UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 28, 1996
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PRAEGITZER INDUSTRIES, INC.
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State of Oregon 34-027932 93-0790158
(State or other jurisdiction of (Commission (IRS Employer
incorporation or organization) File No.) Identification No.)
1270 S.E. Monmouth Cut-Off Road, Dallas, Oregon 97338-9532
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(Address of principal executive offices) (Zip Code)
(503) 623-9273
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name and former address and former fiscal year,
if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to a Merger Agreement (the "Merger Agreement") dated as of
August 16, 1996, by and among Praegitzer Industries, Inc., an Oregon
corporation ("Praegitzer"), Trend Circuits, Inc., a California corporation
("Trend"), and the shareholders of Trend (the "Shareholders"), Trend was
merged with and into Praegitzer (the "Merger"). As a result of the Merger,
Praegitzer and Trend became a single corporation subject to the articles of
incorporation and bylaws of Praegitzer, and Praegitzer acquired all of the
assets and assumed all of the liabilities of Trend.
Effective at the time of the Merger, each outstanding share of common
stock of Trend was converted automatically into (i) 277.085 shares of
common stock of Praegitzer ("Praegitzer Common Stock"), and (ii) the right
to receive a cash payment of $1,385.43 from Praegitzer. On completion of
the Merger, the shareholders of Trend held a total of 1,000,000 shares of
Praegitzer, or approximately 8.5% of the outstanding Praegitzer Common
Stock, and received a total of $5,000,000 cash.
Immediately before the Merger, Trend paid the Shareholders (in their
capacities as employees) an extraordinary bonus in the aggregate amount of
$975,166.52, funded by a loan from Praegitzer, which the Shareholders used
to repay obligations previously incurred to a former shareholder in
connection with the purchase of his shares of Trend.
At the time of the Merger, each Shareholder entered into employment
and noncompetition agreements with Praegitzer. Daniel J. Barnett, the
former president of Trend, was elected a director of Praegitzer.
The amount of consideration paid in connection with the Merger was
determined in arms'-length negotiations between officers of Praegitzer and
Trend. The cash obligations of Praegitzer in the Merger were funded by
draws under its line of credit from Key Bank.
Praegitzer intends to use the assets acquired from Trend by reason of
the Merger to continue the lines of business previously operated by Trend.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired.
Audited financial statements of Trend Circuits, Inc. for the years
ended December 31, 1995 and December 31, 1994 are not yet available
and will be filed as soon as practicable and no later than sixty days
from the date of this Form.
Unaudited balance sheet of Trend Circuits, Inc. dated as of June 30,
1996 is not yet available and will be filed as soon as practicable
and no later than sixty days from the date of this Form.
(b) Pro Forma Financial Information.
Pro forma financial statements for Praegitzer Industries, Inc.
following the merger with Trend Circuits, Inc. are not yet available
and will be filed as soon as practicable and no later than sixty days
from the date of this Form.
c) Exhibits.
2.1 Merger Agreement dated as of August 16, 1996, among Praegitzer
Industries, Inc., Trend Circuits, Inc., and Daniel J. Barnett,
Michael E. Gunion, William Lewis, and Scott R. Steward, and
Robert J. Versiackas
*23.1 Consent of Deloitte & Touche LLP, independent auditors
*27.1 Financial Data Schedule
_____________
* To be filed by Amendment.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
September 11, 1996
PRAEGITZER INDUSTRIES, INC.
By MATTHEW J. BERGERSON
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Matthew J. Bergeron
Senior Vice President and
Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
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2.1 Merger Agreement dated as of August 16, 1996, among
Praegitzer Industries, Inc., Trend Circuits, Inc., and Daniel J.
Barnett, Michael E. Gunion, William Lewis, and Scott R.
Steward, and Robert J. Versiackas
*23.1 Consent of Deloitte & Touche LLP, independent auditors
*27.1 Financial Data Schedule
_____________
* To be filed by Amendment.
MERGER AGREEMENT
This MERGER AGREEMENT ("Agreement") is entered into as of August 16,
1996, by and between PRAEGITZER INDUSTRIES, INC., an Oregon corporation
("Praegitzer"); TREND CIRCUITS, INC., a California corporation ("Trend");
and DANIEL J. BARNETT, MICHAEL E. GUNION, WILLIAM LEWIS, SCOTT R. STEWARD,
and ROBERT J. VERSIACKAS, who among them hold all of the outstanding shares
of Trend (together, the "Shareholders").
RECITALS
A. The Boards of Directors of Trend and Praegitzer believe that it is
in the best interest of each corporation and its shareholders to consummate
the merger of Trend with and into Praegitzer pursuant to the applicable
provisions of the California Corporations Code (the "CCC") and the Oregon
Business Corporation Act (the "OBCA") and on the terms and conditions of
this Agreement (the "Merger") and the Plan of Merger attached hereto as
Exhibit A (the "Plan of Merger").
B. It is intended that the Merger qualify as a tax-free
reorganization under Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended (the "Code").
AGREEMENT
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ARTICLE 1
THE MERGER
1.1 General. At the Effective Time (as defined in Section 1.2 below),
in accordance with the terms and subject to the conditions of this
Agreement and the Plan of Merger, and pursuant to the OBCA and the CCC,
Trend shall be merged with and into Praegitzer, and all outstanding shares
of the capital stock of Trend shall be converted into shares of the capital
stock of Praegitzer and cash pursuant to Section 1.5(a), in a transaction
qualifying as a tax-free reorganization under Section 368(a)(1)(A) of the
Code. Immediately after the Merger, Praegitzer shall continue as the
surviving corporation.
1.2 Effective Time. At or before the Closing (as defined in Section
1.9), Praegitzer and Trend shall execute the Plan of Merger and Articles of
Merger, which shall be filed with the Secretaries of State of the States of
Oregon and California on the Closing Date (as defined in Section 1.9) or as
soon thereafter as practicable. The Merger shall become effective when the
Plan of Merger and Articles of Merger are duly filed with the Secretary of
State of the State of Oregon (the "Effective Time").
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1.3 Effect of Merger. At the Effective Time, Trend shall be merged
with and into Praegitzer in the manner and with the effect provided by the
OBCA and the CCC, the separate corporate existence of Trend shall cease,
and thereupon Praegitzer and Trend shall be a single corporation subject to
the Second Amended and Restated Articles of Incorporation (the "Articles")
and Bylaws of Praegitzer.
1.4 Conversion of Shares.
(a) Trend. At the Effective Time, by reason of the Merger and
without any action by Praegitzer, Trend, or any Shareholder, all of the
shares of common stock of Trend issued and outstanding immediately before
the Effective Time ("Trend Common Stock") shall be converted into (i) One
Million (1,000,000) shares of common stock of Praegitzer ("Praegitzer
Common Stock"), and (ii) the right to receive cash payments totaling Five
Million Dollars ($5,000,000) from Praegitzer.
(b) Praegitzer. Each share of Praegitzer Common Stock
outstanding before the Effective Time shall remain outstanding after the
Effective Time without change.
(c) No Fractional Shares. No fractional shares shall be issued
pursuant to this Agreement. Any fractional amount resulting from conversion
as described above shall be rounded up, if in excess of one-half a share,
or down, if one-half a share or less, to the nearest full share.
(d) Transferability of Praegitzer Common Stock.
(i) Approval by Oregon State Regulator. Praegitzer has
applied for a hearing under ORS 59.095 before the Director of the
Department of Consumer and Business Affairs of the State of Oregon
(the "Director") on the fairness of the terms and conditions of the
Merger. If the Director approves the terms and conditions of the
Merger, giving rise to an exemption pursuant to Section 3(a)(10) from
registration under the Securities Act of 1933 (the "1933 Act") for
the Praegitzer Common Stock, then the shares of Praegitzer issued
pursuant to Section 1.5 shall be fully transferable, subject to the
provisions of Rule 144 and Rule 145 under the 1933 Act, and the
Shareholders shall not have any registration rights pursuant to
Section 1.5(d)(ii).
(ii) Registration Rights. At the Closing, if Praegitzer
has not obtained the approval described in Section 1.5(d)(ii),
Praegitzer and the Shareholders shall enter into a Registration
Rights Agreement in substantially the form attached hereto as Exhibit
C granting the Shareholders the right to cause Praegitzer to register
such shares for public resale under the federal securities laws.
1.5 Certificates. At the Closing, each Shareholder shall deliver and
surrender for cancellation the voting trust certificate or certificates
representing his shares of Trend Common Stock designated on Schedule 1.5
and the Trend Trustee under the Voting Trust Agreement (as
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such terms are defined in Section 2.1(b)) shall deliver and surrender for
cancellation the certificate or certificates representing all shares of
Trend Common Stock designated on Schedule 1.5. Immediately after the
Effective Time, and on surrender of any such certificate or certificates,
Praegitzer shall cause its transfer agent to deliver to each such
Shareholder a certificate or certificates representing the number of shares
of Praegitzer Common Stock, designated on Schedule 1.5, into which such
shares of Trend Common Stock shall have been converted pursuant to Section
1.4(a). If any certificate for shares of Praegitzer Common Stock is to be
issued in a name other than that in which the certificate for Trend Common
Stock surrendered in exchange therefor is registered, the certificate so
surrendered must be properly endorsed and otherwise in proper form for
transfer.
1.6 Payment. Immediately after the Effective Time and on surrender by
each Shareholder at the Closing of a certificate or certificates
representing his shares of Trend Common Stock, Praegitzer shall pay to each
such Shareholder by cashier's check or wire transfer, in next day funds, an
amount equal to the cash into which such Shareholder's Trend Common Stock
shall have been converted, as listed on Schedule 1.5.
1.7 Assumption of Shareholder Liabilities. As additional
consideration to the Shareholders for the tender of their shares of Trend
Common Stock in the Merger, Praegitzer shall assume as of the Closing and
pay according to their terms the liability of each Shareholder under any
guarantees of obligations of Trend listed on Schedule 1.7. Praegitzer shall
use commercially reasonable efforts before and after the Closing to obtain
releases of the Shareholders from such guarantees. However, Praegitzer
shall not be required to accelerate repayment of any such obligations that
bear material prepayment penalties.
1.8 Closing. The closing of the Merger (the "Closing") shall take
place at the offices of Gray Cary Ware & Freidenrich, 400 Hamilton Avenue,
Palo Alto, California, before the close of business on the later of (i) the
day after all of the conditions to the Closing set forth in Article 5 of
this Agreement have been satisfied or waived or (ii) August 26, 1996, or at
such other date, time, and place as the parties may agree (the "Closing
Date").
1.9 Subsequent Actions. At any time after the Effective Time, the
officers and directors of Praegitzer are authorized to take and do, on
behalf of Praegitzer and Trend, or otherwise, all such other actions and
things, including without limitation to execute and deliver any documents
in the name of Trend or otherwise, that are needed or desirable to vest,
perfect, or confirm in Praegitzer its right, title, and interest, to or
under any of the rights, properties, or assets of Trend acquired or to be
acquired by Praegitzer as a result of, or in connection with, the Merger or
otherwise to carry out the intent of this Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
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2.1 Representations and Warranties of Trend. Trend hereby represents
and warrants to Praegitzer as follows, except as set forth otherwise in the
letter delivered by Trend to Praegitzer with this Agreement (the
"Exceptions Letter"):
(a) Organization and Status. Trend is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of California and has all requisite corporate power and corporate
authority to own, operate, and lease its assets and properties and to carry
on its business as it is now conducted. Trend is duly qualified and in good
standing as a foreign corporation in each jurisdiction in which the
properties owned, leased, or operated, or the business conducted by it
require such qualification except where the failure to be so qualified
would not have a material adverse effect on its business or financial
condition. Trend has given Praegitzer complete and accurate copies of its
Articles of Incorporation and Bylaws, each as amended to the date of this
Agreement.
(b) Capitalization. Trend has authorized capital stock
consisting solely of 10,000 shares of Class A common stock ("Trend Common
Stock") and 10,000 shares of nonvoting Class B common stock ("Class B
Stock"). On the date of this Agreement, 3,609 shares of Trend Common Stock
are outstanding and no shares of Class B Stock are outstanding. All
outstanding shares of Trend Common Stock have been duly authorized and are
validly issued, fully paid, and nonassessable. No shares of capital stock
of Trend have been issued in violation of or are subject to any preemptive
or similar rights granted to any former or existing shareholder pursuant to
law, its Articles of Incorporation or Bylaws, or otherwise. Other than
pursuant to this Agreement or as set forth on Schedule 2.1(b) of the
Exceptions Letter, (i) there is no subscription, option, warrant, call,
right, agreement, or commitment granted or issued by or binding on Trend
(A) relating to the issuance, sale, delivery, voting, transfer, ownership,
or other rights to or affecting any shares of capital stock of Trend or any
other securities convertible into, exchangeable for, or evidencing the
right to subscribe for shares of its capital stock except as set forth in
that certain Voting Trust and First Refusal Agreement dated March 31, 1996,
a copy of which Trend has previously given to Praegitzer (the "Voting Trust
Agreement"), all of which rights have been waived or (B) relating to the
payment of amounts measured by changes in the value or price of any capital
stock of Trend, and (ii) Trend has no obligation of any kind to issue any
additional securities. Trend has no outstanding obligation to repurchase,
redeem, or otherwise acquire any of its outstanding shares of capital
stock. Schedule 2.1(b) of the Exceptions Letter lists all of the record
shareholders of Trend as of the date hereof, the number of shares of Trend
Common Stock held of record by each, and the percentage of the shares of
all Trend Common Stock outstanding represented by the shares so held. The
Trend Circuits Voting Trust and First Refusal Agreement dated March 31,
1996 (the "Voting Trust Agreement") is in full force and effect, Daniel J.
Barnett is the trustee duly authorized to vote the shares of Trend Common
Stock pursuant to the Voting Trust Agreement (the "Trend Trustee"), and all
of the outstanding shares of Trend Common Stock are subject to the Voting
Trust Agreement.
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(c) No Subsidiaries. Trend does not own, directly or
indirectly, any outstanding capital stock or other ownership interest (or
securities, rights, or other interests convertible into capital stock or
other ownership interest) in any entity.
(d) Authority; Authorization. Trend has full corporate power
and corporate authority to execute and deliver this Agreement, to
consummate the transactions contemplated by this Agreement, and to carry
out its obligations under this Agreement. Prior to the Closing Date, this
Agreement shall have been duly and validly authorized by the Board of
Directors of Trend, the Trend Trustee, and all of the Shareholders (on
behalf of the Corporation), and, subject to such authorization, has been
duly and validly executed and delivered by Trend, and constitutes the valid
and binding obligation of Trend, enforceable in accordance with its terms,
except as enforcement may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws of general application affecting
the enforcement of creditors' rights, and except that the availability of
the equitable remedies of specific performance and injunctive relief may be
subject to the discretion of the court before which any proceeding may be
brought. No declaration, filing, or registration with, or notice to, or
authorization, consent, or approval of, any governmental or regulatory body
or authority is needed for the execution and delivery of this Agreement by
Trend or the consummation by it of the transactions provided for in this
Agreement, other than the filing of Articles of Merger and those that have
been made or obtained or will be made or obtained before the Closing.
(e) Non-Contravention. The execution and delivery of this
Agreement by Trend and the consummation by Trend of the transactions
provided for herein will not (i) conflict with the Articles of
Incorporation or Bylaws of Trend or, (ii) except for consents required to
be obtained in connection with this Agreement listed on Schedule 2.1(e) of
the Exceptions Letter, result in any violation of or default or loss of a
material benefit under, or permit the acceleration of any obligation under,
any mortgage, indenture, lease, agreement or other instrument, permit,
concession, grant, franchise, license, judgment, order, decree, statute,
law, ordinance, rule, or regulation applicable to Trend or its properties,
except where such violation, default, loss of benefit, or acceleration
would have no material effect on any of the business, assets, or prospects
of Trend.
(f) Financial Statements. Schedule 2.1(f) of the Exceptions
Letter contains true and correct copies of (i) Trend's audited balance
sheets at, and statements of income and statements of cash flows for the
years ended, December 31, 1995 and 1994, including the related notes,
together with the accountants' unqualified reports thereon (collectively,
the "Historical Financial Statements"), and (ii) Trend's unaudited balance
sheet as of June 30, 1996 (the "Current Balance Sheet") and the related
statement of income and statement of cash flows for the six-month period
then ended (collectively, the "Current Financial Statements"), certified by
Trend's chief executive officer. The Historical Financial Statements and
the Current Financial Statements are together referred to as the "Trend
Financial Statements." The Trend Financial Statements, as of their
respective dates, are complete and accurate and present fairly the
financial condition, results of operations, and cash flows of Trend as of
the dates and for the periods indicated therein in
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accordance with generally accepted accounting principles ("GAAP") applied
on a consistent basis throughout the periods indicated, except to the
extent that the Current Financial Statements are not accompanied by notes
or are subject to normal inter-period adjustments that are not expected to
be material in amount or effect, or except as otherwise indicated in the
Trend Financial Statements, the notes thereto, or Schedule 2.1(f) of the
Exceptions Letter.
(g) Accounts Receivable. Schedule 2.1(g) of the Exceptions
Letter contains a complete and accurate list of all of the receivables of
Trend (including accounts receivable, notes receivable, and advances) that
are reflected in the Current Balance Sheet or that have been billed since
the date of the Current Financial Statements (collectively, the
"Receivables"). All of the Receivables reflect actual bona fide
transactions and arose in the ordinary course of business. The Receivables
can be fully collected when due and within ninety days after the Closing,
without resort to litigation and without offset, deduction, or
counterclaim, except to the extent of the normal allowance for doubtful
accounts with respect to accounts receivable, consistent with Trend's prior
practice, as reflected in the Trend Financial Statements.
(h) Inventories. The inventories of Trend, whether finished
goods, work in process, or raw materials, shown on the Current Balance
Sheet or thereafter acquired, are all items of a quality usable or saleable
in the ordinary and usual course of business, except for inventory items
that are obsolete or not usable or saleable in the ordinary course of
business and that have been written down to an amount not in excess of
realizable market value or for which adequate reserves or allowances have
been provided. The values at which inventories are carried reflect an
inventory valuation policy consistent with Trend's past practices and in
accordance with GAAP consistently applied. The present quantities of all of
Trend's inventory, taken as a whole, are reasonable and warranted in the
present circumstances of its business, in accordance with its past
practice.
(i) [INTENTIONALLY LEFT BLANK.]
(j) Absence of Undisclosed Liabilities. Except for current
liabilities incurred after June 30, 1996 in the ordinary course of business
and of types and in amounts consistent with past practice and liabilities
incurred in connection with this Agreement, Trend has no liability or
obligation (whether absolute, accrued, contingent, or other, and whether
due or to become due) that is not accrued, reserved against, or disclosed
in the Trend Financial Statements.
(k) Litigation. There is no claim, litigation, proceeding, or
investigation of any kind pending or threatened by or against Trend or its
officers or directors in their capacities as such, or against the
properties or business of Trend. To the knowledge of Trend and each
Shareholder, there is no basis for any such claim, litigation, proceeding,
or investigation. There are no pending or threatened actions, proceedings,
suits, investigations, or inquiries that question the validity of this
Agreement or any actions to be taken pursuant to it.
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(l) Absence of Changes. Except as set forth on Schedule 2.1(l)
of the Exceptions Letter or as contemplated in this Agreement, since June
30, 1996, Trend has not:
(i) Adverse Changes. Suffered or been threatened with any
adverse change in its business, results of operations, financial
condition, properties, assets, or prospects (other than changes in
its prospects that are consistent in degree and direction to changes
in the prospects of the printed circuit board industry generally);
(ii) Damage. Suffered any material damage, destruction,
requisition, taking, or casualty loss, whether or not covered by
insurance, of or to any of its assets or properties;
(iii) Dividends. Declared, set aside, or paid any
dividend or other distribution (whether in cash, stock, property, or
any combination thereof) in respect of its capital stock, or directly
or indirectly repurchased, redeemed, or otherwise acquired any shares
of its capital stock, or made any other payment to or for the account
of its shareholders;
(iv) Compensation. Other than in the ordinary course of
business and in amounts consistent with its past practice, increased
the rate or terms of compensation payable or to become payable to any
director, officer, or key employee; changed the rate or terms of any
bonus, insurance, pension, or other employee benefit plan, payment,
severance or arrangement made to, for, or with any employee; paid any
special bonus or remuneration; executed or amended any written
employment contract; or made any change in personnel policies;
(v) Expenditures. Entered into any agreement, commitment,
or transaction (including without limitation any borrowing, capital
expenditure, or capital financing; any purchase, acquisition, sale or
other disposition of assets; any lease or sublease; any guaranty,
assumption, or endorsement of payment or performance of any loan or
obligation of another; or any amendment, modification, or termination
of any existing agreement, commitment, or transaction), except
agreements, commitments, or transactions in the ordinary course of
business not involving more than $25,000;
(vi) Accounting Changes. Made any change in accounting
methods, principles, or practices;
(vii) Sales of Stock. Issued or sold any capital stock or
issued or granted any option, warrant, or right to purchase any
capital stock or any security exercisable for the purchase of or
convertible into capital stock or relating to the payment of amounts
measured by changes in the value or price of any capital stock, or
made any commitment to do any of the foregoing;
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(viii) Acquisitions and Sales. Acquired (by merger,
consolidation, or acquisition of stock or assets) or sold (or otherwise
disposed of) any interest in any corporation, partnership, or other
business organization or division thereof;
(ix) Articles and Bylaws. Amended its Articles of
Incorporation or Bylaws;
(x) Business Not in the Ordinary Course. Conducted any
business that is outside the ordinary course of business or not
substantially in the manner that it previously conducted its business;
(xi) Liabilities. Except as disclosed on the Current
Financial Statements, incurred any liability that, either
individually or in total, is material to its business, results of
operations, financial condition, properties, or assets;
(xii) Encumbrances. Except as disclosed on the Current
Financial Statements, encumbered or consented to the encumbrance of
any of its property or assets;
(xiii) Labor. Experienced pending or threatened labor
disputes, organizational activities, or labor disturbances adversely
affecting its business, financial condition, properties, assets, or
prospects; or
(xiv) Further Adverse Changes. Experienced or been
threatened with any material change in its assets, liabilities,
licenses, permits, or franchises, or in any agreement to which it is
a party or by which it is bound, that, either individually or in the
aggregate, has had or reasonably could be expected to have an adverse
effect on its business or financial condition.
(m) Taxes.
(i) Definition. For purposes of this Agreement, "Taxes"
means all taxes, charges, fees, levies, or other assessments of any
kind or nature, including, without limitation, all net income, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise,
estimated, severance, stamp, occupancy or property taxes, customs
duties, fees, assessments or charges of any kind (together with any
interest and any penalties, additions to tax or additional amounts)
imposed by any taxing authority (domestic or foreign) on or payable
by Trend.
(ii) Returns. Trend has timely filed all returns,
declarations, reports, estimates, information returns, and statements
("Returns") that it is required to file under federal, state, local,
or any foreign laws, and all such Returns are true, correct and
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complete in all material respects. There are no extensions of time in
effect with respect to the dates on which any Returns were or are due
to be filed.
(iii) Payment. Trend has timely paid (and until the Closing
will timely pay or will establish adequate reserves for) all Taxes
that are due and payable by it for all periods through Closing.
(iv) Tax Liens. There are no liens for Taxes on the assets
of Trend, except liens for Taxes not yet due.
(v) Consents. Trend has not filed (and will not file before
the Closing) any consent agreement under Section 341(f) of the Code
or agreed to have Section 341(f)(2) of the Code apply to any
disposition of any subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by Trend.
(vi) Statute of Limitations; Deficiencies. Except as set
forth in Schedule 2.1(m)(vi) of the Exceptions Letter, (i) either the
statute of limitations for the assessment of federal income tax has
expired for all federal income tax returns of Trend or such Returns
have been examined by the Internal Revenue Service for all periods
through December 31, 1992; (ii) either the statute of limitations for
the assessment of state, local, and foreign income taxes has expired
for all applicable Returns of Trend or such Returns have been
examined by the appropriate tax authorities for all periods through
December 31, 1989; and (iii) no deficiency for any Taxes has been
proposed, asserted, or assessed against Trend that has not been
resolved and paid in full.
(vii) Waivers of Statute of Limitations. Trend has given no
outstanding waivers or comparable consents regarding the application
of the statute of limitations with respect to any Taxes or Returns.
(viii) Proceedings. No federal, state, local, or foreign
audits or other administrative proceedings or court proceedings are
pending or threatened with regard to any Taxes or Returns. Schedule
2.1(m)(viii) of the Exceptions Letter identifies the Returns of Trend
that have been audited by any taxing authority. Trend has given
Praegitzer correct and complete copies of all examination reports and
statements of deficiencies against or agreed to by Trend with respect
to those Returns. No issue has been raised through the date of this
representation in any such examination that, by application of the
same or similar principles, reasonably could be expected to result in
a proposed deficiency for any other period not so examined. Except as
set forth on Schedule 2.1 (m)(viii) of the Exceptions Letter, no
claim has ever been made by any taxing authority in a jurisdiction in
which Trend does not file Returns that it is or may be subject to
taxation by such jurisdiction.
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(ix) Tax Sharing. Trend is not a party to any tax-sharing
or allocation agreement, and owes no amounts under any tax-sharing or
allocation agreement.
(x) Employee Benefit Plans. No amounts payable under any
employee benefit plan described in Section 2.1(s) will fail to be
deductible for federal income tax purposes by virtue of Section 280G
of the Code.
(xi) Withholding. Trend has complied (and until the Closing
will comply) in all respects with all applicable laws, rules, and
regulations relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to
Sections 1441, 1442, or 1445 of the Code or similar provisions under
any foreign laws) and has, within the time and in the manner
prescribed by law, withheld from wages and other amounts paid or
owing to any employee, creditor, independent contractor, or any third
party, and paid over to the proper government authorities, all
amounts required to be so withheld and paid over.
(xii) Affiliated Group. Trend has never been a member of an
"affiliated group," within the meaning of Section 1504 of the Code.
(xiii) Matters Pending. There are no requests for rulings,
outstanding summons, subpoenas, requests for information, or notices
of proposed reassessment of any property owned or leased by Trend or
any other matter pending between Trend and any taxing authority.
(xiv) Section 338 Election. Neither Trend nor any
predecessor in interest of it has filed, or may be deemed to have
filed, an election under Section 338 of the Code.
(xv) Subchapter S Election. Trend has had in effect at all
times since January 1, 1989, an election to be taxed under Subchapter
S of the Code and has been qualified at all such times to have so
elected.
(xvi) Closing Statements. Trend has given Praegitzer all
closing agreements executed pursuant to Section 7121 of the Code or
any similar provision of any state law that have been entered into by
or with respect to Trend.
(xvii) Accounting Changes. Trend has not agreed, and is not
required, to make any adjustment pursuant to Section 481(a) of the
Code (or any predecessor provision) by reason of any change in its
accounting method, and has no application pending with any taxing
authority requesting permission for any change in its accounting
method.
(xviii) Copies of Returns. Trend has given Praegitzer true
and complete copies of all federal, state, and foreign income tax
returns (together with any Revenue
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Agents Reports) filed by Trend for taxable years ending in and after
1989. A list of such returns is attached hereto as Schedule
2.1(m)(xviii) of the Exceptions Letter.
(n) Compliance With Laws. Trend has at all relevant times
conducted its business in compliance with its Articles of Incorporation and
Bylaws; Trend is not in violation of any applicable laws or regulations;
Trend is subject to no outstanding judgment, order, writ, injunction, or
decree; and Trend has not been charged with or threatened with a charge of,
a violation of any applicable law or regulation except where such
violation, judgment, order, writ, injunction, or decree would not have a
material adverse effect on any of its business, assets, or properties.
(o) Property.
(i) Trend Real Property. Schedule 2.1(o)(i) of the
Exceptions Letter contains a complete and accurate list of all real
property owned or leased by Trend (the "Trend Real Property"),
including the dates of and parties to all leases and any amendments
thereof. Except as set forth on Schedule 2.1(o)(i) of the Exceptions
Letter, Trend has good and marketable title to all Trend Real
Property, free and clear of all liens, mortgages, pledges, covenants,
easements, restrictions, charges, and other claims and encumbrances
of any nature ("Liens").
(ii) Trend Personal Property. Schedule 2.1(o)(ii) of the
Exceptions Letter contains a list of all items of personal property
owned or leased by Trend valued above $1,000 (the "Trend Personal
Property"), including the dates of and parties to all leases and any
amendments thereof. Except as set forth on Schedule 2.1(o)(ii) of the
Exceptions Letter, Trend has good and marketable title to all Trend
Personal Property, free and clear of all material Liens.
(p) Intellectual Property. Except as set forth on Schedule
2.1(p) of the Exceptions Letter, Trend owns, or has a valid and binding
license or licenses (as to all of which there are no defaults by Trend and
no knowledge of defaults by others) to use, all patents, trademarks,
service marks, trade names, copyrights, trade secrets, technology, know-how
and other intellectual property needed or used in the conduct of its
business as now conducted and as proposed to be conducted (the "Trend
Intellectual Property"). Trend has given Praegitzer a complete and accurate
list of all issued patents, patent applications, registered trademarks and
registered service marks and related applications, registered trade names,
and registered copyrights owned by or licensed to Trend, and a description
of any material agreements relating to Trend's acquisition of any Trend
Intellectual Property, excluding object code end-user licenses granted to
end-users in the ordinary course of business that permit the use of
software products without the right to modify, distribute, or sublicense.
Neither Trend nor, to its knowledge, any shareholder, employee, agent, or
representative thereof, has distributed or disclosed confidential or
proprietary information of Trend except under the terms of a
confidentiality agreement. Trend owns or possesses adequate licenses or
other rights to use, sell, and license or dispose of all of
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its Intellectual Property, and has the exclusive right to bring actions for
the infringement of any Intellectual Property owned by it. Trend has good
and marketable title or license rights to all of the Trend Intellectual
Property owned by it and owns such property free and clear of all security
interests, liens, encumbrances, claims, and rights of any kind or nature.
No person or entity other than Trend has any right to market the Trend
Intellectual Property, make any derivative of the Trend Intellectual
Property, or make any sale of or involving any Trend Intellectual Property.
Except as listed on Schedule 2.1(p) of the Exceptions Letter, there are no
royalties, honoraria, fees, or other payments payable by Trend to any
person or entity by reason of the ownership, use, license, sale, or
disposition of the Trend Intellectual Property. The conduct of the business
of Trend does not conflict with or infringe on any intellectual property
rights of any other person. No claims of conflict or infringement are
pending or threatened against Trend.
(q) Environmental Matters.
(i) Definitions. "Environmental Law" means any federal,
state, or local statute, regulation, or ordinance pertaining to the
protection of human health or the environment and any applicable
orders, judgments, decrees, permits, licenses, or other
authorizations or mandates under such laws. "Hazardous Substance"
means any hazardous, toxic, radioactive, or infectious substance,
material, or waste as defined, listed, or regulated under any
Environmental Law, and includes without limitation petroleum oil and
its fractions. "Asbestos-Containing Material" means any material
containing more than one percent by weight of asbestos. "Prior
Property" means, for purposes of this Section 2.1(q), any real
property previously owned, leased, controlled, operated, or occupied
by Trend.
(ii) Hazardous Substances. To the knowledge of Trend, no
Hazardous Substance has been disposed of, spilled, leaked, or
otherwise released in, on, under, or from the Trend Real Property (as
defined in Section 2.1(o)) or the Prior Property. To the knowledge of
Trend, no Hazardous Substance (a) is or has been used, treated,
stored, generated, manufactured, or otherwise handled on the Trend
Real Property, or (b) has otherwise come to be located in, on, or
under the Trend Real Property. To the knowledge of Trend, no
Hazardous Substance has been disposed of, spilled, leaked, or
otherwise released in, on, under, or from property adjacent to or in
the immediate vicinity of any of the Trend Real Property.
(iii) Asbestos; PCBs; Underground Storage Tanks. To the
knowledge of Trend, none of the buildings, structures, fixtures, or
equipment on the Trend Real Property contains any Asbestos-Containing
Material, urea formaldehyde foam insulation, polycholorinated
biphenyls in concentrations greater than 50 parts per million
(including in any electrical equipment located on the Trend Real
Property), or any other Hazardous Substance that is prohibited or
regulated when present in buildings, structures, fixtures or
equipment. To the knowledge of Trend, there are no underground
storage tanks (whether or not excluded from regulation under any
Environmental Law) on the Trend Real
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<PAGE>
Property, including underground storage tanks in use, out of service,
closed, or decommissioned in place.
(iv) Waste Disposal. To the knowledge of Trend, all wastes
generated by the business of Trend are and have been properly
transported off site and disposed of in compliance with all
applicable Environmental Laws. To the knowledge of Trend, Trend has
not arranged for the disposal or treatment of Hazardous Substances
at, or has transported or arranged for transportation on behalf of
itself or any third party any Hazardous Substances to, any facility
listed or proposed for listing on the National Priority List ("NPL")
or the Comprehensive Environmental Response, Compensation, Liability
Information System list ("CERCLIS") compiled by the Environmental
Protection Agency or any similar or comparable list compiled or
maintained by any state or local governmental authority.
(v) Site Lists. To the knowledge of Trend, no portion of
the Trend Real Property is listed or proposed for listing on the
CERCLIS or the NPL or any similar or comparable list compiled or
maintained by any state or local governmental authority. Trend has
received no notice, and has no knowledge of any claim that Trend is a
potentially responsible party under Section 107 of the Comprehensive
Environmental Response, Compensation and Liability Act or any similar
or comparable state or local Environmental Law.
(vi) Environmental Reports. Trend has disclosed and made
available to Praegitzer true, complete, and correct copies or results
of any reports, studies, analyses, tests, or monitoring in the
possession of or initiated by Trend pertaining to the existence of
Hazardous Substances and any other environmental concerns relating to
any of the Trend Real Property, the Prior Property, or the business
of Trend.
(r) Labor Matters. Trend has no collective bargaining agreement
with any labor union. Since January 1, 1993, there has been no strike,
slowdown, picketing, or work stoppage by employees of Trend, nor has any
unfair labor practice charge, complaint, or proceeding been brought against
Trend. Trend has complied in all material respects with all employment
laws, including, without limitation, those relating to wages, hours,
collective bargaining, employment termination, occupational safety, equal
opportunity and discrimination, plant closures and layoffs and notice
thereof, hiring of non-U.S. citizens and the payment of social security and
similar taxes. No person has asserted, and to Trend's knowledge there is no
basis for any person to assert, that Trend is liable in any material amount
for back wages, taxes, or penalties for failure to comply with any of the
foregoing.
(s) Employee Benefit Matters. With respect to the employees of
Trend:
(i) Plans. Schedule 2.1(s) of the Exceptions Letter
contains a true and complete list of each bonus, deferred
compensation, incentive compensation, stock
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purchase, stock option, severance or termination pay, hospitalization
or other medical, life or other insurance, maternity, supplemental
unemployment benefit, profit-sharing, savings, pension, or retirement
plan, program, agreement, or arrangement (collectively, the "Plans"),
sponsored, maintained, contributed to, or required to be contributed
to by Trend, for the benefit of any employee or former employee of
Trend;
(ii) Pension Plans. Trend currently maintains, sponsors, or
contributes to (or has maintained, sponsored, or contributed to
within the past five years) only those employee pension benefit plans
(as defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), whether or not excluded
from coverage under specific Titles or Subtitles of ERISA) for the
benefit of employees or former employees of Trend, that are described
in Schedule 2.1(s) of the Exceptions Letter (the "Pension Plans"),
and any plan that is a multi-employer plan (within the meaning of
Section 3(37) of ERISA) is specifically designated as such;
(iii) Welfare Plans. Trend now maintains, sponsors, or
contributes only to the employee welfare benefit plans (as defined in
Section 3(1) of ERISA, whether or not excluded from coverage under
specific Titles or Subtitles of ERISA) for the benefit of employees
or former employees of Trends described in Schedule 2.1(s) of the
Exceptions Letter (the "Welfare Plans"), and any plan that is a
multi-employer plan (within the meaning of Section 3(37) of ERISA) is
specifically designated as such;
(iv) Accumulated Funding Deficiency. Trend has not incurred
or suffered to exist any "accumulated funding deficiency" (as defined
in Section 302 of ERISA), whether or not waived by the IRS, involving
any Pension Plan subject to Section 412 of the Code or Part 3 of
Title I(B) of ERISA, and all required installment payments have been
timely made on the due date for such installments in accordance with
Section 412(m) of the Code;
(v) Information Regarding Plans. Trend has previously given
Praegitzer true and complete copies of the following documents: a
copy of each Plan (including all amendments thereto); a copy of the
annual report, if required under ERISA, with respect to such Plan for
the last two years; a copy of the actuarial report, if required under
ERISA, with respect to such Plan for the last two years; a copy of
the most recent Summary Plan Description, together with each Summary
of Material Modifications, if required under ERISA, with respect to
such Plan, and all material employee communications relating to such
Plan; if such Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial
statements thereof; all contracts relating to such Plan, including
without limitation service provider agreements, insurance contracts,
investment management agreements, subscription and participation
agreements and record keeping agreements; and the most recent
determination letter received from the IRS with respect to such Plan
if it is intended to be qualified under Section 401 of the Code;
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<PAGE>
(vi) Pension Benefit Guaranty Corporation. Neither Trend
nor any affiliate of Trend as determined under Section 4001(b)(1) of
ERISA or Section 414(b), (c), (m), or (o) of the Code, nor any member
of an "affiliated service group" of which Trend is a member, within
the meaning of Section 414(m) of the Code ("ERISA Affiliate"), has
incurred any material liability to the Pension Benefit Guaranty
Corporation ("PBGC") as a result of the voluntary or involuntary
termination of any Pension Plan subject to Title IV of ERISA; there
is currently no active filing by Trend or any ERISA Affiliate with
the PBGC (and no proceeding has been commenced by the PBGC) to
terminate any Pension Plan subject to Title IV of ERISA maintained or
funded, in whole or in part, by Trend or any ERISA Affiliate; neither
Trend nor any ERISA Affiliate has made a complete or partial
withdrawal from a multi-employer plan, as such term is defined in
Section 3(37) of ERISA, resulting in "withdrawal liability," as such
term is defined in Section 4201 of ERISA (without regard to
subsequent reduction or waiver of such liability under either Section
4207 or 4208 of ERISA);
(vii) New Plans; Modifications. Trend has no plan or
commitment, whether legally binding or not, to create any additional
employee welfare benefit plan (as defined in Section 3(1) of ERISA)
or employee pension benefit plan (as defined in Section 3(2) of
ERISA), and has no plan or commitment to modify or change any
existing Pension Plan or Welfare Plan, other than changes to comply
with applicable law, that would affect any employee of Trend;
(viii)Continuing Benefits. No Pension Plan or Welfare Plan
provides death, medical, or health benefits (whether or not insured)
with respect to current or former employees of Trend after any such
employee's retirement or other termination of service, other than (A)
benefit coverage mandated by applicable law, including, without
limitation, coverage provided pursuant to Section 4980B of the Code,
(B) death benefits or retirement benefits under any Pension Plan, (C)
deferred compensation benefits accrued as liabilities on the books of
Trend, or (D) benefits for which the current employee (or the
employee's beneficiary) bears the full cost;
(ix) Group Health Plans. With respect to each Welfare Plan
constituting a group health plan within the meaning of Section
5000(b)(1) of the Code, the provisions of Section 4980B of the Code
have been complied with in all material respects;
(x) Determinations. Each Pension Plan that is intended to
be "qualified" within the meaning of Section 401(a) of the Code has
been determined by the IRS to be so qualified, and there is no fact
or circumstance that would materially and adversely affect such
qualification;
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<PAGE>
(xi) Compliance with Law. Each Pension Plan and Welfare
Plan has been operated and administered in all material respects in
accordance with applicable laws, including but not limited to ERISA
and the Code;
(xii) Reportable Events. No reportable event (as defined in
Section 404(3) of ERISA) for which the requirement of notice to the
PBGC has not been waived has occurred; and
(xiii)Prohibited Transactions. With respect to each Plan,
no prohibited transaction (within the meaning of Section 406 of ERISA
and Section 4975 of the Code) that has not been exempted exists that
could subject Trend to any liability or civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975
of the Code. Neither Trend nor any administrator or fiduciary of any
Employee Plan (or agent of any of the foregoing) has engaged in any
transaction or acted or failed to act in a manner that could subject
Trend to any material liability for a breach of fiduciary duty under
ERISA or any other applicable law.
(t) Other Employee Matters. Trend is not bound by or subject to
(and none of its properties is bound by or subject to) any material written
or oral, express or implied, employment contract, commitment, or
arrangement with any employee, including, without limitation any "golden
parachute" agreement, and all employees of Trend are employees at will
except as listed on Schedule 2.1(t). Except as set forth in Schedule 2.1(t)
of the Exceptions Letter, Trend has no vacation, holiday, or sick leave
policies or arrangements. Trend has given Praegitzer a true and correct
list of all salaried employees of Trend, which list includes their salaries
and any other material compensation, including compensation in the form of
benefits, allowances, perquisites or otherwise (other than under any
Welfare Plan and any Pension Plan), dates of employment, and positions.
(u) Contracts and Commitments; Absence of Defaults; Violation
of Agreements. Schedule 2.1(u) of the Exceptions Letter contains a list of
all of the contracts or agreements to which Trend is a party or by which
Trend or any of its properties is subject or bound in the following
categories: notes, mortgages, deeds of trust, loan agreements, security
agreements, guaranties, debentures, indentures, credit agreements, and
other evidences of indebtedness with respect to any indebtedness the
principal amount of which exceeds $25,000; (ii) contracts or agreements
with any director, officer, or shareholder; (iii) leases of real property
and leases of equipment or other personal property to Trend under which
rental payments exceed $25,000 annually; (iv) letters of intent,
commitments, option agreements, earnest money agreements, or other similar
agreements pertaining to the lease, purchase, or sale of any real property;
(v) licenses and sublicenses material to the business of Trend; (vi)
contracts or agreements providing for payments to or by Trend in excess of
$25,000 annually; and (vii) any contract or agreement not falling within
any of the foregoing categories but nevertheless material to the business
of Trend. Except as set forth in Schedule 2.1(u) of the Exceptions Letter,
(a) the contracts and agreements listed on Schedule 2.1(u) of the
Exceptions Letter are valid, binding, and enforceable in accordance with
their terms, except as enforceability may be limited by or
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<PAGE>
subject to any bankruptcy, insolvency, reorganization, moratorium, or other
similar laws now or hereafter in effect relating to creditors' rights
generally or by the availability of equitable remedies; (b) Trend is not in
default in any material way under or in violation of any provision of any
such contract or agreement; (c) no third party has asserted any material
claim, dispute, or controversy with Trend or withheld payments from or
performance to Trend with respect to any such contract or agreement to
which it is a party; and (d) Trend has received no notice or warning of
alleged nonperformance or other noncompliance with respect to its
obligations under any such contract or agreement or any notice that any
such contract or agreement may be totally or partially terminated or
suspended by the other party or parties thereto. Except as listed on
Schedule 2.1(u) of the Exceptions Letter, neither the execution and
delivery of this Agreement by Trend and the Shareholders nor the
consummation by it and them of the transactions contemplated hereby will
conflict with, violate, result in a breach of, or constitute a default
under any of the foregoing contracts, agreements, or leases or result in
the creation of any lien or encumbrance on the assets of Trend.
(v) Insurance. Schedule 2.1(v) of the Exceptions Letter
contains a complete and accurate list of all insurance policies maintained
by Trend covering any property or asset of, or otherwise insuring, Trend
and of all deductibles with respect thereto. Except as set forth in
Schedule 2.1(v), all such policies are in full force and effect, all
premiums due have been paid, and no notice of cancellation or termination
has been received with respect to any such policy. Such insurance policies
are sufficient to comply in all material respects with all requirements of
law and agreements to which Trend is a party and provide insurance coverage
for Trend's assets and operations comparable to that of companies similarly
situated. Except as set forth in Schedule 2.1(v), Trend has not been
refused any insurance with respect to its assets or operations or had its
coverage limited by any insurance carrier to which it has applied for any
insurance or with which it has carried insurance since January 1, 1993.
Complete and accurate copies of all current policies and endorsements
thereto have been delivered to Praegitzer.
(w) Consents and Approvals. Except as set forth in Schedules
2.1(e) or 2.1(u) of the Exceptions Letter (which includes a list of all
consents, approvals, authorizations, or filings required to be obtained or
made), no consent, approval, or authorization of, or filing or registration
with, any court, regulatory authority, governmental body, or any other
entity or person not a party to this Agreement (other than the filing of
Articles of Merger) is required for the consummation of the transactions
described in this Agreement by Trend.
(x) Brokers and Finders. Neither Trend, nor any officer,
director, or employee of Trend has employed any broker, finder, or
investment banker, or incurred any liability for any brokerage or
investment banking fees, commissions, or finder's fees in connection with
the transactions provided for in this Agreement.
(y) Restrictive Covenants. Trend is not a party to any
agreement, contract, or covenant limiting the freedom of Trend to compete
in any line of business or with any person or other entity in any
geographic area.
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<PAGE>
(z) Records. The books of account, minute books, and stock
records of Trend are complete and accurate in all material respects, and
there has been no transaction involving the business or stock ownership of
Trend or action of the Board of Directors or shareholders of Trend that
should have been included therein and that has not been accurately so
included. Complete and accurate copies of such books and records have been
given to Praegitzer.
(aa) Certain Interests. Except as set forth in Schedule 2.1(aa)
of the Exceptions Letter, no Shareholder nor any officer or director of
Trend (or any entity owned or controlled by one or more of such parties)
(i) has any material interest in any property, real or personal, tangible
or intangible, used in or pertaining to the business of Trend, (ii) is
indebted to Trend or (iii) has any financial interest, direct or indirect,
in any supplier or customer of, or other outside business that has any
transactions with, Trend. Except as set forth in Schedule 2.1(aa) of the
Exceptions Letter, Trend is not indebted to any Shareholder, or any
director or officer of Trend (or any entity owned or controlled by one or
more of such parties), except for amounts due under normal salary
arrangements and for reimbursement of ordinary business expenses. Except as
set forth in Schedule 2.1(aa), no payment (severance or other) will become
due from Trend to any Shareholder or officer, director, or employee of
Trend (or any entity owned or controlled by one or more of such parties)
other than pursuant to Sections 1.6, 1.7, and 1.8 hereof, solely as a
result of the consummation of the transactions provided for in this
Agreement.
(bb) Certain Payments. None of Trend, any officer or director of
Trend, nor any other person or entity has, directly or indirectly, on
behalf of or with respect to Trend, or the business or operations of Trend
(i) made any payment outside the ordinary course of business to any
purchasing or selling agent or person charged with similar duties of any
entity to which Trend sells or from which Trend buys products for the
purpose of influencing such agent or person to buy products from or sell
products to Trend; (ii) otherwise made or received any payment that was not
legal to make or receive; or (iii) engaged in any transaction, maintained
any bank account, or used any corporate funds or assets except for
transactions, bank accounts, funds, and assets that have been and are
reflected in the normally maintained books and records of Trend.
(cc) Customers and Suppliers. Schedule 2.1(cc) of the Exceptions
Letter sets forth (i) a true and correct list of the ten largest customers
of Trend in terms of sales (A) in the year ended December 31, 1995 and (B)
in the six months ended June 30, 1996, showing the approximate total sales
to each such customer in such periods; and (ii) a true and correct list of
the ten largest suppliers of Trend in terms of purchases (A) in the year
ended December 31, 1995 and (B) in the six months ended June 30, 1996,
showing the approximate total purchases from each such supplier in such
periods. Except as set forth in Schedule 2.1(cc) of the Exceptions Letter,
there has been no material adverse change in the business relationship of
Trend with any customer or supplier named in Schedule 2.1(cc) of the
Exceptions Letter, and Trend has no reason to believe that any such
customer or supplier intends to reduce its level of commitment to Trend.
Except for the customers and suppliers named in Schedule 2.1(cc) of the
Exceptions Letter, no customer accounted for more than five percent of
Trend's sales in the period from 12 months
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before June 30, 1996, and no supplier sold Trend more than five percent of
the goods or services purchased by Trend in such period.
(dd) Accuracy of Representations and Warranties. None of the
representations or warranties of Trend contained in this Agreement contains
or will contain any untrue statement of any material fact or omit or
misstate a material fact needed to make the statements contained in this
Agreement not misleading. Trend knows of no fact that has resulted or that,
in its reasonable judgment may result, in any material adverse change in
the business, results of operations, financial condition, properties, or
assets of Trend, taken as a whole, that has not been set forth in this
Agreement or otherwise disclosed to Praegitzer in writing.
2.2 Representations and Warranties of Shareholders. Each Shareholder
represents and warrants to Praegitzer, severally and not jointly, as
follows:
(a) Capacity. Such Shareholder has full power, authority, and
capacity to execute and deliver this Agreement on behalf of himself and his
marital community, if any, to consummate the transactions contemplated by
this Agreement, and to carry out his obligations under this Agreement.
b) Authorization. This Agreement has been duly and validly
executed and delivered by each Shareholder individually, and constitutes
the valid and binding obligation of each Shareholder, enforceable in
accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other
laws of general application affecting the enforcement of creditors' rights,
and except that the availability of the equitable remedies of specific
performance and injunctive relief may be subject to the discretion of the
court before which any proceeding may be brought. No declaration, filing,
or registration with, or notice to, or authorization, consent, or approval
of, any governmental or regulatory body or authority, or any other person
or entity not a party to this Agreement is needed for the execution and
delivery of this Agreement by such Shareholder or the consummation by him
of the transactions provided for in this Agreement other than those that
have been made or obtained or will be made or obtained before the Closing.
(c) Title to Shares. Such Shareholder owns beneficially all of
the outstanding Trend Shares listed opposite his name on Schedule 2.1(b) of
the Exceptions Letter, free and clear of all pledges, security interests,
liens, charges, encumbrances, equities, claims, options, voting
restrictions, or limitations, except as set forth in the Voting Trust
Agreement, the Secured Promissory Notes dated March 31, 1996 payable to
Sterling E. Walker, and Alice J. Walker, or their successors as Trustees of
The Sterling E. Walker and Alice J. Walker Revocable Living Trust (the
"Walker Trust") in the amounts described on Schedule 2.1(b), or as
otherwise described on Schedule 2.1(b). The Voting Trust Agreement is in
full force and effect, and Daniel J. Barnett is the trustee duly authorized
to vote the shares of Trend Common Stock held by such Shareholder pursuant
to the Voting Trust Agreement (the "Trend Trustee"). Other than pursuant to
this Agreement, the Voting Trust Agreement, or as set forth on Schedule
2.1(b), there is no
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subscription, option, warrant, call, right, agreement, or commitment
granted or issued by or binding on such Shareholder relating to the
issuance, sale, delivery, voting, transfer, ownership, or other rights to
or affecting any of such Shareholder's Trend Shares.
(d) Confidential Information. Such Shareholder has not
distributed or disclosed confidential or proprietary information of Trend
except under the terms of a confidentiality agreement.
(e) Certain Interests. Except as set forth in Schedule 2.1(aa)
of the Exceptions Letter, such Shareholder (or any entity owned or
controlled by him) (i) has no material interest in any property, real or
personal, tangible or intangible, used in or pertaining to the business of
Trend; (ii) is not indebted to Trend and (iii) has no financial interest,
direct or indirect, in any supplier or customer of, or other outside
business that has any transactions with, Trend. Except as set forth in
Schedule 2.1(aa) of the Exceptions Letter, Trend is not indebted to such
Shareholder (or any entity owned or controlled by him), except for amounts
due under normal salary arrangements and for reimbursement of ordinary
business expenses. Except as set forth in Schedule 2.1(aa), no payment
(severance or other) will become due from Trend to such Shareholder (or any
entity owned or controlled by him) other than pursuant to Sections 1.6,
1.7, and 1.8 hereof, solely as a result of the consummation of the
transactions provided for in this Agreement.
(f) Certain Payments. Such Shareholder has not, directly or
indirectly, on behalf of or with respect to Trend, or the business or
operations of Trend (i) made any payment outside the ordinary course of
business to any purchasing or selling agent or person charged with similar
duties of any entity to which Trend sells or from which Trend buys products
for the purpose of influencing such agent or person to buy products from or
sell products to Trend; (ii) otherwise made or received any payment that
was not legal to make or receive; or (iii) engaged in any transaction,
maintained any bank account, or used any corporate funds or assets except
for transactions, bank accounts, funds, and assets that have been and are
reflected in the normally maintained books and records of Trend.
(g) Brokers and Finders. Such Shareholder has not employed any
broker, finder, or investment banker, or incurred any liability for any
brokerage or investment banking fees, commissions, or finder's fees in
connection with the transactions provided for in this Agreement.
(h) Accuracy of Representations and Warranties. None of the
representations or warranties of such Shareholder contained in this
Agreement contains or will contain any untrue statement of any material
fact or omit or misstate a material fact needed to make the statements
contained in this Agreement not misleading. Such Shareholder knows of no
fact that has resulted or that, in his reasonable judgment may result, in
any material adverse change in the business, results of operations,
financial condition, properties, or assets of Trend, taken as a whole, that
has not been set forth in this Agreement or otherwise disclosed to
Praegitzer in writing.
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2.3 Representations and Warranties of Praegitzer. Praegitzer hereby
represents and warrants to Trend as follows:
(a) Organization and Status. Praegitzer is a corporation duly
organized and validly existing and is in good standing under the laws of
the State of Oregon and has all requisite corporate power and corporate
authority to own, operate, and lease its assets and properties and to carry
on its business as it is now conducted and as proposed to be conducted.
Praegitzer is duly qualified and in good standing as a foreign corporation
in each jurisdiction in which the properties owned, leased, or operated, or
the business conducted by it require such qualification, except where
failure to be so qualified would not have a material adverse effect on its
business or financial condition. Praegitzer has given Trend complete and
accurate copies of its Articles and Bylaws, each as in effect on the date
of this Agreement.
(b) Capitalization. Praegitzer has authorized capital stock
consisting of 50,000,000 shares of common stock and 500,000 shares of
Preferred Stock ("Praegitzer Preferred Stock"). On the date of this
Agreement, 11,064,875 shares of Praegitzer Common Stock are outstanding. On
the date of this Agreement, options to purchase 667,000 shares of
Praegitzer Common Stock under the Praegitzer 1995 Stock Incentive Plan and
warrants to purchase 46,333 shares of Praegitzer Common Stock are
outstanding. No shares of Preferred Stock have been designated or issued.
Except under the terms of Praegitzer's employee or director benefit plans
or as disclosed in the SEC Reports (defined in Section 2.3(f)), there are
no subscriptions, options, warrants, rights, convertible securities, or
other agreements or commitments obliging Praegitzer to issue any shares of
capital stock. All outstanding shares of capital stock of Praegitzer have
been duly authorized and are validly issued, fully paid, and nonassessable.
When issued, the shares of Praegitzer Common Stock into which the Trend
Common Stock will be converted at the Effective Time will be duly
authorized, validly issued, fully paid, and nonassessable. Shares of
Praegitzer Common Stock to be issued to the Shareholders on their exercise
of stock options granted in the Employment Agreements will be, when issued,
duly and validly authorized and issued, and, on payment of the exercise
price therefor, fully paid and nonassessable. Praegitzer has authorized and
has reserved for issuance on such exercise a number of shares of Praegitzer
Common Stock equal to the number of shares covered by the options. No
shares of capital stock of Praegitzer have been, and the shares of
Praegitzer Common Stock into which the Trend Common Stock will be converted
at the Effective Time will not be, issued in violation of any preemptive or
similar rights granted to any former or existing shareholder pursuant to
law, Praegitzer's Articles or Bylaws, or otherwise.
(c) Authority; Authorization. Praegitzer has full corporate
power and corporate authority to execute and deliver this Agreement, the
Registration Rights Agreement, the Employment Agreements and the
Noncompetition Agreements described in Section 4.1, and the other documents
contemplated by this Agreement (the "Transaction Documents"), to consummate
the transactions contemplated by the Transaction Documents, and to carry
out its obligations under the Transaction Documents. Prior to the Closing,
this Agreement and the other Transaction
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Documents will have been duly and validly authorized by the Board of
Directors of Praegitzer. Subject to the approval by the Board of Directors
of Praegitzer, this Agreement has been duly and validly executed and
delivered by Praegitzer and constitutes, and each of the Transaction
Documents will, when duly and validly executed and delivered, constitute,
the valid and binding obligations of Praegitzer, enforceable in accordance
with their terms, except as enforcement may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or other laws of
general application affecting the enforcement of creditors' rights, and
except that the availability of the equitable remedies of specific
performance and injunctive relief may be subject to the discretion of the
court before which any proceeding may be brought.
(d) Governmental Filings. Other than the filing of Articles of
Merger contemplated by Article 1, securities filings, and filings that have
been made or obtained or will be made or obtained before the Closing, no
declaration, filing, or registration with, or notice to, or authorization,
consent, or approval of, any governmental or regulatory body or authority
is needed for the execution and delivery of this Agreement by Praegitzer or
the consummation by Praegitzer of the transactions provided for in this
Agreement.
(e) Non-Contravention. The execution and delivery of the
Transaction Documents by Praegitzer and the consummation by Praegitzer of
the transactions provided for therein will not (i) conflict with the
Articles or Bylaws of Praegitzer, or (ii) result in any violation of or
default or loss of a material benefit under, or permit the acceleration of
any material obligation under, any mortgage, indenture, lease, agreement or
other instrument, permit, concession, grant, franchise, license, judgment,
order, decree, statute, law, ordinance, rule, or regulation applicable to
Praegitzer or its properties that would have a material adverse effect on
the business or financial condition of Praegitzer.
(f) SEC Reports and Financial Statements. Praegitzer has given
Trend accurate and complete copies of all registration statements, reports
and proxy statements, including amendments thereto, filed with the
Securities and Exchange Commission (the "SEC") since February 9, 1996
(collectively, the "SEC Reports"). As of their respective dates, the SEC
Reports did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances in which they
were made, not misleading. Each of the financial statements of Praegitzer
(including any related notes and schedules) contained in the SEC Reports
presents fairly the financial condition, results of operations, and cash
flows of Praegitzer as of the dates and for the periods indicated therein
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated except as otherwise
indicated therein and subject, in the case of unaudited statements, to
normal year-end audit adjustments that are not expected to be material in
amount or effect. Praegitzer has filed with the SEC all reports and
documents required to be filed by it since April 4, 1996.
(g) Litigation. Except as set forth in the SEC Reports, no
litigation, proceeding, or governmental investigation is pending or, to the
knowledge of Praegitzer,
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threatened against or relating to Praegitzer, its officers or directors in
their capacities as such, or its properties or businesses other than such
litigation, proceeding, or investigation which, if determined adversely
against such party, would not have a material adverse effect on the
business or financial condition of Praegitzer.
(h) Compliance With Laws. Praegitzer has at all relevant times
conducted its business in compliance with its Articles of Incorporation and
Bylaws; Praegitzer is not in violation of any applicable laws or
regulations; Praegitzer is subject to no outstanding judgment, order, writ,
injunction, or decree; and Praegitzer has not been charged with or
threatened with a change of, a violation of any applicable law or
regulation except where such violation, judgment, order, writ, injunction,
or decree would not have a material adverse effect on its business, assets,
or properties.
(i) No Material Adverse Changes. Since April 4, 1996, there has
been no material adverse change in the business, assets, or prospects of
Praegitzer that would render the information contained in its registration
statement on Form S-1 (Registration No. 333-01228) declared effective by
the SEC April 4, 1996 (the "Registration Statement") materially misleading.
(j) No Changes in Major Stockholders' Ownership. To the best
knowledge of Praegitzer, each shareholder disclosed in the Registration
Statement as owning beneficially more than five percent of the Praegitzer
Common Stock continues to own such shares as of the date of this Agreement.
(k) Tax-Related Representations and Warranties.
(i) Praegitzer has no plan or intention to reacquire any of
its stock issued in the Merger.
(ii) Praegitzer has no plan or intention to sell or
otherwise dispose of any assets of Trend acquired in the Merger
except for dispositions made in the ordinary course of business or
transactions described in Section 368(a)(2)(C) of the Code.
(iii) There is no intercorporate indebtedness existing
between Trend and Praegitzer that was issued, acquired, or will be
settled at a discount.
(l) Brokers and Finders. Neither Praegitzer nor any
shareholder, officer, director, or employee of Praegitzer has incurred any
liability for any brokerage or investment banking fees, commissions, or
finder's fees, in connection with the transactions provided for in this
Agreement.
(m) Registration of Option Shares. Praegitzer has filed with
the SEC a registration statement on Form S-8 covering the shares of
Praegitzer Common Stock covered by
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the options to be issued to the Shareholders under their Employment
Agreements and such registration statement has been declared effective.
(n) Accuracy of Representations and Warranties. None of the
representations or warranties of Praegitzer contained in this Agreement
contain or will contain any untrue statement of any material fact or omit
or misstate a material fact needed to make the statements contained in this
Agreement not misleading.
ARTICLE 3
COVENANTS
3.1 Mutual Covenants. Praegitzer, Trend, and the Shareholders each
covenant and agree as follows:
(a) Consents and Approvals. Praegitzer and Trend shall cooperate
and use their best efforts, between the date of this Agreement and the
Effective Time, to obtain all consents, approvals, licenses, or permits
that may be required in connection with the Merger.
(b) Confidentiality. The terms of this Agreement are
confidential. Between the date of this Agreement and the Effective Time,
neither Praegitzer on one hand, nor Trend or the Shareholders on the other,
issue any press releases or otherwise make any public statement, any
internal communication except on a "need-to-know basis", any third party
communication or statement except to accountants, attorneys and advisors
who agree to be similarly bound, or any filings with any federal or state
governmental or regulatory agency with respect to the transactions
contemplated hereby, without the consent of the other to the contents of
such release, statement, or filing and its release (which consent may not
be unreasonably withheld), except as required by law.
(c) Notice. Praegitzer, Trend, and the Shareholders shall each
give prompt notice to the others, between the date of this Agreement and
the Effective Time, of (i) the occurrence, or failure to occur, of any
event that such party believes would be likely to cause any of
representations or warranties contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date of this
Agreement to the Effective Time and (ii) any material failure of such party
or any of its officers, directors, employees, or agents to comply with or
satisfy any covenant, condition, or agreement to be complied with or
satisfied by it in accordance with this Agreement. Failure to give such
notice shall not constitute a waiver of any defense that may be validly
asserted.
(d) Tax-Free Reorganization. Praegitzer and Trend shall each
report the Merger on their respective federal income tax returns as a
tax-free reorganization within the meaning of Section 368(a) of the Code.
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(e) Reasonable Efforts; Further Assurances. Subject to the terms
and conditions of this Agreement, each party agrees to use all reasonable
efforts to carry out the transactions provided for herein and to fulfill
the conditions of their respective obligations under this Agreement.
3.2 Covenants of Trend. Trend covenants and agrees with Praegitzer
that, except as specifically provided in this Agreement or unless
Praegitzer agrees otherwise in writing, before the Effective Time:
(a) Conduct of Business. Trend's business shall be conducted
only in, and Trend shall not take any action except in, the ordinary course
of business and consistent with its past practice.
(b) Investigations; Access to Information. Trend agrees, until
the earlier of the Effective Time or the termination of this Agreement, to
use all reasonable efforts to give Praegitzer's authorized representatives
and agents full access to all its premises, books, and records and to cause
its officers and its subsidiaries' officers to give Praegitzer such
financial and operating data and other information with respect to its
business and properties as Praegitzer may from time to time reasonably
request. Any such investigations shall (A) be conducted reasonably so as
not to interfere with Trend's business operations; (B) shall not affect or
change any of the representations and warranties in this Agreement; and (C)
shall be subject to the provisions of the Confidentiality Agreement between
Trend and Praegitzer dated May ___,1996 (the "Confidentiality Agreement").
(c) Changes in Capital Stock. Trend shall not directly or
indirectly, without the consent of Praegitzer: (i) sell, pledge, dispose
of, or encumber any shares of, or securities convertible into or
exchangeable for, or any options, warrants, or rights of any kind to
acquire any shares of, its capital stock of any class; (ii) amend or
propose to amend its Articles of Incorporation or Bylaws; (iii) split,
combine, or reclassify any outstanding shares of its capital stock, or
declare, set aside, or pay any dividend payable in cash, stock, property,
or otherwise with respect to such shares, except for the extraordinary
dividend to be paid pursuant to Section 4.3; (iv) redeem, purchase,
acquire, or offer to acquire any shares of its capital stock; or (v) enter
into any contract, agreement, commitment, or arrangement with respect to
any of the matters set forth in this Section 3.2(c).
(d) Sales of Assets; Acquisitions; Contracts. Trend shall not:
(i) issue, sell, pledge, dispose of, or encumber, or agree to issue, sell,
pledge, dispose of, or encumber any of its property or assets except in
nonmaterial amounts in the ordinary course of business consistent with past
practice; (ii) acquire (by merger, consolidation, or acquisition of stock
or assets) any corporation, partnership, or other business organization or
division thereof; (iii) incur indebtedness for borrowed money or issue debt
securities, except for the quarterly allowances for capital equipment and
building purchases shown on Schedule 3.2(d) of the Exceptions Letter or in
the ordinary course of business and consistent with past practice; (iv)
enter into or modify any
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indemnification) against contract, lease, agreement, or commitment, except
in the ordinary course of business and consistent with past practice,
except for the contract for a building purchase, which shall be subject to
Praegitzer's consent (which consent shall not be unreasonably withheld);
(v) terminate, modify, assign, waive, release, or relinquish any contract
rights or amend any rights or claims not in the ordinary course of
business; or (vi) settle or compromise any claim, action, suit, or
proceeding pending or threatened against it, or (if it may be liable or
obliged to provideany of its directors or officers, before any
court, governmental agency, or arbitrator, provided that nothing herein
shall require any action that might impair or otherwise affect the
obligation of any insurance carrier under any insurance policy maintained
by Trend.
(e) Employee Compensation. Trend shall not grant any bonus,
other than the bonus described in Section 4.2, or any increase in the
salary or other compensation of its employees (except in the ordinary
course of business and consistent with past practice or a currently
existing employment agreement) or enter into any employment agreement or
make any loan to or enter into any material transaction of any other nature
with any employee.
(f) Severance. Trend shall take no action to institute any
severance or termination pay practices with respect to any of its
directors, officers, or employees or to increase the benefits payable under
its severance or termination pay practices except in the ordinary course of
business and consistent with past practice.
(g) Employee Benefits. Trend shall not (except for salary
increases for employees who are not executive officers of Trend in the
ordinary course of business and consistent with past practice) adopt or
amend, except as contemplated hereby or as may be required by applicable
law or regulation, any collective bargaining, bonus, profit sharing,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust,
fund, plan, or arrangement for the benefit or welfare of any directors,
officers, or employees.
(h) Suppliers and Customers. Trend shall use its best efforts
to maintain its relationships with its suppliers and customers, and if and
as requested by Praegitzer, (i) Trend shall use reasonable efforts to make
arrangements for representatives of Praegitzer to meet with Trend's
customers and suppliers and (ii) Trend shall schedule, and its officers
shall participate in, meetings of representatives of Praegitzer with
Trend's suppliers and customers.
(i) No Solicitation. Until the earlier of September 30, 1996 or
the termination of this Agreement, Trend will not, and Trend will cause all
of its officers, directors, and employees and any investment banker,
attorney, accountant, or other agent retained by it not to, directly or
indirectly, encourage, initiate, or solicit any inquiries or the making of
any proposal with respect to, or engage in negotiations concerning, or
provide any confidential information or data to, or respond to any
inquiries or proposals by, or have any discussions with, any person other
than Praegitzer relating to any acquisition, business combination, or
purchase of all or a substantial part of Trend's business or assets of or
any equity interest in Trend, and Trend will
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immediately cease any existing activities, discussions, or negotiations
with any parties conducted heretofore with respect to any of the foregoing.
Trend shall notify Praegitzer immediately if any such inquiries or
proposals are received, any such information is requested, or any such
negotiations or discussions are sought to be initiated or continued with
Trend.
3.3 Covenants of Shareholders. Each Shareholder covenants and agrees
with Praegitzer that, except as specifically provided in this Agreement or
unless Praegitzer agrees otherwise in writing, before the Effective Time:
(a) Changes in Capital Stock. Such Shareholder shall not
directly or indirectly sell, pledge, dispose of, or encumber any of his
shares of Trend Common Stock or enter into any contract, agreement,
commitment, or arrangement to do so.
(b) No Solicitation. Until the earlier of September 30, 1996 or
the termination of this Agreement, such Shareholder will not, and will
cause any investment banker, attorney, accountant, or other agent retained
by him not to, directly or indirectly, encourage, initiate, or solicit any
inquiries or the making of any proposal with respect to, or engage in
negotiations concerning, or provide any confidential information or data
to, or respond to any inquiries or proposals by, or have any discussions
with, any person other than Praegitzer relating to any acquisition,
business combination, or purchase of all or a substantial part of Trend's
business or assets of or any equity interest in Trend, and such Shareholder
will immediately cease any such activities, discussions, or negotiations.
The Shareholder shall notify Praegitzer immediately if he receives any such
inquiries or proposals, or requests for information or discussions.
(c) Necessary Actions. Each Shareholder agrees to take all
reasonable action within his power needed to cause Trend to perform its
covenants under this Agreement.
(d) Release. Each Shareholder hereby releases and discharges
Praegitzer and each of its officers and directors from, and agrees and
covenants that he will not commence any litigation or other legal or
administrative proceeding against, Praegitzer or its officers or directors,
relating to any and all claims and demands, known and unknown, suspected
and unsuspected, disclosed and undisclosed, for damages, actual or
consequential, past, present and future, arising out of or in any way
connected with his ownership or alleged ownership of Trend Common Stock or
any other relationship with Trend before the Effective Time, other than
claims or demands arising out of the transactions contemplated by this
Agreement.
(e) Use of Extraordinary Bonus. Each Shareholder covenants that
he will use the funds paid to him as an extraordinary bonus pursuant to
Section 4.2 to repay his outstanding obligations to the Walker Trust
promptly on receipt.
3.4 Covenants of Praegitzer.
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(a) Fairness Hearing. Praegitzer shall promptly apply for a
hearing before the Director as described in Section 1.5(d)(i), and will use
its best efforts to obtain the approval of the Director of the terms and
conditions of the Merger before Closing.
(b) Continuation of Business. Praegitzer covenants and agrees
with each Shareholder that, after the Merger, Praegitzer will continue the
historic business of Trend or use a significant portion of Trend's historic
business assets in a business, within the meaning of such terms as defined
in Treasury Regulation ss.1.368-1(d).
(c) Material Adverse Changes. Praegitzer will promptly advise
Trend and the Shareholders of any material adverse changes in its business
or financial condition before Closing.
(d) No Changes in Capital Stock. Before the Closing, Praegitzer
shall not, without the consent of Trend, split, combine, or reclassify any
outstanding shares of its capital stock, or declare, set aside, or pay any
dividend payable in cash, stock, property, or otherwise with respect to
such shares, or enter into any contract, agreement, commitment, or
arrangement with respect to any of such matters.
(e) Issuance of Certificates. After the Effective Time,
Praegitzer shall cause the Transfer Agent to issue and deliver stock
certificates representing the number of shares of Praegitzer Common Stock
to be issued in the Merger, in accordance with the provisions of Article 1.
(f) Financing. Praegitzer shall provide or arrange financing to
or for Trend to permit Trend to make the payments required pursuant to
Sections 4.2 and 4.5 hereof.
ARTICLE 4
FURTHER AGREEMENTS
4.1 Employment and Noncompetition Agreements. Before or at the
Closing, the Shareholders shall execute Employment Agreements and
Noncompetition Agreements with Praegitzer in the forms attached hereto as
Exhibits D-1 through D-5 and Exhibit E, respectively.
4.2 Bonus. Before the close of business on the Closing Date, Trend
shall pay a bonus to its employees in a total amount not to exceed
$976,000, and in allocations to be determined by the Board of Directors of
Trend in its good faith judgment.
4.3 Dividend. Before the Closing, the Board of Directors of Trend may
declare a dividend, out of funds legally available therefor, payable to the
Shareholders in proportion to their record ownership of Trend Common Stock
immediately before the Closing, of a total amount of up to 50% of the
balance of Trend's accumulated adjustment account as of such time, such
dividend to be paid to the Shareholders before the close of business on the
Closing Date.
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4.4 Walker Payments. At the Closing, Trend shall pay the following
amounts to satisfy the obligations of Trend to Sterling E. Walker and the
Walker Trust:
(a) the principal balance plus interest accrued through the
Closing Date under the Secured Promissory Note dated March 31, 1996 from
Trend to the Walker Trust, which amount will be $1,789,890.91 through
August 23, 1996;
(b) $183,333 due under the Noncompetition Agreement dated as of
March 31, 1996 by and between Trend and Sterling E. Walker;
(c) $240,000 due under the Consulting Agreement dated as of
March 31, 1996 by and between Trend and Walker; and
(d) $235,620 due to Walker from Trend pursuant to the Deferred
Compensation Agreement dated March 31, 1996, by and between Trend and
Walker.
4.5 Tax Treatment. Praegitzer and Trend hereby agree that for federal
income tax purposes, including without limitation the calculation of
Trend's accumulated adjustment account, (a) Trend's existence as an S
corporation under the Code shall end on the Closing Date, (b) all tax items
for Trend through the close of business on the Closing Date, including
without limitation payment of the dividend provided for in Section 4.3,
shall be included on Trend's S corporation return for the period ending on
the Closing Date, (c) all transactions occurring after the close of
business on the Closing Date shall be treated as occurring after the end of
Trend's existence as an S corporation and (d) each of Praegitzer and Trend
shall so report the Merger on their respective federal income tax returns.
ARTICLE 5
CONDITIONS
5.1 Conditions to the Obligations of All Parties. The obligations of
the parties to effect the Merger are subject to the satisfaction, before
the Closing, of each of the following conditions:
(a) Litigation. There shall not be in effect any judgment,
order, decree, or injunction of any court of competent jurisdiction
restraining, enjoining, or prohibiting the consummation of the transactions
provided for in this Agreement. There shall not be outstanding any claim or
action for damages against any party that, if successful, would have a
material adverse effect on the business or financial condition of either
Trend or Praegitzer, taken as a whole.
(b) Release of Former Shareholder. The parties shall have
secured the release of Sterling E. Walker from liability under his personal
guarantees of the obligations of Trend to
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Metlife Capital Limited Partnership and to the CIT Group/Equipment
Financing, Inc., or such obligations of Trend shall have been repaid in
full; or Walker shall have waived his right to obtain such releases.
5.2 Conditions to Obligations of Trend and the Shareholders. The
obligations of Trend and the Shareholders to effect the Merger are subject
to the satisfaction, or waiver by them, before the Closing of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Praegitzer in this Agreement shall be true and correct in all
material respects (i) at the date of this Agreement and (ii) at the Closing
with the same effect as though made on and as of such date, except for
changes specifically contemplated by this Agreement.
(b) Covenants. Praegitzer shall have performed in all material
respects all of the covenants, agreements, and obligations contained in
this Agreement that are required to be performed or complied with by it
before the Closing.
(c) Nasdaq Listing. The shares of Praegitzer Common Stock
issued in the Merger shall have been listed for trading on the Nasdaq
National Market System.
(d) Certificate. The chief executive officer and the chief
financial officer of Praegitzer shall have delivered to Trend and the
Shareholders as of the Closing a certificate certifying on behalf of
Praegitzer that the conditions specified in Sections 5.2(a) and (b) have
been satisfied.
(e) Voting Agreement. Daniel J. Barnett shall have been elected
a director of Praegitzer (effective as of the Effective Time), and Robert
L. Praegitzer shall have entered into a Voting Agreement with Daniel J.
Barnett, providing for the election of Daniel J. Barnett as a director of
Praegitzer, in substantially the form attached hereto as Exhibit F.
(f) Legal Opinion. Trend and the Shareholders shall have
received from Stoel Rives LLP, legal counsel to Praegitzer, an opinion
dated as of the Closing, generally covering those matters set forth in
Exhibit G to this Agreement, in a form to be negotiated in good faith by
the parties hereto.
(g) Corporate Proceedings. All corporate proceedings of
Praegitzer in connection with the Merger and all documents incident thereto
shall be reasonably satisfactory in form and substance to Trend and its
counsel, and they shall have received all certified or other copies or
counterpart originals of such documents as they may reasonably request.
(h) Employment Agreements. Praegitzer shall have executed an
Employment Agreement and Noncompetition Agreement with each Shareholder in
the forms of Exhibits D-1 through D-5 and Exhibits E-1 through E-5,
respectively, to this Agreement, and such persons
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shall have been appointed to the corporate offices, if any, as set forth in
such Employment Agreements (effective as of the Effective Time).
5.3 Conditions to Obligations of Praegitzer. The obligation of
Praegitzer to effect the Merger is subject to the satisfaction, or waiver
by Praegitzer, before the Closing, of each of the following conditions:
(a) Due Diligence. Praegitzer shall have completed a due
diligence investigation of Trend the results of which are satisfactory to
Praegitzer, provided that this condition shall be waived if not asserted by
August 26, 1996.
(b) Representations and Warranties. The representations and
warranties of Trend and the Shareholders in this Agreement shall be true
and correct in all material respects (i) at the date of this Agreement and
(ii) at the Closing, with the same effect as though made on and as of such
date, except for changes specifically contemplated by this Agreement.
(c) Covenants. Trend and the Shareholders shall have performed
in all material respects all of the covenants, agreements, and obligations
contained in this Agreement that are required to be performed or complied
with by any of them before the Closing.
(d) No Material Adverse Change. Since June 30, 1996, there
shall have been no material adverse change, or discovery of a condition or
occurrence of an event that reasonably can be expected to result in a
material adverse change, in the business, properties, financial condition,
or results of operations of Trend.
(e) Termination of Options. The holders of any and all
outstanding options to acquire shares of the capital stock of Trend shall
have signed an acknowledgment, in form reasonably satisfactory to
Praegitzer, that all such options will terminate on or before the Effective
Time.
(f) Certificate. The president and the chief financial officer
of Trend shall have delivered to Praegitzer as of the Closing a certificate
certifying on behalf of Trend that the conditions specified in Sections
5.3(b), (c), and(d) above have been satisfied.
(g) Legal Opinion. Praegitzer shall have received from legal
counsel to Trend an opinion dated as of the Closing, generally covering
those matters set forth in Exhibit H to this Agreement, in a form to be
negotiated in good faith by the parties hereto.
(h) Corporate Proceedings. All corporate proceedings of Trend
in connection with the Merger and all documents incident thereto shall be
reasonably satisfactory in form and substance to Praegitzer and its
counsel, and they shall have received all certified or other copies or
counterpart originals of such documents as they may reasonably request.
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(i) Non-Disclosure Agreements. Trend shall have given
Praegitzer copies of all existing non-disclosure agreements between Trend
and its employees or have obtained from its employees similar agreements in
the current form.
(j) Release by Former Shareholder. Sterling E. Walker shall
have released Trend and Praegitzer from liability under his Promissory
Note, Noncompetition Agreement, Deferred Compensation Agreement, and
Consulting Agreement with Trend dated as of March 31, 1996.
(k) Employment Agreements and Noncompetition Agreements. The
Shareholders shall have executed the Employment Agreements and
Noncompetition Agreements with Praegitzer in the forms of Exhibits D-1
through D-5 and Exhibits E-1 through E-5, respectively, to this Agreement.
(l) Consent of Landlord. Trend shall have obtained any consent
required of the landlord with respect to the lease of its facility on Old
Warm Springs Blvd. in Fremont, California in connection with the
transactions contemplated by this Agreement and have provided to Praegitzer
evidence satisfactory to Praegitzer of such consent.
ARTICLE 6
SURVIVAL AND INDEMNIFICATION
6.1 Survival. The agreement in Section 1.10 (Subsequent Actions)
shall survive the consummation of the Merger. The confidentiality agreement
in Section 3.1(b) shall survive the termination of this Agreement. The
representations and warranties of the parties contained in this Agreement
shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. The representation
and warranties herein shall be extinguished and be of no further force or
effect after (i) three years from the Closing Date, if in Sections 2.1(q)
and 2.1(m); and (ii) two years from the Closing Date, for all other
representations and warranties, except in any case with respect to any
claim for which a Claim Notice (as defined in Section 6.4) is delivered
pursuant to Section 6.5(a) on or before such date.
No Claim Notice shall be effective if delivered after such date.
6.2 Indemnification.
(a) By the Shareholders Collectively. From and after the
Closing Date and subject to the limitations of this Article 6, the
Shareholders severally and not jointly shall indemnify and hold Praegitzer
and its officers and directors (collectively, the "Praegitzer Indemnified
Parties") harmless from, for, and against any losses, costs, expenses,
damages, and liabilities, including reasonable attorneys' fees
(collectively, "Damages"), incurred by a Praegitzer Indemnified Party by
reason of or arising out of any inaccuracy in any representation or
warranty or the breach of any covenant or agreement of Trend made in this
Agreement.
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(b) By Each Shareholder. From and after the Closing Date and
subject to the limitations of this Article 6, each Shareholder shall
indemnify and hold the Praegitzer Indemnified Parties harmless from, for,
and against any Damages incurred by a Praegitzer Indemnified Party by
reason of or arising out of any inaccuracy in any representation or
warranty or the breach of any covenant or agreement made by such
Shareholder in this Agreement.
(c) By Praegitzer. From and after the Closing Date and subject
to the limitations of this Article 6, Praegitzer will indemnify and hold
the Shareholders harmless from, for, and against any Damages incurred by
any of them by reason of or arising out of any inaccuracy in any
representation or warranty, the breach of any covenant of Praegitzer made
in this Agreement, or the failure of Praegitzer to obtain the release of
such Shareholders from their guarantees of Trend's obligations as provided
in Section 1.8.
6.3 Limitations. The liability of Praegitzer and the Shareholders for
the breach of representations, warranties, and covenants is subject to the
following limitation:
(a) Threshold. Neither Praegitzer nor the Shareholders shall
have any indemnity obligation under Section 6.2 until the Damages of the
Praegitzer Indemnified Parties or Shareholders, as the case may be, exceed
$100,000 in the aggregate, from all matters as to which such party would be
entitled to indemnification pursuant to this Article 6, at which point the
indemnity obligation of such party shall cover all Damages from the first
dollar.
(b) Dollar Limit. The maximum indemnity obligation of each
Shareholder under Section 6.2 shall be limited to an amount equal to the
sum of (i) the amount obtained by multiplying the number of shares of
Praegitzer Common Stock into which such Shareholder's Trend Common Stock is
converted at the Effective Time by $10.00 per share, and (ii) the cash
consideration paid to such Shareholder pursuant to Section 1.7. The maximum
indemnity obligation of Praegitzer under Section 6.2 shall be limited to
$10,000,000.
6.4 Claim Procedure for Indemnification. The obligations and
liabilities of Praegitzer and the Shareholders in connection with claims
for indemnification under Section 6.2 shall be subject to the following
terms and conditions:
(a) Notice. If a Praegitzer Indemnified Party or a Shareholder
seeking indemnification (an "Indemnified Party") determines that there are
facts or circumstances that render an indemnifying party liable for
indemnification under Section 6.2, the Indemnified Party shall promptly
give written notice of its claim to the indemnifying party or parties,
provided, however, that the failure to give prompt notice of a claim for
indemnification shall not limit the indemnification obligations of the
indemnifying party hereunder except to the extent that the delay either
exceeds the time limits in Section 6.1 or materially adversely affects the
ability of the indemnifying party to mitigate Damages or to defend against
a claim asserted by a third party against the Indemnified Party (a "Third
Party Claim"). The notice ("Claim Notice") shall set
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forth in reasonable detail the basis for the claim, the nature of the
Damages and the amount thereof, to the extent known.
(b) Response to Third Party Claim. If the Claim Notice states
that a Third Party Claim has been asserted against the Indemnified Party,
the indemnifying party shall have 30 days (or 10 days in the case of a
Third Party Claim with respect to which a complaint has been filed unless
an extension is obtained in the time to respond to the complaint, which
extension the Indemnified Party shall use reasonable efforts to obtain)
after receipt by such indemnifying party of the Claim Notice to notify the
Indemnified Party in writing whether the indemnifying party elects to (i)
participate in, through counsel of such indemnifying party's choice, but
without controlling, the defense of the Third Party Claim, including
settlement discussions or (ii) to assume the defense of the Third Party
Claim as provided in Section 6.4(c).
(c) Defense and Settlement. The indemnifying party may elect to
assume the defense of the Third Party Claim by giving notice to the
Indemnified Party within the time period specified in Section 6.4(b) unless
(i) such claim seeks an order, injunction, or other equitable relief
against the Indemnified Party (and either (a) the third party seeks a
temporary restraining order or preliminary injunction, or (b) the
Indemnified Party reasonably determines that the relief sought would be
materially adverse to the Indemnified Party), or (ii) the Indemnified Party
has reasonably concluded that there is a conflict of interest between the
Indemnified Party and the indemnifying person in the conduct of the defense
of such claim. If the indemnifying party assumes the defense of the Third
Party Claim, it shall undertake, conduct, and control the settlement or
defense of the Third Party Claim diligently, through counsel chosen by the
indemnifying party and approved by the Indemnified Party, and shall use all
reasonable efforts in good faith to resolve the Third Party Claim
expeditiously and at the least possible cost under the circumstances,
provided, however, that the indemnifying party shall have no obligation to
undertake any separate obligation or duty in settlement of such claim. The
Indemnified Party shall cooperate with the indemnifying party in connection
therewith and make available to the indemnifying party all relevant
information reasonably available to the Indemnified Party that is material
to the defense of the Third Party Claim. The Indemnified Party may
participate in the defense of the Third Party Claim through counsel of the
Indemnified Party's choice. If the indemnifying party does not elect to
assume the defense of the Third Party Claim within the time period
specified in Section 6.5(b), the Indemnified Party shall undertake,
conduct, and control the settlement or defense of the Third Party Claim
diligently, through counsel chosen by the Indemnified Party, and shall use
all reasonable efforts in good faith to resolve the Third Party Claim
expeditiously and at the least possible cost under the circumstances,
provided, however, that the Indemnified Party shall have no obligation to
undertake the separate obligation or duty in settlement of such claim, or
to undertake any action that would materially adversely affect the future
conduct of its business. The indemnifying party shall cooperate with the
Indemnified Party in connection therewith and make available to the
Indemnified Party all relevant information reasonably available to the
indemnifying party that is material to the defense of the Third Party
Claim. The indemnifying party shall not, without the prior written consent
of the Indemnified Party, settle or compromise, or consent to the entry of
any judgment in, any such claim or any pending or threatened claim or
action in respect of which indemnification may be sought under this Section
6, unless such settlement, compromise or consent includes an unconditional
release of each Indemnified Party from all liability arising out of such
claim or action.
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(d) Shareholders' Agent. Daniel J. Barnett is appointed the
representative of the Shareholders as their exclusive agent and
attorney-in-fact (the "Shareholders' Agent") to act on behalf of each of
them under this Article 6 after the Closing with respect to all matters
that are the subject of this Article 6 including, without limitation, (i)
receiving or giving all notices, instructions, communications, consents, or
agreements that may be necessary, required, or given under this Article 6
and (ii) asserting, settling, compromising, or defending, or determining
not to assert, settle, compromise, or defend, any claims that a Praegitzer
Indemnified Party may assert, or have the right to assert, against any
Shareholder, if such actions are approved by a majority in interest of the
Shareholders, provided, however, that Praegitzer shall have the right to
rely on the signature of the Shareholders' Agent as conclusive evidence
that such approval has been given. Barnett may resign as Shareholders'
Agent on the appointment of a new Shareholders' Agent by the written
consent of a majority of the Shareholders. A person who is acting as
Shareholders' Agent shall cease being the Shareholders' Agent on such
person's death or disability and, in such event, the Shareholders shall
appoint a substitute Shareholders' Agent. Each Shareholder acknowledges and
agrees that Praegitzer and Trend may deal exclusively with the
Shareholders' Agent in respect of the above-referenced matters and that the
enforceability of this Section 6.4(d) is a material inducement to
Praegitzer entering into this Agreement, and further agrees that he will
bring no claim or action of any sort against the Shareholder's Agent for
actions taken or omissions to act in his capacity as such, if such acts or
omissions were not the result of gross negligence or willful misconduct.
ARTICLE 7
TERMINATION
7.1 Termination. This Agreement may be terminated and the Merger
abandoned at any time before the Effective Time:
(a) Mutual Consent. By mutual consent of Praegitzer and Trend,
by action of their respective Boards of Directors; or
(b) Praegitzer. By Praegitzer if (i) the conditions set forth
in Sections 5.1 and 5.3 shall not have been complied with or performed in
any material respect and such noncompliance or nonperformance shall not
have been cured or eliminated (or by its nature cannot be cured or
eliminated) by Trend and the Shareholders on or before September 30, 1996;
or (ii) the Board of Directors of Trend shall not have approved this
Agreement and the Merger on or before August 26, 1996; or
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(c) Trend and Shareholders. By Trend or the Shareholders if (i)
the conditions set forth in Sections 5.1 and 5.2 shall not have been
complied with or performed in any material respect and such noncompliance
or nonperformance shall not have been cured or eliminated (or by its nature
cannot be cured or eliminated) by Praegitzer on or before September 30,
1996; or (ii) the Board of Directors of Praegitzer shall not have approved
this Agreement and the Merger on or before August 26, 1996; or
(d) Praegitzer or Trend. By either Praegitzer or Trend, if the
Merger has not been effected on or before the close of business on
September 30, 1996 (unless such event has been caused by the breach of this
Agreement by the party seeking such termination).
ARTICLE 8
GENERAL
8.1 Payment of Expenses. Each of Praegitzer and Trend shall pay all
its own costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby. If the transactions contemplated by
this Agreement are consummated, at or after the Closing the fees and
expenses for outside legal, accounting, and financial advice (including
advice through September 30, 1996 with respect to the preparation of tax
returns) to Trend and the Shareholders incurred in connection with the
transactions provided for in this Agreement shall be payable by (a)
Praegitzer, in an amount not to exceed $200,000, and (b) the Shareholders,
in any amounts over a total of $200,000.
8.2 Definition of Knowledge. Any representation or warranty qualified
by the word "knows," "known," or "knowledge" is deemed to include an
additional statement that the party made the representation or warranty
after reasonable inquiry.
8.3 Benefit and Assignment. This Agreement shall be binding on and
shall inure to the benefit of the parties hereto and their respective
successors and assigns. No party hereto may voluntarily or involuntarily
assign such party's interest under this Agreement without the prior written
consent of the other parties.
8.4 Amendment, Waiver, etc. The terms of this Agreement may be
amended or waived only by an instrument in writing signed by the party
against which enforcement of such amendment or waiver is sought. Any waiver
of any term of this Agreement or any breach hereof shall not operate as a
waiver of any other such term, condition or breach, and no failure to
enforce any provision hereof shall operate as a waiver of such provision or
of any other provision hereof.
8.5 Headings. The headings are for convenience only and will not
control or affect the meaning or construction of the provisions of this
Agreement.
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8.6 Jurisdiction; Governing Law. The construction and performance of
this Agreement will be governed by the laws of the State of Oregon (except
for the choice of law provisions thereof), and the courts of Multnomah
County, Oregon shall have non-exclusive jurisdiction over any action
brought in connection with it.
8.7 Arbitration. If any controversy or dispute shall arise between
the parties hereto in connection with, arising from, or in respect to this
Agreement, any provision hereof, or any provision of any instrument,
document, agreement, certification or other writing delivered pursuant
hereto, or with respect to the validity of this Agreement or any such
document, agreement, certification or other writing, and if such
controversy or dispute shall not be resolved within thirty (30) days after
the same shall arise, then any party may submit such dispute or controversy
for arbitration. If such dispute or controversy is submitted to arbitration
by Trend or one or more of the Shareholders then it shall be arbitrated in
Portland, Oregon in accordance with the commercial arbitration rules of the
Portland, Oregon office of the American Arbitration Association then in
effect; if such dispute or controversy is submitted to arbitration by
Praegitzer then it shall be arbitrated in San Jose, California in
accordance with the commercial arbitration rules of the San Jose,
California office of the American Arbitration Association then in effect.
The parties to this Agreement acknowledge that the transactions
contemplated by this Agreement involve interstate commerce and that any
arbitration proceeding pursuant to this Agreement shall be governed by the
Federal Arbitration Act. Any such dispute or controversy shall be
determined by one (1) arbitrator, who shall be a lawyer. Such arbitrator
may award any relief which such arbitrator shall deem proper in the
circumstances, without regard to the relief which would otherwise be
available to either party hereto in a court of law or equity, including,
without limitation, an award of money damages (including interest on unpaid
amounts, calculated from the due date of any such amount, at a rate per
annum determined by said arbitrator), specific performance and injunctive
relief. The award and findings of such arbitrator shall be conclusive and
binding upon the parties thereto, and judgment upon such award may be
entered in any court of competent jurisdiction. Any party against whom an
arbitrator's award shall be issued shall not, in any manner, oppose or
defend against any suit to confirm such award, or any enforcement
proceedings brought against such party, whether within or outside of the
United States of America, with respect to any judgment entered upon the
award, and such party hereby consents to the entry of a judgment against
such party, in the full amount thereof, or other relief granted therein, in
any jurisdiction in which such enforcement is sought. The party against
whom the arbitrator's award is issued shall pay the fees of the arbitrator.
If any term or other provision of this Section 8.7 is held invalid, illegal
or incapable of being enforced by any rule of law or public policy, all
other conditions and provisions of this Section 8.7 shall nevertheless
remain in full force and effect and binding upon the parties hereto.
8.8 Notices. Any notice, demand or request required or permitted to
be given under this Agreement (a) shall be in writing; (b) shall be
delivered personally, including by means of facsimile or courier, or mailed
by registered or certified mail, postage prepaid and return receipt
requested; (c) shall be deemed given on the date of personal delivery or on
the date set forth on
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the return receipt; and (d) shall be delivered or mailed to the addresses
or facsimile numbers set forth below or to such other address as any party
may from time to time direct:
PRAEGITZER: Praegitzer Industries, Inc.
1270 S.E. Monmouth Cut-Off Road
Dallas, OR 97338-9532
Phone: 503-623-9273
Fax: 503-623-3403
Attn: Mr. Robert L. Praegitzer
President, Chief Executive Officer,
and Chairman
Copies to: Stoel Rives LLP
Standard Insurance Center
900 S.W. Fifth Avenue, Suite 2300
Portland, OR 97204-1268
Phone: 503-224-3380
Fax: 503-220-2480
Attn: Stephen E. Babson
TREND: Trend Circuits, Inc.
44358 Old Warm Springs Boulevard
Fremont, CA 94538-6148
Phone: 510-651-1150
Fax: 510-651-5763
Attn: Daniel J. Barnett, President
Copies to: Gray Cary Ware & Freidenrich
400 Hamilton Ave.
Palo Alto, CA 94301
Attn: Douglas J. Rein
SHAREHOLDERS: Michael E. Gunion
378 Avenida Abetos
San Jose, CA 95123
Robert J. Versiackas
112 Rassani Drive
Danville, CA 94506
Scott R. Steward
49 Brightwood Cr.
Danville, CA 94506
Daniel J. Barnett
20677 Rome Drive
San Jose, CA 95120
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William Lewis
137 Centre Street
Dover, MA 02030
8.9 Attorneys' Fees. If suit or action is filed by any party to
enforce the provisions of this Agreement, or otherwise with respect to the
subject matter of this Agreement, the substantially prevailing party shall
be entitled to recover reasonable attorneys' fees as fixed by the court
and, if any appeal is taken, reasonable attorneys' fees as fixed by the
appellate court.
8.10 Entire Agreement. This Agreement and the Schedules and Exhibits
referred to herein embody the entire agreement and understanding of the
parties and supersede any and all prior agreements, arrangements, and
understandings relating to matters provided for herein, other than the
Confidentiality Agreement.
8.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original but all of which
together will constitute a single instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first written above.
PRAEGITZER INDUSTRIES, INC.
By MATTHEW J. BERGERON
-------------------------------------
Matthew J. Bergeron, Senior Vice
President and Chief Financial Officer
TREND CIRCUITS, INC.
By DANIEL J. BARNETT
-------------------------------------
Daniel J. Barnett, President
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The undersigned spouse of each
Shareholder has read and understood
the foregoing Agreement and
consents to the Merger, on behalf
of the Shareholder's marital
community:
- ---------------------------------- ---------------------------------------
Michael E. Gunion, individually Raquel D. Gunion
and on behalf of his marital
community
- ---------------------------------- ---------------------------------------
Robert J. Versiackas, individually Triscille I. Versiackas
and on behalf of his marital
community
- ---------------------------------- ---------------------------------------
Scott R. Steward, individually N/A
- ---------------------------------- ---------------------------------------
Daniel J. Barnett, individually Laurie M. Barnett
and on behalf of his marital
community
- ---------------------------------- ---------------------------------------
William Lewis, individually and Patricia Ann Lewis
on behalf of his marital community
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EXHIBITS
Exhibit A Plan of Merger
Exhibit B [None]
Exhibit C Form of Registration Rights Agreement
Exhibits D-1-D-5 Forms of Employment Agreements
Exhibits E-1-E-5 Forms of Noncompetition Agreements
Exhibit F Form of Voting Agreement
Exhibit G Form of Opinion of Stoel Rives LLP
Exhibit H Form of Opinion of Gray Cary Ware Freidenrich
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TABLE OF CONTENTS
Page
RECITALS...................................................................1
AGREEMENT..................................................................1
ARTICLE 1 THE MERGER.....................................................1
1.1 General........................................................1
1.2 Effective Time.................................................1
1.3 Effect of Merger...............................................2
1.4 Conversion of Shares...........................................2
(a) Trend....................................................2
(b) Praegitzer...............................................2
(c) No Fractional Shares.....................................2
(d) Transferability of Praegitzer Common Stock...............2
1.5 Certificates...................................................2
1.6 Payment........................................................3
1.7 Assumption of Shareholder Liabilities..........................3
1.8 Closing........................................................3
1.9 Subsequent Actions.............................................3
ARTICLE 2 REPRESENTATIONS AND WARRANTIES.................................4
2.1 Representations and Warranties of Trend........................4
(a) Organization and Status..................................4
(b) Capitalization...........................................4
(c) No Subsidiaries..........................................5
(d) Authority; Authorization.................................5
(e) Non-Contravention........................................5
(f) Financial Statements.....................................5
(g) Accounts Receivable......................................6
(h) Inventories..............................................6
(i) [INTENTIONALLY LEFT BLANK.]..............................6
(j) Absence of Undisclosed Liabilities.......................6
(k) Litigation...............................................6
(l) Absence of Changes.......................................7
(m) Taxes....................................................8
(n) Compliance With Laws....................................11
(o) Property................................................11
(p) Intellectual Property...................................11
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(q) Environmental Matters...................................12
(r) Labor Matters...........................................13
(s) Employee Benefit Matters................................13
(t) Other Employee Matters..................................16
(u) Contracts and Commitments; Absence of Defaults;
Violation of Agreements.................................16
(v) Insurance...............................................17
(w) Consents and Approvals..................................17
(x) Brokers and Finders.....................................17
(y) Restrictive Covenants...................................17
(z) Records.................................................17
(aa) Certain Interests.......................................18
(bb) Certain Payments........................................18
(cc) Customers and Suppliers.................................18
(dd) Accuracy of Representations and Warranties..............19
2.2 Representations and Warranties of Shareholders................19
(a) Capacity................................................19
(b) Authorization...........................................19
(c) Title to Shares.........................................19
(d) Confidential Information................................20
(e) Certain Interests.......................................20
(f) Certain Payments........................................20
(g) Brokers and Finders.....................................20
(h) Accuracy of Representations and Warranties..............20
2.3 Representations and Warranties of Praegitzer..................20
(a) Organization and Status.................................21
(b) Capitalization..........................................21
(c) Authority; Authorization................................21
(d) Governmental Filings....................................22
(e) Non-Contravention.......................................22
(f) SEC Reports and Financial Statements....................22
(g) Litigation..............................................22
(h) Compliance With Laws....................................23
(i) No Material Adverse Changes.............................23
(j) No Changes in Major Stockholders' Ownership.............23
(k) Tax-Related Representations and Warranties..............23
(l) Brokers and Finders.....................................23
(m) Registration of Option Shares...........................23
(n) Accuracy of Representations and Warranties..............23
ARTICLE 3 COVENANTS.....................................................24
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3.1 Mutual Covenants..............................................24
(a) Consents and Approvals..................................24
(b) Confidentiality.........................................24
(c) Notice..................................................24
(d) Tax-Free Reorganization.................................24
(e) Reasonable Efforts; Further Assurances..................24
3.2 Covenants of Trend............................................25
(a) Conduct of Business.....................................25
(b) Investigations; Access to Information...................25
(c) Changes in Capital Stock................................25
(d) Sales of Assets; Acquisitions; Contracts................25
(e) Employee Compensation...................................26
(f) Severance...............................................26
(g) Employee Benefits.......................................26
(h) Suppliers and Customers.................................26
(i) No Solicitation.........................................26
3.3 Covenants of Shareholders.....................................27
(a) Changes in Capital Stock................................27
(b) No Solicitation.........................................27
(c) Necessary Actions.......................................27
(d) Release.................................................27
(e) Use of Extraordinary Bonus..............................27
3.4 Covenants of Praegitzer.......................................27
(a) Fairness Hearing........................................27
(b) Continuation of Business................................27
(c) Material Adverse Changes................................28
(d) No Changes in Capital Stock.............................28
(e) Issuance of Certificates................................28
(f) Financing...............................................28
ARTICLE 4 FURTHER AGREEMENTS............................................28
4.1 Employment and Noncompetition Agreements......................28
4.2 Bonus.........................................................28
4.3 Dividend......................................................28
4.4 Walker Payments...............................................28
4.5 Tax Treatment.................................................29
ARTICLE 5 CONDITIONS....................................................29
5.1 Conditions to the Obligations of All Parties..................29
(a) Litigation..............................................29
(b) Release of Former Shareholder...........................29
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5.2 Conditions to Obligations of Trend and the Shareholders.......30
(a) Representations and Warranties..........................30
(b) Covenants...............................................30
(c) Nasdaq Listing..........................................30
(d) Certificate.............................................30
(e) Voting Agreement........................................30
(f) Legal Opinion...........................................30
(g) Corporate Proceedings...................................30
(h) Employment Agreements...................................30
5.3 Conditions to Obligations of Praegitzer.......................31
(a) Due Diligence...........................................31
(b) Representations and Warranties..........................31
(c) Covenants...............................................31
(d) No Material Adverse Change..............................31
(e) Termination of Options..................................31
(f) Certificate.............................................31
(g) Legal Opinion...........................................31
(h) Corporate Proceedings...................................31
(i) Non-Disclosure Agreements...............................31
(j) Release by Former Shareholder...........................32
(k) Employment Agreements and Noncompetition Agreements.....32
(l) Consent of Landlord.....................................32
ARTICLE 6 SURVIVAL AND INDEMNIFICATION..................................32
6.1 Survival......................................................32
6.2 Indemnification...............................................32
(a) By the Shareholders Collectively........................32
(b) By Each Shareholder.....................................32
(c) By Praegitzer...........................................33
6.3 Limitations...................................................33
(a) Threshold...............................................33
(b) Dollar Limit............................................33
6.4 Claim Procedure for Indemnification...........................33
(a) Notice..................................................33
(b) Response to Third Party Claim...........................33
(c) Defense and Settlement..................................34
(d) Shareholders' Agent.....................................35
ARTICLE 7 TERMINATION...................................................35
7.1 Termination...................................................35
(a) Mutual Consent..........................................35
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(b) Praegitzer..............................................35
(c) Trend and Shareholders..................................35
(d) Praegitzer or Trend.....................................36
ARTICLE 8 GENERAL.......................................................36
8.1 Payment of Expenses...........................................36
8.2 Definition of Knowledge.......................................36
8.3 Benefit and Assignment........................................36
8.4 Amendment, Waiver, etc........................................36
8.5 Headings......................................................36
8.6 Jurisdiction; Governing Law...................................36
8.7 Arbitration...................................................37
8.8 Notices.......................................................37
8.9 Attorneys' Fees...............................................39
8.10 Entire Agreement..............................................39
8.11 Counterparts..................................................39
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