net income of $1.6 million for the same period of 1997. Net income for the three months ended June 30, 1998 was 2.7% of net sales compared to 8.6% for the same period of 1997. The reduction in net income was due to lower sales with a production infrastructure capable of higher production run rates resulting in over capacity. Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997. Net Sales. Net sales for the six months ended June 30, 1998 were $43.4 million, an increase of 25.4% over net sales of $34.6 million for the six months ended June 30, 1997. This increase, which occurred in the first quarter of 1998, was a result of higher order rates for Cerprobe's probe card and interface products. However, in the second quarter of 1998, slower sales rates resulted from the softness in the worldwide demand for the semiconductors along with weaker business in Asia. Gross Profit. Gross profit for the six months ended June 30, 1998 was $17.0 million, an increase of 19.7% from the gross profit of $14.2 million for the same period in 1997. Gross margin decreased to 39.2% for the six months ended June 30, 1998, from 41.0% for the same period of 1997. The decrease in gross margin primarily resulted from second quarter lower sales due to the softness in the worldwide demand for semiconductors. The Company's production infrastructure was capable of higher production run rates thereby resulting in over capacity. Selling, General and Administrative. Selling, general and administrative expenses were $11.3 million, or 26.0% of net sales, for the six months ended June 30, 1998 as compared to $9.1 million, or 26.3% of net sales, for the same period of 1997, an increase of $2.2 million. The increase in selling, general and administrative expenses resulted primarily from domestic expansion occurring in the later part of 1997 and first quarter of 1998. Engineering and Product Development. Engineering and product development expenses were $1.6 million for the six months ended June 30, 1998, an increase of 166.7% over $617,774 for the same period of 1997. This increase resulted primarily from Cerprobe's continued emphasis on engineering and product development. Additionally, during the six months ended June 30, 1997, expenses were offset by increased project funding receipts from collaborations on engineering and product development with certain customers. Interest Income. Interest income was $736,848 for the six months ended June 30, 1998 as compared to $67,664 for the same period in 1997. The increase was due to the investment of the net proceeds of the Company's 1997 secondary offering. Interest Expense. Interest expense was $122,588 for the six months ended June 30, 1998 as compared to $296,853 for the same period in 1997, a decrease of 58.7%. A portion of the net proceeds from the Company's 1997 secondary offering was used to repay the Company's short-term debt. Minority Interest Share of (Income) Loss. The minority interest share of income from operations of $25,393 for the six months ended June 30, 1998 represents the Company's joint venture partners' share (40.0%) of the income from Cerprobe Asia PTE LTD and the Company's joint venture partner's share 11 12 (45.0%) of the loss from Upsys-Cerprobe, L.L.C. For the six months ended June 30, 1997, the minority interest share of loss from operations of $28,985 represents the Company's joint venture partner's share (40.0%, 30.0% prior to August 18, 1997) of income from Cerprobe Asia PTE LTD and the Company's joint venture partner's share (45.0%) of the loss from Upsys-Cerprobe, L.L.C. Provision for Income Taxes. The provision for income taxes was $1.9 million, which represents an effective tax rate of 40.4% for the six months ended June 30, 1998, compared to the provision for income taxes for the six months ended June 30, 1997 of $1.5 million, which represented an effective tax rate of 38.6%, excluding acquisition related expenses of $6.2 million. Net Income. Net income for the six months ended June 30, 1998 was $2.8 million, an increase of $0.1 million, or 3.7%, from net income of $2.7 million, before acquisition related expenses, for the same period of 1997. Net income for the six months ended June 30, 1998 was 6.5% of net sales compared to 7.8% for the same period of 1997. This reduction of net income as a percentage of sales is due to lower sales with a production infrastructure capable of higher production run rates resulting in over capacity. 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. At June 30, 1998, cash and short-term investments were $25.3 million compared to $30.3 million at December 31, 1997. Cerprobe generated approximately $390,262 in cash flow from operating activities for the six months ended June 30, 1998. Net accounts receivable increased by $294,569, or 2.9%, to $10.6 million at June 30, 1998. Net inventories increased $2.0 million, or 23.5%, over December 31, 1997 to $10.5 million at June 30, 1998. Inventory levels were increased in anticipation of continued growing demand for the Company's probe card and interface products. Beginning with the second quarter of 1998, however, demand for the Company's products fell sharply due to the onset of worldwide softness in semiconductor demand. Accounts payable and accrued expenses decreased $2.3 million, or 30.3%, to $5.3 million at June 30, 1998. The decrease resulted from Cerprobe's short-term financing of capital equipment purchased from vendors. The current portions of notes payable and capital leases increased to $1.7 million at June 30, 1998, from $769,459 at December 31, 1997, primarily as a result of financing capital equipment purchases. Working capital decreased $657,000, or 1.6%, to $41.8 million at June 30, 1998 from December 31, 1997. The current ratio increased from 6.1 at December 31, 1997 to 7.0 at June 30, 1998. This increase was due to the longer term financing of capital equipment. Cerprobe increased its net investment in property, plant, and equipment during the six months ended June 30, 1998 by $3.5 million, or 23.2%, to $18.6 million. This increase was attributable to the Company's first quarter 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 secondary offering. 12 13 In April 1998, the Company signed a letter of intent to purchase the probe card operation of Upsys, a French testing and engineering company owned by IBM and GAME COGEMA Group for approximately $8,000,000 in cash. On July 14, 1998, the Company terminated negotiations. On December 17, 1997, the Board of Directors approved the Employee Stock Purchase Plan. The ESPP, was approved by the shareholders on May 29, 1998, at the Company's annual shareholder meeting. On August 5, 1998, the Company announced a stock repurchase program whereby up to 500,000 shares, or approximately 6%, of the Company's common stock may be purchased from time to time in the open market. The Company intends to utilize a portion of the reacquired shares for reissuance in connection with its newly adopted aforementioned Employee Stock Purchase Plan as well as to reduce dilution from the Company's existing stock option plans. Cerprobe believes that its working capital, together with the loan commitments, 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. There can be no assurance that any such financing will be available on acceptable terms and that any additional equity financing, if available, would not result in additional dilution to existing investors. YEAR 2000 ISSUE The Company is in the process of performing a comprehensive review of its Year 2000 issues and has completed its review of internal systems (information technology ("IT") and non-IT). The majority of the Company's application software programs are currently being replaced with Oracle applications which are Year 2000 compliant. The Company estimates the status of progress on these internal systems as follows: IT Systems 20% Non-IT Systems 50% The Company presently believes that with modifications and updates to existing software and the implementation of the Oracle applications, the Year 2000 problem will not pose significant operational problems for the Company's internal systems. The Company also believes that remediation costs to become Year 2000 compliant, excluding the costs associated with the replacement Oracle applications, are not material. The Company is also continuing to verify the Year 2000 readiness of third parties (vendors and customers) with whom the Company has material relationships. The Company is not able to determine the effect on the Company's results of operations, liquidity, and financial condition in the event the Company's material vendors and customers are not Year 2000 compliant. The Company will continue to monitor the progress of its material vendors and customers and formulate a contingency plan at that point in time when the Company believes a material vendor or customer will not be compliant. 13 14 BUSINESS OUTLOOK The Company's business depends substantially on both the volume of IC production by semiconductor manufacturers as well as new IC designs, which in turn depend on the demand of ICs and products utilizing ICs. The semiconductor industry is highly cyclical and historically has experienced periods of oversupply, resulting in reduced demand for IC testing products, including the products manufactured by the Company. Based on lower production rates among many of the Company's customers, the Company is very cautious about net sales for the remainder of 1998. In response to those lower sales, the Company analyzed its current cost structure and in early July undertook a restructuring to bring its production and overhead costs in line with the anticipated industry demand for its products in the second half of this year. "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Statements in this section regarding the Company's prospects for growth and adequacy of sources of capital are forward-looking statements. Words such as "believes," "expects," "anticipates," "intends," "may," "estimates," "should," "will likely," and similar expressions are intended to identify such forward-looking statements. Actual results, however, could differ materially from those anticipated for a number of reasons, including product demand and development, technological advances, impact of competitive products and pricing, growth in targeted markets and other factors identified under "Special Considerations" of the Company's 1997 Form 10-K which has been filed with the Securities and Exchange Commission. Additional risk factors are identified from time to time in the Company's 1998 financial press releases. The cautionary statements made in this Report should be read as being applicable to all related forward-looking statements wherever they appear in this Report. 14 15 PART II - OTHER INFORMATION Item 2 Sales of Unregistered Securities In June 1998, the Company issued upon exercise of a warrant 2,000 shares of its Common Stock at $16.55 per share to a representative of the sales agent that placed the Company's Series A Convertible Preferred in January of 1996. Payment was made in a cash-less exercise by surrender of 1,551 shares of the Company's Common Stock valued at $21.35 per share. The offering was made pursuant to Section 4(2) of the Securities Act of 1933. Item 4 Submission of Matters to Vote of Security Holders a. An annual meeting of stockholders of the Company was held on May 29, 1998. 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: Votes For Votes Withheld Ross J. Mangano 6,246,463 212,857 C. Zane Close 6,248,901 210,419 Kenneth W. Miller 6,246,501 212,819 Donald F. Walter 6,145,981 313,339 William A. Fresh 6,249,401 209,919 2. An amendment to the Company's First Restated Certificate of Incorporation to increase the number of authorized shares of common stock from 10,000,000 to 25,000,000 was approved at the annual meeting pursuant to the following vote: Votes For 4,766,963 Votes Against 1,659,659 Votes Abstaining 32,698 3. An amendment to the Company's 1995 Stock Option Plan to increase the number of shares of common stock that may be issued pursuant to the plan from 800,000 to 1,400,000 was approved at the annual meeting pursuant to the following vote: Votes For 2,625,307 Votes Against 1,791,944 Votes Abstaining 35,721 Not Voted 2,006,348 4. An amendment to the Company's 1995 Stock Option Plan (a) to increase the number of options granted to non-employee members of the Board of Directors pursuant to annual automatic options from options to acquire 2,000 shares to 3,000 shares, (b) to provide that annual automatic options shall vest at the time of grant, and (c) to eliminate the granting of initial automatic options to new members of the Board of Directors was approved at the annual meeting pursuant to the following vote: Votes For 4,765,590 Votes Against 1,613,347 Votes Abstaining 37,545 Not Voted 42,838 15 16 5. The Company's Employee Stock Purchase Plan was approved at the annual meeting pursuant to the following vote: Votes For 4,369,885 Votes Against 47,220 Votes Abstaining 35,867 Not Voted 2,006,348 6. 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 6,077,618 Votes Against 18,714 Votes Abstaining 362,988 Item 6 Exhibits and Reports on Form 8-K a. Exhibits 10(fff) Lease agreement between CompuRoute and BancOne Leasing Corporation dated May 7, 1998. 10(ggg) Lease agreement between CompuRoute and BancOne Leasing Corporation dated June 17, 1998. 10(hhh) Lease agreement between Cerprobe Corporation and Jackson-Shaw El Dorado Tech I Limited Partnership dated May 15, 1998. 3(a) Second Restated Certificate of Incorporation of Cerprobe Corporation, filed with the Delaware Secretary of State on June 23, 1998. (11) Computation of Net Income (Loss) Per Share. (27.1) Financial Data Schedule - June 30, 1998 (27.2) Financial Data Schedule - June 30, 1997 b. No reports on Form 8-K were filed by the Company during the quarter ended June 30, 1998. 16 17 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigning thereunto duly authorized. CERPROBE CORPORATION /s/ Randal L. Buness ---------------------------------------- Randal L. Buness Vice President - Chief Financial Officer August 14, 1998 18 EXHIBIT INDEX EXHIBIT NUMBER DESCRIPTION - ------- ----------- 10(fff) Lease agreement between CompuRoute and BancOne Leasing Corporation dated May 7, 1998. 10(ggg) Lease agreement between CompuRoute and BancOne Leasing Corporation dated June 17, 1998. 10(hhh) Lease agreement between Cerprobe Corporation and Jackson-Shaw El Dorado Tech I Limited Partnership dated May 15, 1998. 3(a) Second Restated Certificate of Incorporation of Cerprobe Corporation, filed with the Delaware Secretary of State on June 23, 1998. (11) Computation of Net Income (Loss) Per Share. (27.1) Financial Data Schedule - June 30, 1998 (27.2) Financial Data Schedule - June 30, 1997 EX-3.A 2 EX-3.A 1 EXHIBIT 3(a) SECOND RESTATED CERTIFICATE OF INCORPORATION OF CERPROBE CORPORATION 1. The name of the corporation is CERPROBE CORPORATION (which is hereinafter referred to as the "Corporation"). 2. The original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on March 23, 1987, under the name CERPROBE CORPORATION. 3. This Second Restated Certificate of Incorporation has been duly proposed by resolutions adopted and declared advisable by the Board of Directors of the Corporation, duly adopted by the stockholders of the Corporation at a meeting duly called, and duly executed and acknowledged by the officers of the Corporation in accordance with the provisions of Sections 103 and 245 of the General Corporation Law of the State of Delaware, and amends and restates, and integrates the provisions of the Certificate of Incorporation of the Corporation and, upon filing with the Secretary of State in accordance with Section 103 and 242, shall thenceforth supersede the Certificate of Incorporation and all amendments thereto, and shall, as it may thereafter be amended in accordance with its terms and applicable law, be the Certificate of Incorporation of the Corporation. 4. The text of the Certificate of Incorporation of the Corporation is hereby amended and restated to read in its entirety as follows: ARTICLE I NAME The name of the Corporation shall be Cerprobe Corporation. ARTICLE II ADDRESS The registered office of the Corporation in the State of Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle. The name and address of the Corporation's registered agent is The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801. 2 ARTICLE III PURPOSE The purpose for which this Corporation is organized is the transaction of any or all lawful business for which corporations may be incorporated under the laws of the State of Delaware, as may be amended from time to time. ARTICLE IV STOCK The Corporation shall have the authority to issue twenty-five million (25,000,000) shares of Common Stock. The par value of each share of Common Stock shall be 5/100 Dollar ($0.05). The Corporation shall have the authority to issue ten million (10,000,000) shares of Preferred Stock. The par value of each share of Preferred Stock shall be 5/100 Dollar ($0.05). Section 1. Common Stock. The Board of Directors of the Corporation may, from time to time, distribute on a pro rata basis to its Common Stock shareholders, out of the capital surplus of the Corporation, a portion of its assets, in cash or property. The Board of Directors of the Corporation may, from time to time, cause the Corporation to purchase its own Common Stock shares to the extent of the unreserved and unrestricted earned and capital surplus of the Corporation. The Corporation may issue rights and options to purchase shares of Common Stock of the Corporation to Directors, Officers or employees of the Corporation or any affiliate thereof, and no shareholder approval or ratification of any such issuance of rights and options shall be required. Section 2. Preferred Stock. The Corporation shall have authority to issue its Preferred Stock in series. The Board of Directors is vested with authority to establish and designate series and to fix the number of shares to be included in each such series and the relative rights, preferences and limitations of each such series, subject to the provisions set forth below. If the stated dividends and amounts payable on liquidation are not paid in full, the shares of all series of the same class shall share ratably in the payment of dividends including accumulations, if any, in accordance with the sums which would be payable on such shares if all dividends were declared and paid in full, and in any distribution of assets other than by way of dividends in accordance with the sums which would be payable in such distribution if all sums payable were discharged in full. The authority of the Board of Directors with respect to each series of Preferred Stock shall include, but not be limited to, determination of the following: a. The number of shares constituting that series and the distinctive designation of that series; 2 3 b. The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates; c. Whether that series shall participate in unlimited dividend rights, and, if so, the extent of such participation; d. Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights, including whether it shall vote as a separate series, or with other series of Preferred Stock, or as one class with the holders of Common Stock, with or without other series of Preferred Stock, and whether differently as to different matters, or any combination of the foregoing; e. Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; f. Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; g. The amounts payable on the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation; h. Any other relative rights, preferences and limitations of that series. Dividends on outstanding Preferred Stock of each series shall be declared and paid, or set apart for payment, before any dividends shall be declared and paid, or set apart for payment, on the Common Stock with respect to the same dividend period. Upon any dissolution, liquidation or winding up of the Corporation, whether voluntary or involuntary, the holders of the Preferred Stock shall be entitled to receive out of the assets of the Corporation, before any distribution shall be made to the holders of the Common Stock, the amounts determined to be payable on the Preferred Stock of each series in the event of voluntary or involuntary liquidation. No holder of Preferred Stock shall be entitled to any preemptive rights. The Corporation may issue rights and options to purchase shares of Preferred Stock of the Corporation to Directors, Officers or employees of the Corporation or any affiliate thereof, and no shareholder approval or ratification of any such issuance of rights and options shall be required. Section 3. Cumulative Voting. At all elections of directors of the Corporation, or at elections held under specified circumstances, each holder of stock or of any class or classes or of a series or series thereof shall be entitled to as many votes as shall equal the number of votes which he would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors 3 4 to be elected by him, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them as he may see fit. ARTICLE V BOARD OF DIRECTORS The number of persons to serve on the Board of Directors shall be fixed by the Bylaws. ARTICLE VI INDEMNIFICATION Section 1. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived any improper personal benefit. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of the foregoing paragraph by the stockholder of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. Section 2. a. Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "Proceeding"), by reason of the fact that he or she is or was a director, officer or employee of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (hereinafter an "Indemnitee"), whether the basis of such Proceeding is an alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the Indemnitee's heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof with respect to Proceedings to enforce rights to indemnification, the Corporation shall indemnify any such Indemnitee in 4 5 connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such Proceeding in advance of its final disposition (hereinafter an "Advancement of Expenses"); provided, however, that, if the Delaware General Corporation Law requires, an Advancement of Expenses incurred by an Indemnitee in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such Indemnitee, including without limitation, service to an employee benefit plan) shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal that such Indemnitee is not entitled to be indemnified for such expenses under this Section or otherwise (hereinafter and "Undertaking"). b. Right of Indemnitee to Bring Suit. If a claim under paragraph (a) of this Section is not paid in full by the Corporation within sixty days after a written claim has been received by the Corporation, except in the case of a claim for an Advancement of Expenses, in which case the applicable period shall be twenty days, the Indemnitee may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit or in a suit brought by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking, the Indemnitee shall be entitled to be paid also the expense of prosecuting or defending such suit. In (i) any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an Advancement of Expenses) it shall be a defense that, and (ii) any suit by the Corporation to recover an Advancement of Expenses pursuant to the terms of an Undertaking the Corporation shall be entitled to recover such expenses upon final adjudication that, the Indemnitee has not met the applicable standard of conduct set forth in the Delaware General Corporation Law. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to enforce a right hereunder, or by the Corporation to recover an Advancement of Expenses pursuant to the terms of an undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified or to such Advancement of Expenses under this Section or otherwise shall be on the Corporation. c. Non-Exclusivity of Rights. The rights to indemnification and to the advancement of expenses conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, this Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise. d. Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another Corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. 5 6 e. Indemnification of Agents of the Corporation. The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification and to the advancement of expenses, to any agent of the Corporation to the fullest extent of the provisions of this Section with respect to the indemnification and advancement of expenses of directors, officers and employees of the Corporation. ARTICLE VII ELECTION OF DIRECTORS All elections of Directors will be by ballot vote where a ballot vote is demanded by any person entitled to vote prior to the time the voting begins; otherwise, a voice vote will suffice. ARTICLE VIII AMENDMENT OF BYLAWS The Bylaws may be altered, amended, repealed or temporarily or permanently suspended, in whole or in part, or new bylaws adopted by the action of the Board of Directors or the Stockholders, in accordance with the provisions set forth below: Section 1. By Action of the Board of Directors. The Bylaws may be altered, amended, repealed or temporarily or permanently suspended, in whole or in part, or new bylaws adopted by the action of the Board of Directors only upon the affirmative vote of a majority of the entire Board of Directors. Such vote may be taken at any annual, regular or special meeting of the Board of Directors if notice of such alteration, amendment, repeal or adoption of the new bylaws shall be contained in the notice of such annual, regular or special meeting. Section 2. By Action of the Stockholders. The Bylaws may be altered, amended or repealed or new bylaws may be adopted by the stockholders only (i) upon the affirmative vote as to all the stock held by the holders of not less than eighty percent (80%) of the Outstanding Voting Shares and (ii) by a Majority of Stockholders. Such vote may be taken at any annual or special meeting of the stockholders if notice of such alteration, amendment, repeal or adoption of the new bylaws shall be contained in the notice of such annual or special meeting. 6 7 ARTICLE IX BOARD CONSIDERATIONS UPON SIGNIFICANT EVENTS The Board, when evaluating any (A) tender offer or invitation for tenders, or proposal to make a tender offer or request or invitation for tenders, by another party, for any equity security of the Corporation, or (B) proposal or offer by another party to (1) merge or consolidate the Corporation or any subsidiary with another corporation or other entity, (2) purchase or otherwise acquire all or a substantial portion of the properties or assets of the Corporation or any subsidiary, or sell or otherwise dispose of to the Corporation or any subsidiary all or a substantial portion of the properties or assets of such other party, or (3) liquidate, dissolve, reclassify the securities of, declare an extraordinary dividend of, recapitalize or reorganize the Corporation, shall take into account all factors that the Board deems relevant, including, without limitation, to the extent so deemed relevant, the potential impact on employees, customers, suppliers, partners, joint venturers and other constituents of the Corporation and the communities in which the Corporation operates. In addition to any affirmative vote required by applicable law and in addition to any vote of the holders of any series of Preferred Stock provided for or fixed pursuant to the provisions of Article IV of this Second restated Certificate of Incorporation, any alteration, amendment or repeal relating to this Article IX must be approved by the affirmative vote of the holders of at least sixty six and two-thirds percent (66 2/3%) of the combined voting power of the issued and outstanding shares of Voting Stock (as defined in Article XII), voting together as a single class. ARTICLE X Notwithstanding anything to the contrary contained in the Corporation's Bylaws, the Corporation elects to be governed by Section 203 of the Delaware General Corporation Law. In addition to any affirmative vote required by applicable law and in addition to any vote of the holders of any series of Preferred Stock provided for or fixed pursuant to the provisions of Article IV of this Second restated Certificate of Incorporation, any alteration, amendment or repeal relating to this Article X must be approved by the affirmative vote of the holders of at least sixty six and two-thirds percent (66 2/3%) of the combined voting power of the issued and outstanding shares of Voting Stock (as defined in Article XII), voting together as a single class. ARTICLE XI STOCKHOLDER CONSENT No action that is required or permitted to be taken by the stockholders of the Corporation at any annual or special meeting of stockholders may be effected by written consent of stockholders in lieu of a meeting of stockholders, unless the action to be effected by written consent of stockholders and the taking of such action by such written consent have expressly been approved in advance by the Board. In addition to any affirmative vote required by applicable law and in addition to any vote of the holders of any series of Preferred Stock provided for or fixed pursuant to the provisions of Article IV of this Second restated Certificate of Incorporation, any alteration, amendment or repeal relating to 7 8 this Article XI must be approved by the affirmative vote of the holders of at least sixty six and two-thirds percent (66 2/3%) of the combined voting power of the issued and outstanding shares of Voting Stock (as defined in Article XII), voting together as a single class. ARTICLE XII BUSINESS COMBINATIONS; FAIR PRICE A. In addition to any affirmative vote required by law or this Second restated Certificate of Incorporation, and except as otherwise expressly provided in paragraph B of this Article XII: 1. any merger or consolidation of the Corporation or any Subsidiary (as hereinafter defined) with (a) any Interested Stockholder (as hereinafter defined), or (b) any other corporation, partnership or other entity (whether or not itself an Interested Stockholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Stockholder other than a merger enacted in accordance with Section 253 of the Delaware General Corporation Law or any successor thereof; or 2. any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Stockholder, including all Affiliates of the Interested Stockholder, of any assets of the Corporation or any Subsidiary having an aggregate Fair Market Value (as hereinafter defined) of ten million dollars ($10,000,000) or more; or 3. the issuance or transfer by the Corporation or any Subsidiary (in one transaction or a series of transactions) of any securities of the Corporation or any Subsidiary to any Interested Stockholder, including all Affiliates of the Interested Stockholder, in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value of ten million dollars ($10,000,000) or more (other than on a pro rata basis to all holders of Voting Stock of the same class held by the Interested Stockholder pursuant to a stock split, stock dividend or distribution of warrants or rights and other than in connection with the exercise or conversion of securities exercisable for or convertible into securities of the Corporation of any of its subsidiaries which securities have been distributed pro rata to all holders of Voting Stock); or 4. the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Stockholder or any Affiliates of an Interested Stockholder; or 5. any reclassification of securities (including any reverse stock split), or recapitalization of the Corporation, or any merger or consolidation of the Corporation with any of its Subsidiaries or any other transaction (whether or not an Interested Stockholder is a party thereto) which has the effect, directly or indirectly, of increasing the proportionate share by more than one percent (1%) of the issued and outstanding shares of any class of equity or convertible securities of the Corporation or any 8 9 Subsidiary which are directly or indirectly owned by any Interested Stockholder or one or more Affiliates of the Interested Stockholder; shall require the affirmative vote of the holders of at least sixty six and two-thirds percent (66 2/3%) of the voting power of the then issued and outstanding Voting Stock, as hereinafter defined, voting together as a single class, including the affirmative vote of the holders of at least sixty six and two-thirds percent (66 2/3%) of the voting power of the then issued and outstanding Voting Stock not Beneficially Owned directly or indirectly by an Interested Stockholder or any Affiliate of any Interested Stockholder. Such affirmative vote shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be permitted, by law or in any agreement with any national securities exchange or otherwise. B. The provisions of Section A of this Article XII shall not be applicable to any particular Business Combination (as hereinafter defined), and such Business Combination shall require only such affirmative vote as is required by law or any other provision of this Second restated Certificate of Incorporation, if the conditions specified in either of the following paragraph 1 or 2 are met: 1. the Business Combination shall have been approved by a majority of the Continuing Directors (as hereinafter defined); or 2. all of the following price and procedural conditions shall have been met: (a) the aggregate amount of the cash and the Fair Market Value (as hereinafter defined) as of the date of the consummation of the Business Combination of consideration other than cash, to be received per share by the holders of Common Stock in such Business Combination, shall be at least equal to the highest of the following: (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of Common Stock acquired by it (A) within the two (2) year period immediately prior to the first public announcement of the proposal of such Business Combination (the "Announcement Date"), or (B) in the transaction in which it became an Interested Stockholder, whichever is higher; (ii) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Interested Stockholder became an Interested Stockholder (the "Determination Date"), whichever is higher; and (iii) (if applicable) the price per share equal to the Fair Market Value per share of Common Stock determined pursuant to paragraph 2(a)(ii) above, multiplied by the ratio of (A) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of Common Stock acquired by it within the two (2) year period immediately prior to the Announcement Date to (B) the Fair Market Value per share of Common Stock on the first day in such two (2) year period upon which the Interested Stockholder acquired any shares of Common Stock; and 9 10 (b) the aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of any other class, other than Common Stock or Excluded Preferred Stock, of issued and outstanding Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this paragraph 2(b) shall be required to be met with respect to every such class of issued and outstanding Voting Stock, whether or not the Interested Stockholder has previously acquired any shares of a particular class of Voting Stock): (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of such class of Voting Stock acquired by it (A) within the two (2) year period immediately prior to the Announcement Date, or (B) in the transaction in which it became an Interested Stockholder, whichever is higher; (ii) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; (iii) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher; and (iv) (if applicable) the price per share equal to the Fair Market Value per share of such class of Voting Stock determined pursuant to paragraph 2(b)(iii) above, multiplied by the ratio of (A) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Stockholder for any shares of such class of Voting Stock acquired by it within the two (2) year period immediately prior to the Announcement Date to (B) the Fair Market Value per share of such class of Voting Stock on the first day in such two (2) year period upon which the Interested Stockholder acquired any shares of such class of Voting Stock; and (c) the consideration to be received by holders of a particular class of issued and outstanding Voting Stock (including Common Stock and other than Excluded Preferred Stock) shall be in cash or in the same form as the Interested Stockholder has previously paid for shares of such class of Voting Stock (if the Interested Stockholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration for such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock previously acquired by it); and (d) after such Interested Stockholder has become an Interested Stockholder and prior to the consummation of such Business Combination: (i) there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on any issued and outstanding preferred stock, except as approved by a majority of the Continuing Directors; (ii) there shall have been 10 11 no reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock), except as approved by a majority of the Continuing Directors; (iii) there shall have been an increase in the annual rate of dividends as necessary fully to reflect any recapitalization (including any reverse stock split), reorganization or any similar reorganization which has the effect of reducing the number of issued and outstanding shares of the Common Stock, unless the failure so to increase such annual rate is approved by a majority of the Continuing Directors; and (iv) such Interested Stockholder shall not have become the Beneficial Owner of any additional Voting Stock except as part of the transaction which results in such Interested Stockholder becoming an Interested Stockholder; and (e) after such Interested Stockholder has become an Interested Stockholder, such Interested Stockholder shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation, whether in anticipation of or in connection with such Business Combination or otherwise; and (f) a proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to stockholders of the Corporation at least thirty (30) days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be marked pursuant to such Act or subsequent provisions). C. For purposes of this Article XII the following terms shall have the following meanings: 1. "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on June 21, 1996. 2. "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations of the Securities Exchange Act of 1934, as in effect on June 21, 1996. In addition, a Person shall be the "Beneficial Owner" of any Voting Stock which such Person or any of its Affiliates or Associates has: (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; or (b) the right to vote pursuant to any agreement, arrangement or understanding (but neither such Person nor any such Affiliate or Associate shall be deemed to be the Beneficial Owner of any shares of Voting Stock solely by reason of a revocable proxy granted for a particular meeting of the stockholders, pursuant to a public solicitation of proxies for such meeting, and with respect to which shares neither such Person nor any such Affiliate of Associate is otherwise deemed the Beneficial Owner). 3. "Business Combination" shall mean any transaction described in any one or more of clauses (1) through (5) of Section A of this Article XII. 11 12 4. "Continuing Director" shall mean any member of the Board who is unaffiliated with and is not the Interested Stockholder and was a member of the Board prior to the time that the Interested Stockholder became an Interested Stockholder, and any director who is thereafter chosen to fill any vacancy on the Board or who is elected and who, in either event, is unaffiliated with the Interested Stockholder and in connection with his or her initial assumption of office is recommended for appointment or election by a majority of Continuing Directors then on the Board. 5. "Excluded Preferred Stock" means any series of Preferred Stock with respect to which a majority of the Continuing Directors have approved a Preferred Stock Designation creating such series that expressly provides that the provisions of this Article XII shall not apply. 6. "Fair Market Value" shall mean: (a) in the case of stock, the highest closing sale price during the thirty (30) day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange listed stocks, or, if such stock is not quoted on the composite tape, on the New York Stock Exchange, or, if such stock is not listed on such exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the thirty (30) day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotation System or any system then in use in its stead, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board in accordance with Section D of this Article XII; and (b) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board in accordance with Section D of this Article XII. 7. "Interested Stockholder" shall mean any Person to or which: (a) itself, or along with its Affiliates, is the Beneficial Owner, directly or indirectly, of more than fifteen percent (15%) of the then issued and outstanding Voting Stock; or (b) is an Affiliate of the Corporation and at any time within the two (2) year period immediately prior to the date in question was itself, or along with its Affiliates, the Beneficial Owner, directly or indirectly, of fifteen percent (15%) or more of the then issued and outstanding Voting Stock; or (c) is an assignee of or has otherwise succeeded to any Voting Stock which was at any time within the two (2) year period immediately prior to the date in question beneficially owned by an Interested Stockholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. For the purpose of determining whether a Person is an Interested Stockholder pursuant to paragraph 7 of this Section C, the number of shares of Voting Stock deemed to be issued and outstanding shall include shares deemed owned through application of paragraph 2 of this Section C but shall not include any other shares of Voting Stock that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options or otherwise. 12 13 Notwithstanding anything to the contrary contained in this Second restated Certificate of Incorporation, for purposes of this Second restated Certificate of Incorporation, the term "Interested Stockholder" shall not, for any purpose, include, and the provisions of Article XII(A) hereof shall not apply to: (a) the Corporation or any Subsidiary; or (b) any employee stock ownership plan of the Corporation or any Subsidiary. 8. In the event of any Business Combination in which the Corporation survives, the phrase "other consideration to be received" as used in paragraphs 2(a) and (b) and paragraph B of this Article XII shall include the shares of Common Stock and/or the shares of any other class of issued and outstanding Voting Stock retained by the holders of such shares. 9. "Person" shall mean any individual, firm, corporation, partnership or other entity. 10. "Subsidiary" shall mean any corporation or other entity of which the Corporation owns, directly or indirectly, securities that enable the Corporation to elect a majority of the board of directors or other persons performing similar functions of such corporation or entity or that otherwise give to the Corporation the power to control such corporation or entity. 11. "Voting Stock" means all issued and outstanding shares of capital stock of the Corporation that pursuant to or in accordance with this Second restated Certificate of Incorporation are entitled to vote generally in the election of directors of the Corporation, and each reference herein, where appropriate, to a percentage or portion of shares of Voting Stock shall refer to such percentage or portion of the voting power of such shares entitled to vote. The issued and outstanding shares of Voting Stock shall not include any shares of Voting Stock that may be issuable pursuant to any agreement, or upon the exercise or conversion of any rights, warrants or options or otherwise. D. The Continuing Directors of the Corporation shall have the power and duty to determine for the purposes of this Article XII, on the basis of information known to them after reasonable inquiry, all facts necessary to determine compliance with this Article XII, including, without limitation: (i) whether a Person is an Interested Stockholder; (ii) the number of shares of Voting Stock beneficially owned by any Person; (iii) whether a Person is an Affiliate or Associate of another; (iv) whether the applicable conditions set forth in paragraph 2 of paragraph B of this Article XII have been met with respect to any Business Combination; (v) the Fair Market Value of stock or other property in accordance with paragraph 6 of paragraph C of this Article XII; and (vi) whether the assets which are the subject of any Business Combination have, or the consideration to be received for the issuance or transfer of securities by the Corporation or any Subsidiary in any Business Combination has, an aggregate Fair Market Value of ten million dollars ($10,000,000) or more. E. Nothing contained in this Article XII shall be construed to relieve any Interested Stockholder from any fiduciary obligation imposed by law. F. In addition to any affirmative vote required by applicable law and in addition to any vote of the holders of any series of Preferred Stock provided for or fixed pursuant to the provisions of Article IV of this Second restated Certificate of Incorporation, any alteration, amendment or repeal relating to this Article XII must be approved by the affirmative vote of the holders of at least sixty six and two-thirds percent (66 2/3%) of the combined voting power of the issued and outstanding shares of Voting Stock, voting together as a single class. 13 14 IN WITNESS WHEREOF, this Second restated Certificate of Incorporation has been signed this ____ day of May 1998. CERPROBE CORPORATION By: --------------------------------------- C. Zane Close, President 14 EX-10.F.F.F 3 EX-10.F.F.F 1 EXHIBIT 10.fff LEASE SCHEDULE NO. 1000065778 FINANCING LEASE Master Lease Agreement dated NOVEMBER 17, 1997 Lessor: Banc One Leasing Corporation Lessee: COMPUROUTE, INC. 1. GENERAL. This Lease Schedule is signed and delivered under the Master Lease Agreement identified above, as amended from time to time ("Master Lease"), between Lessee and Lessor. Capitalized terms defined in the Master Lease will have the same meanings when used in this Schedule. 2. FINANCING. Lessor finances for Lessee, and Lessee finances with Lessor, all of the property ("Equipment") described below or in Schedule A-1 attached hereto (and Lessee represents that all Equipment is new unless specifically identified as used): 3. AMOUNT FINANCED. $389,190.31 EQUIPMENT COST $ 100.00 DOCUMENTATION FEE $389,290.31 TOTAL AMOUNT FINANCED 4. FINANCING TERM. The Lease Term of this Schedule shall be SIXTY (60) months. The Lease Term begins on the earlier of the Acceptance Date or the Commencement Date and continues for the number of months after the Commencement Date as stated above. The Acceptance Date is the date that Lessor accepts this Schedule as stated below Lessor's signature. The Commencement Date is the 15th day of the month in which the Acceptance Date occurs. 5. INSTALLMENT PAYMENTS. As financing for the Equipment, Lessee shall pay to Lessor all amounts stated below on the due dates stated below. There shall be added to each installment payment all applicable Taxes as in effect from time to time. MONTHLY INSTALLMENT PAYMENT (excluding Taxes): $7,745.20 FREQUENCY & TIMING OF INSTALLMENT PAYMENTS: MONTHLY IN ARREARS NUMBER OF INSTALLMENT PAYMENTS: SIXTY (60) INSTALLMENT PAYMENT DUE DATES: The first installment payment shall be paid thirty (30) days from the Commencement Date and all subsequent installment payments shall be paid on the same day of each month thereafter. SET-UP/FILING FEE: $0.00 which shall be paid on the Commencement Date. SECURITY DEPOSIT: $0.00 which shall be paid on the Commencement Date. At the end of the lease term, Lessee shall make a final payment of $1.00. Principal Amount: $389,290.31 Interest Rate Per Annum: 7.20% Lessee promises to pay said principal, with interest at said rate, in the amount and at the times stated in this schedule. Interest is calculated on the basis of 30-day months and 360-day year. 6. SECURITY INTEREST. This Schedule is intended to be a secured debt financing transaction, NOT a true lease. See Paragraph 7 below regarding Lessee's ownership of the Equipment. As collateral security for payment and performance of all Secured Obligations (defined in Paragraph 8 below) and to induce Lessor to extend credit from time to time to Lessee (under the Lease or otherwise), Lessee hereby grants to Lessor a first priority security interest in all of Lessee's right, title and interest in the Equipment, whether now existing or hereafter acquired, any sums specified in this Schedule as a "Security Deposit", and in all Proceeds Page 1 of 3 2 (defined in Paragraph 8 below). At its option, Lessor may apply all or any part of any Security Deposit to cure any default of Lessee under the Lease. If upon final termination of this Schedule, Lessee has fulfilled all of the terms and conditions hereof, then Lessor shall pay to Lessee upon Lessee's written request any remaining balance of the Security Deposit for this Schedule, without interest. 7. TITLE TO EQUIPMENT; FIRST PRIORITY LIEN. Lessee represents, warrants and agrees: that Lessee currently is the lawful owner of the Equipment; that good and marketable title to the Equipment shall remain with Lessee at all times; that Lessee has granted to Lessor a first priority security interest in the Equipment and all Proceeds; and that the Equipment and all Proceeds are, and at all times shall be, free and clear of any Liens other than Lessor's security interest therein. Lessee at its sole expense will protect and defend Lessor's first priority security interest in the Equipment against all claims and demands whatsoever. 8. CERTAIN DEFINITIONS. "Secured Obligations" means (a) all payments and other obligations of Lessee under or in connection with this Schedule, and (b) all payments and other obligations of Lessee (whether now existing or hereafter incurred) under or in connection with the Master Lease and all present and future Lease Schedules thereto, and (c) all other leases, indebtedness, liabilities and/or obligations of any kind (whether now existing or hereafter incurred, absolute or contingent, direct or indirect) of Lessee to Lessor or to any affiliate of either Lessor or BANC ONE CORPORATION. "Proceeds" means all cash and non-cash proceeds of the Equipment including, without limitation, proceeds of insurance, indemnities and/or warranties. 9. AMENDMENTS TO MASTER LEASE. FOR PURPOSES OF THIS SCHEDULE ONLY, LESSEE AND LESSOR agree to amend the Master Lease as follows: (a) public liability or property insurance as described in the second sentence of Section 8 will not be required; (b) the definition of "Stipulated loss Value" in clause (b) of Section 9 is deleted and replaced by Paragraph 10 below; (c) the text of Section 10 is deleted in its entirety; (d) Subsections 23(a) and 23(c) are deleted; (e) subsection 23(b)) and the last sentence of section 4 will apply only if an event of default occurs; and(f) all references in the Lease at it relates to this Schedule to "Lessee" and Lessor" shall be changed to "Borrower" and "Lender" respectively. 10. STIPULATED LOSS VALUE. FOR PURPOSES OF THIS SCHEDULE ONLY, the "Stipulated Loss Value" of any item of Equipment during its lease Term equals the aggregate of the following as of the date specified by Lessor: (a) all accrued and unpaid interest, late charges and other amounts due under this Schedule and the Master Lease to the extent it relates to this Schedule as of such specified date, plus(b) the remaining principal balance due and payable by Lessee under this Schedule as of such specified date, plus (c) interest on the amount described in the foregoing clauses (a) and (b) at the Overdue Rate commencing with the specified date; provided, that the foregoing calculation shall not exceed the maximum amount which may be collected by lessor from lessee under applicable law in connection with enforcement of Lessor's rights under this schedule and the Master Lease to the extent it relates to this Schedule. 11. LESSEE TO PAY ALL TAXES. FOR PURPOSES OF THIS SCHEDULE AND ITS EQUIPMENT ONLY: Lessee shall pay any and all Taxes relating to this Schedule and its Equipment directly to the applicable taxing authority; Lessee shall prepare and file all reports or returns concerning any such Taxes as may be required by applicable law or regulation (provided, that Lessor shall not be identified as the owner of the Equipment in such reports or returns); and Lessee shall, upon Lessor's request, send Lessor evidence of payment of such Taxes and copies of any such reports or returns. 12. LESSEE'S ASSURANCES. Lessee irrevocably and unconditionally: (a) reaffirms all of the terms and conditions of the Master Lease and agrees that the Master Lease remains in full force and effect; (b) agrees that the Equipment is and will be used at all times solely for commercial purposes, and not for personal, family or household purposes; and (c) incorporates all of the terms and conditions of the Master Lease as if fully set forth in this Schedule. 13. REPRESENTATIONS AND WARRANTIES: Lessee represents and warrants that: (a) Lessee is a corporation, partnership or proprietorship duly organized, validly existing and in good standing under the laws Page 2 of 3 3 of the state of its organization and is qualified to do business and is in good standing under the laws of each other state in which the Equipment is or will be located; (b) Lessee has full power, authority and legal right to sign, deliver and perform the Master Lease, this Schedule and all related documents and such actions have been duly authorized by all necessary corporate/partnership/ proprietorship action; and (c) the Master Lease, this Schedule and each related document has been duly signed and delivered by Lessee and each such document constitutes a legal, valid and binding obligation of Lessee enforceable in accordance with its terms. 14. CONDITIONS. No lease of Equipment under this Schedule shall be binding on Lessor, and Lessor shall have no obligation to purchase the Equipment covered hereby, unless: (a) Lessor has received evidence of all required insurance; (b) in Lessor's sole judgment, there has been no material adverse change in the financial condition or business of Lessee or any guarantor; (c) Lessee has signed and delivered to Lessor this Schedule, which must be satisfactory to Lessor, and Lessor has signed and accepted this Schedule; (d) no change in the Code or any regulation thereunder, which in Lessor's sole judgment would adversely affect the economics to Lessor of the lease transaction, shall have occurred or shall appear to be imminent; (e) Lessor has received, in form and substance satisfactory to Lessor, such other documents and information as Lessor shall reasonably request; and (f) Lessee has satisfied all other reasonable conditions established by Lessor. 15. OTHER DOCUMENTS: EXPENSES: Lessee agrees to sign and deliver to Lessor any additional documents deemed desirable by Lessor to effect the terms of the Master Lease or this Schedule including, without limitation, Uniform Commercial Code financing statements which Lessor is authorized to file with the appropriate filing officers. Lessee hereby irrevocably appoints Lessor as Lessee's attorney-in-fact with full power and authority in the place of Lessee and in the name of Lessee to prepare, sign, amend, file or record any Uniform Commercial Code financing statements or other documents deemed desirable by Lessor to perfect, establish or give notice of Lessor's interests in the Equipment or in any collateral as to which Lessee has granted Lessor a security interest. Lessee shall pay upon Lessor's written request any actual out-of-pocket costs and expenses paid or incurred by Lessor in connection with the above terms of this section or the funding and closing of this Schedule. 16. PURCHASE ORDERS AND ACCEPTANCE OF EQUIPMENT. Lessee agrees that (i) Lessor has not selected, manufactured, sold or supplied any of the Equipment, (ii) Lessee has selected all of the Equipment and its suppliers, and (iii) Lessee has received a copy of, and approved, the purchase orders or purchase contracts for the Equipment. AS BETWEEN LESSEE AND LESSOR, LESSEE AGREES THAT: (a) LESSEE HAS RECEIVED, INSPECTED AND APPROVED ALL OF THE EQUIPMENT; (b) ALL EQUIPMENT IS IN GOOD WORKING ORDER AND COMPLIES WITH ALL PURCHASE ORDERS OR CONTRACTS AND ALL APPLICABLE SPECIFICATIONS; (c) LESSEE IRREVOCABLY ACCEPTS ALL EQUIPMENT FOR PURPOSES OF THE LEASE "AS-IS, WHERE-IS" WITH ALL FAULTS; AND (d) LESSEE UNCONDITIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO REVOKE ITS ACCEPTANCE OF THE EQUIPMENT. LESSEE HAS READ AND UNDERSTOOD ALL OF THE TERMS OF THIS SCHEDULE. LESSEE AGREES THAT THERE ARE NO ORAL OR UNWRITTEN AGREEMENTS WITH LESSOR REGARDING THE EQUIPMENT OR THIS SCHEDULE. BANC ONE LEASING CORPORATION COMPUROUTE, INC. (Lessor) (Lessee) By: Illegible Signature By: /s/ Alexander D. Wasserzug - -------------------------------- ------------------------------------ Title: MGR, FUNDING Title: PRESIDENT - -------------------------------- ------------------------------------ Acceptance Date: 6/17/98 Witness: Illegible Signature - -------------------------------- ------------------------------------ Page 3 of 3 4 CORPORATE LEASE ACKNOWLEDGMENT State of Texas : : SS County of Dallas : The above mentioned foregoing instrument, was acknowledged before me this 7 May 1998 by (Officers' Name) Alexander D. Wasserzug, (Officer's Title) President, of CompuRoute, a Delaware corporation, on behalf of the corporation. /s/ Linda J. Adams ----------------------- [Notary Seal] Notary Public Commission Expires 6-23-98 5 BANC ONE LEASING CORPORATION SCHEDULE A-1 EQUIPMENT LEASED HEREUNDER QUANTITY DESCRIPTION PAGE 1 =========== ==================================================================== EQUIPMENT LOCATION: 10365 SANDEN DRIVE DALLAS, TEXAS 75238 COUNTY: DALLAS EQUIPMENT COST: $389,190.31 EQUIPMENT DESCRIPTION: ONE (1) PLURITEC USA MULTISTATION PCB CNC DRILL, SERIAL NO. 07001197-1 FIVE (5) MILLER SQA WORKSTATIONS ONE (1) ISHII HYOKI JET SCRUBBER, WITH COMPONENTS: ULTRA SONIC GENERATOR, SERIAL NO. U-7018 RINSE DRYER, SERIAL NO. U-7012 CONTROL PANEL, SERIAL NO. U-97020 ONE (1) GERBER SYSTEMS SCAN HEAD UPGRADE W/VIDEO, SERIAL NO. 9723563S TOGETHER WITH ALL ATTACHMENTS, ADDITIONS, ACCESSIONS, PARTS, REPAIRS, IMPROVEMENTS, REPLACEMENTS AND SUBSTITUTIONS THERETO. This Schedule A-1 is attached to and made a part of Lease Number 1000065778 and constitutes a true and accurate description of the equipment. Lessee: COMPUROUTE, INC. By: /s/ Alexander D. Wasserzug ----------------------------- Date: 07 May 1998 ---------------------------- 6 PREPAYMENT SCHEDULE ADDENDUM (For Prepayment of a Financing Lease Schedule) Dated 07 May 1998 Lease Schedule No. 1000065778 Dated 07 May 1998 - --------------------------------------- --------------------- Lessee: COMPUROUTE, INC. Reference is made to the above Lease Schedule as previously amended ("Schedule") and to the Master Lease Agreement as previously amended ("Master Lease") identified in the Schedule, which are by and between Banc One Leasing Corporation ("Lessor") and the above lessee ("Lessee"). As used herein: "Lease" shall mean the Schedule and the Master Lease, but only to the extent that the Master Lease relates to the Schedule; and "Equipment" shall mean the equipment covered by the Schedule. This Schedule Addendum amends and supplements the terms and conditions of the Lease. Unless otherwise defined herein, capitalized terms defined in the Lease shall have the same meaning when used herein. SOLELY FOR PURPOSES OF THE SCHEDULE, LESSOR AND LESSEE AGREE AS FOLLOWS: 1. Notwithstanding anything to the contrary in the Lease, Lessee and Lessor agree that so long as Lessee gives Lessor at least 20 days prior written notice (the "Notice Period"), Lessee may elect to prepay the outstanding principal balance of the Schedule, in whole or in part, on the rent payment date (a "Prepayment Date") following the Notice Period by paying to Lessor (whether made voluntarily or involuntarily as a result of an acceleration of the Maturity Date or otherwise), the total of the following: (a) all accrued rent or installment payments, interest, Taxes, late charges and other amounts then due and payable under the Schedule and the Master Lease to the extent it relates to the Schedule; plus (b) the principal amount selected by Lessee for prepayment in the notice of prepayment (hereinafter, the "Prepaid Principal"); plus (c) a prepayment premium, if any, equal to the product of (i) a Average Lost Monthly Interest Income and (ii) the number of months from the Prepayment Date to the Maturity Date (with any fraction of a month counted as a month), discounted to present value at the Discount Rate. At the option of Lessor, in its absolute and sole discretion, any prepayment shall be applied to installments coming due hereunder in the inverse order of their due dates. 2. Solely for purposes of this Addendum, the following definitions in this paragraph 2 shall apply to this Addendum. "Maturity Date" means the scheduled expiration of the Lease Term of the Schedule as set forth in the Schedule. "Average Lost Monthly Interest Income" means the amount determined by dividing (i) the product of the Average Principal and the Lost Rate, by (ii) twelve (12). "Average Principal" is the amount equal to either (i) one-half of the sum of (A) the amount of Prepaid Principal and (B) the amount of principal that is scheduled to be due on the Maturity Date ("Balloon Amount"), or (ii) the amount of Page 1 7 Prepaid Principal, if such amount is less than the Balloon Amount. "Lost Rate" is the rate per annum equal to the percentage, if any, by which (i) the yield to maturity of United States Treasury debt obligations having a maturity date nearest to the Maturity Date ("Treasury Obligations") determined on the date hereof exceeds (ii) the yield to maturity of Treasury Obligations determined on the date of prepayment. "Discount Rate" is the rate per annum equal to the yield to maturity of Treasury Obligations determined on the date of prepayment. The maturity date and yield to maturity of the Treasury Obligations shall be determined by Lessor, in its absolute and sole discretion, on the basis of quotations published in The Wall Street Journal, or other comparable sources. Treasury Obligations shall exclude any stripped U.S. Treasury obligations and any U.S. Treasury obligations which have multiple maturity or call dates, and if more than one issue of U.S. Treasury obligations has the applicable maturity month, then the U.S. Treasury obligation with the highest yield to maturity shall be used. 3. Except as expressly amended or supplemented by this Addendum and other instruments signed by Lessor, the Lease remains unchanged and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of the date referenced above. COMPUROUTE, INC. Banc One Leasing Corporation (Lessee) (Lessor) By: /s/ Alexander D. Wasserzug By: Illegible Signature - ------------------------------ ----------------------------- Title: PRESIDENT Title: MGR, FUNDING - ------------------------------ ----------------------------- Page 2 8 CORPORATE GUARANTY (Limited to the "Guaranteed Lease") Master Lease Agreement Date: NOVEMBER 17, 1997 Lessee Name: COMPUROUTE, INC. Lease Schedule Number: 1000065778 Equipment Cost/Amount Financed: $389,290.31 1. For valuable consideration, the receipt of which is hereby acknowledged, the undersigned jointly and severally unconditionally guarantee to BANC ONE LEASING CORPORATION (hereinafter called "Lessor") the full and prompt performance by the lessee identified above (hereinafter called "Lessee") of all obligations which Lessee now has or may hereafter have to Lessor under the GUARANTEED LEASE (as defined below) and unconditionally guarantee the prompt payment when due (whether at scheduled maturity, upon acceleration or otherwise) of any and all sums, indebtedness and liabilities of whatsoever nature, due or to become due, direct or indirect, absolute or contingent, now or hereafter at any time owed or contracted by Lessee to Lessor under the GUARANTEED LEASE, and all costs and expenses of and incidental to collection of any of the foregoing, including reasonable attorneys' fees (all of the foregoing hereinafter called "Obligations"). "GUARANTEED LEASE" shall mean the Lease Schedule identified above (whether now existing or hereafter arising) together with the Master Lease Agreement identified above ("Master Lease") to the extent that it relates to the above-described Lease Schedule. 2. This is an absolute and unconditional guarantee of payment and not of collection. Lessor shall not be required, as a condition of the liability of the undersigned, to resort to, enforce or exhaust any of its remedies against the Lessee or any other party who may be liable for payment on any Obligation or to resort to, marshall, enforce or exhaust any of its remedies against any leased property or any property given or held as security for this Guaranty or any Obligation. 3. The undersigned hereby waive and grant to Lessor, without notice to the undersigned and without in any way affecting the liability of the undersigned, the right at any time and from time to time, to extend other and additional credit, leases, loans or financial accommodations to Lessee apart from the Obligations, to deal in any manner as it shall see fit with any Obligation of Lessee to Lessor and with any leased property or security for such Obligation, including, but not limited to, (i) accepting partial payments on account of any Obligation, (ii) granting extensions or renewals of all or any part of any Obligation, (iii) releasing, surrendering, exchanging, dealing with, abstaining from taking, taking, abstaining from perfecting, perfecting, or accepting substitutes for any or all leased property or security which it holds or may hold for any Obligation, (iv) modifying, waiving, supplementing or otherwise changing any of the terms, conditions or provisions contained in any Obligation and (v) the addition or release of any other party or person liable hereon, liable on the Obligations or liable on any other guaranty executed to guarantee any of Lessee's Obligations. The undersigned jointly and severally hereby agree that any and all settlements, compromises, compositions, accounts stated and agreed balances made in good faith between Lessor and Lessee shall be binding upon the undersigned. 4. Every right, power and discretion herein granted to Lessor shall be for the benefit of the successors or assigns of Lessor and of any transferee or assignee of any Obligation covered by this Guaranty, and in the event any such Obligation shall be transferred or assigned, every reference herein to Lessor shall be construed to mean, as to such Obligation, the transferee or assignee thereof. This Guaranty shall be binding upon each of the undersigned's executors, administrators, heirs, successors and assigns. 5. This Guaranty shall continue in force for so long as Lessee shall be obligated to Lessor pursuant to the Obligations described above. The undersigned expressly waive notice of the incurring by Lessee of any Obligation to Lessor. The undersigned also waive presentment, demand of payment, protest, notice of dishonor or nonpayment of or nonperformance of any Obligation. 6. The undersigned hereby waive any claims or rights which they might now have or hereafter acquire against Lessee or any other person primarily or contingently liable on any Obligation of Lessee, which claims or rights arise from the existence or performance of the undersigned's obligations under this Guaranty or any other guaranty or under any instrument or agreement with respect to any leased property or any property constituting collateral or security for this Guaranty or any other guaranty, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, or any right to participate in any claim or remedy of Lessor or any other creditor which the undersigned now has or hereafter acquires, whether such claim or right arises in equity, under contract or statute, at common law, or otherwise. 7. Lessor's rights hereunder shall be reinstated and revived, and this Guaranty shall be fully enforceable, with respect Page 1 9 to any amount at any time paid on account of the Obligations which thereafter shall be required to be restored or returned by Lessor upon the bankruptcy, insolvency or reorganization of the Lessee, the undersigned or any other person, or as a result of any other fact or circumstance, all as though such amount had not been paid. 8. The undersigned jointly and severally agree to pay to Lessor all costs and expenses, including reasonable attorneys' fees, incurred by Lessor in the enforcement or attempted enforcement of this Guaranty, whether or not suit is filed in connection therewith, or in the exercise by Lessor of any right, privilege, power or remedy conferred by this Guaranty. 9. The undersigned represent and warrant that they have relied exclusively on their own independent investigation of Lessee, the leased property and the collateral for their decision to guarantee Lessee's Obligations now existing or thereafter arising. The undersigned agree that they have sufficient knowledge of the Lessee, the leased property, and the collateral to make an informed decision about this Guaranty, and that Lessor has no duty or obligation to disclose any information in its possession or control about Lessee, the leased property, and the collateral to the undersigned. The undersigned warrant to Lessor that they have adequate means to obtain from the Lessee on a continuing basis information concerning the financial condition of the Lessee and that they are not relying on Lessor to provide such information either now or in the future. 10. As long as any indebtedness under any of the Obligations remains unpaid or any credit is available to Lessee under any of the Obligations, the undersigned agree to furnish to Lessor: (a) annual financial statements setting forth the financial condition and results of operation of the undersigned (financial statements shall include balance sheet, income statement, changes in financial position and all notes thereto) within 120 days of the end of each fiscal year of the undersigned; (b) quarterly financial statements setting forth the financial condition and results of operation of the undersigned within 60 days of the end of each of the first three fiscal quarters of the undersigned; and (c) such other financial information as Lessor may from time to time request including, without limitation, financial reports filed by the undersigned with federal or state regulatory agencies. 11. No postponement or delay on the part of Lessor in the enforcement of any right hereunder shall constitute a waiver of such right. The failure of any person or entity to sign this Guaranty shall not discharge the liability of any of the undersigned. 12. This Guaranty remains fully enforceable irrespective of any claim, defense or counterclaim which the Lessee may or could assert on any of the Obligations including but not limited to failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, fraud, bankruptcy, accord and satisfaction, and usury, some of which the undersigned hereby waive along with any standing by the undersigned to assert any said claim, defense or counterclaim. 13. This Guaranty contains the entire agreement of the parties and supersedes all prior agreements and understandings, oral or written, with respect to the subject matter hereof. This Guaranty is not intended to replace or supersede any other guaranty which the undersigned have entered into or may enter into in the future. The undersigned may enter into additional guaranties in the future which may or may not refer to the Master Lease identified above and such guaranties are not intended to replace or supersede this Guaranty unless specifically provided in the additional guaranty. The interpretation, construction and validity of this guaranty shall be governed by the laws of the State of Ohio. With respect to any action brought by Lessor against Guarantor to enforce any term of this guaranty, Guarantor hereby irrevocably consents to the jurisdiction and venue of any state or federal court in Franklin County, Ohio, where Lessor has its principal place of business and where payments are to be made by Lessee and Guarantor. ALL PARTIES TO THIS GUARANTY, INCLUDING GUARANTOR AND LESSOR, 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 GUARANTY. CERPROBE CORPORATION (Guarantor/Undersigned) By: /s/ Randal L. Buness --------------------------- Title: VP & CFO Witness: /s/ Laura M. Back ------------------------ ------------------------ Date: 6/4/98 ------------------------- Page 2 10 CORPORATE ACKNOWLEDGEMENT State of Arizona ) ) SS. County of Maricopa ) The foregoing instrument, Corporate Guaranty, was acknowledged before me this June 5, 1998 by (Officers' Name) Randal L. Buness, (Officer's Title) V.P. & CFO, of (Name of Corporation) Cerprobe Corporation, a Delaware corporation, on behalf of the corporation. [Notary Seal] /s/ Laura M. Back --------------------------- Notary Public Commission Expires July 14, 2001 - --------------------------------- OFFICIAL SEAL LAURA M. BACK Notary Public - State of Arizona MARICOPA COUNTY My Comm. Expires July 14, 2001 - --------------------------------- EX-10.G.G.G 4 EX-10.G.G.G 1 [BANK ONE LETTERHEAD] Exhibit 10.ggg Amendment of Lease No. 1000065410 Be it understood and agreed by and between COMPUROUTE, INC. (Lessee) and Banc One Leasing Corporation (Lessor), that: 1) Lease shall herein be referred to as Lease No. 1000065638. 2) Monthly lease payments shall now be $4,604.66. 3) The Interest Per Annum shall now be (7.24%) Seven and twenty-four hundredths percent. All other terms, provisions, and conditions thereof shall remain the same. Lessee: COMPUROUTE, INC. By: /s/ [illegible] ------------------ Title: PRESIDENT --------------- Lessor: BANC ONE LEASING CORPORATION Approved and Accepted this 17th day of June, 1998. By: /s/ [illegible] -------------------- Title: MGR., FUNDING ----------------- 2 LEASE SCHEDULE NO. 1000065410 FINANCING LEASE Master Lease Agreement dated NOVEMBER 17, 1997 Lessor: Banc One Leasing Corporation Lessee: COMPUROUTE, INC. 1. GENERAL. This Lease Schedule is signed and delivered under the Master Lease Agreement identified above, as amended from time to time ("Master Lease"), between Lessee and Lessor. Capitalized terms defined in the Master Lease will have the same meanings when used in this Schedule. 2. FINANCING. Lessor finances for Lessee, and Lessee finances with Lessor, all of the property ("Equipment") described below or in Schedule A-1 attached hereto (and Lessee represents that all Equipment is new unless specifically identified as used): 3. AMOUNT FINANCED. $231,119.93 $ 100.00 $231,219.93 4. FINANCING TERM. The Lease Term of this Schedule shall be SIXTY (60) months. The Lease Term begins on the earlier of the Acceptance Date or the Commencement Date and continues for the number of months after the Commencement Date as stated above. The Acceptance Date is the date that Lessor accepts this Schedule as stated below Lessor's signature. The Commencement Date is the 15TH day of the month in which the Acceptance Date occurs. 5. INSTALLMENT PAYMENTS. As financing for the Equipment, Lessee shall pay to Lessor all amounts stated below on the due dates stated below. There shall be added to each installment payment all applicable Taxes as in effect from time to time. MONTHLY INSTALLMENT PAYMENT (excluding Taxes): $4,587.16 FREQUENCY & TIMING OF INSTALLMENT PAYMENTS: MONTHLY IN ARREARS NUMBER OF INSTALLMENT PAYMENTS: SIXTY (60) INSTALLMENT PAYMENT DUE DATES: The first installment payment shall be paid thirty (30) days from the Commencement Date and all subsequent installment payments shall be paid on the same day of each month thereafter. SET-UP/FILING FEE: $0.00 which shall be paid on the Commencement Date. SECURITY DEPOSIT: $0.00 which shall be paid on the Commencement Date. At the end of the lease term, Lessee shall make a final payment of $1.00. Principal Amount: $231,219.93 Interest Rate Per Annum: 7.08% Lessee promises to pay said principal, with interest at said rate, in the amount and at the times stated in this schedule. Interest is calculated on the basis of 30-day months and 360-day year. 6. SECURITY INTEREST. This Schedule is intended to be a secured debt financing transaction, NOT a true lease. See Paragraph 7 below regarding Lessee's ownership of the Equipment. As collateral security for payment and performance of all Secured Obligations (defined in Paragraph 8 below) and to induce Lessor to extend credit from time to time to Lessee (under the Lease or otherwise), Lessee hereby grants to Lessor a first priority security interest in all of Lessee's right, title and interest in the Equipment, whether now existing or hereafter acquired, any sums specified in this Schedule as a "Security Deposit", and in all Proceeds Page 1 of 3 3 (defined in Paragraph 8 below). At its option, Lessor may apply all or any part of any Security Deposit to cure any default of Lessee under the Lease. If upon final termination of this Schedule, Lessee has fulfilled all of the terms and conditions hereof, then Lessor shall pay to Lessee upon Lessee's written request any remaining balance of the Security Deposit for this Schedule, without interest. 7. TITLE TO EQUIPMENT; FIRST PRIORITY LIEN. Lessee represents, warrants and agrees: that Lessee currently is the lawful owner of the Equipment; that good and marketable title to the Equipment shall remain with Lessee at all times; that Lessee has granted to Lessor a first priority security interest in the Equipment and all Proceeds; and that the Equipment and all Proceeds are, and at all times shall be, free and clear of any Liens other than Lessor's security interest therein. Lessee at its sole expense will protect and defend Lessor's first priority security interest in the Equipment against all claims and demands whatsoever. 8. CERTAIN DEFINITIONS. "Secured Obligations" means (a) all payments and other obligations of Lessee under or in connection with this Schedule, and (b) all payments and other obligations of Lessee (whether now existing or hereafter incurred) under or in connection with the Master Lease and all present and future Lease Schedules thereto, and (c) all other leases, indebtedness, liabilities and/or obligations of any kind (whether now existing or hereafter incurred, absolute or contingent, direct or indirect) of Lessee to Lessor or to any affiliate of either Lessor or BANC ONE CORPORATION. "Proceeds" means all cash and non-cash proceeds of the Equipment including, without limitation, proceeds of insurance, indemnities and/or warranties. 9. AMENDMENTS TO MASTER LEASE. FOR PURPOSES OF THIS SCHEDULE ONLY, Lessee and Lessor agree to amend the Master Lease as follows: (a) public liability or property insurance as described in the second sentence of Section 8 will not be required; (b) the definition of "Stipulated Loss Value" in clause (b) of Section 9 is deleted and replaced by Paragraph 10 below; (c) the text of Section 10 is deleted in its entirety; (d) Subsections 23(a) and 23(c) are deleted; (e) subsection 23(b) and the last sentence of section 4 will apply only if an event of default occurs; and (f) all references in the Lease as it relates to this Schedule to "Lessee" and "Lessor" shall be changed to "Borrower" and "Lender" respectively. 10. STIPULATED LOSS VALUE. FOR PURPOSES OF THIS SCHEDULE ONLY, the "Stipulated Loss Value" of any item of Equipment during its Lease Term equals the aggregate of the following as of the date specified by Lessor: (a) all accrued and unpaid interest, late charges and other amounts due under this Schedule and the Master Lease to the extent it relates to this Schedule as of such specified date, plus (b) the remaining principal balance due and payable by Lessee under this Schedule as of such specified date, plus (c) interest on the amount described in the foregoing clauses (a) and (b) at the Overdue Rate commencing with the specified date; provided, that the foregoing calculation shall not exceed the maximum amount which may be collected by Lessor from Lessee under applicable law in connection with enforcement of Lessor's rights under this Schedule and the Master Lease to the extent it relates to this Schedule. 11. LESSEE TO PAY ALL TAXES. FOR PURPOSES OF THIS SCHEDULE AND ITS EQUIPMENT ONLY: Lessee shall pay any and all Taxes relating to this Schedule and its Equipment directly to the applicable taxing authority; Lessee shall prepare and file all reports or returns concerning any such Taxes as may be required by applicable law or regulation (provided, that Lessor shall not be identified as the owner of the Equipment in such reports or returns); and Lessee shall, upon Lessor's request, send Lessor evidence of payment of such Taxes and copies of any such reports or returns. 12. LESSEE'S ASSURANCES. Lessee irrevocably and unconditionally: (a) reaffirms all of the terms and conditions of the Master Lease and agrees that the Master Lease remains in full force and effect; (b) agrees that the Equipment is and will be used at all times solely for commercial purposes, and not for personal, family or household purposes; and (c) incorporates all of the terms and conditions of the Master Lease as if fully set forth in this Schedule. 13. REPRESENTATIONS AND WARRANTIES: Lessee represents and warrants that: (a) Lessee is a corporation, partnership or proprietorship duly organized, validly existing and in good standing under the laws Page 2 of 3 4 of the state of its organization and is qualified to do business and is in good standing under the laws of each other state in which the Equipment is or will be located; (b) Lessee has full power, authority and legal right to sign, deliver and perform the Master Lease, this Schedule and all related documents and such actions have been duly authorized by all necessary corporate/partnership/ proprietorship action; and (c) the Master Lease, this Schedule and each related document has been duly signed and delivered by Lessee and each such document constitutes a legal, valid and binding obligation of Lessee enforceable in accordance with its terms. 14. CONDITIONS. No lease of Equipment under this Schedule shall be binding on Lessor, and Lessor shall have no obligation to purchase the Equipment covered hereby, unless: (a) Lessor has received evidence of all required insurance; (b) in Lessor's sole judgment, there has been no material adverse change in the financial condition or business of Lessee or any guarantor; (c) Lessee has signed and delivered to Lessor this Schedule, which must be satisfactory to Lessor, and Lessor has signed and accepted this Schedule; (d) no change in the Code or any regulation thereunder, which in Lessor's sole judgment would adversely affect the economics to Lessor of the lease transaction, shall have occurred or shall appear to be imminent; (e) Lessor has received, in form and substance satisfactory to Lessor, such other documents and information as Lessor shall reasonably request; and (f) Lessee has satisfied all other reasonable conditions established by Lessor. 15. OTHER DOCUMENTS: EXPENSES: Lessee agrees to sign and deliver to Lessor any additional documents deemed desirable by Lessor to effect the terms of the Master Lease or this Schedule including, without limitation, Uniform Commercial Code financing statements which Lessor is authorized to file with the appropriate filing officers. Lessee hereby irrevocably appoints Lessor as Lessee's attorney-in-fact with full power and authority in the place of Lessee and in the name of Lessee to prepare, sign, amend, file or record any Uniform Commercial Code financing statements or other documents deemed desirable by Lessor to perfect, establish or give notice of Lessor's interests in the Equipment or in any collateral as to which Lessee has granted Lessor a security interest. Lessee shall pay upon Lessor's written request any actual out-of-pocket costs and expenses paid or incurred by Lessor in connection with the above terms of this section or the funding and closing of this Schedule. 16. PURCHASE ORDERS AND ACCEPTANCE OF EQUIPMENT. Lessee agrees that (i) Lessor has not selected, manufactured, sold or supplied any of the Equipment, (ii) Lessee has selected all of the Equipment and its suppliers, and (iii) Lessee has received a copy of, and approved, the purchase orders or purchase contracts for the Equipment. AS BETWEEN LESSEE AND LESSOR, LESSEE AGREES THAT: (a) LESSEE HAS RECEIVED, INSPECTED AND APPROVED ALL OF THE EQUIPMENT; (b) ALL EQUIPMENT IS IN GOOD WORKING ORDER AND COMPLIES WITH ALL PURCHASE ORDERS OR CONTRACTS AND ALL APPLICABLE SPECIFICATIONS; (c) LESSEE IRREVOCABLY ACCEPTS ALL EQUIPMENT FOR PURPOSES OF THE LEASE "AS-IS, WHERE-IS" WITH ALL FAULTS; AND (d) LESSEE UNCONDITIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO REVOKE ITS ACCEPTANCE OF THE EQUIPMENT. LESSEE HAS READ AND UNDERSTOOD ALL OF THE TERMS OF THIS SCHEDULE, LESSEE AGREES THAT THERE ARE NO ORAL OR UNWRITTEN AGREEMENTS WITH LESSOR REGARDING THE EQUIPMENT OR THIS SCHEDULE. BANC ONE LEASING CORPORATION COMPUROUTE, INC. (Lessor) (Lessee) By: Illegible Signature By: /s/ Alexander D. Wasserzug - ----------------------------- ------------------------------------ Title: Mgr. Funding Title: President - ----------------------------- ------------------------------------ Acceptance Date: 6/17/98 Witness: Illegible Signature - ----------------------------- ------------------------------------ Page 3 of 3 5 CORPORATE LEASE ACKNOWLEDGEMENT State of Texas : County of Dallas : SS : The above mentioned foregoing instrument, was acknowledged before me this 4/24, 1998 by (Officers' Name) Alexander D. Wasserzug, (Officer's Title) President, of Compuroute, Inc., a Delaware corporation, on behalf of the corporation. [Notary Seal] Linda J. Adams Notary Public Commission Expires 6-23-98 6 BANC ONE LEASING CORPORATION SCHEDULE A-1 EQUIPMENT LEASED HEREUNDER QUANTITY DESCRIPTION PAGE 1 =============================================================================== EQUIPMENT LOCATION: 10365 SANDEN DRIVE DALLAS, TEXAS 75238 COUNTY: DALLAS EQUIPMENT COST: $231,119.93 EQUIPMENT DESCRIPTION: AS DESCRIBED ON TECHNOLOGIES CORPORATION INVOICE NO. 1601 ONE (1) MODEL TT30 HOT AIR LEVELER ONE (1) MODEL 3500 PRECLEANING SYSTEM ONE (1) MODEL 2500 POSTCLEANING SYSTEM ONE (1) MODEL 1550 FREE STANDING FLEXER/HOLDER SYSTEM ONE (1) MODEL 750 COOL DOWN AS DESCRIBED ON INTELLIGENT INTERIORS PO# 546 ONE (1) (30) 6X6 Q SYSTEM WORKSTATIONS TOGETHER WITH ALL ATTACHMENTS, ADDITIONS, ACCESSIONS, PARTS, REPAIRS, IMPROVEMENTS, REPLACEMENTS AND SUBSTITUTIONS THERETO. This Schedule A-1 is attached to and made a part of Lease Number 1000065410 and constitutes a true and accurate description of the equipment. Lessee: COMPUROUTE, INC. By: /s/ Alexander D. Wasserzug - ------------------------------------ Date: 27 April 1998 - ------------------------------------ 7 PREPAYMENT SCHEDULE ADDENDUM (For Prepayment of a Financing Lease Schedule) Dated 6/17/98 Lease Schedule No. 1000065410 Dated 6/17/98 --------------- -------------- Lessee: COMPUROUTE, INC. Reference is made to the above Lease Schedule as previously amended ("Schedule") and to the Master Lease Agreement as previously amended ("Master Lease") identified in the Schedule, which are by and between Banc One Leasing Corporation ("Lessor") and the above lessee ("Lessee"). As used herein: "Lease" shall mean the Schedule and the Master Lease, but only to the extent that the Master Lease relates to the Schedule; and "Equipment" shall mean the equipment covered by the Schedule. This Schedule Addendum amends and supplements the terms and conditions of the Lease. Unless otherwise defined herein, capitalized terms defined in the Lease shall have the same meaning when used herein. SOLELY FOR PURPOSES OF THE SCHEDULE, LESSOR AND LESSEE AGREE AS FOLLOWS: 1. Notwithstanding anything to the contrary in the Lease, Lessee and Lessor agree that so long as Lessee gives Lessor at least 20 days prior written notice (the "Notice Period"), Lessee may elect to prepay the outstanding principal balance of the Schedule, in whole or in part, on the rent payment date (a "Prepayment Date") following the Notice Period by paying to Lessor (whether made voluntarily or involuntarily as a result of an acceleration of the Maturity Date or otherwise), the total of the following: (a) all accrued rent or installment payments, interest, Taxes, late charges and other amounts then due and payable under the Schedule and the Master Lease to the extent it relates to the Schedule; plus (b) the principal amount selected by Lessee for prepayment in the notice of prepayment (hereinafter, the "Prepaid Principal"); plus (c) a prepayment premium, if any, equal to the product of (i) a Average Lost Monthly Interest Income and (ii) the number of months from the Prepayment Date to the Maturity Date (with any fraction of a month counted as a month), discounted to present value at the Discount Rate. At the option of Lessor, in its absolute and sole discretion, any prepayment shall be applied to installments coming due hereunder in the inverse order of their due dates. 2. Solely for purposes of this Addendum, the following definitions in this paragraph 2 shall apply to this Addendum. "Maturity Date" means the scheduled expiration of the Lease Term of the Schedule as set forth in the Schedule. "Average Lost Monthly Interest Income" means the amount determined by dividing (i) the product of the Average Principal and the Lost Rate, by (ii) twelve (12). "Average Principal" is the amount equal to either (i) one-half of the sum of (A) the amount of Prepaid Principal and (B) the amount of principal that is scheduled to be due on the Maturity Date ("Balloon Amount"), or (ii) the amount of Page 1 8 Prepaid Principal, if such amount is less than the Balloon Amount. "Lost Rate" is the rate per annum equal to the percentage, if any, by which (i) the yield to maturity of United States Treasury debt obligations having a maturity date nearest to the Maturity Date ("Treasury Obligations") determined on the date hereof exceeds (ii) the yield to maturity of Treasury Obligations determined on the date of prepayment. "Discount Rate" is the rate per annum equal to the yield to maturity of Treasury Obligations determined on the date of prepayment. The maturity date and yield to maturity of the Treasury Obligations shall be determined by Lessor, in its absolute and sole discretion, on the basis of quotations published in The Wall Street Journal, or other comparable sources. Treasury Obligations shall exclude any stripped U.S. Treasury obligations and any U.S. Treasury obligations which have multiple maturity or call dates, and if more than one issue of U.S. Treasury obligations has the applicable maturity month, then the U.S. Treasury obligation with the highest yield to maturity shall be used. 3. Except as expressly amended or supplemented by this Addendum and other instruments signed by Lessor, the Lease remains unchanged and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Addendum as of the date referenced above. COMPUROUTE, INC. Banc One Leasing Corporation (Lessee) (Lessor) By: /s/ Alexander D. Wasserzug By: Illegible Signature -------------------------- ------------------------ Title: PRESIDENT Title: MGR., FUNDING ----------------- --------------------- Page 2 9 CORPORATE GUARANTY (Limited to the "Guaranteed Lease") Master Lease Agreement Date: NOVEMBER 17,1997 Lessee Name: COMPUROUTE INC. Lease Schedule Number: 1000065638 Equipment Cost/Amount Financed: $231,219.93 1. For valuable consideration, the receipt of which is hereby acknowledged, the undersigned jointly and severally unconditionally guarantee to BANC ONE LEASING CORPORATION (hereinafter called "Lessor") the full and prompt performance by the lessee identified above (hereinafter called "Lessee") of all obligations which Lessee now has or may hereafter have to Lessor under the GUARANTEED LEASE (as defined below) and unconditionally guarantee the prompt payment when due (whether at scheduled maturity, upon acceleration or otherwise) of any and all sums, indebtedness and liabilities of whatsoever nature, due or to become due, direct or indirect, absolute or contingent, now or hereafter at any time owed or contracted by Lessee to Lessor under the GUARANTEED LEASE, and all costs and expenses of and incidental to collection of any of the foregoing, including reasonable attorneys' fees (all of the foregoing hereinafter called "Obligations"). "GUARANTEED LEASE" shall mean the Lease Schedule identified above (whether now existing or hereafter arising) together with the Master Lease Agreement identified above ("Master Lease") to the extent that it relates to the above-described Lease Schedule. 2. This is an absolute and unconditional guarantee of payment and not of collection. Lessor shall not be required, as a condition of the liability of the undersigned, to resort to, enforce or exhaust any of its remedies against the Lessee or any other party who may be liable for payment on any Obligation or to resort to, marshal, enforce or exhaust any of its remedies against any leased property or any property given or held as security for this Guaranty or any Obligation. 3. The undersigned hereby waive and grant to Lessor, without notice to the undersigned and without in any way affecting the liability of the undersigned, the right at any time and from time to time, to extend other and additional credit, leases, loans or financial accommodations to Lessee apart from the Obligations, to deal in any manner as it shall see fit with any Obligation of Lessee to Lessor and with any leased property or security for such Obligation, including, but not limited to, (i) accepting partial payments on account of any Obligation, (ii) granting extensions or renewals of all or any part of any Obligation, (iii) releasing, surrendering, exchanging, dealing with, abstaining from taking, taking, abstaining from perfecting, perfecting, or accepting substitutes for any or all leased property or security which it holds or may hold for any Obligation, (iv) modifying, waiving, supplementing or otherwise changing any of the terms, conditions or provisions contained in any Obligation and (v) the addition or release of any other party or person liable hereon, liable on the Obligations or liable on any other guaranty executed to guarantee any of Lessee's Obligations. The undersigned jointly and severally hereby agree that any and all settlements, compromises, compositions, accounts stated and agreed balances made in good faith between Lessor and Lessee shall be binding upon the undersigned. 4. Every right, power and discretion herein granted to Lessor shall be for the benefit of the successors or assigns of Lessor and of any transferee or assignee of any Obligation covered by this Guaranty, and in the event any such Obligation shall be transferred or assigned, every reference herein to Lessor shall be construed to mean, as to such Obligation, the transferee or assignee thereof. This Guaranty shall be binding upon each of the undersigned's executors, administrators, heirs, successors and assigns. 5. This Guaranty shall continue in force for so long as Lessee shall be obligated to Lessor pursuant to the Obligations described above. The undersigned expressly waive notice of the incurring by Lessee of any Obligation to Lessor. The undersigned also waive presentment, demand of payment, protest, notice of dishonor or nonpayment of or nonperformance of any Obligation. 6. The undersigned hereby waive any claims or rights which they might now have or hereafter acquire against Lessee or any other person primarily or contingently liable on any Obligation of Lessee, which claims or rights arise from the existence or performance of the undersigned's obligations under this Guaranty or any other guaranty or under any instrument or agreement with respect to any leased property or any property constituting collateral or security for this Guaranty or any other guaranty, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution, indemnification, or any right to participate in any claim or remedy of Lessor or any other creditor which the undersigned now has or hereafter acquires, whether such claim or right arises in equity, under contract or statute, at common law, or otherwise. 7. Lessor's rights hereunder shall be reinstated and revived, and this Guaranty shall be fully enforceable, with respect Page 1 10 to any amount at any time paid on account of the Obligations which thereafter shall be required to be restored or returned by Lessor upon the bankruptcy, insolvency or reorganization of the Lessee, the undersigned or any other person, or as a result of any other fact or circumstance, all as though such amount had not been paid. 8. The undersigned jointly and severally agree to pay to Lessor all costs and expenses, including reasonable attorneys' fees, incurred by Lessor in the enforcement or attempted enforcement of this Guaranty, whether or not suit is filed in connection therewith, or in the exercise by Lessor of any right, privilege, power or remedy conferred by this Guaranty. 9. The undersigned represent and warrant that they have relied exclusively on their own independent investigation of Lessee, the leased property and the collateral for their decision to guarantee Lessee's Obligations now existing or thereafter arising. The undersigned agree that they have sufficient knowledge of the Lessee, the leased property, and the collateral to make an informed decision about this Guaranty, and that Lessor has no duty or obligation to disclose any information in its possession or control about Lessee, the leased property, and the collateral to the undersigned. The undersigned warrant to Lessor that they have adequate means to obtain from the Lessee on a continuing basis information concerning the financial condition of the Lessee and they are not relying on Lessor to provide such information either now or in the future. 10. As long as any indebtedness under any of the Obligations remains unpaid or any credit is available to Lessee under any of the Obligations, the undersigned agree to furnish to Lessor: (a) annual financial statements setting forth the financial condition and results of operations of the undersigned (financial statements shall include balance sheet, income statement, changes in financial position and all notes thereto) within 120 days of the end of each fiscal year of the undersigned; (b) quarterly financial statements setting forth the financial condition and results of operation of the undersigned within 60 days of the end of each of the first three fiscal quarters of the undersigned; and (c) such other financial information as Lessor may from time to time request including, without limitation, financial reports filed by the undersigned with federal or state regulatory agencies. 11. No postponement or delay on the part of Lessor in the enforcement of any right hereunder shall constitute a waiver of such right. The failure of any person or entity to sign this Guaranty shall not discharge the liability of any of the undersigned. 12. This Guaranty remains fully enforceable irrespective of any claim, defense or counterclaim which the Lessee may or could assert on any of the Obligations including but not limited to failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, fraud, bankruptcy, accord and satisfaction, and usury, same of which the undersigned hereby waive along with any standing by the undersigned to asset any said claim, defense or counterclaim. 13. This Guaranty contains the entire agreement of the parties and supersedes all prior agreements and understandings, oral or written, with respect to the subject matter hereof. This Guaranty is not intended to replace or supersede any other guaranty which the undersigned have entered into or may enter into in the future. The undersigned may enter into additional guaranties in the future which may or may not refer to the Master Lease identified above and such guaranties are not intended to replace or supersede this Guaranty unless specifically provided in that additional guaranty. The interpretation, construction and validity of this guaranty shall be governed by the laws of the State of Ohio. With respect to any action brought by Lessor against Guarantor to enforce any term of this guaranty, Guarantor hereby irrevocably consents to the jurisdiction and venue of any state or federal court in Franklin County, Ohio, where Lessor has its principal place of business and where payments are to be made by Lessee and Guarantor. ALL PARTIES TO THIS GUARANTY, INCLUDING GUARANTOR AND LESSOR, 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 GUARANTY. CERPROBE CORPORATION (Guarantor/Undersigned) By: Randal L. Buness ------------------- Title: VP & CFO Witness: /s/ Laura M. Back ---------------- ---------------------------------- Date: 6/4/98 ----------------- Page 2 11 CORPORATE ACKNOWLEDGEMENT State of Arizona: ---------: ss. County of Maricopa: --------- The foregoing instrument, Corporate Guaranty --------------------------------------------, was acknowledged before me this June 5 ,1998 by (Officers' --------------- -- Name) Randal L. Buness ----------------------------------------------------------------, (Officer's Title) V.P. & CFO ----------------------------------------, of (Name of Corporation) Cerprobe Corporation ---------------------------------------------------------, a Delaware corporation, on behalf of the corporation. -------- /s/ Laura M. Back ---------------------------------- Notary Public [Notary Seal] - -------------------------------------- Commission Expires July 14, 2001 OFFICIAL SEAL ------------- LAURA M. BACK [SEAL] Notary Public-State of Arizona MARICOPA COUNTY My Comm. Expires July 14, 2001 - --------------------------------------- EX-10.H.H.H 5 EX-10.H.H.H 1 EXHIBIT 10.hhh [LEE & ASSOCIATES LOGO] INDUSTRIAL REAL ESTATE LEASE (MULTI-TENANT FACILITY) ARTICLE ONE: BASIC TERMS This Article One contains the Basic Terms of this Lease between the Landlord and Tenant named below. Other Articles, Sections and Paragraphs of the Lease referred to in this Article One explain and define the Basic Terms and are to be read in conjunction with the Basic Terms. Section 1.01. DATE OF LEASE: May 15, 1998 Section 1.02. LANDLORD (INCLUDE LEGAL ENTITY): Jackson-Shaw/El Dorado Tech I Limited Partnership Address of Landlord: 4890 Alpha Road, Suite 100, Dallas, Texas 75244 Section 1.03. TENANT (INCLUDE LEGAL ENTITY): Cerprobe Corporation, a Delaware Corporation Address of Tenant: 1150 N. Fiesta Blvd., Gilbert, Arizona 85233-2237 Section 1.04. PROPERTY: The Property is part of Landlord's multi-tenant real property development known as El Dorado Commerce Center and described or depicted in Exhibit "A"(the "Project"). The Project includes the land, the buildings and all other improvements located on the land, and the common areas described in Paragraph 4.05(a). The Property is (include street address, approximate square footage and description) Building Two (2) at the El Dorado Commerce Center is approximately 52,780 square feet. Located south of the southeast corner of San Angelo Street and Colorado Street in Gilbert, Arizona, a.k.a. 973 N. Colorado Street. Tenant to occupy 100% of the building. Section 1.05. LEASE TERM: Ten (10) years Zero (0) months BEGINNING ON AUGUST 1, 1998 or such other date as is specified in this Lease, and ENDING ON JULY 30, 2008. TENANT HAS ONE (1) FIVE (5) YEAR OPTION TO EXTEND THE LEASE AT NINETY PERCENT (90%) OF THE THEN PREVAILING MARKET RENT, AS SUCH TERM IS MORE SPECIFICALLY DEFINED ON ADDENDUM B. Section 1.06. PERMITTED USES: (See Article Five) ADMINISTRATIVE OFFICE, MACHINE SHOP, ELECTRONIC TEST MANUFACTURING AND OTHER USES ALLOWED BY THEN EXISTING ZONING. Section 1.07. TENANT'S GUARANTOR: (If none, so state) None Section 1.08. BROKERS: (See Article Fourteen) (If none, so state) Landlord's Broker: Lee & Associates Arizona Tenant's Broker: Lee & Associates Arizona Section 1.09. COMMISSION PAYABLE TO LANDLORD'S BROKER: (See Article Fourteen) $ Per separate agreement Section 1.10. INITIAL SECURITY DEPOSIT: (See Section 3.03) $ 25,800.00 Section 1.11. VEHICLE PARKING SPACES ALLOCATED TO TENANT: (See Section 4.05) 123 TENANT, AT ITS SOLE EXPENSE AND ENFORCEMENT, MAY RESERVE THE SPACES ALLOCATED ABOVE. Section 1.12. RENT AND OTHER CHARGES PAYABLE BY TENANT: (a) BASE RENT: See Addendum A Dollars ($____) per month for the first _____ months, as provided in Section 3.01, and shall be increased on the first day of the ____ month(s) after the Commencement Date, either (i) as provided in Section 3.02, or (ii) _______________ (b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes (See Section 4.02); (ii) Utilities (See Section 4.03); (iii) Insurance Premiums (See Section 4.04); (iv) Tenant's Initial Pro Rata Share of Common Area Expenses AND PROPERTY TAXES 46.7 % (See Section 4.05); (v) Impounds for Insurance Premiums and Property Taxes (See Section 4.08); (vi) Maintenance, Repairs and Alterations (See Article Six). Section 1.13. LANDLORD'S SHARE OF PROFIT ON ASSIGNMENT OR SUBLEASE: (See Section 9.05) FIFTY PERCENT percent ( 50 %) of the Profit (the "Landlord's Share") SHALL NOT APPLY TO ANY TENANT'S AFFILIATE (AS DEFINED IN SECTION 9.02). Section 1.14. RIDERS: The following Riders are attached to and made a part of this Lease: (If none, so state) Addendum A - Rent Schedule Exhibit 1 - Tenant Improvements Rules and Regulations Lee & Associates Arizona Disclosure Statement Hazardous Waste Rider Addendum B - Market Rent ARTICLE TWO: LEASE TERM 1 2 Section 2.01. LEASE OF PROPERTY FOR LEASE TERM. Landlord leases the Property to Tenant and Tenant leases the Property from Landlord for the Lease Term. The Lease Term is for the period stated in Section 1.05 above and shall begin and end on the dates specified in Section 1.05 above, unless the beginning or end of the Lease Term is changed under any provision of this Lease. The "Commencement Date" shall be the date specified in Section 1.05 above for the beginning of the Lease Term, unless advanced or delayed under any provision of this Lease. [***] Section 2.03. EARLY OCCUPANCY. If Tenant occupies the Property prior to the Commencement Date, Tenant's occupancy of the Property shall be subject to all of the provisions of this Lease. Early occupancy of the Property shall not advance the expiration date of this Lease. [***] Section 2.04. HOLDING OVER. Tenant shall vacate the Property upon the expiration or earlier termination of this Lease. Tenant shall reimburse Landlord for and indemnity Landlord against all damages which Landlord incurs-s from Tenant's delay in vacating the Property. If Tenant does not vacate the Property upon the expiration or earlier termination of the Lease and Landlord thereafter accepts rent from Tenant, Tenant's occupancy of the Property shall be a month-to-month" tenancy, subject to all of the terms of this Lease applicable to a month-to-month tenancy, except that the Base Rent then in effect shall be increased by twenty-five percent (25%). ARTICLE THREE: BASE RENT Section 3.01. TIME AND MANNER OF PAYMENT. Upon execution of this Lease, Tenant shall pay. Landlord the Base Rent in the amount stated in Paragraph 1.12(a) above for the first month of the Lease Term. On the first day of the second month of the Lease Term and each month thereafter, Tenant shall pay Landlord the Base Rent, in advance, without offset, deduction or prior demand. The Base Rent shall be payable at Landlord's address or at such other place as Landlord may designate in writing. [***] [***] [***] Section 3.03. SECURITY DEPOSIT; INCREASES. (a) Upon the execution of this Lease, Tenant shall deposit with Landlord a cash Security Deposit in the amount set forth in Section 1.10 above. Landlord may apply all or part of the Security Deposit to any unpaid rent or other charges due from Tenant or to cure any other defaults of Tenant. If Landlord uses any part of the Security Deposit, Tenant shall restore the Security Deposit to its full amount Within ten (10) days after Landlord's written request. Tenant's failure to do so shall be a material default under this Lease. No Interest shall be paid on the Security Deposit. Landlord shall not be required to keep the Security Deposit separate from its other accounts and no trust relationship is created with respect to the Security Deposit. AS LONG AS TENANT IS NOT IN DEFAULT, LANDLORD SHALL RETURN THE SECURITY DEPOSIT TO TENANT AFTER THE THIRD (3RD) ANNIVERSARY OF THE LEASE. [***] [Confidential Treatment Requested] 2 3 Section 3.04. TERMINATIONS, ADVANCE PAYMENTS. Upon termination of this Lease under Article Seven (Damage or Destruction), Article Eight (Condemnation) or any other termination not resulting from Tenant's default, and after Tenant has vacated the Property in the manner required by this Lease, Landlord shall refund or credit to Tenant (or Tenant's successor) the unused portion of the Security Deposit, any advance rent or other advance payments made by Tenant to Landlord, and any amounts paid for real property taxes and other reserves which apply to any time periods after termination of the Lease. ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT Section 4.01. Additional Rent. All charges payable by Tenant other than Base Rent are called "Additional Rent" unless this Lease provides otherwise, Tenant shall pay all Additional Rent then due with the next monthly installment of Base Rent. The term "rent" shall mean Base Rent and Additional Rent. Section 4.02. PROPERTY TAXES. (a) REAL PROPERTY TAXES. Tenant shall pay all real property taxes on the Property (including any fees, taxes or assessments against, or as a result of, any tenant improvements installed on the Property by or for the benefit of Tenant) during the Lease Term, Subject to Paragraph 4.02(c) and Section 4.08 below, such payment shall be made at least ten (10) days prior to the delinquency date of the taxes. Within such ten (10) day period, Tenant shall furnish Landlord with satisfactory evidence that the real property taxes have been paid. Landlord shall reimburse Tenant for any real property taxes paid by Tenant covering any period of time prior to or after the Lease Term. If Tenant falls to pay the real property taxes when due, Landlord may pay the taxes and Tenant shall reimburse Landlord for the amount of such tax payment as Additional Rent. (b) DEFINITION OF "REAL PROPERTY TAX." Real property tax" means: (i)any fee, license fee, license tax, business license fee, commercial rental tax, levy, charge, assessment, penalty or tax imposed by any taxing authority against the Property; (ii) any tax on the Landlord's right to receive, or the receipt of, rent or income from the Property or against Landlord's business of leasing the Property; (iii) any tax or charge for fire protection, streets, sidewalks, road maintenance, refuse or other services provided to the Property by any governmental agency; (iv) any tax imposed upon this transaction or based upon a re-assessment of the Property due to a change of ownership, as defined by applicable law, or other transfer of all or part of Landlord's interest In the Property; and (v) any charge or fee replacing any tax previously included within the definition of real property tax. "Real property tax" does not, however, include Landlord's federal or state income, franchise, inheritance or estate taxes. (c) JOINT ASSESSMENT. If the Property is not separately assessed, Landlord shall reasonably determine Tenant's share of the real property tax payable by Tenant under Paragraph 4.02(a) from the assessor's worksheets or other reasonably available information. Tenant shall pay such share to Landlord within fifteen (15) days after receipt of Landlord's written statement. (d) PERSONAL PROPERTY TAXES. (i) Tenant shall pay all taxes charged against trade fixtures, furnishings, equipment or any other personal property belonging to Tenant. Tenant shall try to have personal property taxed separately from the Property. (ii) If any of Tenant's personal property is taxed with the Property, Tenant shall pay Landlord the taxes for the personal property within fifteen (15) days after Tenant receives a written statement from Landlord for such personal property taxes. Section 4.03. Utilities. Tenant shall pay directly to the appropriate supplier the cost of all natural gas heat, light, power, sewer service, telephone, water, refuse disposal and other utilities and services supplied to the Property. However, If any services or utilities are jointly metered with other property, Landlord shall make a reasonable determination of Tenant's proportionate share of the cost of such utilities and services and Tenant shall pay such share to Landlord within fifteen (15) days after receipt of Landlord's written statement. Section 4.04. INSURANCE POLICIES. (a) LIABILITY INSURANCE. During the Lease Term, Tenant shall maintain a policy of commercial general liability insurance (sometimes known as broad form comprehensive general liability Insurance) insuring Tenant against liability for bodily injury, property damage (including loss of use of property) and personal injury arising out of the operation, use or occupancy of the Property. Tenant shall name Landlord as an additional insured under such policy. The initial amount of such Insurance shall be One Million Dollars ($1,000,000) per occurrence and shall be subject to REASONABLE periodic increase based upon Inflation, increased liability awards, recommendation of Landlord's professional Insurance advisers and other relevant factors. The liability insurance obtained by Tenant under this Paragraph 4.04(a) shall (i) be primary and non-contributing; (ii) contain cross-liability endorsements; and (iii) insure Landlord against Tenant's performance under Section 5.05, if the matters giving rise to the indemnity under Section 5.05 result from the negligence of Tenant. The amount and coverage of such insurance shall not limit Tenant's liability nor relieve Tenant of any other obligation under this Lease. Landlord may also obtain comprehensive public liability insurance in an amount and with coverage determined by Landlord Insuring Landlord against liability arising out of ownership, operation, use or occupancy of the Property. The policy obtained by Landlord shall not be contributory and shall not provide primary insurance. (b) PROPERTY AND RENTAL INCOME INSURANCE. During the Lease Term, [***] TENANT shall maintain policies of Insurance covering loss of or damage to the Property in the full amount of Its replacement value. Such policy shall contain an Inflation Guard Endorsement and shall provide protection against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, special extended perils (all risk), sprinkler leakage and any other perils which Landlord deems reasonably necessary. [***] TENANT shall [***] obtain flood [***] Insurance if required by any lender holding a security interest In the Property. Landlord shall not obtain Insurance for Tenant's fixtures or equipment or building improvements installed by Tenant on the Property. During the Lease Term, [***] TENANT shall also maintain a rental income insurance policy, with loss payable to Landlord, In an amount equal to one year's Base Rent, plus estimated real property taxes [***]. Tenant shall be liable for the payment of any deductible amount under [***] Tenant's insurance policies maintained pursuant to this Section 4.04, in an amount not to exceed Ten Thousand Dollars ($10,000). Tenant shall not do or permit anything to be done which invalidates any such insurance policies. [Confidential Treatment Requested] 3 4 (c) PAYMENT OF PREMIUMS. Subject to Section 4.08, Tenant shall pay all premiums for the insurance policies described in Paragraphs 4.04(a) and (b) (whether obtained by Landlord or Tenant) within fifteen (15) days after Tenant's receipt of a copy of the premium statement or other evidence of the amount due, except Landlord shall pay all premiums for non-primary comprehensive public liability insurance which Landlord elects to obtain as provided in Paragraph 4.04(a). For insurance policies maintained by Landlord which cover improvements on the entire Project, Tenant shall pay Tenant's prorated share of the premiums, in accordance with the formula in Paragraph 4.05(e) for determining Tenant's share of Common Area costs. If insurance policies maintained by Landlord cover improvements on real property other than the Project, Landlord shall deliver to Tenant a statement of the premium applicable to the Property showing in reasonable detail how Tenant's share of the premium was computed. If the Lease Term expires before the expiration of an insurance policy maintained by Landlord, Tenant shall be liable for Tenant's prorated share of the insurance premiums. Before the Commencement Date, Tenant shall deliver to Landlord a copy of any policy of insurance which Tenant Is required to maintain under this Section 4.04. At least thirty (30) days prior to the expiration of any such policy, Tenant shall deliver to Landlord a renewal of such policy. As an alternative to providing a policy of insurance, Tenant shall have the right to provide Landlord a Certificate of Insurance, executed by an authorized officer of the insurance company, showing that the insurance which Tenant is required to maintain under this Section 4.04 Is In full force and effect and containing such other information which Landlord reasonably requires. (d) GENERAL INSURANCE PROVISIONS. (i) Any insurance which Tenant is required to maintain under this Lease shall include a provision which requires the insurance carrier to give Landlord not less than thirty (30) days' written notice prior to any cancellation or modification of such coverage. (ii) If Tenant falls to deliver any policy, certificate or renewal to Landlord required under this Lease within the prescribed time period or if any such policy Is canceled or modified during the Lease Term without Landlord's consent, Landlord may obtain such Insurance, in which case Tenant shall reimburse Landlord for the cost of such insurance within fifteen (15) days after receipt of a statement that indicates the cost of such insurance. (iii) Tenant shall maintain all Insurance required under this Lease with companies holding a "General Policy Rating" of A-12 or better, as set forth In the most current issue of "Best Key Rating Guide". Landlord and Tenant acknowledge the insurance markets are rapidly changing and that insurance in the form and amounts described in this Section 4.04 may not be available In the future. Tenant acknowledges that the insurance described in this Section 4.04 Is for the primary benefit of Landlord. If at any time during the Lease Term, Tenant is unable to maintain the insurance required under the Lease, Tenant shall nevertheless maintain insurance coverage which is customary and commercially reasonable in the insurance industry for Tenant's type of business, as that coverage may change from time to time. Landlord makes no representation as to the adequacy of such insurance to protect Landlord's or Tenant's Interests. Therefore, Tenant shall obtain any such additional property liability insurance which Tenant deems necessary to protect Landlord and Tenant. (iv) Unless prohibited under any applicable insurance policies maintained, Landlord and Tenant each hereby waive any and all rights of recovery against the other, or against the officers, employees, agents or representatives of the other, for loss of or damage to its property or the property of others under its control, if such loss or damage is covered by any insurance policy in force (whether or not described in this Lease) at the time of such loss or damage. Upon obtaining the required policies of insurance, Landlord and Tenant shall give notice to the Insurance carriers of this mutual waiver of subrogation. Section 4.05. COMMON AREAS; USE, MAINTENANCE AND COSTS. (a) COMMON AREAS. As used in this Lease, "Common Areas" shall mean all areas within the Project which are available for the common use of tenants of the Project and which are not leased or held for the exclusive use of Tenant or other tenants, including, but not limited to, parking areas, driveways, sidewalks, [***], access roads, corridors, landscaping and planted areas. Landlord, from time to time, may change the size, location, nature and use of any of the Common Areas, convert Common Areas into leaseable areas, construct additional parking facilities (including parking structures) in the Common Areas, and increase or decrease Common Area land and/or facilities, PROVIDED HOWEVER ANY SUCH CHANGE SHALL NOT MATERIALLY AND ADVERSELY EFFECT TENANT'S PARKING OR ACCESS TO THE PROPERTY. Tenant acknowledges that such activities may result in inconvenience to Tenant. Such activities and changes are permitted it they do not materially affect Tenant's use of the Property. TENANT SHALL NOT BE RESPONSIBLE FOR ANY COST FOR SUCH CHANGES TO THE COMMON AREAS. (b) USE OF COMMON AREAS. Tenant shall have the nonexclusive right (in common with other tenants and all others to whom Landlord has granted or may grant such rights) to use the Common Areas for the purposes intended, subject to such reasonable rules and regulations as Landlord may establish from time to time. Tenant shall abide by such rules and regulations and shall use its best effort to cause others who use the Common Areas with Tenant's express or implied permission to abide by Landlord's rules and regulations. At any time, Landlord may close any Common Areas to perform any acts in the Common Areas as, in Landlord's judgment, are desirable to improve the Project. Tenant shall not interfere with the rights of Landlord, other tenants or any other person entitled to use the Common Areas. (c) SPECIFIC PROVISION RE: VEHICLE PARKING. Tenant shall be entitled to use the number of vehicle parking spaces in the Project allocated to Tenant in Section 1.11 of the Lease without paying any additional rent. Tenant's parking [***] shall be limited to vehicles no larger than standard size automobiles or pickup utility vehicles. Tenant shall not cause large trucks or other large vehicles to be parked within the Project or on the adjacent public streets. Temporary parking of large delivery vehicles in the Project may be permitted by the rules and regulations established by Landlord. Vehicles shall be parked only in striped parking spaces and not in driveways, loading areas or other locations not specifically designated for parking. Handicapped spaces shall only be used by those legally permitted to use them. If Tenant parks more vehicles in the parking area than the number set forth in Section 1.11 of this Lease, such conduct shall be a material breach of this Lease. In addition to Landlord's other remedies under the Lease, Tenant shall pay a daily charge determined by Landlord for each such additional vehicle. LANDLORD REPRESENTS AND WARRANTS THAT THE NUMBER OF PARKING SPACES SPECIFIED IN SECTION 1.11 OF THIS LEASE ARE AVAILABLE FOR TENANT'S USE AND SHALL BE AVAILABLE FOR TENANT'S USE THROUGHOUT THE LEASE TERM. (d) MAINTENANCE OF COMMON AREAS. Landlord shall maintain the Common Areas in good order, condition and repair and shall operate the Project, in Landlord's [***] REASONABLE discretion, as a first-class industrial/commercial real [Confidential Treatment Requested] 4 5 property development. Tenant shall pay Tenant's pro rata share (as determined below) of all costs incurred by Landlord for the operation and maintenance of the Common Areas. Common Area costs Include, but are not limited to, costs and expenses for the following: gardening and landscaping; utilities, water and sewage charges; maintenance of signs (other than tenants' signs); premiums for liability, property damage, fire and other types of casualty insurance on the Common Areas and worker's compensation insurance; all property taxes and assessments levied on or attributable to the Common Areas and all Common Area improvements; all personal property taxes levied on or attributable to personal property used in connection with the Common Areas; straight-line depreciation on personal property owned by Landlord which it consumed in the operation or maintenance of the Common Areas; rental or lease payments paid by Landlord for rented or leased personal property used in the operation or maintenance of the Common Areas; fees for required licenses and permits; repairing, resurfacing, repaving, maintaining, painting, lighting, cleaning, refuse removal, security and similar items; reserves for roof replacement and exterior painting and other appropriate reserves; and a reasonable allowance to Landlord for Landlord's supervision of the Common Areas (not to exceed five percent (5%) of the gross rents of the Project for the calendar year). Landlord may cause any or all of such services to be provided by third parties and the cost of such services shall be included in Common Area costs. Common Area costs shall not Include depreciation of real property which forms part of the Common Areas. COMMON AREA COSTS FOR ANY CAPITAL ITEMS (INCLUDING RESURFACING AND REPAVING OF THE PARKING LOT) SHALL BE AMORTIZED OVER THE USEFUL LIFE OF THE IMPROVEMENT. (e) TENANT'S SHARE AND PAYMENT. Tenant shall pay Tenant's annual pro rata share of all Common Area costs (prorated for any fractional month) upon written notice from Landlord that such costs are due and payable, and in any event prior to delinquency. Tenant's pro rata share shall be calculated by dividing the square foot area of the Property, as set forth in Section 1.04 of the Lease, by the aggregate square foot area of THE BUILDINGS BUILT OR WHICH MAY BE BUILT IN the Project [***], as of the date on which the computation is made. Tenant's initial pro rata share is set out in Paragraph 1.1 2(b). Any changes in the Common Area costs and/or the aggregate [***] SQUARE FOOT AREA OF THE BUILDINGS BUILT OR WHICH MAY BE BUILT IN the Project [***] shall be effective on the first day of the month after such change occurs. Landlord may, at Landlord's election, estimate in advance and charge to Tenant as Common Area costs, NOT MORE THAN ONE (1) TIME PER YEAR, all real property taxes for which Tenant is liable under Section 4.02 of the Lease, all Insurance premiums for which Tenant Is liable under Section 4.04 of the Lease, all maintenance and repair costs for which Tenant is liable under Section 6.04 of the Lease, and all other Common Area costs payable by Tenant hereunder. At Landlord's election, such statements of estimated Common Area costs shall be delivered monthly, quarterly or at any other periodic Intervals to be designated by Landlord. Landlord may adjust such estimates at any time based upon Landlord's experience and reasonable anticipation of costs. Such adjustments shall be effective as of the next rent payment date after notice to Tenant. Within sixty (60) days after the end of each calendar year of the Lease Term, Landlord shall deliver to Tenant a statement prepared in accordance with generally accepted accounting principles setting forth, in reasonable detail, the Common Area costs paid or incurred by Landlord during the preceding calendar year and Tenant's pro rata share. Upon receipt of such statement, there shall be an adjustment between Landlord and Tenant, with payment to or credit given by Landlord (as the case may be) so that Landlord shall receive the entire amount of Tenant's share of such costs and expenses for such period. Section 4.06. LATE CHARGES. Tenant's failure to pay rent promptly may cause Landlord to incur unanticipated costs. The exact amount of such costs are Impractical or extremely difficult to ascertain. Such costs may include, but are not limited to, processing and accounting charges and late charges which may be imposed on Landlord by any ground lease, mortgage or trust deed encumbering the Property. Therefore, If Landlord does not receive any rent payment within [***] FIVE [***] (5) days after NOTICE TO TENANT THAT it becomes due, Tenant shall pay Landlord a late charge equal to [***] FIVE percent [***] (5%) of the overdue amount. The parties agree that such late charge represents a fair and reasonable estimate of the costs Landlord will Incur by reason of such late payment. Section 4.07. INTEREST ON PAST DUE OBLIGATIONS. Any amount owed by Tenant to Landlord which is not paid WITHIN FIVE (5) DAYS AFTER NOTICE, [***] shall bear interest THEREAFTER at the rate of fifteen percent (15%) per annum [***] However, interest shall not be payable on late charges to be paid by Tenant under this Lease. The payment of interest on such amounts shall not excuse or cure any default by Tenant under his Lease. If the interest rate specified in this Lease is higher than the rate permitted by law, the interest rate is hereby decreased to the maximum legal interest rate permitted by law. Section 4.08. IMPOUNDS FOR INSURANCE PREMIUMS AND REAL PROPERTY TAXES. [***] If Tenant is more than ten (10) days late in the payment of REAL PROPERTY TAXES, LANDLORD MAY ELECT TO HAVE TENANT PAY LANDLORD [***] a sum equal to one-twelfth (1/12) of the annual real property taxes [***], together with each payment of Base Rent. Landlord shall hold such payments in a non-interest bearing impound account. If unknown, Landlord shall reasonably estimate the amount of real property taxes [***] when due. Tenant shall pay any deficiency of funds in the impound account to Landlord upon written request. If Tenant defaults under this Lease, Landlord may apply any funds in the impound account to any obligation then due under this Lease. ONCE TENANT HAS TIMELY PAID ITS IMPOUNDS AND RENT FOR SIX (6) CONSECUTIVE MONTHS THE REQUIREMENT TO IMPOUND SHALL CEASE. ARTICLE FIVE: USE OF PROPERTY Section 5.01. PERMITTED USES. Tenant may use the Property only for the Permitted Uses set forth in Section l.06 above. Section 5.02. MANNER OF USE. Tenant shall not cause or permit the Property to be used in any way which constitutes a violation of any law, ordinance, or governmental regulation or order, which annoys or Interferes with the rights of tenants of the Project, or which constitutes a nuisance or waste. Tenant shall obtain and pay for all permits, including a Certificate of Occupancy, required for Tenant's occupancy of the Property and shall promptly take all actions necessary to comply with all applicable statutes, ordinances, rules, regulations, orders and requirements regulating the use by Tenant of the Property, including the Occupational Safety and Health Act. Section 5.03. HAZARDOUS MATERIALS. SEE ATTACHED RIDER. [***] [Confidential Treatment Requested] 5 6 [***] Section 5.04. SIGNS AND AUCTIONS. Tenant shall not place any signs on the Property without Landlord's prior written consent. Tenant shall not conduct or permit any auctions or sheriff's sales at the Property. Section 5.05. INDEMNITY. Tenant shall Indemnify Landlord against and hold Landlord harmless from any and all costs, claims or liability arising from: (a) Tenant's use of the Property; (b) the conduct of Tenant's business or anything else done or permitted by Tenant to be done in or about the Property, including any contamination of the Property or any other property resulting from the presence or use of Hazardous Material caused or permitted by Tenant PURSUANT TO THE HAZARDOUS WASTE RIDER: (c) any breach or default in the performance of Tenant's obligations under this Lease; (d) any misrepresentation or breach of warranty by Tenant under this Lease; or (a) other acts or omissions of Tenant. Tenant shall defend Landlord against any such cost, claim or liability at Tenant's expense with counsel reasonably acceptable to Landlord or, at Landlord's election, Tenant shall reimburse Landlord for any legal fees or costs incurred by Landlord in connection with any such claim. As a material part of the consideration to Landlord, Tenant assumes all risk of damage to property or injury to persons in or about the Property arising from any cause, and Tenant hereby waives all claims in respect thereof against Landlord, except for any claim arising out of Landlord's [***] negligence or willful misconduct. As used in this Section, the term "Tenant" shall include Tenant's employees, agents, contractors and invitees, if applicable. LANDLORD SHALL INDEMNIFY TENANT AGAINST AND HOLD TENANT HARMLESS FROM ANY AND ALL COSTS, CLAIMS OR LIABILITY WHICH DIRECTLY ARISE FROM: (A) LANDLORD'S BREACH OF ANY OBLIGATION IT HAS PURSUANT TO THE HAZARDOUS WASTE RIDER; (B) ANY BREACH OR DEFAULT IN LANDLORD'S PERFORMANCE OF ITS OBLIGATION UNDER THIS LEASE; OR (C) OTHER NEGLIGENT ACTS OR OMISSIONS OR INTENTIONAL MISCONDUCT OF LANDLORD. IN SUCH EVENT, LANDLORD SHALL DEFEND TENANT AGAINST ANY SUCH COST, CLAIM OR LIABILITY AT LANDLORD'S EXPENSE WITH COUNSEL REASONABLY ACCEPTABLE TO TENANT OR, AT TENANT'S ELECTION, LANDLORD SHALL REIMBURSE TENANT FOR ANY ACTUAL AND REASONABLE LEGAL FEES OR COSTS INCURRED BY TENANT IN CONNECTION WITH ANY SUCH CLAIM. AS USED IN THIS SECTION, THE TERM "LANDLORD" SHALL INCLUDE LANDLORD'S EMPLOYEES, AGENTS, CONTRACTORS AND INVITEES, IF APPLICABLE. Section 5.06. LANDLORD'S ACCESS. Landlord or its agents may enter the Property WITH REASONABLE NOTICE at all reasonable times to show the Property to potential buyers, investors or tenants or other parties; to do any other act or to inspect and conduct tests in order to monitor Tenant's compliance with all applicable environmental laws and all laws governing the presence and use of Hazardous Material; or for any other purpose Landlord deems necessary. Landlord shall give Tenant prior notice of such entry, except in the case of an emergency. Landlord may place customary "For Sale" or "For Lease" signs on the Property ONLY WITHIN THE LAST SIX (6) MONTHS OF THE LEASE TERM. Section 5.07. QUIET POSSESSION. If Tenant pays the rent and complies with all other terms of this Lease, Tenant may occupy and enjoy the Property for the full Lease Term, subject to the provisions of this Lease. ARTICLE SIX: CONDITION OF PROPERTY, MAINTENANCE, REPAIRS AND ALTERATIONS Section 6.01. EXISTING CONDITIONS. Tenant accepts the Property in its condition as of the execution of the Lease, subject to all recorded matters, laws, ordinances, and governmental regulations and orders. Except as provided herein, Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation as to the condition of the Property or the suitability of the Property for Tenant's intended use. Tenant represents and warrants that Tenant has made Its own inspection of and inquiry regarding the condition of the Property and is not relying on any representations of Landlord or any Broker with respect thereto. If Landlord or Landlord's Broker has provided a Property Information Sheet or other Disclosure Statement regarding the Property, a copy is attached as an exhibit to the Lease. Section 6.02. EXEMPTION OF LANDLORD FROM LIABILITY. Landlord shall not be liable for any damage or injury to the person, business (or any loss of income therefrom), goods, wares, merchandise or other property of Tenant, Tenant's employees, invitees, customers or any other person in or about the Property, whether such damage or injury is caused by or results from: (a) fire, steam, electricity, water, gas or rain; (b) the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures or any other cause; (c) conditions arising in or about the Property or upon other portions of the Project, or from other sources or places; or (d) any act or omission of any other tenant of the Project. Landlord shall not be liable for any such damage or injury even though the cause of or the means of repairing such damage or injury are not accessible to Tenant. The provisions of this Section 6.02 shall not, however, exempt Landlord from liability for Landlord's [***] negligence or willful misconduct. Section 6.03. LANDLORD'S OBLIGATIONS. (a) Except as provided in Article Seven (Damage or Destruction) and Article Eight (Condemnation), Landlord shall keep the following in good order, condition and repair: the foundations, exterior walls and roof, INCLUDING ALL SUB-STRUCTURE THEREOF, of the Property (including painting the exterior surface of the exterior walls of the Property not more often than once every five ( 5) years, if necessary) and all components of electrical, mechanical, plumbing, heating and air conditioning systems and facilities located in the Property which are concealed or used in common by tenants of the Project. However, Landlord shall not be obligated to maintain or repair windows, doors, plate glass or the Interior surfaces of exterior walls EXCEPT FOR DAMAGE CAUSED BY LANDLORD OR LANDLORD'S AGENTS. Landlord shall make repairs under this Section 6.03 within a reasonable time after receipt of written notice from Tenant of the need for such repairs. (b) Tenant shall pay or reimburse Landlord for all costs Landlord ACTUALLY incurs under Paragraph 6.03(a) above as Common Area costs as provided for in Section 4.05 of the Lease. [***] [Confidential Treatment Requested] 6 7 [***] Section 6.04. TENANT'S OBLIGATIONS. (a) Except as provided in Section 6.03, Article Seven (Damage or Destruction) and Article Eight (Condemnation), Tenant shall keep all portions of the Property (including structural, nonstructural, interior, systems and equipment) in good order, condition and repair (including Interior repainting and refinishing, as needed). It any portion of the Property or any system or equipment in the Property which Tenant is obligated to repair cannot be fully repaired or restored, Tenant shall promptly replace such portion of the Property or system or equipment in the Property, regardless of whether the benefit of such replacement extends beyond the Lease Term; but if the benefit or useful life of such replacement extends beyond the Lease Term (as such term may be extended by exercise of any options), the useful life of such replacement shall be prorated over the remaining portion of the Lease Term (as extended), and Tenant shall be liable only for that portion of the cost which Is applicable to the Lease Term (as extended). [* * *] EXCEPT AS PROVIDED IN ARTICLE 7, If any part of the Property or the Project is damaged by any act or omission of Tenant, Tenant shall pay Landlord the cost of repairing or replacing such damaged property, whether or not Landlord would otherwise be obligated to pay the cost of maintaining or repairing such property. It is the intention of Landlord and Tenant that at all times Tenant shall maintain the portions of the Property which Tenant is obligated to maintain in an attractive, first-class and fully operative condition. (b) Tenant shall fulfill all of Tenant's obligations under this Section 6.04 at Tenant's sole expense. If Tenant falls to maintain, repair or replace the Property as required by this Section 6.04, Landlord may, upon ten (10) days' prior notice to Tenant (except that no notice shall be required in the case of an emergency), enter the Property and perform such maintenance or repair (including replacement, as needed) on behalf of Tenant. In such case, Tenant shall reimburse Landlord for all costs incurred in performing such maintenance or repair immediately upon demand. Section 6.05. ALTERATIONS, ADDITIONS, AND IMPROVEMENTS. (a) Tenant shall not make any alterations, additions, or improvements to the Property without Landlord's prior written consent, except for non-structural alterations which do not exceed [***] FIVE HUNDRED Thousand Dollars [***] ($500,000.00) In cost cumulatively over the Lease Term and FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00) PER YEAR, which are not visible from the outside of any building of which the Property is part. Landlord may require Tenant to provide demolition and/or lien and completion bonds in form and amount satisfactory to Landlord. Tenant shall promptly remove any alterations, additions, or improvements constructed In violation of this Paragraph 6.05(a) upon Landlord's written request. All alterations, additions, and improvements shall be done in a good and workmanlike manner, in conformity with all applicable laws and regulations, and by a contractor approved by Landlord. Upon completion of any such work, Tenant shall provide Landlord with "as built" plans, copies of all construction contracts, and proof of payment for all labor and materials. (b) Tenant shall pay when due all claims for labor and material furnished to the Property. Tenant shall give Landlord at least twenty (20) days' prior written notice of the commencement of any work on the Property, regardless of whether Landlord's consent to such work is required. Landlord may elect to record and post notices of non-responsibility on the Property. Section 6.06. CONDITION UPON TERMINATION. Upon the termination of the Lease, Tenant shall surrender the Property to Landlord, broom clean and in the same condition as received except for ordinary wear and tear which Tenant was not otherwise obligated to remedy under any provision of this Lease. However, Tenant shall not be obligated to repair any damage which Landlord is required to repair under Article Seven (Damage or Destruction). [* * *] All alterations, additions and improvements which [* * *] Tenant [***] HAS NOT removed shall become Landlord's property and shall be surrendered to Landlord upon the expiration or earlier termination of the Lease, except that Tenant may remove any of Tenant's machinery or equipment which can be removed without material damage to the Property. Tenant shall repair, at Tenant's expense, any damage to the Property caused by the removal of any such machinery or equipment. In no event, however, shall Tenant remove any of the following materials or equipment (which shall be deemed Landlord's property) without Landlord's prior written consent: any power wiring or power panels; lighting or lighting fixtures; wall coverings; drapes, blinds or other window coverings; carpets or other floor coverings; heaters, air conditioners or any other heating or air conditioning equipment; fencing or security gates; or other similar building operating equipment and decorations. ARTICLE SEVEN: DAMAGE OR DESTRUCTION Section 7.01. PARTIAL DAMAGE TO PROPERTY, (a) Tenant shall notify Landlord in writing immediately upon the occurrence of any damage to the Property. If the Property is only partially damaged (i.e., less than fifty percent (50%) of the Property is unrentable as a result of such damage or less than fifty percent (50%) of Tenant's operations are materially Impaired) and if the proceeds received by Landlord from the insurance policies described in Paragraph 4.04(b) are sufficient to pay for the necessary repairs (AND IF THEY ARE INSUFFICIENT AND IF THE DAMAGE OR DESTRUCTION WAS CAUSED BY AN ACT OF TENANT AND IF TENANT IS CARRYING THE INSURANCE, TENANT SHALL PAY LANDLORD THE DIFFERENCE), this Lease shall remain in effect and Landlord shall repair the damage as soon as reasonably possible. Landlord may elect (but is not required) to repair any damage to Tenant's fixtures, equipment, or improvements. (b) If the insurance proceeds received by Landlord are not sufficient to pay the entire cost of repair, or if the cause of the damage is not covered by the insurance policies which [* * *] ARE MAINTAINED under Paragraph 4.04(b) (AND IN EITHER EVENT IF TENANT DOES NOT ELECT TO PAY THE SHORTFALL), Landlord may elect [* * *] to [* * *] repair the damage as soon as reasonably possible, in which case this Lease shall remain in full force and effect, or [* * *] LANDLORD OR TENANT MAY terminate this Lease as of the date the damage occurred AS HEREIN AFTER PROVIDED. [* * *] EACH PARTY shall notify [* * *] THE OTHER within thirty (30) days after [* * *] the occurrence of the damage whether [Confidential Treatment Requested] 7 8 [* * *] IT elects to repair the damage or terminate the Lease. If Landlord elects to repair the damage, Tenant shall pay Landlord the "deductible amount" (if any) under [* * *] THE insurance policies and, if the damage was due to an act or omission of Tenant, or Tenant's employees, agents, contractors or invitees, the difference between the actual cost of repair and any insurance proceeds received by Landlord. If Landlord elects to terminate the Lease, Tenant may elect to continue this Lease in full force and effect, [* * *] AND CAUSE LANDLORD TO repair any damage to the Property and any building In which the Property is located [* * *], BY TENANT PAYING ANY SHORTFALL IN INSURANCE PROCEEDS. Tenant shall give Landlord written notice of such election within [* * *] TWENTY [* * *] (20) days after receiving Landlord's termination notice. (c) If the damage to the Property occurs during the last six (6) months of the Lease Term (OR EXTENSION THEREOF) and such damage will COST MORE THAN FIFTY THOUSAND AND NO/100 DOLLARS ($50,000.00) TO REPAIR AND WILL require more than thirty (30) days to repair, either Landlord or Tenant may elect to terminate this Lease as of the date the damage occurred, regardless of the sufficiency of any insurance proceeds. The party electing to terminate this Lease shall give written notification to the other party of such election within thirty (30) days after Tenant's notice to Landlord of the occurrence of the damage. Section 7.02. SUBSTANTIAL OR TOTAL DESTRUCTION. If the Property is substantially or totally destroyed by any cause whatsoever (i.e., the damage to the Property Is greater than partial damage as described In Section 7.01), and regardless of whether Landlord receives any insurance proceeds, this Lease shall terminate as of the date the destruction occurred. Notwithstanding the preceding sentence, if the Property can be rebuilt within six (6) months after the date of destruction, TENANT OR Landlord may elect to [* * *] CAUSE the Property TO BE REBUILT at Landlord's own expense, in which case this Lease shall remain In full force and effect. [* * *] THE PARTY ELECTING TO CAUSE THE REBUILDING shall notify [* * *] THE OTHER of such election within thirty (30) days after [* * *] the occurrence of total or substantial destruction. [* * *], Landlord shall rebuild the Property at Landlord's sole expense, except that if the destruction was caused by an act or omission of Tenant, Tenant shall pay Landlord the difference between the actual cost of rebuilding and any insurance proceeds received by Landlord. Section 7.03. TEMPORARY REDUCTION OF RENT. If the Property is destroyed or damaged and Landlord or Tenant repairs or restores the Property pursuant to the provisions of this Article Seven, any [* * *] AMOUNTS payable HEREUNDER during the period of such damage, repair and/or restoration shall be reduced according to the degree, if any, to which Tenant's use of the Property is impaired. However, the reduction shall not exceed the sum of one year's payment of Base Rent, Insurance premiums, [* * *] real property taxes AND OTHER AMOUNTS PAYABLE HEREUNDER. Except for such possible [* * *] REDUCTIONS in Base Rent, insurance premiums, [* * *] real property taxes AND OTHER AMOUNTS PAYABLE HEREUNDER, Tenant shall not be entitled to any compensation, reduction, or reimbursement from Landlord as a result of any damage, destruction, repair, or restoration of or to the Property. Section 7.04. WAIVER. Tenant waives the protection of any statute, code or judicial decision which grants a tenant the right to terminate a lease in the event of the substantial or total destruction of the leased property. Tenant agrees that the provisions of Section 7.02 above shall govern the rights and obligations of Landlord and Tenant in the event of any substantial or total destruction to the Property. ARTICLE EIGHT: CONDEMNATION If all or any portion of the Property is taken under the power of eminent domain or sold under the threat of that power (all of which are called "Condemnation"), this Lease shall terminate as to the part taken or sold on the date the condemning authority takes title or possession, whichever occurs first. If more than twenty percent (20%) of the floor area of the building in which the Property is located, or which is located on the Property, is taken, [* * *] or IF ANY OTHER PART OF THE PROPERTY IS TAKEN WHICH RESULTS, IN TENANT'S REASONABLE BUSINESS JUDGMENT, IN A SUBSTANTIAL IMPAIRMENT OF TENANT'S ABILITY TO CONDUCT ITS THEN CURRENT AND REASONABLY CONTEMPLATED FUTURE BUSINESS AT THE PROPERTY Tenant may terminate this Lease as of the date the condemning authority takes title or possession, by delivering written notice to [* * *] LANDLORD within [* * *] TWENTY [* * *] (20) days after receipt of written notice of such taking (or in the absence of such notice, [* * *] TWENTY [* * *] (20) days after the condemning authority takes title or possession). If [* * *] TENANT DOES NOT TERMINATE this Lease, this Lease shall remain in effect as to the portion of the Property not taken, except that the Base Rent [* * *], Additional Rent AND ANY OTHER CHARGES PAYABLE HEREUNDER shall be EQUITABLY reduced [* * *]. Any Condemnation award or payment shall be distributed in the following order: (a) first, to any ground lessor, mortgagee or beneficiary under a deed of trust encumbering the Property, the amount of its Interest in the Property; (b) second, to Tenant, [* * *] THE VALUE OF ITS LEASEHOLD AND the amount of any award specifically designated for loss of or damage to Tenant's trade fixtures or removable personal property; and (e) third, to Landlord, the remainder of such award, whether as compensation for [* * *], the taking of the fee, or otherwise. If this Lease is not terminated, Landlord shall repair any damage to the Property caused by the Condemnation, except that Landlord shall not be obligated to repair any damage for which Tenant has been reimbursed by the condemning authority. If the [* * *] damages received by Landlord are not sufficient to pay for such repair AND IF TENANT REFUSES TO FUND THE SHORTFALL, Landlord shall have the right to either terminate this Lease or make such repair at Landlord's expense. ARTICLE NINE: ASSIGNMENT AND SUBLETTING Section 9.01. LANDLORD'S CONSENT REQUIRED. No portion of the Property or of Tenant's interest in this Lease may be acquired by any other person or entity, whether by sale, assignment, mortgage, sublease, transfer, operation of law, or act of Tenant, without Landlord's prior written consent, except as provided in Section 9.02 below. Landlord has the right to grant or withhold its consent as provided in Section 9.05 below. Any attempted transfer without consent shall be void and shall constitute a non-curable breach of this Lease. If Tenant is a partnership, any cumulative transfer of more than twenty percent (20%) of the partnership interests shall require Landlord's consent. [* * *] Section 9.02. TENANT AFFILIATE. Tenant may assign this Lease or sublease the Property, without Landlord's consent, to any [* * *] ENTITY which controls, is controlled by or is under common control with Tenant, or to any corporation ENTITY resulting from the merger of or consolidation with Tenant OR TO [* * *] ANY ENTITY TO [Confidential Treatment Requested] 8 9 WHOM ALL OR SUBSTANTIALLY ALL OF THE ASSETS AND/OR OUTSTANDING STOCK OF TENANT IS TRANSFERRED ("TENANT'S AFFILIATE"). In such case, any Tenant's Affiliate shall assume in writing all of Tenant's obligations under this Lease. Section 9.03. NO RELEASE OF TENANT. No transfer permitted by this Article Nine, whether with or without Landlord's consent, shall release Tenant or change Tenant's primary liability to pay the rent and to perform all other obligations of Tenant under this Lease. Landlord's acceptance of rent from any other person is not a waiver of any provision of this Article Nine. Consent to one transfer is not a consent to any subsequent transfer. If Tenant's transferee defaults under this Lease, Landlord may proceed directly against Tenant without pursuing remedies against the transferee. Landlord may consent to subsequent assignments or modifications of this Lease by Tenant's transferee, without notifying Tenant or obtaining its consent. Such action shall not relieve Tenant's liability under this Lease. Section 9.04. OFFER TO TERMINATE. If Tenant desires to assign the Lease or sublease the Property, Tenant shall have the right to offer, in writing, to terminate the Lease as of a date specified In the offer. If Landlord elects in writing to accept the offer to terminate within twenty (20) days after notice of the offer, the Lease shall terminate as of the date specified and all the terms and provisions of the Lease governing termination shall apply. If Landlord does not so elect, the Lease shall continue in effect until otherwise terminated and the provisions of Section 9.05 with respect to any proposed transfer shall continue to apply. Section 9.05. LANDLORD'S CONSENT. (a) Tenant's request for consent to any transfer described in Section 9.01 shall set forth in writing the details of the proposed transfer, including the name, business and financial condition of the prospective transferee, financial details of the proposed transfer (e.g. the term of and the rent and security deposit payable under any proposed assignment or sublease), and any other information Landlord deems relevant. Landlord shall have the right to withhold consent, if reasonable, or to grant consent, based on the following factors: (i) the business of the proposed assignee or subtenant and the proposed use of the Property; (ii) the net worth and financial reputation of the proposed assignee or subtenant, (iii) Tenant's compliance with all of its obligations under the Lease; and (iv) such other factors as Landlord may reasonably deem relevant. If Landlord objects to a proposed assignment solely because of the net worth and/or financial reputation of the proposed assignee, Tenant may nonetheless sublease (but not assign), all or a portion of the Property to the proposed transferee, but only on the other terms of the proposed transfer. (b) If Tenant assigns or subleases, the following shall apply: (i) Tenant shall pay to Landlord as Additional Rent under the Lease the Landlord's Share ([* * *] SUBJECT TO Section 1.13) of the Profit (defined below) on such transaction as and when received by Tenant, unless Landlord gives written notice to Tenant and the assignee or subtenant that Landlord's Share shall be paid by the assignee or subtenant to Landlord directly. The "Profit" means (A) all amounts paid to Tenant for such assignment or sublease, including "key" money, monthly rent in excess of the monthly rent payable under the Lease, and all fees and other consideration paid for the assignment or sublease, including fees under any collateral agreements, less (B) costs and expenses directly incurred by Tenant in connection with the execution and performance of such assignment or sublease for real estate broker's commissions and costs of renovation or construction of tenant improvements required under such assignment or sublease. Tenant is entitled to recover such costs and expenses before Tenant is obligated to pay the Landlord's Share to Landlord. The Profit in the case of a sublease of less than all the Property is the rent allocable to the subleased space as a percentage on a square footage basis. (ii) Tenant shall provide Landlord a written statement certifying all amounts to be paid from any assignment or sublease of the Property within thirty (30) days after the transaction documentation is signed, and Landlord may inspect Tenant's books and records to verity the accuracy of such statement. On written request, Tenant shall promptly furnish to Landlord copies of all the transaction documentation, all of which shall be certified by Tenant to be complete, true and correct. Landlord's receipt of Landlord's Share shall not be a consent to any further assignment or subletting. The breach of Tenant's obligation under this Paragraph 9.05(b) shall be a material default of the Lease. Section 9.06. NO MERGER. No merger shall result from Tenant's sublease of the Property under this Article Nine, Tenant's surrender of this Lease or the termination of this Lease in any other manner. In any such event, Landlord may terminate any or all subtenancies or succeed to the interest of Tenant as sublandlord under any or all subtenancies. ARTICLE TEN: DEFAULTS; REMEDIES Section 10.01. COVENANTS AND CONDITIONS. Tenant's performance of each of Tenant's obligations under this Lease is a condition as well as a covenant. Tenant's right to continue in possession of the Property is conditioned upon such performance. Time is of the essence in the performance of all covenants and conditions. Section 10.02. DEFAULTS. Tenant shall be in material default under this Lease: (a) [* * *] If Tenant's vacation of the Property results in the cancellation of any insurance described in Section 4.04; (b) If Tenant fails to pay rent or any other charge [* * *] WITHIN FIVE (5) DAYS AFTER TENANT RECEIVES NOTICE OF FAILURE TO PAY WHEN DUE; (c) If Tenant falls to perform any of Tenant's non-monetary obligations under this Lease for a period of thirty (30) days after written notice from Landlord; provided that It more than thirty (30) days are required to complete such performance, Tenant shall not be in default if Tenant commences such performance within the thirty (30) -day period and thereafter diligently pursues its completion. However, Landlord shall not be required to give such notice if Tenant's failure to perform constitutes a non-curable breach of this Lease. The notice required by this Paragraph is intended to satisfy any and all notice requirements imposed by law on Landlord and is not in addition to any such requirement. (d) (i) If Tenant makes a general assignment or general arrangement for the benefit of creditors; (ii) if a petition for adjudication of bankruptcy or for reorganization or rearrangement is filed by or against Tenant and Is not dismissed within [* * *] SIXTY [* * *] (60) days; (iii) if a trustee or receiver is appointed to take possession of substantially all of Tenant's assets located at the Property or of Tenant's interest in this Lease and possession is not restored to Tenant within [* * *] SIXTY [* * *] (60) days; or (iv) if substantially all of Tenant's assets located at the Property or of Tenant's Interest in this [Confidential Treatment Requested] 9 10 Lease is subjected to attachment, execution or other judicial seizure which is not discharged within [***] SIXTY [***] (60) days. If a court of competent jurisdiction determines that any of the acts described in this subparagraph (d) is not a default under this Lease, and a trustee is appointed to take possession (or if Tenant remains a debtor in possession) and such trustee or Tenant transfers Tenant's interest hereunder, then Landlord shall receive, as Additional Rent, the excess, If any, of the rent (or any other consideration) paid in connection with such assignment or sublease over the rent payable by Tenant under this Lease. (e) If any guarantor of the Lease revokes or otherwise terminates, or purports to revoke or other wise terminate, any guaranty of all or any portion of Tenant's obligations under the Lease. Unless otherwise expressly provided, no guaranty of the Lease is revocable. Section l0.03 REMEDIES. On the occurrence of any material default 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: (a) Terminate Tenant's right to possession of the Property by any lawful means, in which case this Lease shall terminate and Tenant shall immediately surrender possession of the Property 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 (1) the worth at the time of the award of the unpaid Base Rent, Additional Rent and other charges which Landlord had earned at the time of the termination; (ii) the worth at the time of the award of the amount by which the unpaid Base Rent, Additional Rent and other charges which Landlord would have earned after termination until the time of the award exceeds the amount of such rental loss that Tenant proves Landlord could have reasonably avoided; (iii) the worth at the time of the award of the amount by which the unpaid Base Rent, Additional Rent and other charges which Tenant would have paid for the balance of the Lease Term after the time of award exceeds the amount of such rental loss that Tenant proves Landlord could have reasonably avoided; and (iv) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform its obligations under the Lease or which in the ordinary course of things would be likely to result thereof from, including, but not limited to, any costs or expenses Landlord incurs in maintaining or preserving the Property after such default, the cost of recovering possession of the Property, expenses of reletting, [***] of the Property, Landlord's reasonable attorneys fees incurred in connection therewith, and any real estate commission paid or payable. As used in subparts (i) and (ii) above, the "worth at the time of the award" is computed by allowing interest on unpaid amounts at the rate of fifteen percent (15%) per annum, or such lesser amount as may then be the maximum lawful rate. As used in subpart (iii) above, the "worth at the time of the award" is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of the award, plus one percent (1%). If Tenant has abandoned the Property, AND DEFAULTED ON THIS LEASE, Landlord shall have the option of (i) retaking possession of the Property and recovering from Tenant the amount specified In this Paragraph 10.03(a), or (ii) proceeding under Paragraph 10.03(b); (b) Maintain Tenant's right to possession, in which case this Lease shall continue in effect whether or not Tenant has abandoned the Property. 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; (c) Pursue any other remedy now or hereafter available to Landlord under the laws or judicial decisions of the state in which the Property is located. [***] Section 10.05. AUTOMATIC TERMINATION. Notwithstanding any other term or provision hereof to the contrary, the Lease shall terminate on the occurrence of any act which affirms the Landlord's intention to terminate the Lease as provided in Section 10.03 hereof, including the filing of an unlawful detainer action against Tenant. On such termination, Landlord's damages for default shall include all costs and fees, including reasonable attorneys' fees that Landlord incurs in connection with the filing, commencement, pursuing and/or defending of any action in any bankruptcy court or other court with respect to the Lease; the obtaining of relief from any stay in bankruptcy restraining any action to evict Tenant; or the pursuing of any action with respect to Landlord's right to possession of the Property. All such damages suffered (apart from Base Rent and other rent payable hereunder) shall constitute pecuniary damages which must be reimbursed to Landlord prior to assumption of the Lease by Tenant or any successor to Tenant in any bankruptcy or other proceeding. Section 10.06. CUMULATIVE REMEDIES. Landlord's exercise of any right or remedy shall not prevent it from exercising any other right or remedy. ARTICLE ELEVEN: PROTECTION OF LENDERS Section 11.01. SUBORDINATION. CONDITIONAL UPON TENANT'S RECEIPT OF A NON-DISTURBANCE AGREEMENT IN FORM REASONABLY SATISFACTORY TO TENANT, Landlord shall have the right to subordinate this Lease to any ground lease, deed of trust or mortgage encumbering the Property, any advances made on the security thereof and any renewals, modifications, consolidations, replacements or extensions thereof, whenever made or recorded. Tenant shall cooperate with Landlord and any lender which is acquiring a security interest in the Property or the Lease. [***] Tenant's right to quiet possession of the Property during the Lease Term shall not be disturbed if Tenant pays the rent and performs all of Tenant's obligations under this Lease and is not otherwise in default. If any ground lessor, beneficiary or mortgagee elects to have this Lease prior to the lien of its ground lease, deed of trust or mortgage and gives written notice thereof to Tenant, this Lease shall be deemed prior to [Confidential Treatment Requested] 10 11 such ground lease, deed of trust or mortgage whether this Lease is dated prior or subsequent to the date of said ground lease, dead of trust or mortgage or the date of recording thereof. Section 11.02. ATTORNMENT. If Landlord's interest in the Property is acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or successor to Landlord's interest in the Property and recognize such transferee or successor as Landlord under this Lease. Tenant waives the protection of any statute or rule of law which gives or purports to give Tenant any right to terminate this Lease or surrender possession of the Property upon the transfer of Landlord's interest. Section 11.03. SIGNING OF DOCUMENTS. . CONDITIONAL UPON TENANT'S RECEIPT OF A NON-DISTURBANCE AGREEMENT IN FORM REASONABLY SATISFACTORY TO TENANT, Tenant shall [***] EXECUTE and deliver SUCH ANY [***] attornment [***], subordination or agreement CONTAINING SUCH REASONABLE TERMS AND CONDITIONS AS LANDLORD, TENANT AND LANDLORD'S LENDER SHALL AGREE.[***] Section 11.04. ESTOPPEL CERTIFICATES. (a) Upon [***] written request, OF EITHER PARTY Tenant AND LANDLORD shall execute, acknowledge and deliver to Landlord a written statement certifying: (i) that none of the terms or provisions of this Lease have been changed (or if they have been changed, stating how they have been changed); (ii) that this Lease has not been canceled or terminated; (iii) the last date of payment of the Base Rent and other charges and the time period covered by such payment; (iv) that [***] THE REQUESTING PARTY is not in default under this Lease (or, if [***] THE REQUESTING PARTY is claimed to be in default, stating why); and (v) such other representations or information with respect to [***] THE OTHER PARTY or the Lease as [***] THE REQUESTING PARTY may reasonably request or which any prospective purchaser or encumbrancer of the Property may require. [***] A PARTY shall deliver such statement to [***] THE REQUESTING PARTY within ten (10) days after [***] request. [***] A PARTY may give any such statement [***] to any prospective purchaser, [***] encumbrancer, ASSIGNEE, SUBLEASEE, TRANSFEREE OR FINANCIER (A "BENEFITED PERSON"). [***]. Such [***] BENEFITED PERSON may rely conclusively upon such statement as true and correct. (b) If [***] THE OTHER PARTY does not deliver such statement to [***] THE REQUESTING PARTY within such ten (10) day period [***] THE REQUESTING PARTY, and any [***], BENEFITED PERSON may conclusively presume and rely upon the following facts: (i) that the terms and provisions of this Lease have not been changed except as otherwise represented by [***] THE REQUESTING PARTY, (ii) that this Lease has not been canceled or terminated except as otherwise represented by [***] THE REQUESTING PARTY,(iii) that not more than one month's Base Rent or other charges have been paid in advance; and (iv) that [***] THE REQUESTING PARTY, is not In default under the Lease. In such event, [***] THE OTHER PARTY shall be estopped from denying the truth of such facts. Section 11.05. TENANT'S FINANCIAL CONDITION. Within ten (10) days after written request from Landlord, Tenant shall deliver to Landlord such financial statements as Landlord reasonably requires to verify the net worth of Tenant or any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall deliver to any lender designated by Landlord any financial statements required by such lender to facilitate the financing or refinancing of the Property. Tenant represents and warrants to Landlord that each such financial statement is a true and accurate statement as of the date of such statement. All financial statements shall be confidential and shall be used only for the purposes set forth In this Lease. ARTICLE TWELVE: LEGAL COSTS Section 12.01. LEGAL PROCEEDINGS. If Tenant or Landlord shall be in breach or default under this Lease, such party (the "Defaulting Party") shall reimburse the other party (the "Nondefaulting Party") upon demand for any costs or expenses that the Nondefaulting Party incurs in connection with any breach or default of the Defaulting Party under this Lease, whether or not suit is commenced or judgment entered. Such costs shall include legal fees and costs incurred for the negotiation of a settlement, enforcement of rights-or otherwise. Furthermore, if any action for breach of or to enforce the provisions of this Lease is commenced, the court in such action shall award to the party in whose favor a judgment is entered, a reasonable sum as attorneys' fees and costs. The losing party in such action shall pay such attorneys' fees and costs. [***] "LANDLORD AND TENANT SHALL INDEMNIFY AND HOLD EACH OTHER HARMLESS FROM ALL COSTS, EXPENSES, DEMANDS AND LIABILITY WHICH THE INDEMNIFIED PARTY MAY INCUR IF THE INDEMNIFIED PARTY BECOMES OR IS MADE A PARTY TO ANY CLAIM OR ACTION: (A) INSTITUTED BY THE INDEMNIFYING PARTY AGAINST ANY THIRD PARTY OR BY ANY THIRD PARTY AGAINST THE INDEMNIFYING PARTY, OR BY OR AGAINST ANY THIRD PERSON HOLDING AN INTEREST UNDER OR USING THE PROPERTY BY LICENSE OF OR AGREEMENT WITH THE INDEMNIFYING PARTY; (B) FOR FORECLOSURE OF ANY LIEN FOR LABOR OR MATERIAL FURNISHED TO OR FOR THE INDEMNIFYING PARTY OR SUCH THIRD PERSON; (C) OTHERWISE ARISING OUT OF OR RESULTING FROM ANY ACT OR TRANSACTION OF THE INDEMNIFYING PARTY OR SUCH THIRD PERSON; OR (D) NECESSARY TO PROTECT THE INTEREST OF THE INDEMNIFIED PARTY UNDER THIS LEASE IN A BANKRUPTCY PROCEEDING, OR OTHER PROCEEDING UNDER TITLE XI OF THE UNITED STATES CODE AS AMENDED. [Confidential Treatment Requested] 11 12 THE INDEMNIFYING PARTY SHALL DEFEND AND HOLD THE INDEMNIFIED PARTY HARMLESS AGAINST ANY SUCH CLAIM OR ACTION AT THE INDEMNIFYING PARTY'S EXPENSE WITH COUNSEL REASONABLY ACCEPTABLE TO THE INDEMNIFIED PARTY OR AT THE ELECTION OF THE INDEMNIFIED PARTY, THE INDEMNIFYING PARTY SHALL REIMBURSE THE INDEMNIFIED PARTY FOR ANY LEGAL COSTS OR COSTS THE INDEMNIFIED PARTY INCURS IN ANY SUCH CLAIM OR ACTION." Section 12.02. LANDLORD'S CONSENT. Tenant shall pay Landlord's reasonable attorneys' fees incurred in connection with Tenant's request for Landlord's consent under Article Nine (Assignment and Subletting), or in connection with any other act which Tenant proposes to do and which requires Landlord's consent. ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS Section 13.01. Non-Discrimination. Tenant promises, and it is a condition to the continuance of this Lease, that there will be no discrimination against, or segregation of, any person or group of persons on the basis of race, color, sex, creed, national origin or ancestry in the leasing, subleasing, transferring, occupancy, tenure or use of the Property or any portion thereof. Section 13.02. LANDLORD'S LIABILITY; CERTAIN DUTIES. (a) As used in this Lease, the term "Landlord" means only the current owner or owners of the fee title to the Property or Project or the leasehold estate under a ground lease of the Property or Project at the time in question. Each Landlord is obligated to perform the obligations of Landlord under this Lease only during the time such Landlord owns such interest or title. Any Landlord who transfers its title or interest is relieved of all liability with respect to the obligations of Landlord under this Lease to be performed on or after the date of transfer. However, each Landlord shall deliver to its transferee all funds that Tenant previously paid if such funds have not yet been applied under the terms of this Lease. (b) Tenant shall give written notice of any failure by Landlord to perform any of its obligations under this Lease to Landlord and to any ground lessor, mortgagee or beneficiary under any deed of trust encumbering the Property whose name and address have been furnished to Tenant in writing. Landlord shall not be in default under this Lease unless Landlord (or such ground lessor, mortgagee or beneficiary) fails to cure such non-performance within thirty (30) days after receipt of Tenant's notice. However, if such non-performance reasonably requires more than thirty (30) days to cure, Landlord shall not be in default if such cure is commenced within such thirty (30) day period and thereafter diligently pursued to completion. (c) Notwithstanding any term or provision herein to the contrary the liability of Landlord for the performance of its duties and obligations under this Lease is limited to Landlord's interest in the Property and the Project, and neither the Landlord nor its partners, shareholders, officers or other principals shall have any personal liability under this Lease. Section 13.03. SEVERABILITY. A determination by a court of competent jurisdiction that any provision of this Lease or any part thereof is illegal or unenforceable shall not cancel or invalidate the remainder of such provision or this Lease, which shall remain In full force and effect. Section 13.04. INTERPRETATION. The captions of the Articles or Sections of this Lease are to assist the parties in reading this Lease and are not a part of the terms or provisions of this Lease. Whenever required by the context of this Lease, the singular shall include the plural and the plural shall include the singular. The masculine, feminine and neuter genders shall each include the other. In any provision relating to the conduct, acts or omissions of Tenant, the term "Tenant" shall include Tenant's agents, employees, contractors, invitees, successors or others using the Property with Tenant's expressed or implied permission. Section 13.05. INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS. This Lease is the only agreement between the parties pertaining to the lease of the Property and no other agreements are effective. All amendments to this Lease shall be in writing and signed by all parties, any other attempted amendment shall be void. Section 13.06. NOTICES. All notices required or permitted under this Lease shall be in writing and shall be personally delivered or sent by certified mail, return receipt requested, postage prepaid. Notices to Tenant shall be delivered to the address specified in Section 1.03 above, except that upon Tenant's taking possession of the Property, the Property shall be Tenant's address for notice purposes. Notices to Landlord shall be delivered to the address specified in Section 1.02 above. All notices shall be effective upon delivery. Either party may change its notice address upon written notice to the other party. Section 13.07. WAIVERS. All waivers must be in writing and signed by the waiving party. Landlord's failure to enforce any provision of this Lease or its acceptance of rent shall not be a waiver and shall not prevent Landlord from enforcing that provision or any other provision of this Lease in the future. No statement on a payment check from Tenant or in a letter accompanying a payment check shall be binding on Landlord. Landlord may, with or without notice to Tenant, negotiate such check without being bound to the conditions of such statement. Section 13.08. NO RECORDATION. Tenant shall not record this Lease Without prior written consent from Landlord. However, either Landlord or Tenant may require that a "Short Form" memorandum of this Lease executed by both parties be recorded. The party requiring such recording shall pay all transfer taxes and recording fees, Section 13.09. BINDING EFFECT; CHOICE OF LAW. This Lease binds any party who legally acquires any rights or interest in this Lease from Landlord or Tenant. However, Landlord shall have no obligation to Tenant's successor unless the rights or interests of Tenant's successor are acquired in accordance with the terms of this Lease. The laws of the state in which the Property is located shall govern this Lease. Section 13.10. CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY. If Tenant is a corporation, each person signing this Lease on behalf of Tenant represents and warrants that he has full authority to do so and that this Lease binds the corporation. Within thirty (30) days after this Lease is signed, Tenant shall deliver to Landlord a certified copy of a resolution of Tenant's Board of Directors authorizing the execution of this Lease or other evidence of such authority reasonably acceptable to Landlord. If Tenant is a partnership, each person or entity signing this Lease for Tenant represents and warrants that he or it is a general partner of the partnership, that he or it has full authority to sign for the partnership and that this Lease binds the partnership and all general partners of the partnership. Tenant shall give written 12 13 notice to Landlord of any general partner's withdrawal or addition. Within thirty (30) days after this Lease is signed, Tenant shall deliver to Landlord a copy of Tenant's recorded statement of partnership or certificate of limited partnership. Section 13.11. JOINT AND SEVERAL LIABILITY. All parties signing this Lease as Tenant shall be jointly and severally liable for all obligations of Tenant. Section 13.12. FORCE MAJEURE. If [***] EITHER PARTY cannot perform any of Its RESPECTIVE obligations due to events beyond [***] SUCH PARTIES control (EXCLUDING FINANCIAL INABILITY), the time provided for performing such obligations shall be extended by a period of time equal to the duration of such events. Events beyond [***] A PARTY'S control include, but are not limited to, acts of God, war, civil commotion, labor disputes, strikes, fire, flood or other casualty, shortages of labor or material, government regulation or restriction and weather conditions. Section 13.13. EXECUTION OF LEASE. This Lease may be executed in counterparts and, when all counterpart documents are executed, the counterparts shall constitute a single binding instrument. Landlord's delivery of this Lease to Tenant shall not be deemed to be an offer to lease and shall not be binding upon either party until executed and delivered by both parties. Section 13.14. SURVIVAL. All representations and warranties of Landlord and Tenant shall survive the termination of this Lease. ARTICLE FOURTEEN: BROKERS Section 14.01. BROKER'S FEE. When this Lease is signed by and delivered to both Landlord and Tenant, Landlord AT NO EXPENSE TO TENANT shall pay a real estate commission to Landlord's Broker named in Section 1.08 above, if any, as provided in the written agreement between Landlord and Landlord's Broker, or the sum stated in Section 1.09 above for services rendered to Landlord by Landlord's Broker in this transaction. Landlord shall pay Landlord's Broker a commission if Tenant exercises any option to extend the Lease Term or to buy the Property, or any similar option or right which Landlord may grant to Tenant, or it Landlord's Broker is the procuring cause of any other lease or sale entered into between Landlord and Tenant covering the Property. Such commission shall be the amount set forth in Landlord's Broker's commission schedule in effect as of the execution of this Lease. If a Tenant's Broker is named in Section 1.08 above, Landlord's Broker shall pay an appropriate portion of Its commission to Tenant's Broker if so provided in any agreement between Landlord's Broker and Tenant's Broker. Nothing contained in this Lease shall impose any obligation on Landlord to pay a commission or fee to any party other than Landlord's Broker. Section 14.02. PROTECTION OF BROKERS. If Landlord sells the Property, or assigns Landlord's interest in this Lease, the buyer or assignee shall, by accepting such conveyance of the Property or assignment of the Lease, be conclusively deemed to have agreed to make all payments to Landlord's Broker thereafter required of Landlord under this Article Fourteen. Landlord's Broker shall have the right to bring a legal action to enforce or declare rights under this provision. The prevailing party in such action shall be entitled to reasonable attorneys' fees to be paid by the losing party. Such attorneys' fees shall be fixed by the court in such action. This Paragraph is Included In this Lease for the benefit of Landlord's Broker. Section 14.03. AGENCY DISCLOSURE; NO OTHER BROKERS. Landlord and Tenant each warrant that they have dealt with no other real estate broker(s) in connection with this transaction except: Lee & Associates Arizona, who represents Both Landlord and Tenant and _______________________________________ who represents ________________________________________________________________. In the event that Lee & Associates Arizona represents both Landlord and Tenant, Landlord and Tenant hereby confirm that they were timely advised of the dual representation and that they consent to the same, and that they do not expect said broker to disclose to either of them the confidential information of the other party. ARTICLE FIFTEEN: COMPLIANCE The parties hereto agree to comply with all applicable federal, state and local laws, regulations, codes, ordinances and administrative orders having jurisdiction over the parties, property or the subject matter of this Agreement, including, but not limited to, the 1964 Civil Rights Act and all amendments thereto, the Foreign Investment In Real Property Tax Act, the Comprehensive Environmental Response Compensation and Liability Act, and The Americans With Disabilities Act. ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER OR RIDERS ATTACHED HERETO OR IN THE BLANK SPACE BELOW. IF NO ADDITIONAL PROVISIONS ARE INSERTED, PLEASE DRAW A LINE THROUGH THE SPACE BELOW. [Confidential Treatment Requested] 13 14 Landlord and Tenant have signed this Lease at the place and on the dates specified adjacent to their signatures below and have initialed all Riders which are attached to or incorporated by reference in this Lease. "LANDLORD" Signed on ______________,19_____ Jackson-Shaw/El Dorado Tech I at _____________________________ Limited Partnership By: Jackson-Shaw/Arizona, Inc. Its: General Partner By: _____________________________ J. Michael Bray Its: Vice President "TENANT" Signed on ______________,19_____ Cerprobe Corporation at _____________________________ a Delaware Corporation By: _____________________________ C. Zane Close Its: President and C.E.O. By: Its: IN ANY REAL ESTATE TRANSACTION, IT IS RECOMMENDED THAT YOU CONSULT WITH A PROFESSIONAL, SUCH AS A CIVIL ENGINEER, INDUSTRIAL HYGIENIST OR OTHER PERSON WITH EXPERIENCE IN EVALUATING THE CONDITION OF THE PROPERTY, INCLUDING THE POSSIBLE PRESENCE OF ASBESTOS, HAZARDOUS MATERIALS AND UNDERGROUND STORAGE TANKS. THIS PRINTED FORM LEASE HAS BEEN DRAFTED BY LEGAL COUNSEL AT THE DIRECTION OF THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE REALTORS? INC. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE REALTORS? INC., ITS LEGAL COUNSEL, THE REAL ESTATE BROKERS NAMED HEREIN, OR THEIR EMPLOYEES OR AGENTS, AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT OR TAX CONSEQUENCES OF THIS LEASE OR OF THIS TRANSACTION. LANDLORD AND TENANT SHOULD RETAIN LEGAL COUNSEL TO ADVISE THEM ON SUCH MATTERS AND SHOULD RELY UPON THE ADVICE OF SUCH LEGAL COUNSEL. 14 EX-11 6 EX-11 1 CERPROBE CORPORATION EXHIBIT 11 COMPUTATION OF NET INCOME (LOSS) PER SHARE EXHIBIT 11 (UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------------- -------------------------- 1998 1997 1998 1997 ----------- ----------- ----------- ----------- Net income (loss) $ 466,778 $ 1,589,326 $ 2,812,208 $(3,305,307) =========== =========== =========== =========== Weighted average common shares outstanding 8,109,950 6,353,047 8,105,700 6,321,399 Common equivalent shares representing shares issuable upon exercise of stock options 276,844 243,022 326,702 238,626 Subtraction of common equivalent shares due to antidilutive nature -- -- -- (238,626) ----------- ----------- ----------- ----------- Dilutive adjusted weighted average shares and assumed conversions 8,386,794 6,596,069 8,432,402 6,321,399 =========== =========== =========== =========== Basic net income (loss) per share $ 0.06 $ 0.25 $ 0.35 $ (0.52) =========== =========== =========== =========== Diluted net income (loss) per share $ 0.06 $ 0.24 $ 0.33 $ (0.52) =========== =========== =========== ===========
EX-27.1 7 EX-27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AT JUNE 30, 1998 AND THE CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1998 APR-01-1998 JUN-30-1998 25,318,979 0 10,916,244 280,247 10,476,668 48,875,948 27,612,780 8,972,985 71,014,299 7,028,220 1,482,378 0 0 406,464 61,329,367 71,014,299 43,421,805 43,421,805 26,470,077 12,897,587 122,588 12,000 122,588 4,703,233 (1,865,632) 2,812,208 0 0 0 2,812,208 0.35 0.33
EX-27.2 8 EX-27.2
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 FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1997 APR-01-1997 JUN-30-1997 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 15,909,241 296,853 12,000 296,853 (1,843,992) 1,490,300 (3,305,307) 0 0 0 (3,305,307) (0.52) (0.52)
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