<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 31, 1999
REGISTRATION NO. 333-85145
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CENTURY ELECTRONICS MANUFACTURING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3672 04-3334332
STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER)
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
274 CEDAR HILL ROAD, MARLBOROUGH, MASSACHUSETTS 01752
(508) 485-0275
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
LESLIE J. SAINSBURY, PRESIDENT AND CHIEF EXECUTIVE OFFICER
274 CEDAR HILL ROAD, MARLBOROUGH, MASSACHUSETTS 01752
(508) 485-0275
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------------
Copies To:
<TABLE>
<S> <C>
KEITH F. HIGGINS, ESQ. WILLIAM P. GELNAW, JR., ESQ.
Ropes & Gray Choate, Hall & Stewart
One International Place Exchange Place
Boston, Massachusetts 02110-2624 53 State Street
(617) 951-7000 Boston, Massachusetts 02109
(617) 951-7050 (fax) (617) 248-5000
(617) 248-4000 (fax)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION DATED AUGUST 31, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
4,000,000 SHARES
CENTURY ELECTRONICS MANUFACTURING, INC.
[CENTURY LOGO]
Common Stock
------------------
This is our initial public offering of common stock. All of the shares in
this offering are being sold by us, Century Electronics Manufacturing.
We currently expect the public offering price to be between $8.00 and $10.00
per share. After pricing of the offering, we expect that our common stock will
trade on the Nasdaq National Market under the symbol "CEMI."
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 4.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
---------- ----------
<S> <C> <C>
Public Offering Price................................................................. $ $
Underwriting Discount................................................................. $ $
Proceeds, before expenses, to Century................................................. $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT, NOR HAS ANY STATE SECURITIES
REGULATOR, APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
We have granted the underwriters a 30-day option to purchase up to 600,000
additional shares of our common stock to cover overallotments. We expect the
underwriters to deliver the shares of common stock to purchasers on or about
, 1999.
------------------------
ADVEST, INC.
J.C. BRADFORD & CO.
NEEDHAM & COMPANY, INC.
THE DATE OF THIS PROSPECTUS IS , 1999
<PAGE>
Inside front cover:
[Map of world with the following:
line going from Massachusetts to picture of Century's Marlborough, MA
facility;
line going from Florida to picture of Century's Boca Raton, FL facility;
line going from United Kingdom to picture of Century's St. Albans
facility and Hemel Hemstead facility;
line going from California to picture of Century's Santa Clara, CA
facility; and
line going from Thailand to picture of Century's Bangkok, Thailand
facility.
Note: all facility pictures are labeled by location]
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE AND
THE UNDERWRITERS HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT
INFORMATION. WE AND THE UNDERWRITERS ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS, REFERENCES TO
THE "COMPANY," "CENTURY," "WE," "US" AND "OUR" REFER TO CENTURY ELECTRONICS
MANUFACTURING, INC. AND ITS SUBSIDIARIES, INCLUDING AMITEK CORPORATION, EXCEPT
WHERE NOTED OR THE CONTEXT CLEARLY SUGGESTS OTHERWISE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Disclosure Regarding Forward-Looking Statements............................................................ i
Prospectus Summary......................................................................................... 1
Risk Factors............................................................................................... 4
Use of Proceeds............................................................................................ 12
Dividend Policy............................................................................................ 12
Capitalization............................................................................................. 13
Dilution................................................................................................... 14
Selected Consolidated Financial Data....................................................................... 15
Unaudited Pro Forma Financial Data......................................................................... 16
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 21
Business................................................................................................... 30
Management................................................................................................. 38
Principal Stockholders..................................................................................... 44
Certain Relationships and Related Transactions............................................................. 46
Description of Securities.................................................................................. 49
Shares Eligible for Future Sale............................................................................ 54
Underwriting............................................................................................... 56
Validity of Common Stock................................................................................... 58
Experts.................................................................................................... 58
Where You Can Find More Information........................................................................ 59
Index to Consolidated Financial Statements................................................................. F-1
</TABLE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. For example, statements
included in this prospectus regarding the future of the industry in which we
operate and our financial position, business strategy and other plans and
objectives for future operations, and assumptions and predictions about future
customer relationships, product demand, supply, manufacturing, costs, marketing
and pricing factors are all forward-looking statements. When we use words like
"intend," "may," "will," "strategy," "should," "continue," "anticipate,"
"believe," "estimate," "plan" or "expect" or other similar words we are making
forward-looking statements. We believe that the assumptions and expectations
reflected in such forward-looking statements are reasonable, based on
information currently available to us, but we cannot assure you that these
assumptions and expectations will prove to have been correct or that we will
take any action that we may presently be planning. Our actual results and future
events may differ materially from what we currently expect. We have disclosed
important factors that could cause our actual results to differ materially from
our current expectations under the section entitled "Risk Factors" and elsewhere
in this prospectus. Forward-looking statements made in connection with this
offering should be read with these factors in mind.
--------------------------
THE INDUSTRY STATISTICAL DATA PRESENTED IN THIS PROSPECTUS HAVE BEEN
COMPILED FROM AN ELECTRONICS MANUFACTURING SERVICES INDUSTRY REPORT -- "CONTRACT
MANUFACTURING FROM A GLOBAL PERSPECTIVE, 1997 UPDATE" -- PREPARED BY TECHNOLOGY
FORECASTERS, INC., A CALIFORNIA BASED MANAGEMENT CONSULTING FIRM SPECIALIZING IN
THE ELECTRONICS MANUFACTURING INDUSTRY, EXCEPT WHERE OTHERWISE NOTED. TECHNOLOGY
FORECASTERS IS COMMONLY RELIED UPON AS AN INFORMATION SOURCE IN THE ELECTRONICS
MANUFACTURING SERVICES INDUSTRY. ALTHOUGH WE HAVE NOT INDEPENDENTLY VERIFIED ANY
SUCH DATA, WE BELIEVE THAT THE INFORMATION PROVIDED BY TECHNOLOGY FORECASTERS IN
THIS PROSPECTUS IS RELIABLE.
--------------------------
Since 1996, our fiscal year has ended on June 30. References to "fiscal
1999" refer to the fiscal year ended June 30, 1999, references to "fiscal 1998"
refer to the fiscal year ended June 30, 1998 and references to "fiscal 1997"
refer to the fiscal year ended June 30, 1997.
i
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY CONTAINS BASIC INFORMATION. BECAUSE THIS IS ONLY A
SUMMARY, IT DOES NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO YOU.
YOU SHOULD READ THE ENTIRE PROSPECTUS, ESPECIALLY "RISK FACTORS," BEGINNING ON
PAGE 4, AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE RELATED NOTES, BEFORE
DECIDING TO INVEST IN OUR COMMON STOCK.
THE COMPANY
<TABLE>
<S> <C>
OUR BUSINESS: We are a worldwide provider of electronics manufacturing
services to leading original equipment manufacturers, or
OEMs, primarily in the communications and networking
industries. We have established manufacturing facilities in
several of the world's major electronics markets to meet the
requirements of our OEM customers. We offer a broad range of
manufacturing services from product design and prototyping
through volume production and order fulfillment. In
addition, we have substantial expertise in manufacturing and
testing radio frequency, or RF, assemblies. The products we
manufacture include, or can be found in, a wide range of end
products, including cable modems, wireless phones,
communications and networking switching equipment, two-way
radio equipment and digital imaging products.
OUR INDUSTRY: The electronics manufacturing services industry has grown in
response to OEMs outsourcing an increasing portion of their
manufacturing requirements and the overall growth of the
electronics industry. In some instances, OEMs have sold
their manufacturing operations to electronics manufacturing
service providers, and at the same time established
contractual manufacturing relationships with those
providers. Outsourcing allows OEMs to take advantage of the
manufacturing expertise and capital investments of
electronics manufacturing service providers and allows them
to concentrate on their core competencies such as product
development, marketing and sales.
OUR CUSTOMERS: Our existing customer base includes industry leaders in the
communications and networking industries, such as Nortel
Networks, Motorola, Lucent Technologies, and 3Com. For the
fiscal year ended June 30, 1999, Nortel represented 49% and
Motorola represented 28% of our total pro forma net sales.
Additionally, our expertise in manufacturing complex
products and our locations in several of the world's
technology centers makes us an attractive manufacturing
partner for emerging companies.
OUR STRATEGY: Our principal strategic focus is on the manufacture of
complex, high-density electronic assemblies in low- to
medium-volume production runs. We believe this focus enables
us to compete effectively against many of the largest
electronic manufacturing service providers that tend to
focus on higher volume production with a less flexible
approach to customer service.
Global manufacturing capabilities are becoming increasingly
important as many OEMs expand their international revenues
and seek to manufacture their products in multiple
locations. Our strategy of establishing regionally focused
operations on a global basis allows us to develop
relationships with OEMs and emerging technology companies
and presents opportunities for us to expand our business
with our existing customers. We believe our strategy
benefits our customers by reducing logistical barriers and
costs, improving supply-chain management, increasing
flexibility, lowering transportation costs, reducing
turnaround times and accelerating time-to-market of the
OEMs' products.
</TABLE>
1
<PAGE>
<TABLE>
<S> <C>
ACQUISITIONS: Growth through selective acquisitions is an important
element in our strategy. We have completed three
acquisitions since April 1998, including our July 1999
acquisition of Amitek Corporation, a Florida-based
electronics manufacturing services provider. Motorola is
Amitek's largest customer. Amitek supports Motorola
locations in Florida, Illinois, Iowa, and Georgia,
domestically, and Brazil, Ireland, Israel, Malaysia, and
Germany, internationally. We will continue to selectively
seek other acquisition opportunities. We believe that
acquisitions can strengthen our market position by expanding
our geographic presence, enlarging our target OEM customer
base, broadening our service offerings and expanding our
management team.
</TABLE>
We are a Delaware corporation incorporated in 1996. Our principal executive
offices are located at 274 Cedar Hill Road, Marlborough, Massachusetts 01752 and
our telephone number is (508) 485-0275.
THE OFFERING
The following assumes that the underwriters do not exercise the option that
we have granted them to purchase additional shares in this offering. Please see
"Underwriting."
<TABLE>
<S> <C>
Common stock offered by Century.............. 4,000,000 shares
Common stock to be outstanding after the
offering................................... 16,787,325 shares
Use of proceeds.............................. To pay down existing indebtedness and for
working capital and general corporate
purposes, including possible acquisitions.
Nasdaq National Market Symbol................ CEMI
</TABLE>
This information and, unless otherwise noted, the information throughout
this prospectus are based upon the number of our shares of common stock
outstanding as of June 30, 1999 and gives effect to the conversion of all
outstanding shares of our convertible preferred stock into 4,337,900 shares of
our common stock automatically upon the closing of this offering. This
information excludes, as of the date of this prospectus:
- 1,341,905 shares subject to options outstanding at a weighted average
exercise price of $2.47 per share;
- 187,397 shares subject to warrants outstanding at a weighted average
exercise price of $5.12 per share; and
- 1,079,875 additional shares that could be issued under our stock option
and employee stock purchase plans.
2
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following tables summarize selected historical and pro forma financial
data for our business. The pro forma as adjusted statement of operations data
give effect to the acquisition of Amitek and this offering as if each had
occurred on July 1, 1998. The pro forma balance sheet data give effect to the
Amitek acquisition as if it had occurred on June 30, 1999. The pro forma as
adjusted balance sheet data give effect to the application of the estimated net
proceeds from the sale of common stock in this offering and the conversion of
all outstanding convertible preferred stock into common stock. You should read
this information with the discussion in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our consolidated financial
statements and notes to those statements, our unaudited pro forma financial data
and the related notes and the audited financial statements of Amitek and the
notes to those statements.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------
<S> <C> <C> <C> <C>
PRO FORMA
AS ADJUSTED
1997 1998 1999 1999
--------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net sales.............................................................. $ 70,744 $ 69,945 $ 121,677 $ 177,497
Cost of sales.......................................................... 63,428 65,079 107,618 157,754
--------- --------- --------- -----------
Gross profit........................................................... 7,316 4,866 14,059 19,743
--------- --------- --------- -----------
Operating costs and expenses:
Selling, marketing, general and administrative expenses.............. 2,493 5,989 7,623 10,232
Stock compensation expense........................................... 1,775 1,186 -- --
Goodwill write-off................................................... -- 7,489 -- --
Goodwill amortization................................................ 788 18 95 1,953
--------- --------- --------- -----------
Operating income (loss)................................................ 2,260 (9,816) 6,341 7,558
--------- --------- --------- -----------
Other (income) expenses:
Interest expense, net................................................ 558 1,136 1,873 1,897
Other, net........................................................... (26) (280) (34) (34)
--------- --------- --------- -----------
Income (loss) before income taxes...................................... 1,728 (10,672) 4,502 5,695
Income tax expense (benefit)........................................... 1,451 (218) 1,688 2,868
--------- --------- --------- -----------
Net income (loss)...................................................... $ 277 $ (10,454) $ 2,814 $ 2,827
--------- --------- --------- -----------
--------- --------- --------- -----------
Net income (loss) per share--basic..................................... $ 0.03 $ (1.33) $ 0.44 $ 0.17
--------- --------- --------- -----------
--------- --------- --------- -----------
Net income (loss) per share--diluted................................... $ 0.03 $ (1.33) $ 0.24 $ 0.16
--------- --------- --------- -----------
--------- --------- --------- -----------
Weighted average common shares outstanding--basic...................... 9,889 7,870 6,447 16,913
Weighted average common shares outstanding--diluted.................... 9,889 7,870 11,517 17,645
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
-----------------------------------
<S> <C> <C> <C>
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
--------- ----------- -----------
(IN THOUSANDS)
BALANCE SHEET DATA:
Cash............................................................................ $ 1,220 $ 2,779 $ 6,227
Working capital................................................................. 3,609 (6,576) 18,685
Total assets.................................................................... 57,231 113,465 116,913
Total debt...................................................................... 13,563 42,001 15,434
Total stockholders' equity...................................................... 17,751 32,192 64,672
</TABLE>
3
<PAGE>
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO THE OTHER
INFORMATION IN THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE RISKS
DESCRIBED BELOW BEFORE YOU DECIDE TO PURCHASE OUR COMMON STOCK. THE RISKS AND
UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES FACING OUR COMPANY.
ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT WE
CURRENTLY BELIEVE TO BE IMMATERIAL MAY ALSO ADVERSELY AFFECT OUR BUSINESS IN THE
FUTURE. IF ANY OF THE FOLLOWING RISKS WERE TO OCCUR, OUR BUSINESS, FINANCIAL
CONDITION OR RESULTS OF OPERATIONS WOULD LIKELY SUFFER. IN THAT EVENT, THE
TRADING PRICE OF OUR COMMON STOCK COULD DECLINE AND YOU COULD LOSE ALL OR PART
OF YOUR INVESTMENT.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
WE HAVE EXPERIENCED SIGNIFICANT GROWTH IN A SHORT PERIOD OF TIME AND MAY HAVE
TROUBLE MANAGING OUR EXPANSION
We have experienced significant growth since 1996 and intend to pursue
continued growth through internal expansion and acquisitions. Such growth has
placed and will continue to place a significant strain on our management and
financial resources, and on our management information, operating and financial
systems. Our success will depend in part on our ability to manage this growth
effectively. To do so, we will need to:
- enhance our management information, operating and financial systems, and
internal controls;
- expand our management team;
- develop the skills of our operations managers and supervisors; and
- train, motivate, manage, retain and increase the number of our employees.
No assurances can be given that we will continue to grow. Our failure to grow or
to manage growth effectively could materially adversely affect our business and
operating results.
WE RELY ON TWO SIGNIFICANT CUSTOMERS AND THE LOSS OF EITHER OF THEM WOULD
ADVERSELY AFFECT OUR BUSINESS OPERATIONS
We have historically relied on a small number of customers to generate a
significant percentage of our net sales. Two customers currently account for a
substantial majority of our net sales. The loss of either of our two major
customers or a material reduction in the net sales produced by these customers
would materially adversely affect us. On a pro forma basis, giving effect to the
acquisition of Amitek, Nortel accounted for 49% of our total pro forma net sales
and Motorola accounted for 28% of our total pro forma net sales in fiscal 1999.
We expect to continue to depend on sales to our largest customers. Any loss of
our relationship with these customers or material delay, cancellation or
reduction of orders from these or other significant customers could adversely
affect our results of operations. For example, our sales to 3Com decreased by
approximately $18.1 million from fiscal 1997 to fiscal 1998 and approximately
$13.6 million from fiscal 1998 to fiscal 1999, as a result of the loss of
production of certain products. In addition, the insolvency or other inability
of a significant customer to pay outstanding receivables could adversely affect
our results of operations and financial condition.
We are exposed to the life cycles of our customers' products. Our ability to
continue manufacturing new or updated products for existing customers is
important to our sales and results of operations. We derive substantial revenues
from a single product program with Nortel. In fiscal 1999, all of our net sales
to Nortel were attributable to this product program. If Nortel were to cancel
this program or the product's life cycle were to wind down, our net sales would
be materially adversely affected.
4
<PAGE>
WE MAY EXPERIENCE DIFFICULTY IN INTEGRATING ACQUIRED BUSINESSES WHICH MAY
INTERRUPT OUR BUSINESS OPERATIONS
Since April 1998, we have made three acquisitions, including our recent
acquisition of Amitek. Amitek is the most significant acquisition we have made
to date. Acquisitions involve numerous risks, including some or all of the
following:
- difficulty in integrating the operations, technologies, systems,
management, and products and services of acquired companies;
- diversion of management's attention;
- increased expenses and working capital requirements;
- entering markets in which we have no or limited prior experience and where
competitors have stronger market positions;
- potential loss of key employees and customers of acquired companies; and
- financial risks, such as
- potential liabilities of the acquired businesses;
- the dilutive effect of the issuance of additional equity securities;
- the incurrence of additional debt;
- the financial impact of amortizing or writing off goodwill and other
intangible assets involved in any transactions that are accounted for
using the purchase method of accounting; and
- possible adverse tax and accounting effects.
The difficulties of integrating acquired businesses may be further complicated
by geographic distances. The occurrence of any one or a combination of these
risks may adversely affect our ability to operate our business successfully and
produce consistent financial results. In addition, during the integration of an
acquired company, our financial performance may suffer from disruption of
operations and the financial impact of expenses necessary to finance and close
the transaction and realize benefits from the acquisition.
WE MAY NOT BE ABLE TO IDENTIFY, FINANCE, AND CLOSE ANY FUTURE ACQUISITIONS
We expect to pursue acquisitions as part of our overall growth strategy.
Competition for attractive companies in our industry is substantial. In
executing this part of our strategy, we may experience difficulty in identifying
suitable acquisition candidates or in completing selected transactions. In
addition, our existing credit facilities restrict our ability to acquire the
assets or businesses of other companies. If we are able to identify acquisition
candidates, such acquisitions may be financed with cash or substantial
borrowings. The use of cash or borrowings may affect our financial liquidity. In
addition, we may choose to finance transactions with potentially dilutive
issuances of equity securities.
WE HAVE HAD RECENT OPERATING LOSSES
As of June 30, 1999, we had an accumulated deficit of approximately $11.1
million. We have experienced net losses in three of the last five fiscal years.
We may not be profitable in future periods. If we are not profitable, the market
price of our common stock would be materially adversely affected. For a
discussion of our results of operations, please turn to "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
5
<PAGE>
SHORTAGES OR PRICE FLUCTUATIONS IN COMPONENT PARTS SPECIFIED BY OUR CUSTOMERS
COULD DELAY PRODUCT SHIPMENT AND AFFECT OUR PROFITABILITY
A substantial portion of our sales are derived from "turnkey" sales. In
turnkey manufacturing, we provide both the materials and the manufacturing
services. As a result, we often bear the risk of fluctuations in materials
costs, scrap and excess inventory, each of which can affect our gross profit
margins and liquidity. We forecast our future needs based upon the anticipated
needs of our customers. Inaccuracies in making these forecasts or estimates
could result in a shortage or an excess of materials, which could affect
production schedules, margins and profitability.
Many of the products we manufacture require one or more components that we
order from sole-source suppliers. Supply shortages for a particular component
can delay production of all products using that component or cause cost
increases in the services we provide. In addition, in the past some of the
materials we use, such as memory and logic devices, have been subject to
industry-wide shortages. As a result, suppliers have been forced to allocate
available quantities among their customers and we have not been able to obtain
all of the materials desired. Our inability to obtain these needed materials
could slow production or assembly, delay shipments to our customers and impact
profitability. Also, we may bear the risk of component price increases that
occur between periodic repricings during the term of a customer contract.
Accordingly, some component price increases could adversely affect our gross
profit margins.
LONG-TERM CONTRACTS ARE NOT TYPICAL IN OUR INDUSTRY AND REDUCTIONS,
CANCELLATIONS, OR DELAYS IN CUSTOMER ORDERS WOULD ADVERSELY AFFECT OUR
PROFITABILITY
As is typical in the electronic manufacturing services industry, we do not
obtain long-term purchase orders or commitments from our customers. Instead, we
work closely with customers to develop nonbinding forecasts of the future volume
of orders. Customers may cancel their orders, change production quantities from
forecast volumes or delay production for a number of reasons beyond our control.
Significant or numerous cancellations, reductions or delays in orders by
customers would have a material adverse effect on us. In addition, because many
of our costs are fixed, a reduction in customer demand could have an adverse
affect on our gross profit margins and operating income.
OUR INDUSTRY IS VERY COMPETITIVE AND OUR SUCCESS WILL DEPEND IN PART ON OUR
ABILITY TO COMPETE EFFECTIVELY
We are in a highly competitive industry. We compete against numerous other
domestic and foreign providers of electronic manufacturing services, some of
which are more established in the industry and have substantially greater
revenues or resources than we do. Competition could cause price reductions,
reduced profits or losses, or loss of market share, any of which could
materially adversely affect us. To compete effectively, we must:
- provide technologically advanced manufacturing services;
- maintain strict quality standards;
- offer geographic flexibility in production and delivery;
- respond flexibly and rapidly to customers' design and schedule changes;
and
- deliver products on a reliable basis at competitive prices.
Our inability to do any of these things could materially adversely affect us. We
also face competition from the manufacturing operations of our current and
potential customers who are continually evaluating the relative merits of
internal manufacturing versus outsourcing. A shift away from outsourcing on
behalf of our current or potential customers could materially adversely impact
our earnings. Finally, a number of OEMs, including some of our customers, are
currently focusing on
6
<PAGE>
divesting some or all of their manufacturing facilities. These divestitures may
adversely affect us if our competitors acquire these facilities. Among other
things, this may adversely affect our ability to continue as an electronic
manufacturing service provider to such OEMs.
FLUCTUATIONS OR SLOWDOWNS IN THE ELECTRONICS OR TECHNOLOGY INDUSTRIES COULD
ADVERSELY AFFECT OUR BUSINESS
Our financial performance depends on our customers' continued growth,
viability and financial stability. Factors affecting the electronics industry in
general could have a material adverse effect on our customers and, as a result,
on us. Our customers substantially depend on the growth of the communications
and networking industries. These industries are characterized by rapidly
changing technologies and short product life cycles. These industries have also
experienced pricing and margin pressures. A downturn in demand for technology
products, such as cellular phones or cable modems, would adversely affect our
business. If our customers' existing demand changes, our business would likely
be adversely affected. In addition, we are currently seeking to add emerging
technology companies to our customer base. If there is a slowdown in
technological development, or new technological companies do not emerge, our
ability to attract new customers or expand our customer base may be limited. Our
success will depend to a significant extent on the success achieved by our
customers in developing and marketing their products, some of which are new and
untested. If our customers' products become obsolete or fail to gain widespread
commercial acceptance, our business may be materially adversely affected. Our
customers' markets are also subject to economic cycles and are likely to
experience recessionary periods in the future. A recession in the industries we
serve could have a material adverse effect on us.
WE ARE SUBJECT TO A VARIETY OF ENVIRONMENTAL, HEALTH AND SAFETY LAWS WHICH COULD
ADVERSELY AFFECT OUR BUSINESS OPERATIONS
In addition to other regulatory requirements affecting our business, we are
subject to a variety of federal, state and local regulatory requirements
relating to environmental, waste management, health and safety matters. If we
fail to comply with any present or future regulations, we could be subject to
future liabilities or the suspension of production. In addition, these
regulations could restrict our ability to expand our facilities or could require
us to acquire costly equipment, or to incur other significant expenses to comply
with applicable environmental and other regulations.
WE MAY EXPERIENCE VARIABILITY IN OUR ANNUAL AND QUARTERLY RESULTS
Our operating results have fluctuated in the past. Our annual and quarterly
results may vary significantly depending on various factors, many of which are
beyond our control. These factors include:
- variations in the timing and volume of customer orders relative to our
capacity due to, among other things,
- a customer's attempts to balance its inventory;
- changes in a customer's manufacturing strategy; and
- variation in demand for a customer's products;
- customer introduction and market acceptance of new products;
- changes in demand for our customers' products;
- the timing of our expenditures in anticipation of future orders;
- our effectiveness in managing manufacturing processes;
- changes in competitive and economic conditions generally or in our
customers' markets;
7
<PAGE>
- the timing of, and the price we pay for, acquisitions and related
integration costs; and
- the impact of any accounting issues arising in connection with past or
future acquisitions, including the amortization or write off of goodwill.
In addition, our customers typically do not commit to firm production
schedules for more than 30 to 90 days in advance. Accordingly, we cannot
forecast the level of customer orders with certainty. This makes it difficult to
schedule production and maximize utilization of our manufacturing capacity. To
the extent we have too little or too great capacity to meet actual customer
needs, our results of operations will be adversely affected.
Because of these factors, you should not rely on quarter-to-quarter
comparisons of our results of operations as an indication of our future
performance. It is possible that, in future periods, our results may be below
the expectations of public market analysts and investors. This could cause the
trading price of our common stock to decline.
WE MUST MAINTAIN OUR TECHNOLOGICAL AND MANUFACTURING PROCESS EXPERTISE TO BE
COMPETITIVE
The market for our manufacturing services is characterized by rapidly
changing technology and continuing process development. We are continually
evaluating the advantages and feasibility of new manufacturing processes. We
believe that our future success will depend upon our ability to develop and
provide manufacturing services which meet our customers' changing needs,
maintain technological leadership, and successfully anticipate or respond to
technological changes in manufacturing processes on a cost-effective and timely
basis. As technologies evolve and product life cycles shrink, we will need to
develop new manufacturing solutions to reduce the time between a customer's
product idea and the time it is sold commercially. If our efforts at process
development are not successful, our ability to be competitive may be hindered,
and we may be materially adversely affected.
WE MAY EXPERIENCE YEAR 2000 PROBLEMS WHICH COULD ADVERSELY AFFECT OUR REGULAR
BUSINESS OPERATIONS
Many existing computer programs use only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the upcoming change in century. If not corrected, many computer
applications could fail or create erroneous results by or at the Year 2000. We
are actively taking steps to ensure that our information technology
infrastructure and business system applications, manufacturing equipment and
systems will be Year 2000 compliant. We are also seeking assurances of Year 2000
compliance from our suppliers, customers and other third parties with whom we
conduct business. However, we cannot be certain that our efforts will be
appropriate, adequate or complete. If Year 2000 problems should occur with our
systems, or the systems of our suppliers, customers or third parties with whom
we do business or the systems of entities we have acquired or may acquire in the
future, our business operations and financial results could be materially
adversely affected. Please see "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
OUR CREDIT FACILITIES RESTRICT OUR ABILITY TO OPERATE OUR BUSINESS
Our existing credit facilities contain financial and operating covenants
that limit our management's discretion with respect to certain business matters.
Among other things, these covenants restrict our ability and our subsidiaries'
ability to incur additional debt, create liens or other encumbrances, make
certain payments including dividends and investments, sell or otherwise dispose
of assets and merge or consolidate with other entities. Our credit facilities
also contain covenants concerning financials ratios and events of default which
could require us to pay off the credit facilities before their maturity. For a
further description of these restrictions, please see "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources." The restrictions imposed by
8
<PAGE>
our credit facilities or the failure of our lenders to advance funds under such
facilities could adversely effect us.
PROVISIONS IN OUR CHARTER DOCUMENTS AND STATE LAW MAY MAKE IT HARDER FOR OTHERS
TO OBTAIN CONTROL OF US EVEN THOUGH SOME STOCKHOLDERS MIGHT CONSIDER SUCH A
DEVELOPMENT FAVORABLE
Provisions in our charter and bylaws may have the effect of delaying or
preventing a change of control or changes in our management that stockholders
consider favorable or beneficial. If a change of control or change in management
is delayed or prevented, the market price of our common stock could suffer.
Please see "Description of Securities."
OUR DIRECTORS, EXECUTIVE AND KEY EMPLOYEES HAVE SUBSTANTIAL CONTROL OVER OUR
BUSINESS OPERATIONS
Our directors, executive officers and key employees currently beneficially
own in the aggregate approximately 58% of the outstanding shares of our common
stock, and after the offering will beneficially own approximately 45% of the
outstanding shares of our common stock. Accordingly, they will have significant
influence in determining the outcome of any corporate transaction or other
matter submitted to the stockholders for approval, including mergers,
consolidations and the sale of all or substantially all of our assets, and also
the power to prevent or cause a change in control. The interests of these
stockholders may differ from your interests or the interests of other
stockholders.
OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL
Recruiting personnel in the electronic manufacturing services industry is
highly competitive. We depend on the services of our senior key executives,
including Leslie J. Sainsbury, Ian McEwan and Mark Lombardo. In particular, our
success depends on the continued efforts of several senior executives who have
strong relationships with our existing customers. Our ability to maintain and
develop these customer relationships is heavily dependent on these executives.
For example, at Amitek, Mr. Lombardo's continued services are critical to
Amitek's relationship with Motorola. The loss of the services of one or several
of these key employees or an inability to attract or retain qualified employees
could result in the loss of customers or otherwise adversely affect our ability
to operate our business successfully.
RISKS PARTICULAR TO OUR INTERNATIONAL OPERATIONS COULD ADVERSELY AFFECT OUR
OVERALL RESULTS
Pro forma net sales generated outside of the United States were
approximately 23% of total pro forma net sales during fiscal 1998 and 14% for
fiscal 1999. Our manufacturing operations are located in Thailand, the United
Kingdom and the United States. The geographical distances between Asia, the
United States and Europe create a number of logistical and communications
challenges. In addition, we purchase a substantial portion of our materials from
international suppliers. International operations are subject to inherent risks,
which may adversely affect us, including:
- fluctuations in the value of currencies;
- changes in labor conditions and difficulties in staffing and managing
foreign operations;
- longer payment cycles;
- greater difficulty in collecting accounts receivable;
- unexpected changes in and the burdens and costs of compliance with a
variety of foreign laws;
- political and economic instability;
- increases in duties and taxation;
- imposition of restrictions on currency conversion or the transfer of
funds;
9
<PAGE>
- limitations on imports or exports;
- expropriation of private enterprises; and
- reversal of the current policies (including favorable tax and lending
policies) encouraging foreign investment or foreign trade by our host
countries.
The attractiveness of our services to our customers can be affected by
changes in U.S. trade policies, such as favorable trade status and trade
preferences for certain Asian nations. In addition, our international operations
are subject to significant political, economic and legal uncertainties outside
the United States. In the recent past, for instance, Thailand has experienced
economic turmoil and a devaluation of its currency. The risks related to such
economic turmoil could result in the reversal of current policies encouraging
foreign investment and trade, restrictions on the transfer of funds overseas or
other domestic economic problems that could adversely affect us.
Our success will depend among other things on our successful expansion into
new foreign markets in order to offer our customers lower-cost production
options. In our experience, entry into new international markets requires
considerable management time as well as start-up expenses for market
development, hiring and establishing office facilities before any significant
revenues are generated. As a result, operations in a new market may operate at
low margins or may be unprofitable.
RISKS RELATED TO THIS OFFERING
WE MAY USE SOME OF THE PROCEEDS OF THIS OFFERING IN WAYS WITH WHICH YOU MAY NOT
AGREE
We have not committed all of the net proceeds of this offering to a specific
purpose. Our management will therefore have flexibility in applying a portion of
the net proceeds of this offering, including ways with which stockholders may
disagree. If we do not apply the funds we receive effectively, our accumulated
deficit may increase and we may lose significant business opportunities. Please
see "Use of Proceeds."
OUR STOCK PRICE COULD BE VOLATILE AND COULD DROP UNEXPECTEDLY FOLLOWING THIS
OFFERING
Following this offering, the price at which our common stock will trade is
likely to be highly volatile and may fluctuate substantially. The trading price
of our common stock could fluctuate widely in response to:
- quarterly and annual variations in our operations and financial results
and our ability to meet analysts' expectations;
- announcements by us or our competitors of technological innovations, new
products, new contracts or acquisitions;
- changes in our prices or the prices of our competitors' products and
services;
- changes in our product mix;
- changes in our growth rate as a whole or for a particular portion of our
business;
- general conditions in our industry; and
- systemic fluctuations in the stock markets.
In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have affected the market prices for the
securities of technology companies, including companies in the electronic
manufacturing services industry. Such fluctuations have often been unrelated to
the companies' operating performance. As a result, investors in our common stock
may
10
<PAGE>
experience a decrease in the value of their common stock regardless of our
operating performance or prospects.
THERE IS CURRENTLY NO PUBLIC MARKET FOR OUR COMMON STOCK
Prior to the offering, there has been no public market for our common stock.
We cannot assure you that an active trading market for our common stock will
develop or be sustained after the offering. The initial public offering price
for our common stock will be determined by negotiations between the underwriters
and us. We cannot assure you that the initial public offering price will
correspond to the price at which our common stock will trade in the public
market subsequent to the offering or that the price of our common stock
available in the public market will reflect our actual financial performance.
IF OUR STOCK PRICE IS VOLATILE, WE MAY BECOME SUBJECT TO SECURITIES LITIGATION
WHICH IS EXPENSIVE AND WOULD RESULT IN A DIVERSION OF RESOURCES
In the past, following periods of volatility in the market price of a
particular company's securities, securities class action litigation has often
been brought against that company. Many companies have been subject to this type
of litigation in the past. We may also become involved in this type of
litigation. Litigation is often expensive and diverts management's attention and
resources. Such litigation, if it were to occur, could have a material adverse
effect upon our business, financial condition and results of operations.
SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD ADVERSELY AFFECT OUR
STOCK PRICE
The market price of our common stock could decline as a result of sales by
our existing stockholders of shares of common stock in the market after this
offering, or the perception that these sales could occur. These sales also might
make it difficult for us to sell equity securities in the future at a time and
at a price that we deem appropriate. See "Shares Eligible For Future Sale." In
addition, some existing stockholders have the ability to require us to register
their shares. Please see "Description of Securities--Registration Rights."
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price per share will significantly exceed the
net tangible book value per share. Accordingly, investors purchasing shares in
this offering will suffer immediate and substantial dilution of their
investment. For additional information about this dilution, please turn to
"Dilution."
11
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from our sale of common stock will be
approximately $32.5 million, assuming an initial public offering price of $9.00
and after deducting the estimated underwriting discounts and offering expenses
payable by us. If the underwriters' overallotment option is exercised in full,
we estimate that our net proceeds will be approximately $37.5 million.
We expect to use the net proceeds from this offering for the following
purposes:
- approximately $7.2 million to pay notes issued to Amitek stockholders as a
portion of the consideration for the Amitek acquisition. These notes bear
interest at prime plus 1% and mature in five years, but are payable
earlier upon an initial public offering;
- approximately $1.5 million to pay compensation owed to three current or
former Amitek employees and a consultant. These amounts bear interest at
prime plus 1% and mature September 2004, but are payable earlier upon an
initial public offering;
- approximately $13.5 million to pay down the Amitek revolving credit
facility. This indebtedness bears interest at prime plus 1.5% and matures
June 2001;
- approximately $5.8 million to pay down indebtedness under our revolving
credit facility. This indebtedness bears interest at prime plus 1% and
matures December 2001. A portion of such indebtedness was used to pay the
purchase price and transaction costs incurred in connection with the
Amitek acquisition;
- approximately $965,000 to pay the unpaid balance of a fee owed by Amitek
to Advest for Advest's investment banking services to Amitek in connection
with our acquisition of Amitek;
- to make future acquisitions, although we currently have no agreements or
understandings about any specific acquisition; and
- for working capital and general corporate purposes.
With respect to the balance of the net proceeds, we have not determined the
amount of net proceeds to be used for the other purposes indicated. Accordingly,
our management will have flexibility in applying the net proceeds of the
offering. Pending any use, we will invest the net proceeds of this offering in
short-term, investment-grade interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid a cash dividend on our common stock, and we
do not intend to do so in the foreseeable future. Our existing credit facilities
restrict our ability and the ability of our subsidiaries to pay dividends. We
currently intend to retain earnings to finance future operations and expansion.
Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
12
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of June 30, 1999:
- on an actual basis;
- on a pro forma basis to give effect to our acquisition of Amitek as if it
occurred on June 30, 1999; and
- on a pro forma basis as adjusted to reflect the conversion of all
outstanding convertible preferred stock, the application of the estimated
net proceeds from the sale of common stock in this offering, assuming an
initial public offering price of $9.00 per share and after deducting the
estimated underwriting discount and estimated offering expenses payable by
us.
You should read this information together with our consolidated financial
statements and notes to those statements appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1999
-----------------------------------
(IN THOUSANDS)
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ---------- -----------
<S> <C> <C> <C>
Long-term obligations........................................................ $ 4,224 $ 12,627 $ 5,408
Stockholders' equity
Series A preferred stock, $0.01 par value per share; 3,726,027 shares
authorized and 3,671,233 shares issued and outstanding (actual and pro
forma); no shares authorized, issued and outstanding (pro forma as
adjusted).................................................................. 13,282 13,282 --
Series B preferred stock, $0.01 par value per share; 666,667 shares
authorized, issued and outstanding (actual and pro forma); no shares
authorized, issued and outstanding (pro forma as adjusted)................. 4,000 4,000 --
Common stock, $0.01 par value per share; 17,593,607 shares authorized (actual
and pro forma); 50,000,000 shares authorized (pro forma as adjusted);
6,321,877 shares, issued and outstanding (actual); 8,449,425 shares, issued
and outstanding (pro forma); 16,787,325 shares, issued and outstanding (pro
forma as adjusted)......................................................... 63 84 168
Additional paid-in capital................................................... 11,717 26,137 75,815
Accumulated deficit.......................................................... (11,101) (11,101) (11,101)
Foreign currency translation (loss).......................................... (210) (210) (210)
---------- ---------- -----------
Total stockholders' equity................................................. 17,751 32,192 64,672
---------- ---------- -----------
Total capitalization....................................................... $ 21,975 $ 44,819 $ 70,080
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
13
<PAGE>
DILUTION
At June 30, 1999, our pro forma net tangible book value was approximately
$3.9 million, or $0.46 per share of common stock. Our pro forma net tangible
book value per share of common stock represents our total tangible assets less
total liabilities divided by the total number of shares of our common stock
outstanding at such date, in each case giving effect to the acquisition of
Amitek.
After giving effect to the sale of shares of our common stock in this
offering, our pro forma net tangible book value as of June 30, 1999 would have
been approximately $36.3 million or $2.16 per share. This represents an
immediate increase in pro forma net tangible book value of $1.70 per share to
the existing stockholders and an immediate dilution in pro forma net tangible
book value of $6.84 per share to new investors purchasing shares in this
offering.
The following table illustrates the dilution in pro forma net tangible book
value per share to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............................. $ 9.00
Pro forma net tangible book value per share as of June 30, 1999............ $ 0.46
Increase in net tangible book value per share attributable to new
investors................................................................ 1.70
---------
Pro forma net tangible book value per share after the offering (after
deducting underwriting commissions and estimated expenses of the offering
payable by us)............................................................. 2.16
---------
Dilution per share to new investors.......................................... $ 6.84
---------
---------
</TABLE>
If the initial public offering price is higher or lower, the dilution to new
investors will be greater or less.
The table below summarizes, as of June 30, 1999 on a pro forma basis, the
difference between:
- the number of shares of common stock purchased from us by our existing
stockholders since our inception;
- the number of shares of common stock purchased by new investors in this
offering;
- the aggregate cash consideration paid by existing stockholders and to be
paid by new investors; and
- the average purchase price per share paid by the existing stockholders and
to be paid by the new investors.
The table below assumes an initial public offering price of $9.00 per share
before deducting underwriting discounts and commissions and estimated offering
expenses payable by us.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------------- -------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............................ 12,787,325 76.2% $ 43,062,000 54.5% $ 3.37
New investors.................................... 4,000,000 23.8 36,000,000 45.5 9.00
------------ ----- ------------- ----- -----
Total........................................ 16,787,325 100.0% $ 79,062,000 100.0% $ 4.71
------------ ----- ------------- ----- -----
------------ ----- ------------- ----- -----
</TABLE>
The information in this table assumes that the underwriters' over-allotment
option and outstanding stock options and warrants are not exercised. We have
outstanding options and warrants exercisable for a total of 1,529,302 shares of
our common stock at a weighted average exercise price of $2.80 per share. To the
extent any of those options or warrants are exercised, there would be further
dilution to new investors.
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
You should read the following selected financial data in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and notes to those
statements and other financial information included elsewhere in this
prospectus. In 1995, we changed our fiscal year end from October 31 to June 30
beginning June 30, 1996. The statement of operations data for the years ended
October 31, 1994 and 1995, for the eight-month period ended June 30, 1996, and
for the years ended June 30, 1997, 1998 and 1999, and the related balance sheet
data are derived from our audited financial statements that have been audited by
KPMG LLP. The historical results presented herein are not necessarily indicative
of future results. These historical results do not include the operations of
Amitek.
<TABLE>
<CAPTION>
EIGHT
MONTHS
YEAR ENDED ENDED
OCTOBER 31, JUNE 30, YEAR ENDED JUNE 30,
-------------------- ----------- -------------------------------
1994 1995 1996 1997 1998 1999
--------- --------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Net sales.................................................... $ 8,482 $ 9,070 $ 11,450 $ 70,744 $ 69,945 $ 121,677
Cost of sales................................................ 6,926 8,814 10,782 63,428 65,079 107,618
--------- --------- ----------- --------- --------- ---------
Gross profit................................................. 1,556 256 668 7,316 4,866 14,059
--------- --------- ----------- --------- --------- ---------
Operating costs and expenses:
Selling, marketing, general and administrative expenses.... 1,171 1,244 1,109 2,493 5,989 7,623
Stock compensation expense................................. -- 98 -- 1,775 1,186 --
Goodwill write-off......................................... -- -- -- -- 7,489 --
Goodwill amortization...................................... -- -- -- 788 18 95
--------- --------- ----------- --------- --------- ---------
Operating income (loss)...................................... 385 (1,086) (441) 2,260 (9,816) 6,341
--------- --------- ----------- --------- --------- ---------
Other (income) expenses:
Interest expense, net...................................... 197 348 202 558 1,136 1,873
Other, net................................................. (22) -- (3) (26) (280) (34)
--------- --------- ----------- --------- --------- ---------
Income (loss) before income taxes............................ 210 (1,434) (640) 1,728 (10,672) 4,502
Income tax expense (benefit)................................. 39 (16) -- 1,451 (218) 1,688
--------- --------- ----------- --------- --------- ---------
Net income (loss)............................................ $ 171 $ (1,418) $ (640) $ 277 $ (10,454) $ 2,814
--------- --------- ----------- --------- --------- ---------
--------- --------- ----------- --------- --------- ---------
Net income (loss) per share--basic........................... $ 0.03 $ (0.23) $ (0.10) $ 0.03 $ (1.33) $ 0.44
--------- --------- ----------- --------- --------- ---------
--------- --------- ----------- --------- --------- ---------
Net income (loss) per share--diluted......................... $ 0.03 $ (0.23) $ (0.10) $ 0.03 $ (1.33) $ 0.24
--------- --------- ----------- --------- --------- ---------
--------- --------- ----------- --------- --------- ---------
Weighted average common shares
outstanding--basic........................................... 6,092 6,256 6,256 9,889 7,870 6,447
Weighted average common shares
outstanding--diluted......................................... 6,092 6,256 6,256 9,889 7,870 11,517
BALANCE SHEET DATA:
Cash......................................................... $ 28 $ 2 $ 385 $ 2,556 $ 1,630 $ 1,220
Working capital.............................................. 49 (299) (688) (1,092) 403 3,609
Total assets................................................. 4,977 6,136 6,475 46,348 36,821 57,231
Total debt................................................... 2,237 2,352 2,099 10,284 9,851 13,563
Total stockholders' equity................................... 1,252 599 305 13,901 12,128 17,751
</TABLE>
15
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma combined financial statements as of and
for the twelve months ended June 30, 1999 give effect to the acquisition of
Amitek Corporation and this offering. The pro forma combined balance sheet
presents our financial position as if the acquisition of Amitek and the offering
had occurred on June 30, 1999. The pro forma combined statements of operations
present results for us as if the acquisition of Amitek and the offering had
occurred on July 1, 1998.
The pro forma combined financial statements include, in management's
opinion, all material adjustments necessary to reflect the acquisition of
Amitek. The pro forma combined financial statements do not represent the actual
historical results of our operations, or of Amitek, nor do they purport to
predict or indicate our financial position or results of operations at any
future date or for any future period. The pro forma combined financial
statements should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," our financial
statements and notes to those statements and Amitek's financial statements and
notes to those statements included elsewhere in the prospectus.
PRO FORMA COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JUNE 30, 1999
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA PRO FORMA
PRO FORMA FOR OFFERING AS
CENTURY ACTUAL AMITEK ACTUAL ADJUSTMENTS ACQUISITION ADJUSTMENTS ADJUSTED
-------------- ------------- ------------- ----------- ------------- -----------
Net sales........................ $ 121,677 $ 55,820 $ -- $ 177,497 $ -- $ 177,497
Cost of sales.................... 107,618 52,218 (2,082) (d) 157,754 -- 157,754
-------------- ------------- ------------- ----------- ------------- -----------
Gross profit..................... 14,059 3,602 2,082 19,743 -- 19,743
-------------- ------------- ------------- ----------- ------------- -----------
Operating costs and expenses:
Selling, marketing, general and
administrative expenses...... 7,623 2,307 655(d) 10,232 -- 10,232
180(c)
(533) (m)
Goodwill amortization.......... 95 -- 1,858(e) 1,953 -- 1,953
-------------- ------------- ------------- ----------- ------------- -----------
Operating income (loss).......... 6,341 1,295 (78) 7,558 -- 7,558
-------------- ------------- ------------- ----------- ------------- -----------
Other (income) expenses:
Interest expense, net.......... 1,873 1,064 1,253(c) 4,190 (2,159) (i) 1,897
(134) (j)
Other, net..................... (34) -- -- (34) -- (34)
-------------- ------------- ------------- ----------- ------------- -----------
Income (loss) before income
taxes.......................... 4,502 231 (1,331) 3,402 2,293 5,695
Income tax expense............... 1,688 -- 303(h) 1,951 917(h) 2,868
-------------- ------------- ------------- ----------- ------------- -----------
Net income (loss)................ $ 2,814 $ 231 $ (1,634) $ 1,451 $ 1,376 $ 2,827
-------------- ------------- ------------- ----------- ------------- -----------
-------------- ------------- ------------- ----------- ------------- -----------
Net income per share-basic....... $ 0.44 $ 0.17 $ 0.17
-------------- ----------- -----------
-------------- ----------- -----------
Net income per share-diluted..... $ 0.24 $ 0.11 $ 0.16
-------------- ----------- -----------
-------------- ----------- -----------
Weighted average common shares
outstanding-basic.............. 6,447 8,575 16,913
Weighted average common shares
outstanding-diluted............ 11,517 13,645 17,645
</TABLE>
16
<PAGE>
PRO FORMA COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
----------------------------------------------------------------------------
PRO FORMA PRO FORMA
CENTURY AMITEK PRO FORMA FOR OFFERING AS
ACTUAL ACTUAL ADJUSTMENTS ACQUISITION ADJUSTMENTS ADJUSTED
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash....................................... $ 1,219 $ 1,560 $ (5,654) (a) $ 2,779 $ 3,448(g) $ 6,227
5,654(c)
Accounts receivable, less allowance for
doubtful accounts........................ 20,152 10,856 -- 31,008 -- 31,008
Inventories................................ 14,878 10,974 (511) (d) 25,341 -- 25,341
Prepaid expenses........................... 1,474 -- -- 1,474 -- 1,474
Receivable from stockholders and
affiliates............................... 327 1,926 (1,641) (l) 612 -- 612
Deferred income taxes...................... 380 -- -- 380 -- 380
Other...................................... -- 41 -- 41 -- 41
----------- ----------- ----------- ----------- ----------- -----------
Total current assets..................... 38,430 25,357 (2,152) 61,635 3,448 65,083
Property, plant, equipment and land........ 17,162 4,614 -- 21,776 -- 21,776
Goodwill, net.............................. 498 -- 27,873(a) 28,371 -- 28,371
Other assets............................... 1,141 122 420(c) 1,683 -- 1,683
----------- ----------- ----------- ----------- ----------- -----------
Total assets................................. $ 57,231 $ 30,093 $ 26,141 $ 113,465 $ 3,448 $ 116,913
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
LIABILITIES:
Current liabilities:
Revolving note payable..................... $ 7,783 $ 13,517 $ 2,154(c) $ 23,454 $ (13,517) (g) $ 4,106
(5,831) (g)
Note payable............................... -- -- 3,500(c) 3,500 -- 3,500
Payable to affiliates...................... -- 10,730 (10,730) (d) -- -- --
Current portion of bank term note.......... 485 83 -- 568 -- 568
Current portion of capital leases.......... 1,070 782 -- 1,852 -- 1,852
Accounts payable........................... 22,401 668 10,219(d) 33,288 -- 33,288
Income taxes payable....................... 451 -- -- 451 -- 451
Accrued expenses and other current
liabilities.............................. 2,631 -- 2,467(a) 5,098 (2,465) (g) 2,633
----------- ----------- ----------- ----------- ----------- -----------
Total current liabilities................ 34,821 25,780 7,610 68,211 (21,813) 46,398
Long term portion of bank term note........ 3,133 493 -- 3,626 -- 3,626
Notes payable to stockholder............... -- 1,641 7,219 ,(c 7,219 (7,219) (g) --
(1,641) (l)
Capital leases payable, net of current
installments............................. 1,091 691 -- 1,782 -- 1,782
Deferred income taxes...................... 435 -- -- 435 -- 435
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities............................ 39,480 28,605 13,188 81,273 (29,032) 52,241
STOCKHOLDERS' EQUITY:
Series A preferred stock................... 13,282 -- -- 13,282 (13,282) (k) --
Series B preferred stock................... 4,000 -- -- 4,000 (4,000) (k) --
Common stock............................... 63 1 21(a) 84 40(f) 168
(1) (b) -- 44(k)
Additional paid-in capital................. 11,717 2,700 13,276(a) 26,137 17,238(k) 75,815
724(a)
(2,700) (b) 32,440(f)
420(c)
Accumulated deficit........................ (11,101) (1,213) 1,213(b) (11,101) -- (11,101)
Foreign currency translation gain (loss)... (210) -- -- (210) -- (210)
----------- ----------- ----------- ----------- ----------- -----------
Total stockholders' equity................... 17,751 1,488 12,953 32,192 32,480 64,672
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities and stockholders' equity... $ 57,231 $ 30,093 $ 26,141 $ 113,465 $ 3,448 $ 116,913
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
17
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
(a) We acquired Amitek for aggregate merger consideration of approximately
$27,000, subject to adjustment. The acquisition is expected to result in an
excess of the purchase price over the historical carrying value of net
assets to be acquired as follows:
<TABLE>
<S> <C>
Purchase price:
Cash..................................................................... $ 5,654
Issuance of 2,127,548 shares of common stock, par value $0.01
Common stock........................................................... 21
Additional paid-in capital............................................. 13,276
Value of vested options issued........................................... 724
Notes payable to former stockholders..................................... 7,219
---------
$ 26,894
---------
---------
Historical carrying value of net assets:
Total net assets......................................................... $ 1,488
Less: accrued transaction costs.......................................... (2,467)
---------
Historical carrying value of net assets acquired......................... (979)
---------
Excess of net purchase price over net assets acquired...................... $ 27,873
---------
---------
</TABLE>
The allocation of the Amitek purchase price is based on preliminary estimates
of the fair value of the assets and liabilities. Final determination of the
allocation of the purchase price is currently being completed. Accordingly,
final amounts could differ from those used in those statements. However, we
do not expect that the impact of any differences will have a material effect
on our financial statements.
(b) To eliminate the historical net book value of Amitek:
<TABLE>
<S> <C>
Common stock............................................................... $ (1)
Additional paid-in capital................................................. (2,700)
Accumulated deficit........................................................ 1,213
---------
$ (1,488)
---------
---------
</TABLE>
18
<PAGE>
(c) We incurred additional debt to finance our acquisition of Amitek. The terms
of the debt and related adjustments are as follows:
<TABLE>
<CAPTION>
INTEREST
EXPENSE
<S> <C>
FOR THE YEAR
ENDED
JUNE 30, 1999
---------------
Term note-Suntrust
($3,500 at Prime +1%)................................................................ $ 341
Line of credit
($2,154 at Prime +1%)................................................................ 210
Notes payable to former stockholders
($7,219 at Prime +1%)................................................................ 702
------
$ 1,253
------
------
</TABLE>
In return for increasing our line of credit, we granted our lender a warrant
to purchase 60,000 shares of our common stock at an exercise price of $6.00
per share. Pursuant to the warrant, the holder has the option at any time on
or after the first anniversary of its grant date and prior to July 15, 2004
to require us to repurchase the entire warrant at a price of $360,000. The
value of the warrant will be amortized through December 2001, which is the
remaining life of the credit agreement.
(d) Prior to being acquired by Century, Amitek purchased all of its inventory
from an affiliated company which charged Amitek a fee equal to 5% of
material cost. We did not acquire the affiliated company as part of the
Amitek acquisition. As of the date of the acquisition, all of the employees
of the affiliated company's purchasing department became employees of
Amitek.
These pro forma adjustments eliminate the effects of the 5% charge from the
affiliated company from Amitek's financial statements and recognize the cost
of the purchasing department.
<TABLE>
<CAPTION>
FOR THE YEAR
AS OF ENDED
JUNE 30, 1999 JUNE 30, 1999
------------- -------------
<S> <C> <C>
Inventories............................................................... $ (511) --
Payables to affiliates.................................................... (10,730) --
Accounts payable.......................................................... 10,219 --
Cost of sales............................................................. -- $ (2,082)
Selling, marketing, general and administrative............................ -- 655
</TABLE>
(e) To reflect the pro forma adjustments as follows:
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
JUNE 30, 1999
-------------
<S> <C> <C> <C>
Amortization (over a period of 15 years) of goodwill established in the
acquisition............................................................... $ 1,858
(f) To reflect the par value and anticipated additional paid-in capital as a result of this offering, based
upon an offering price of $9.00 per share:
Common stock, par value $0.01 per share; 4,000,000 shares................. $ 40
Additional paid-in capital (net proceeds of $32,480 less $40 par value)... 32,440
-------------
$ 32,480
-------------
-------------
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C> <C>
(g) To reflect the application of the anticipated net proceeds from this
offering:
Repayment of notes payable to Amitek former stockholders.... $ 7,219
Repayment of Amitek's line of credit........................ 13,517
Repayment of Century's line of credit....................... 5,831
Payment of Amitek's accrued compensation.................... 1,500
Payment of Amitek's accrued investment banking fee.......... 965
Increase in cash............................................ 3,448
-----------
$ 32,480
-----------
-----------
</TABLE>
(h) To reflect the income tax provision based on applying the pro forma
estimated effective income tax rate of the combined companies. The estimated
effective tax rate applied differs from the federal statutory tax rate of
34% due principally to state income taxes and nondeductible goodwill
amortization.
(i) The offering adjustments reflect the use of proceeds to repay existing debt:
<TABLE>
<CAPTION>
INTEREST
EXPENSE
REDUCTION
PRO-FORMA FOR THE YEAR
HISTORICAL PRINCIPAL OFFERING ENDED
CENTURY AMOUNT ADJUSTMENTS ADJUSTMENTS JUNE 30, 1999
- ------------------------------------------------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Revolving note payable................................. $ 7,783 $ 2,154 $ (5,831) $ 525
Notes payable--stockholders............................ -- 7,219 (7,219) 702
Note payable--Suntrust................................. -- 3,500 -- --
Bank note.............................................. 3,618 -- -- --
Capital lease obligation............................... 2,161 -- -- --
</TABLE>
<TABLE>
<CAPTION>
AMITEK
- -------------------------------------------------------
<S> <C> <C> <C> <C>
Revolving note payable................................. $ 13,517 -- $ (13,517) $ 932
Bank term note......................................... 576 -- -- --
Capital lease obligation............................... 1,473 -- -- --
----------- ----------- ----------- ------
Total interest reduction............................... $ 2,159
------
------
</TABLE>
(j) To reflect interest income from the anticipated increase in cash from this
offering utilizing the interest rate we currently receive on overnight funds
(3.9%):
<TABLE>
<CAPTION>
INTEREST INCOME
<S> <C>
FOR THE YEAR
ENDED
JUNE 30, 1999
-----------------
Interest income from the anticipated increase in cash from this offering................ $ 134
-----
-----
</TABLE>
(k) To reflect the one-for-one conversion of our series A and series B preferred
stock into common stock.
(l) To offset the Amitek receivable due from affiliates against the Amitek note
payable to stockholder in accordance with the merger agreement.
(m) To reflect the elimination of transaction costs associated with the
acquisition of Amitek by Century incurred by Amitek.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION IN CONJUNCTION WITH THE "SELECTED
CONSOLIDATED FINANCIAL DATA" SECTION OF THIS PROSPECTUS AND OUR CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES TO THOSE STATEMENTS INCLUDED ELSEWHERE IN THIS
PROSPECTUS. UNLESS THE CONTEXT OTHERWISE INDICATES, THIS DISCUSSION RELATES
SOLELY TO OUR OPERATIONS AND DOES NOT REFLECT THE OPERATIONS OF AMITEK. THE
FORWARD-LOOKING STATEMENTS IN THIS DISCUSSION REGARDING THE ELECTRONICS
MANUFACTURING SERVICES INDUSTRY, OUR EXPECTATIONS REGARDING OUR FUTURE
PERFORMANCE, LIQUIDITY AND CAPITAL RESOURCES AND OTHER NON-HISTORICAL STATEMENTS
IN THIS DISCUSSION INCLUDE NUMEROUS RISKS AND UNCERTAINTIES, AS DESCRIBED IN THE
"RISK FACTORS" SECTION OF THIS PROSPECTUS. OUR ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE CONTAINED IN ANY FORWARD-LOOKING STATEMENTS.
OVERVIEW
We are a worldwide provider of electronics manufacturing services to leading
OEMs primarily in the communications and networking industries. Our headquarters
are in Marlborough, Massachusetts and we have local manufacturing operations in
Marlborough, Massachusetts, Santa Clara, California, St. Albans and Hemel
Hempstead, United Kingdom, Bangkok, Thailand, and Boca Raton, Florida (Amitek
Corporation). We have established manufacturing facilities in several of the
world's major electronics markets, to serve the increasing international needs
of our OEM customers. We have grown primarily through internal growth and
strategic acquisitions.
Most of our net sales are derived from the manufacture of products for OEM
customers. Sales, net of estimated product returns and warranty costs, are
recognized at the time of product shipment.
Our cost of sales includes the cost of raw materials and components that
comprise the manufactured products, the cost of labor and manufacturing
overhead, and provisions for excess and obsolete inventory.
COMPANY HISTORY
On July 10, 1996, Centennial Technologies, Inc., or Centennial, and a group
of investors acquired all of the outstanding common stock of Design Circuits,
Inc., or DCI, and redeemed all of the outstanding preferred stock, common stock
warrants, and common stock options of DCI in exchange for cash and stock of
Centennial. A portion of the total consideration paid by Centennial and the
other investors in the acquisition was paid to DCI's employees in consideration
for the cancellation of their outstanding DCI stock options. As a result of
these transactions, Centennial acquired approximately 75% of DCI.
On July 24, 1996, Centennial formed us as Century Manufacturing, Inc., a
Delaware corporation. We were later renamed Century Electronics Manufacturing,
Inc. In October 1996, Centennial and the other investors exchanged their shares
in DCI for our shares. As a result, we became the parent company of DCI. DCI was
later renamed Century Electronics Manufacturing (NE) Inc.
In November 1996, we acquired all of the outstanding capital stock of TRIAX
Technology Group, Ltd. in exchange for 2,119,500 shares of our common stock,
valued at approximately $4.5 million, and approximately $5.0 million in cash,
including transaction costs. This transaction was accounted for under the
purchase method of accounting.
In July 1997, we acquired from Centennial a 51% interest in our Thailand
subsidiary, a company now known as Century Electronics Manufacturing (Thailand)
Limited, for $1,250,000. As part of this transaction, we repurchased 3,000,000
shares of our common stock held by Centennial and Centennial's ownership of our
common stock was reduced below 50%. To effect our repurchase, we issued
Centennial a 6% convertible subordinated debenture in the amount of $6,000,000
and due June 25, 2007. Centennial also transferred 928,000 shares of our common
stock to a trust for the benefit of
21
<PAGE>
employees and others who were former stockholders of TRIAX to settle potential
litigation against Centennial. In November 1997, we purchased the remaining 49%
of Century Thailand from CTN Thailand Holdings Limited (now Century Electronics
Holdings Limited) for 750,000 shares of our common stock and a warrant to
purchase 100,000 shares of our common stock at $5.00 per share at any time prior
to September 2000. Both of these transactions were accounted for under the
purchase method of accounting.
In April 1998, we acquired all of the outstanding capital stock of Quality
Manufacturing Services, Inc., an electronics manufacturing service provider
located in California, for a total purchase price of $300,000 in cash and the
issuance of 200,000 common stock options at an exercise price of $4.00 per
share. In connection with the transaction, we assumed approximately $500,000 of
outstanding indebtedness. We may be responsible for up to $200,000 of additional
cash consideration in April 2001 if defined operating targets are met. This
transaction was recorded under the purchase method of accounting.
In August 1998, we acquired all of the outstanding capital stock of YMC
Manufacturing Inc., an electronics manufacturing service provider located in
California, for a total purchase price of approximately $250,000 in cash. In
connection with the transaction, we assumed approximately $2.2 million of
outstanding indebtedness. This transaction was recorded under the purchase
method of accounting. Subsequent to this acquisition, the operations of Quality
Manufacturing Services, Inc. were moved to this facility.
Finally in July 1999, we acquired all of the outstanding capital stock of
Amitek Corporation, a Florida electronics manufacturing service provider, for a
total purchase price of approximately $27.0 million, subject to adjustment, of
which we paid approximately $5.7 million in cash, approximately $7.2 million in
notes, $724,000 in vested stock options and 2,127,548 shares of our common stock
valued at approximately $13.3 million. The purchase price will be adjusted to
reflect changes in Amitek's net book value from December 31, 1998 to the closing
date (up to a maximum adjustment of $1.0 million). To the extent any adjustment
is paid by us, 50% will be paid in our common stock. We also assumed obligations
of Amitek to its employees in an aggregate of $1.8 million representing
compensatory amounts owed to three past or current employees and a consultant of
Amitek with respect to bonuses and compensatory arrangements for past services.
In addition, we agreed with Mr. Park and Mrs. Park, the principal Amitek
stockholders, to pay them an amount equal to the tax benefits received by us
from the compensatory payments and from the exercise of 147,905 non-qualified
options issued to Amitek employees in exchange for their existing options. These
payments to Mr. Park and Mrs. Park, if made, will be made at the time we realize
the tax benefit and will be made 50% in cash and 50% in stock, valued at the
time of payment.
The Amitek merger agreement includes customary provisions for transactions
of this type, including indemnification for breaches of representations and
warranties. To the extent we are required to make any indemnification payments,
we will make them 50% in cash and 50% in our common stock, valued at the time of
payment.
In connection with the Amitek acquisition, we recorded $27.9 million as
goodwill. Goodwill will be amortized as a non-cash charge to our income
statement over a period of 15 years. The pro forma impact of this amortization
expense is approximately $1.9 million per year.
Please also refer to "Certain Relationships and Related Transactions" for
more information about some of these transactions.
22
<PAGE>
RESULTS OF OPERATIONS
The following table presents certain information concerning our results of
operations, including certain information presented as a percentage of net
sales:
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------------------------------
1997 1998 1999
-------------------- -------------------- --------------------
(IN THOUSANDS, EXCEPT FOR PER SHARE
AND PERCENTAGE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net sales..................................................... $ 70,744 100.0% $ 69,945 100.0% $ 121,677 100.0%
Cost of sales................................................. 63,428 89.7 65,079 93.0 107,618 88.4
--------- --------- --------- --------- --------- ---------
Gross profit.................................................. 7,316 10.3 4,866 7.0 14,059 11.6
Operating costs and expenses:
Selling, marketing, general and administrative expenses..... 2,493 3.5 5,989 8.6 7,623 6.3
Stock compensation expense.................................. 1,775 2.5 1,186 1.7 -- --
Goodwill write-off.......................................... -- -- 7,489 10.7 -- --
Goodwill amortization....................................... 788 1.1 18 0.0 95 0.1
--------- --------- --------- --------- --------- ---------
Operating income (loss)....................................... 2,260 3.2 (9,816) (14.0) 6,341 5.2
Other expense, net............................................ 532 0.8 856 1.2 1,839 1.5
--------- --------- --------- --------- --------- ---------
Net income (loss) before income taxes......................... 1,728 2.4 (10,672) (15.2) 4,502 3.7
Income tax expense (benefit).................................. 1,451 2.0 (218) (0.3) 1,688 1.4
--------- --------- --------- --------- --------- ---------
Net income (loss)............................................. $ 277 0.4 $ (10,454) (14.9) $ 2,814 2.3
--------- --------- ---------
--------- --------- ---------
Net income (loss) per share--basic............................ $ 0.03 $ (1.33) $ 0.44
--------- --------- ---------
--------- --------- ---------
Net income (loss) per share--diluted.......................... $ 0.03 $ (1.33) $ 0.24
--------- --------- ---------
--------- --------- ---------
Weighted average common shares--basic......................... 9,889 7,870 6,447
--------- --------- ---------
--------- --------- ---------
Weighted average common shares--diluted....................... 9,889 7,870 11,517
--------- --------- ---------
--------- --------- ---------
</TABLE>
FISCAL 1999 COMPARED TO FISCAL 1998
NET SALES
Net sales for fiscal 1999 increased $51.8 million, or 74.0%, to $121.7
million from $69.9 million for fiscal 1998. The increase in net sales was
primarily attributable to growth in sales to a customer in the broadband
networking technology industry from $29.7 million in fiscal 1998 to $85.8
million in fiscal 1999 and sales of $5.1 million generated by our West Coast
operations acquired in April and August 1998. This increase was partially offset
by a reduction in sales of approximately $13.6 million because of the loss in
fiscal 1998 of production of a product for a large customer of TRIAX. We believe
that this loss of production by TRIAX in fiscal 1998 was principally due to the
OEM's decision to utilize a different electronic manufacturing service provider
for the next generation of that product. Sales of that product represented a
substantial majority of the TRIAX business.
COST OF SALES
Cost of sales for fiscal 1999 increased $42.5 million, or 65.3%, to $107.6
million from $65.1 million for fiscal 1998. Cost of sales as a percentage of net
sales decreased to 88.4% for fiscal 1999 from 93.0% for fiscal 1998, primarily
as a result of changes in product mix and increased utilization of our
production facilities.
OPERATING EXPENSES
Operating expenses for fiscal 1999 decreased $7.0 million, or 47.6%, to $7.7
million from $14.7 for fiscal 1998. The decrease in operating expenses was
primarily due to the write-off of goodwill of $7.5 million in fiscal 1998
associated with our acquisition of TRIAX. Such goodwill was written off due to
the loss of production of a product for a significant customer of TRIAX. Also in
fiscal 1998,
23
<PAGE>
Centennial transferred 928,000 shares of our stock to a trust for the benefit of
several of our employees who were the former owners of TRIAX in exchange for a
mutual release. We recorded stock compensation expense of $1.2 million related
to this transfer. Operating expenses as a percentage of net sales were 6.4% for
fiscal 1999 compared to 21.0%, 8.6% excluding the two charges, for fiscal 1998.
Excluding the two charges, operating expenses as a percentage of sales for
fiscal 1999 decreased compared to fiscal 1998 because our fixed costs did not
increase proportionally with sales.
OTHER EXPENSE, NET
Other expense, net for fiscal 1999 increased $0.9 million to $1.8 million
from $0.9 million for fiscal 1998, primarily due to the higher interest costs
resulting from increased borrowings under our revolving facility.
INCOME TAX EXPENSE (BENEFIT)
Income tax expense for fiscal 1999 increased $1.9 million to $1.7 million
from a benefit of $0.2 million for fiscal 1998. The effective tax rate for
fiscal 1999 of 37.5% was 3.5% higher than the federal statutory rate of 34%
principally due to state income taxes with an effective tax rate of 6.8% and
taxes on foreign operations which increased the effective tax rate by 3.8%,
offset by a decrease in our valuation allowance for deferred taxes reducing the
effective tax rate by 14.1%.
NET INCOME (LOSS)
For the reasons set forth above, net income for fiscal 1999 increased $13.3
million to $2.8 million, or $0.44 per share--basic, from a loss of $10.5
million, or ($1.33) per share--basic, for fiscal 1998.
PRO FORMA RESULTS OF OPERATIONS
After the inclusion of Amitek and the application of the anticipated net
proceeds from this offering, pro forma as adjusted net sales were $177.5 million
and pro forma as adjusted net income for fiscal 1999 was $2.8 million, or $0.17
per share--basic, compared to our actual results of net sales of $121.7 million
and net income of $2.8 million, or $0.44 per share--basic for the same period.
The results of operations on a pro forma basis include the amortization of
goodwill that results from the net difference between the purchase price of
Amitek and the fair value of the net assets of Amitek on the date of
acquisition. See "Unaudited Pro Forma Financial Data." These results are not
necessarily indicative of the results that would have been achieved had the
Amitek acquisition occurred on July 1, 1998.
FISCAL 1998 COMPARED TO FISCAL 1997
NET SALES
Net sales for fiscal 1998 decreased $0.8 million, or 1.1%, to $69.9 million
from $70.7 million for fiscal 1997. The decrease in the net sales was
attributable to a reduction in sales of approximately $18.1 million from $41.2
million in fiscal 1997 to $23.1 million in fiscal 1998 from the loss of
production of a product for a large customer of TRIAX offset by increases in
sales of $8.5 million to a major customer in the broadband technology industry
and net increases of $8.8 million to other OEM customers. We believe that this
loss of production by TRIAX in fiscal 1998 was principally due to the OEM's
decision to utilize a different electronic manufacturing service provider for
the next generation of that product. Sales of that product represented a
substantial majority of the TRIAX business.
24
<PAGE>
COST OF SALES
Cost of sales for fiscal 1998 increased $1.7 million, or 2.7%, to $65.1
million from $63.4 million for fiscal 1997. Cost of sales as a percentage of net
sales increased to 93.0% for fiscal 1998 from 89.7% for fiscal 1997 primarily as
a result of changes in customer mix combined with a decrease in utilization of
our UK production facilities related to the loss of production of a product for
a significant customer.
OPERATING EXPENSES
Operating expenses for fiscal 1998 increased $9.6 million, to $14.7 million
from $5.1 million for fiscal 1997. The increase in operating expenses was
primarily due to the write-off of goodwill of $7.5 million in fiscal 1998
associated with our UK operation due to the loss of production of a product for
a significant customer. When Centennial and other investors acquired DCI in
1996, a portion of the consideration was paid to DCI employees by DCI for their
stock options. We recorded additional paid-in capital and stock compensation
expense of $1.8 million in fiscal 1997 related to this transaction. Also in
fiscal 1998, Centennial transferred 928,000 shares of our stock to a trust for
the benefit of several of our employees who were the former owners of TRIAX in
exchange for a mutual release. We recorded stock compensation expense of $1.2
million related to this transfer. Operating expenses as a percentage of net
sales were 21.0% for fiscal 1998 compared to 7.1% for fiscal 1997. Excluding the
two charges in fiscal 1998, operating expenses as a percentage of net sales were
8.6% for fiscal 1998.
OTHER EXPENSE, NET
Other expense, net for fiscal 1998 increased $0.4 million to $0.9 million
from $0.5 million for fiscal 1997.
INCOME TAX EXPENSE (BENEFIT)
Income tax expense for fiscal 1998 decreased $1.7 million to an income tax
benefit of $0.2 million from an expense of $1.5 million for fiscal 1997. Our
effective tax rate for fiscal 1998 of 2.0% was 32.0% less than the federal
statutory tax rate of 34.0% due to the write-off of non-deductible goodwill, an
increase in our valuation allowance for deferred tax assets and losses from
foreign losses for which no benefit was taken. Our effective tax rate for fiscal
1997 of 84.0% was 50.0% higher than the federal statutory tax rate of 34.0% due
primarily to non-deductible goodwill amortization and an increase in the
valuation allowance for deferred tax assets.
NET INCOME (LOSS)
For reasons set forth above, net income for fiscal 1998 decreased $10.8
million to a net loss of $10.5 million, or ($1.33) per share, from net income of
$0.3 million, or $0.03 per share, for fiscal 1997.
QUARTERLY RESULTS OF OPERATIONS
Selected information from our results of operations on a quarterly basis is
presented below. The quarterly information is obtained from unaudited financial
statements that are not included in this prospectus. These statements were
prepared on the same basis as our audited financial statements and include all
adjustments necessary to present fairly the quarterly information. The quarterly
information should be read along with our consolidated financial statements and
related notes included elsewhere in this prospectus. The operating results for
the quarters presented below are not necessarily indicative
25
<PAGE>
of the results of a full year of operations or of any future quarters and do not
include the results of operations of Amitek.
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL 1999
----------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales.................................................. $ 21,403 $ 25,747 $ 36,895 $ 37,632
Gross profit............................................... 1,812 2,517 4,568 5,163
Operating income (loss).................................... 268 317 2,756 2,998
Income (loss) before tax................................... 6 (301) 2,365 2,433
Net income (loss).......................................... $ 4 $ (181) $ 1,471 $ 1,521
Net income (loss) per share--basic......................... $ 0.00 $ (0.03) $ 0.23 $ 0.24
Net income (loss) per share--diluted....................... $ 0.00 $ (0.02) $ 0.14 $ 0.13
Weighted average shares outstanding--basic................. 6,559 6,573 6,337 6,322
Weighted average shares outstanding--diluted............... 9,966 10,308 10,702 11,364
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1998
--------------------------------------------------
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales................................................... $ 16,841 $ 15,404 $ 17,374 $ 20,326
Gross profit................................................ 1,331 1,196 666 1,673
Operating income (loss)..................................... (8,640) (199) (925) (52)
Income (loss) before tax.................................... (8,773) (423) (1,204) (272)
Net income (loss)........................................... $ (8,593) $ (414) $ (1,184) $ (263)
Net income (loss) per share--basic and diluted.............. $ (0.97) $ (0.04) $ (0.16) $ (0.04)
Weighted average shares outstanding--basic and diluted...... 8,875 9,500 7,290 5,855
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
During fiscal years 1997, 1998 and 1999 we primarily funded operations
through borrowings under credit facilities with banks, and debt and equity
investments by shareholders. We generated negative cash flow from operations of
$1.6 million for fiscal 1997 and $1.9 million for fiscal 1998, and $0.7 million
of cash was provided from operations for fiscal 1999.
Cash used in investing activities was $7.3 million for fiscal 1997, $1.6
million for fiscal 1998 and $3.9 million for fiscal 1999. Cash was paid
(assumed) in connection with our acquisitions of $4.5 million for fiscal 1997,
($0.9 million) for fiscal 1998 and $0.4 million for the fiscal 1999. Capital
expenditures were $2.7 million for fiscal 1997, $2.5 million for fiscal 1998 and
$3.4 million for fiscal 1999.
Cash provided by financing activities was $11.1 million for fiscal 1997,
$2.6 million for fiscal 1998 and $3.0 million for fiscal 1999. In fiscal 1997,
we raised $5.0 million from the issuance of common stock to fund the acquisition
of TRIAX, $3.9 million in capital contributions was received from shareholders
to repurchase employee stock options and to repay existing debt, and $4.1
million was received from shareholder notes to fund operations. In fiscal 1998,
we received $9.9 million from the issuance series A of preferred stock, $2.0
million from the issuance of convertible notes, and $3.2 million from borrowings
under our credit facility. These amounts were utilized to repurchase and retire
$5.7 million of common stock from Centennial, to repay the $4.1 million of notes
payable to Centennial, to purchase assets under capital lease from Centennial
for $2.2 million, to make $1.4 million of principal payments on capital lease
obligations and to fund operating and capital expenditures. Also, in fiscal
1998, the $2.0 million in convertible notes were converted into 705,424 shares
of common stock. In fiscal 1999 we received $3.4 million of net proceeds from
borrowings under credit facilities and $3.4 million for the issuance of
preferred stock, offset by $2.6 million of principal
26
<PAGE>
payments on capital lease obligations and debt. In addition, we received $1.0
million of bridge financing, which was paid off upon the issuance of the
preferred stock.
During fiscal 1999, we experienced significant growth in operations. As a
result we used cash from operations, vendor trade payables and our revolving
credit facility to finance increases in our inventory and accounts receivable.
In the event that we experience significant growth in the future, we may need to
finance such growth and any corresponding working capital needs with additional
borrowings as well as additional public and private offerings of our debt and
equity. However, we currently do not know if such funds will be available to us
in the future on terms that would be favorable to us, or at all.
In December 1998, our U.S. subsidiaries entered into a three-year, $14.0
million loan facility with Fidelity Funding, Inc., which is guaranteed by us.
The credit facility provides for a $2.0 million term loan and a $12.0 million
revolving credit facility. The amount of credit available under the revolving
credit facility is based upon the levels of eligible receivables and inventory.
Loans under this facility bear interest at prime plus 1% and are secured by
substantially all of the assets of our United States operations. This facility
includes conditions to borrowing, certain financial and other affirmative and
negative covenants, including, among others, limits on the incurrence of
indebtedness, covenants concerning financial ratios, restrictions on dividends,
and events of default. As of June 30, 1999, we had borrowed $1.8 million on the
term loan and $8.9 million on the revolving loan.
As of June 30, 1999, we had outstanding 3,671,233 shares of series A
preferred stock and 666,667 shares of series B preferred stock. Series A
preferred stock is convertible into common stock on a one-for-one basis and has
a liquidation preference of $26.8 million. Series B preferred stock is
convertible into common stock on a one-for-one basis and has a liquidation
preference of $4.0 million which is subordinate to the series A shareholders.
All preferred shares will be automatically converted into common stock in the
event of an initial public offering.
In July 1999, we acquired Amitek in a merger. The acquisition will be
accounted for using the purchase method of accounting. The purchase price of
approximately $27.0 million, which is subject to adjustment, comprised of
approximately $5.7 million in cash, approximately $7.2 million in notes,
$724,000 in vested options and 2,127,548 shares of our common stock valued at
approximately $13.3 million. In connection with the acquisition we assumed
approximately $15.6 million of indebtedness (based on Amitek's June 30, 1999
balance sheet). The notes payable to former Amitek stockholders bear interest at
prime plus 1% and are payable on a quarterly basis over a five-year period or,
if sooner, at the time of closing of this offering. The indebtedness assumed is
under a $14.0 million revolving credit agreement with National Bank of Canada
that we anticipate will remain in place to fund the operations of Amitek. We
have agreed to guaranty all of Amitek's obligations under the revolving credit
facility. The amount of credit available under the revolving credit facility is
based upon levels of eligible receivables and inventory. Borrowings under the
facility bear interest at prime plus 1.5% and are secured by substantially all
of the assets of Amitek. This facility includes conditions to borrowing, certain
financial and other affirmative and negative covenants, including, among others,
limits on the incurrence of indebtedness, covenants concerning financial ratios,
restrictions on dividends, and events of default. The revolving credit facility
matures in 2001.
Also in July 1999, in connection with the acquisition of Amitek, we amended
our loan facility with Fidelity Funding to increase the revolving credit
facility to $15.0 million. The limit on the revolving credit facility will be
reduced to $12.0 million by March 2000. In addition, we entered into a $3.5
million term loan with Suntrust Bank. The term loan bears interest at prime plus
1%, is payable over two years and contains covenants and restrictions
substantially identical to those under our revolving credit facility. Proceeds
from the term loan and additional borrowings on the revolving credit facility
were utilized to make the cash payment for the acquisition.
We intend to continue pursuing attractive acquisition opportunities. The
timing, size or success of any acquisition and the associated potential capital
commitments are unpredictable. We currently plan
27
<PAGE>
to fund future acquisitions primarily through a combination of working capital,
including the proceeds from this offering, cash flow from operations and
borrowings, as well as the issuances of debt and/or equity securities. However,
we currently do not know if such funds will be available to us in the future at
terms that would be favorable to us or at all. We believe that our cash flows
from operations, cash on hand and cash from the net proceeds of this offering,
together with the availability under our credit facilities, will be sufficient
to meet our anticipated working capital and capital expenditure requirements and
provide us with adequate liquidity to meet our anticipated operating needs for
at least the next 12 months. Although operating activities are expected to
provide cash, to the extent we grow significantly in the future or make material
acquisitions, our operating and investing activities may use cash and,
consequently, growth or acquisitions may require us to obtain additional sources
of financing. There can be no assurance that any necessary additional financing
will be available to us on commercially reasonable terms, if at all.
YEAR 2000
GENERAL
The year 2000 issue concerns the potential exposures related to the
automated generation of business and financial misinformation resulting from the
fact that certain computer systems, embedded systems and hardware use two
digits, rather than four, to define the applicable year. On January 1, 2000,
these systems and programs may recognize the date as January 1, 1900 and may
process data incorrectly or stop processing data altogether. We rely upon
vendor-supplied technology and recognize the potential business risk to our
assets and systems associated with the arrival of the year 2000.
STATUS OF REMEDIATION
We have identified three phases in our year 2000 project: identify, test and
validate. The identification phase involves the collection and validation of an
inventory of computer related devices and an evaluation and assessment of each
inventoried item. The testing phase includes remediation (repair, replace or
retire) and various levels of testing for compliance. The validation phase
includes the verification that the system or process will continue to function
in the year 2000 and beyond.
In addressing the year 2000 issues and risks, we have focused on our mission
critical systems, including our information systems used in manufacturing, sales
and finance, and have begun converting these systems to systems that are
certified to be year 2000 compliant by the vendors providing the new or upgraded
systems. Conversion efforts, including testing, will be completed by the end of
September 1999.
We expect to complete all year 2000 remediation for these projects by the
end of October 1999. The failure to complete the remedial actions on a timely
basis could have a material adverse effect on our business, results of
operations and financial condition.
THIRD PARTY COMPLIANCE
Our year 2000 project scope extends to assessing issues affecting suppliers'
and customers' products, services, systems and operations. In early 1999, we
sent questionnaires to our principal vendors and suppliers requesting
information regarding their year 2000 compliance, and we are following up on all
unsatisfactory responses. As of August 1, 1999, we had received responses from
almost half of our vendors and suppliers. Until we have received responses from
all of our vendors and suppliers we will not be able to evaluate the impact of
their compliance on our business.
In addition to these formal inquiries, we have been working closely on year
2000 issues with those third parties with which we have significant
relationships, including, in particular, significant customers
28
<PAGE>
and suppliers. Mutual testing of electronic data interfaces between us and our
significant customers and suppliers is being performed in an effort to ensure
their year 2000 compliance.
CONTINGENCY PLANS
We intend to develop, where practicable, contingency plans for all mission
critical processes. We plan to complete these contingency plans by the end of
1999.
ESTIMATED COSTS
We currently estimate that the total costs for our year 2000 remediation
projects will be approximately $1.0 million. As of August 1, 1999, we had
incurred $0.7 million for year 2000 projects. Year 2000 expenditures are
financed through funds generated from operations. We have not deferred any major
information technology projects as a result of our year 2000 remediation
efforts.
We have not assessed the financial impact of not being year 2000 compliant.
Failure to be year 2000 compliant could have a material adverse effect on our
business, results of operations and financial condition.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Financial Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for derivative
instruments and hedging, requiring recognition of all derivatives as either
assets or liabilities in the statement of financial position measured at fair
value. This statement, as amended by SFAS 137, is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. The effects of adopting
SFAS 133 are not expected to have a material impact on our financial condition,
results of operations or cash flows.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We have financial instruments which are subject to interest rate risk,
principally debt obligations under our credit facilities. Historically, we have
not experienced significant fluctuations in operating results due to interest
rate changes. The carrying value of our long-term debt, including current
maturities, was approximately $5.8 million at June 30, 1999. We also have
borrowings under a revolving note payable with a carrying value of approximately
$7.8 million at June 30, 1999. After giving effect to the use of the anticipated
net proceeds from this offering, the pro forma as adjusted carrying value of our
long-term debt would have been $7.8 million at June 30, 1999 and the carrying
value of borrowings under our notes payable would have been $7.6 million at June
30, 1999. Due to the nature of the debt instruments, management has determined
that the fair value was not materially different from carrying value. Based upon
a hypothetical ten-percent increase in interest rates, the potential losses in
future earnings before taxes would be immaterial to us.
We are subject to foreign currency exchange rate risk primarily for the
operations in the United Kingdom and Thailand. We currently do not enter into
any derivative financial instruments to either hedge our foreign currency risk
or for trading purposes. Based upon the size of our operations outside the
United States, and our corresponding exposure to changes in exchange rates, we
do not consider our exposure relating to currency exchange to be material.
29
<PAGE>
BUSINESS
BACKGROUND
We are a worldwide provider of electronics manufacturing services to leading
original equipment manufacturers, or OEMs, primarily in the communications and
networking industries. We have established regionally-focused manufacturing
facilities in several of the world's major electronics markets to meet the
requirements of our OEM customers. Our principal strategic focus is on the
manufacture of complex, high-density electronic assemblies and products in low-
to medium-volume production runs. We offer a broad range of manufacturing
services from product design and prototyping through volume production and order
fulfillment. In addition we have substantial expertise in manufacturing and
testing radio frequency, or RF, assemblies. Our customers include industry
leaders, such as Nortel, Motorola, Lucent and 3Com.
RECENT DEVELOPMENTS
On July 30, 1999 we acquired Amitek Corporation, a Florida-based electronics
manufacturing services provider, for aggregate consideration of approximately
$27.0 million, subject to adjustment, in cash, notes, and stock and options in a
transaction accounted for as a purchase. Amitek had net sales of $45.2 million
for the year ended December 31, 1998 and $32.6 million for the six months ended
June 30, 1999. From 1995 to 1998, Amitek achieved a compound annual growth rate
of net sales of 78%. Amitek's largest customer is Motorola. Motorola represented
88% of Amitek's net sales in 1998 and 90% of net sales for the six months ended
June 30, 1999. Motorola has been a customer since 1994. Amitek supports Motorola
locations in Florida, Illinois, Iowa, and Georgia, domestically, and Brazil,
Ireland, Israel, Malaysia and Germany, internationally. The Amitek acquisition
has provided us with a new regionally-focused manufacturing operation.
After giving effect to the Amitek acquisition, our pro forma combined net
sales were $177.5 million for fiscal 1999.
OVERVIEW OF THE ELECTRONICS MANUFACTURING SERVICES INDUSTRY
The electronic manufacturing services industry provides a range of
manufacturing services to OEMs in the electronics industry. According to
Technology Forecaster's estimates, the electronics manufacturing services
industry grew from $10.0 billion in 1988 to $89.6 billion in 1998, a compound
annual growth rate of 25%. Technology Forecasters forecasts that the electronics
manufacturing services industry will continue to grow annually at approximately
25% into the next decade, with industry revenue projected at $178.0 billion by
2001.
30
<PAGE>
ELECTRONICS MANUFACTURING SERVICES REVENUES (ESTIMATED)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BILLIONS OF
DOLLARS
<S> <C>
1996 59.3
1997 (1) 72.6
1998 (1) 89.6
1999 (1) 112.0
2000 (1) 140.5
2001 (1) 178.0
</TABLE>
Source: Technology Forecasters
OEMs are increasingly outsourcing their manufacturing requirements. In some
instances, OEMs have sold their manufacturing operations to electronics
manufacturing service providers, and at the same time established contractual
manufacturing relationships with those providers. Technology Forecasters
estimates that by 2001, outsourcing by OEMs to electronics manufacturing service
providers will increase to 26% of the projected total cost of goods sold for the
electronics industry:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
OUTSOURCING OPPORTUNITY
<S> <C>
(ESTIMATED ELECTRONICS MANUFACTURING SERVICES DEMAND AS A PERCENTAGE OF THE ELECTRONICS INDUSTRY COST OF GOODS
SOLD)
Total Electronics
Cost of Goods Sold -
$554.0 billion
(1998)
Total Electronics
Cost of Goods Sold -
$682.0 billion
(2001)
<CAPTION>
OUTSOURCING OPPORTUNITY
<S> <C>
(ESTIMATED ELECTRONICS MANUFACTURING SERVICES DEMAND AS A PERCENTAGE OF THE ELECTRONICS INDUSTRY COST OF GOODS
SOLD)
16% ($89.6 billion)
(1998)
26% ($178.0
billion)
(2001)
</TABLE>
Source: Technology Forecasters
31
<PAGE>
Outsourcing allows OEMs to take advantage of the manufacturing expertise and
capital investments of electronics manufacturing service providers. It also
enables OEMs to concentrate on their core competencies, such as product
development, marketing and sales. We believe that an electronics manufacturing
service provider can enhance an OEM's competitive position by:
- reducing overall production costs;
- accelerating product time-to-market and time-to-volume;
- providing access to advanced manufacturing capabilities;
- improving inventory management and purchasing power; and
- reducing capital investment in equipment and facilities.
In order to meet the evolving needs of OEMs, electronic manufacturing
service providers are focused on establishing manufacturing facilities around
the world that can shorten and simplify an OEM's supply chain and significantly
reduce the time it takes to bring products to market. In addition, electronic
manufacturing service providers are locating facilities in regions such as
Mexico, Asia and Central Europe in order to expand their services offerings to
include a lower-cost manufacturing alternative.
The electronics content of many of today's commercial and consumer products
has increased dramatically, with more products involving complex, high density
assemblies in low to medium-volume production. The growth of the Internet and
the increased usage of personal communications systems have spawned development
of a multitude of complex electronics products addressing these trends. This
development is helping to drive the growth of the electronic manufacturing
services industry. For many users of the Internet, particularly those seeking
broadband access, the cable modem has become a desired method of connecting to
the Internet. According to Kinetic Strategies Inc., a Phoenix, Arizona, based
consulting firm specializing in the emerging broadband Internet market, the
number of cable modem subscribers in North America is expected to reach 3
million in 2001, up from approximately 500,000 in 1998, representing more than
an 80% compound annual growth rate. Wireless communications is one of the
fastest growing sectors of the communications industry. Nokia, a leading
wireless communications equipment provider, expects the number of wireless
subscribers worldwide to reach 1 billion in 2005, up from an estimated 300
million subscribers at the end of 1998, representing approximately a 20%
compound annual growth rate. These trends are proving favorable for providers of
electronics manufacturing services, particularly those with the ability to
effectively meet the production requirements of these markets as well as those
with RF expertise. We believe that the diversity of electronics products
provides significant opportunities for low- to medium-volume manufacturers to
capture substantial production opportunities.
OUR BUSINESS STRATEGY
Our goal is to be the leading global provider of complex, high-density
electronic assemblies. To achieve this, we are implementing the following
business strategy:
- PROVIDE MANUFACTURING SERVICES THROUGH REGIONALLY-FOCUSED OPERATIONS ON A
GLOBAL BASIS. Global manufacturing capabilities are becoming increasingly
more important as many OEMs expand their international revenues. We
believe our strategy of establishing regionally-focused operations on a
global basis will enable us to increase penetration with our existing OEM
customers as we have the ability to manufacture the same product in
multiple locations. Furthermore, in the United States and the United
Kingdom, we have manufacturing operations that are strategically
positioned close to our customers. This local presence enables us to be
more responsive to our customers' requirements, while reducing costs and
accelerating time to market. We believe this
32
<PAGE>
global strategy will enable us to increase our penetration with existing
OEM customers and establish new relationships with leading OEMs in our
targeted markets.
- PROVIDE A BROAD RANGE OF MANUFACTURING SERVICES. We offer a broad range of
services from initial product design, prototyping, electromechanical and
printed circuit board assembly and testing, to final product assembly. We
also have significant expertise in manufacturing and testing radio
frequency assemblies. In recent years we have expanded our service
offering to include distribution and repair and warranty services.
- ATTRACT PROMISING EMERGING COMPANIES. Our expertise in manufacturing
complex products for the communications and networking industries and our
proximity to several of the world's technology centers make us an
attractive manufacturing partner for emerging companies. Emerging
companies present us with opportunities to maintain our technological
expertise, which helps strengthen our competitive position, while
providing attractive growth opportunities as their products gain market
acceptance.
- PURSUE STRATEGIC ACQUISITIONS. Growth through selective acquisitions is an
important element in our strategy. We have completed three acquisitions
since April 1998, including the recent acquisition of Amitek, and will
continue to selectively seek other opportunities that will further our
strategy of locating operations near existing and potential customers. We
may also seek acquisition opportunities similar to our facility in
Thailand that will provide a lower-cost manufacturing alternative for our
OEM customers. We believe that acquisitions can strengthen our market
position by, among other things:
- expanding our geographic presence to serve our current and future OEM
customers;
- enlarging our target OEM customer base;
- broadening our service offerings; and/or
- adding experienced management.
There can be no assurance that our strategies will be successful or will reduce
the risks associated with our business. See "Risk Factors--Risks Related to Our
Business and Industry."
OUR SERVICES
We provide a broad range of electronics manufacturing services with advanced
production capabilities on three continents. The services we offer include:
ASSEMBLY AND MANUFACTURING SERVICES. Our assembly and manufacturing
services include printed circuit board assembly, electromechanical assembly and
final product assembly. A substantial portion of our sales are derived from the
manufacture and assembly of complete products (rather than components). As OEMs
seek to provide greater functionality in smaller products, they increasingly
require more sophisticated manufacturing technologies and processes. We have
invested in advanced manufacturing equipment and have experience in packaging
and interconnect technologies, such as ball grid array, micro ball grid arrays,
x-ray analysis, bare die attach and chip-on-board. We view our ability to
provide manufacturing services using our expertise in these advanced
technologies as one of our core strengths.
MATERIALS PROCUREMENT AND MANAGEMENT. Materials procurement and management
involves planning, purchasing and expediting the delivery of components and
materials used in the manufacturing process. We employ various inventory
management techniques such as just-in-time, ship-to-stock and autoreplenish
programs. We have developed direct relationships with component suppliers that
reduce our customers' material acquisition costs. We have also established
distribution relationships with Avnet Electronics, Arrow Electronics, and Future
Electronics in the United States
33
<PAGE>
and Pioneer in the United Kingdom. These relationships help to protect us from
price fluctuations, as a portion of the risk is often borne by our customers
and/or the distributors. In addition, we have established in-house stores at our
facilities which effectively shorten the supply chain between component
suppliers and our customers.
DESIGN AND ENGINEERING SERVICES. Our engineers collaborate with customers
to refine and complete product design. We coordinate our design, prototype and
other engineering capabilities to design for manufacturability and design for
test requirements. We also offer mechanical design and metal forming
capabilities from our St. Albans, U.K. facility. We believe this collaborative
approach strengthens our relationships with our customers.
TESTING SERVICES. We provide testing services for assembled printed circuit
boards, subsystems and systems, which enable us to deliver high-quality products
on a consistent basis. We also work with our customers to develop
product-specific test strategies. Our test capabilities include manufacturing
defect analysis, in-circuit tests, functional tests, accelerated stress and life
tests, and environmental stress tests of board or system assemblies. Our
capabilities include custom design test equipment and software. We have also
developed an expertise in radio frequency testing protocols to meet customer
needs. Radio frequency technology involves the wireless transmission and
reception of electromagnetic radiation in the radio frequency range through the
use of a transmitter and a receiver. Advanced applications of radio frequency
technology include analog and digital mobile phone communications, paging
services and wireless data transmission services such as e-mail, facsimile and
wireless connections to computer networks.
DISTRIBUTION AND FULFILLMENT SERVICES. We offer our customers flexible,
just-in-time delivery programs allowing product shipments to be closely
coordinated with customers' requirements. We also offer direct order fulfillment
services and increasingly deliver final products we assemble for our customers
directly into customers' distribution channels or directly to the end-user. We
believe that these services provide our customers with a comprehensive solution
and enable them to be more responsive to market demands.
DEPOT REPAIR SERVICES. We have full product testing and diagnostic
capabilities and depot repair services of product, including system upgrades, in
and out of warranty repair services.
CUSTOMERS
We target leading OEMs in the communications and networking industries and
other growing sectors of the electronics industry. A small number of customers
and industry segments have historically comprised a major portion of our net
sales. Our customers include industry leaders Nortel, Motorola, Lucent and 3Com.
During fiscal 1999, giving effect to the Amitek acquisition, Nortel represented
49% of total pro forma net sales, and Motorola represented 28% of total pro
forma net sales. During fiscal 1998, giving effect to the Amitek acquisition,
Nortel represented 28% of our pro forma net sales, and Motorola represented 31%
of our pro forma net sales.
SALES AND MARKETING
We market our services through a direct sales force and through independent
marketing representatives. In addition, our divisional and executive management
teams are an integral part of our relationships with customers. We seek to
develop our business by participating in product design and development,
leveraging relationships with existing customers and executing formal marketing
efforts. Each of our salespeople has been carefully selected for his/her
knowledge of the local market around his/her particular facility. We believe
this knowledge of a specific marketplace is key to understanding who the
customers are and where the business development opportunities exist.
34
<PAGE>
We recognize the importance of customer relationships. We cooperate with
existing and potential customers to transform their ideas into finished
products. Once a marketable product is conceived, we work with a client to
design a manufacturable product that meets desired specifications. We then
prototype the design and produce a small quantity of assemblies for the
customer. During this "start up" phase, we will assemble a customer specific
team consisting of:
- a program manager;
- a manufacturing/test engineer;
- a quality engineer; and
- a materials/purchasing manager.
Our teams manage all phases of the product development and production
process for the customer. As the product matures, we meet with our customer to
evaluate on-going needs and respond to customer concerns.
COMPETITION
The electronic manufacturing services industry is extremely competitive. We
compete against numerous domestic and foreign electronics manufacturing service
providers, including companies such as ACT Manufacturing, Benchmark Electronics,
Jabil Circuit, Sanmina, and Solectron Corporation. Many of these companies are
substantially larger than us and have greater financial, operating,
manufacturing and marketing resources than we do. Some of our competitors have
broader geographic breadth, broader ranges of services and more established
overseas operations than we do. In addition, some of our customers may have
broader relationships with our customers than we do. We also face competition
from the manufacturing operations of our current and potential customers, who
continually evaluate the relative benefits of internal manufacturing versus
outsourcing. As more OEMs dispose of their manufacturing assets, we face
increasing competitive pressures to grow our business. We believe that the
principal competitive factors in our target markets are product quality,
flexibility and timeliness in responding to design and schedule changes,
reliability in meeting product delivery schedules, pricing, technological
sophistication, and geographic location. To remain competitive, we believe we
must continue to provide technologically advanced manufacturing services,
maintain quality levels, offer flexible delivery schedules, deliver finished
products on a reliable basis and compete effectively on the basis of price.
Please see "Risk Factors."
SUPPLIERS
Many of the products we manufacture require one or more components that are
ordered from only one source. In addition, many assemblies require components
that are available from only a single source. Some of these components are or
may be allocated by the supplier in response to supply shortages. We attempt to
ensure continuity of supply of these components. One way we have done this is by
establishing in-house stores with a select group of component suppliers to
improve their ability to effectively meet our customers' short lead times. In
cases where unanticipated customer demand or supply shortages occur, we attempt
to arrange for alternative sources of supply, where available, or defer planned
production to meet the anticipated availability of the critical component. In
some cases, supply shortages will substantially curtail production of all
assemblies using a particular component. In addition, at various times there
have been industry wide shortages of electronic components. Please see "Risk
Factors."
35
<PAGE>
EMPLOYEES
As of June 30, 1999, including Amitek, we had 835 full-time employees, of
whom 728 worked in manufacturing and 107 worked in sales and administration. Two
hundred forty employees joined us as a result of the Amitek acquisition. We
consider our relations with our employees to be good.
GEOGRAPHIC SALES
For fiscal 1999, we had net sales of approximately $22.3 million in Europe,
$97.2 million in North America, and $2.2 million in Asia. In fiscal 1998, we had
net sales of approximately $23.3 million in Europe, $45.7 million in North
America, and $0.9 million in Asia. In fiscal 1997, we had net sales of
approximately $39.2 million in Europe, $31.5 million in North America and none
in Asia. Please see note 10 of the notes to our consolidated financial
statements for additional information with respect to our foreign and domestic
operations and export sales.
FACILITIES
Our principal executive offices are located in Marlborough, Massachusetts,
under a lease that expires in July 31, 2007. We also lease manufacturing and
warehouse space in the following locations and employ the following number of
persons at such locations:
<TABLE>
<CAPTION>
LOCATION SPACE EMPLOYEES
- ----------------------------------------------------------------- ----------- ----------------
<S> <C> <C>
(SQ. FEET)
Marlborough, Massachusetts....................................... 70,000 245 employees
Santa Clara, California.......................................... 44,000 152 employees
Boca Raton, Florida.............................................. 51,000 240 employees
Hemel Hempstead, United Kingdom.................................. 70,000 88 employees
Bangkok, Thailand................................................ 10,000 70 employees
</TABLE>
We own a 45,000 square foot facility in St. Albans, United Kingdom where we
have 40 employees. Our operations at the St. Albans facility consist of
mechanical design and metal forming and processing.
The leases for these locations expire between 2000 and 2013. All of our
manufacturing facilities, except Florida, are ISO 9002 certified. Amitek's
Florida location has a QSR rating from Motorola and Amitek is in the process of
applying for ISO 9002 certification.
BACKLOG
Although we obtain firm purchase orders from our customers, OEM customers
typically do not make firm orders for delivery of products more than 30 to 90
days in advance. We do not believe that the backlog of expected product sales
covered by firm purchase orders is a meaningful measure of future sales since
orders may be rescheduled or cancelled.
LEGAL PROCEEDINGS
We are party to certain lawsuits in the ordinary course of business. We do
not believe that these proceedings individually or in the aggregate will have a
material adverse effect on our financial position, results of operations and
cash flows.
GOVERNMENT REGULATION
We are subject to extensive environmental, health and safety laws and
regulations, including measures relating to the release, use, storage,
treatment, transportation, discharge, disposal and remediation of contaminants,
hazardous substances and wastes, as well as practices and procedures
36
<PAGE>
applicable to the construction and operation of our plants. We believe that we
comply in all material respects with current environmental laws.
Our operations, and the operations of businesses that we acquire, are
subject to certain federal, state and local regulatory requirements relating to
environmental, waste management and health and safety matters. There can be no
assurance that material costs and liabilities will not be incurred or that past
or future operations will not result in exposure to injury or claims of injury
by employees or the public. Although some risk of costs and liabilities related
to these matters is inherent in our business, as with many similar businesses,
we believe that our business is operated in substantial compliance with
applicable regulations. However, new, modified or more stringent requirements or
enforcement policies could be adopted, which could adversely affect us.
We periodically generate and temporarily handle limited amounts of materials
that are considered hazardous waste under applicable law. We contract for the
off-site disposal of these materials and have implemented a waste management
program to address related regulatory issues.
We are not presently aware of any facts or circumstances that would cause us
to incur significant costs or liabilities in the future.
37
<PAGE>
MANAGEMENT
Our executive officers and directors and their respective ages and positions
as of the date of this prospectus are as follows:
<TABLE>
<CAPTION>
NAME AGE TITLE(S)
- ---------------------------------------------- --- ------------------------------------------------------------
<S> <C> <C>
Leslie J. Sainsbury 48 President and Chief Executive Officer; Director
Louis Gaviglia 53 Senior Vice President of Operations
Ian McEwan 44 President, New England Operations; Director
Mark A. Lombardo 35 President, Amitek Operations
Paul Wilson 35 Managing Director, United Kingdom Operations
Walter J. Conroy, Jr. 63 President, West Coast Operations; Director
Robert F. Wennerstrand 44 Vice President, Business Development
James M. Roller 47 Vice President of Finance
Ofer Nemirovsky 41 Director
</TABLE>
MR. SAINSBURY joined us in November 1996 and has held the position of
President of Century since that time. At the time of our acquisition of TRIAX,
Mr. Sainsbury had served as Managing Director of TRIAX from February 1995 to
October 1996. Before joining TRIAX, Mr. Sainsbury served as a director and
Managing Director of Stanley Precision Ltd., an electronics manufacturing
services provider, from July 1993 until January 1995 when it was placed in
receivership under the laws of the United Kingdom. At the time Mr. Sainsbury
joined Stanley, Stanley had financial problems and Mr. Sainsbury was brought in
to help turn around the company. In February 1995, TRIAX, of which Mr. Sainsbury
was a director and shareholder, purchased the assets of Stanley Precision out of
receivership. Before joining Stanley, Mr. Sainsbury spent over two years as the
Sales and Marketing Director of Welwyn Systems Ltd., an electronics
manufacturing services provider, in England where he was responsible for
developing and implementing strategic marketing, sales and profit, customer care
and service, and new corporate identity plans. Mr. Sainsbury's previous
experience also includes serving as a Managing Director of Interactive
Electronics Ltd. and as General Sales and Customer support Manager for Marconi
Instruments.
MR. GAVIGLIA will join us on September 1, 1999. Prior to joining us, Mr.
Gaviglia was President and General Manager of Madison Cable Corporation from
1993 to 1999. From 1967 to 1993, Mr. Gaviglia was employed in various positions
of increasing responsibility at Digital Equipment Corporation, including Vice
President, US Manufacturing, Logistics & Administration, and Vice President &
Group Manager, Computer Systems Manufacturing.
MR. MCEWAN joined us in November 1996 and serves as President of our New
England Operations. He was Managing Director of Century U.K. from November 1996
to February 1998. At the time of our acquisition of TRIAX, Mr. McEwan had served
as a director and Materials/Operations Director of TRIAX from February 1995 to
November 1996. Mr. McEwan served as Materials / Operations Director of Stanley
Precision, an electronics manufacturing services provider, from September 1993
to January 1995 when it was placed in receivership under the laws of the United
Kingdom. In February 1995, TRIAX, of which Mr. McEwan was a director and
shareholder, purchased the assets of Stanley Precision out of receivership. Mr.
McEwan was Materials Director at Welwyn Systems, an electronics manufacturing
services provider, for three years prior to joining Stanley Precision. His
experience also includes tenures with Philips Communications, a manufacturer of
telecommunications equipment and business systems, Wang Computers, a
manufacturer of mainframe and personal computers, and Mitsubishi Video, a
manufacturer of high volume consumer video recorders, covering the following
management disciplines: materials, distribution and manufacturing.
MR. LOMBARDO joined us in July 1999 and serves as President of our Amitek
operations. Mr. Lombardo was co-founder of Amitek in 1992 and served as its Vice
President from
38
<PAGE>
September 1992 until our acquisition of Amitek in July 1999. Prior to starting
at Amitek, Mr. Lombardo was the Director of Engineering and Operations for
Megassembly, Inc., an electronics manufacturing service provider. Prior to this,
Mr. Lombardo served in senior level engineering positions at Racal Corporation,
a manufacturer of communications equipment, and Universal Instrument
Corporation, a manufacturer of automated assembly equipment.
MR. WILSON joined us in September 1997 and has served as Managing Director
of United Kingdom Operations since that time. Prior to joining us, he had over
eleven years experience in electronics manufacturing. He was Materials Director,
responsible for manufacturing, materials and engineering at Welwyn Systems Ltd.
from 1995 to 1997. From 1993 to 1995, Mr. Wilson was Factory Manager at Samsung
Electronics Manufacturing UK Ltd., a manufacturer of televisions. Other
positions Mr. Wilson held at Welwyn included Production Manager, Manufacturing
Manager and Technical Manager, with responsibilities for Production, Test,
Quality and Maintenance Engineering.
MR. CONROY joined us in October 1996 and has served as President of our West
Coast Operations since that time. Previously, Mr. Conroy served as our President
of New England Operations. Prior to joining us Mr. Conroy served as President
and CEO of Design Circuits, Inc., an electronics manufacturing service provider,
from 1991 to 1996. Mr. Conroy co-founded SACON Industries, a contract
manufacturing company, in 1990. Mr. Conroy was a Senior Vice President and
General Manager with Flextronics International, an electronics manufacturing
service provider, from 1988 to 1991, and served in several Vice President and
General Manager positions for SCI Manufacturing, an electronics manufacturing
service provider, from 1983 to 1988, including Vice President of the Business
Machines Group designing and manufacturing custom products.
MR. WENNERSTRAND joined us in January 1997 and has served as our Vice
President of Business Development since that time. Prior to joining us, Mr.
Wennerstrand was New England Director of Sales for Matco Electronics Group, an
electronics manufacturing services provider of high technology products, where
he managed accounts such as 3Com, Monarch Marching Systems, Telxon Corp. and
G.A.P. Technologies from March 1996 to January 1997. Prior to his experience at
Matco, Mr. Wennerstrand spent twelve years as a Senior Account Manager with Pagg
Corporation, an electronics manufacturing service provider.
MR. ROLLER joined us in September 1998 as Vice President of Finance. Prior
to joining us, Mr. Roller was the Corporate Controller for Openroute Networks,
Inc., a publicly traded manufacturer of networking products designed for the
Internet, from July 1996 to September 1998. From August 1995 to July 1996, Mr.
Roller served as CFO for Old Neighborhood Foods, a private food processing
company. From December 1991 to May 1995, he served as Director of Product
Engineering for Town & Country Fine Jewelery Group, a publicly traded jewelry
manufacturer. Mr. Roller began his career as a CPA working twelve years for
Arthur Andersen in its New York, Johannesburg and Cape Town offices.
MR. NEMIROVSKY has served as a director since March 1998. Mr. Nemirovsky has
been a Managing Director of HarbourVest Partners, LLC, a venture capital firm,
since January 1997. HarborVest Partners was formed by the management team of
Hancock Venture Partners, Inc., where Mr. Nemirovsky served in various
capacities since 1986. Prior to joining Hancock, Mr. Nemirovsky held various
computer sales and marketing positions at Hewlett-Packard Company, a
measurement, computation and communications company. He is currently a director
of Ultimate Software Group, Inc., a vendor of human resource management and
payroll software solutions, Primix Solutions, Inc. (formerly OneWave, Inc.), an
Internet software and services company, and Paradigm Geophysical, a software
company engaged in the provision of seismic data processing and interpretation
services to facilitate the exploration and development of oil and gas reserves,
as well as several privately-held companies.
39
<PAGE>
Pursuant to an agreement among us, HarbourVest Partners V, Messrs.
Sainsbury, McEwan and other of our stockholders, Messrs. Conroy, McEwan and
Sainsbury were elected to our board as the nominees of the holders of our common
stock and Mr. Nemirovsky was elected to the board as the nominee of the holders
of our preferred stock. This agreement will expire upon the effectiveness of
this offering.
Effective upon the closing of this offering, we will implement a classified
board of directors pursuant to which our board of directors will be divided into
three classes of directors as nearly equal in size as possible, serving
staggered three year terms. Please see "Description of Securities." Executive
officers are elected annually and serve at the discretion of the board of
directors.
COMMITTEES
Prior to this offering, we had not established any committees. Historically,
the board of directors has made compensation decisions. We intend for the board
of directors to establish a compensation committee and an audit committee. The
compensation committee will have the authority to approve salaries and bonuses
and other compensation matters for our officers, to approve employee health and
benefit plans and to administer our stock plans. The audit committee will have
the authority to recommend the appointment of our independent auditors and to
review the results and scope of audits, internal accounting controls and tax and
other accounting related matters.
DIRECTOR COMPENSATION
No director receives separate compensation for services rendered as a
director.
EXECUTIVE COMPENSATION
The following table shows the cash compensation paid or accrued for the year
ended June 30, 1999, to our Chief Executive Officer and to each of our three
highest paid executive officers other than the Chief Executive Officer who
received more than $100,000 in salary and bonus during the year ended June 30,
1999.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-----------------
SHARES OF
ANNUAL COMPENSATION COMMON STOCK ALL OTHER
---------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS (#) ($)
- ---------------------------------------------------------- ---------- ---------- ----------------- -------------
<S> <C> <C> <C> <C>
Leslie J. Sainsbury,
PRESIDENT AND CHIEF EXECUTIVE OFFICER................... $ 202,266 $ -- -- $ --
Walter J. Conroy, Jr.
PRESIDENT, WEST COAST OPERATIONS........................ 178,978 -- -- --
Ian McEwan,
PRESIDENT, NEW ENGLAND OPERATIONS....................... 140,000 -- -- --
Robert F. Wennerstrand,
VICE PRESIDENT, BUSINESS DEVELOPMENT.................... 115,000 -- -- --
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
We did not grant any stock options or stock appreciation rights to the named
executive officers during the year ended June 30, 1999.
40
<PAGE>
FISCAL YEAR-END OPTION VALUES
The table below sets forth information for the named executive officers with
respect to options held as of June 30, 1999. There was no public trading market
for our common stock as of June 30, 1999. Accordingly, the values in the table
have been calculated on the basis of an initial public offering price of $9.00
per share less the applicable exercise price, multiplied by the number of shares
underlying the options.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON STOCK VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR END FISCAL-YEAR-END
--------------------------------- --------------------------------
EXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) UNEXERCISABLE (#) ($) ($)
- -------------------------------------------- -------------- ----------------- -------------- ----------------
<S> <C> <C> <C> <C>
Leslie J. Sainsbury......................... 275,000 -- $ 1,925,000 $ --
Walter J. Conroy, Jr........................ 191,000 -- 1,353,500 --
Ian McEwan.................................. 150,000 -- 1,050,000 --
Robert F. Wennerstrand...................... 30,000 10,000 210,000 70,000
</TABLE>
EMPLOYMENT CONTRACTS
We have entered into executive employment agreements with Messrs. Sainsbury
and Lombardo.
Mr. Sainsbury's employment agreement provides for a base salary of $200,000
per year, and an initial stock option to purchase 25,000 shares of our common
stock at the fair market value determined by our board of directors upon signing
of the agreement, which was $2.00 per share. He is also entitled to participate
in our health, group insurance plan, or pension insurance and benefits plan. Mr.
Sainsbury's employment agreement terminates on November 5, 1999, but is subject
to earlier termination. Mr. Sainsbury's employment agreement provides that if he
is terminated by us without cause, he will be entitled to receive from us as
severance pay an amount equal to:
- his base salary for a period equal to three months; less
- applicable taxes and other required withholdings; and less
- any amounts he may owe us.
Mr. Sainsbury will also be entitled to receive all health and insurance
benefits paid for by us that he enjoyed at the time of termination for a period
equal to three months.
Mr. Sainsbury's employment agreement prohibits him from doing any business for a
period of two years from the date of his termination of employment with any
person, firm or company who was a client, customer, supplier, agent or
distributor of ours during the period of one year prior to the end of his
employment and with whom he had contact during such period. In addition, he is
prohibited from rendering services similar or related to those he has rendered
during the period of one year prior to the end of his employment to any person
or entity which competes with us in any line of business engaged in by us.
Mr. Lombardo's employment agreement provides for a base salary of $150,000
per year and the granting of an option to purchase 30,000 shares of our common
stock at its fair market value as determined by our board of directors, which
was $6.34 per share. The employment agreement also provides that, subject to
achieving performance targets, Mr. Lombardo shall receive an annual performance
bonus of $50,000 and up to 30,000 additional stock options. The employment
agreement also provides that he will be reimbursed in the amount of $650.00 per
month for motor vehicle costs. He is also entitled to participate in our health,
group insurance plan, or pension insurance plan and benefit program. Mr.
Lombardo's employment agreement terminates on July 31, 2002, but is subject to
41
<PAGE>
earlier termination. Mr. Lombardo's employment agreement provides that if he is
terminated without cause, he will be entitled to receive from us as severance
pay an amount equal to:
- his base salary for a period equal to the greater of:
- six months or
- the amount of time remaining in the term of the agreement at the time
of termination, but in any event not less than three months; less
- applicable taxes and other required withholdings; and less
- any amounts he may owe to us.
- Mr. Lombardo will also be entitled to receive all health and insurance
benefits paid for by us that he enjoyed at the time of termination for a
period equal to the greater of:
- six months or
- the amount of time remaining in the term of the agreement at the time
of termination, but in any event not less than three months.
Mr. Lombardo's employment agreement prohibits him from, for a period of two
years after the termination of his employment, doing any business or having any
dealings with any person, firm, or company who was a client, customer, supplier,
agent, or distributor of ours during the period of one year prior to the end of
his employment and with whom he had contact during the period of one year prior
to the end of his employment. In addition, he is prohibited, for a period of two
years after the termination of his employment, from rendering services similar
to those which he has rendered during the one year period prior to the end of
his employment to any person which competes with us in any line of business. Mr.
Lombardo's employment agreement prohibits him, for a period of one year
following the termination of his employment, from enticing or encouraging any of
our then-current employees of ours to leave his or her employment, and he also
may not assist any company, entity, recruitment firm, employment agency, or
other organization in the hiring of any of our then-current employees.
STOCK INCENTIVE PLANS
1996 STOCK OPTION PLAN
Our 1996 Stock Option Plan was adopted by our board of directors on August
4, 1996 and approved by our stockholders on August 4, 1996. A total of 750,000
shares of common stock were originally authorized for issuance under the 1996
Stock Option Plan. The number of shares of common stock available for issuance
under the 1996 Plan has subsequently been increased to 2,000,000.
Under the 1996 Plan, eligible individuals in our employ or service may, at
the discretion of the plan administrator, be granted options to purchase shares
of common stock at an exercise price determined by the plan administrator.
Eligible individuals include all employees, consultants, directors and other
non-employees.
The 1996 Plan is administered by our board of directors or any one or more
committees that the board of directors may, from time to time, delegate any of
its functions to under the Plan. As plan administrator, the board and/or any
committee has complete discretion to determine which eligible individuals are to
receive option grants, the time or times when option grants are to be made, the
number or shares subject to each grant or issuance, the status of any granted
option as either an incentive stock option or a non-statutory stock option under
the Federal tax laws, the vesting schedule to be in effect for the option grant
and the maximum term for which any granted option is to remain outstanding.
42
<PAGE>
The exercise price for the shares of common stock subject to option grants
made under the 1996 Plan may be paid partly or completely in shares of our stock
valued at fair market value, or by any such other lawful consideration as the
board may determine.
The board of directors may terminate, amend or modify the 1996 Plan at any
time, subject to required stockholder approval for amendments increasing the
number of shares covered by the plan or affecting certain subject matter. The
1996 Plan will terminate on the earliest of the date determined by the board or
September 30, 2006. Options under the 1996 Plan, however, will remain
outstanding in accordance with their terms.
1999 EMPLOYEE STOCK PURCHASE PLAN
Our 1999 Employee Stock Purchase Plan was approved by our board of directors
and our stockholders in 1999 and is intended to qualify under section
423 of the Internal Revenue Code. A total of 300,000 shares of our common stock
has been reserved for issuance under the stock purchase plan. Purchases under
the plan will occur at the end of each option period. The first option period
will commence on the date of this Prospectus and will end on June 30, 2000.
Thereafter, each option period will be successive six-month purchase periods. An
employee who both has completed six months or more of continuous service in our
employ and whose customary employment is more than 20 hours per week is eligible
to participate.
The stock purchase plan permits eligible employees to purchase our common
stock through payroll deductions that may not exceed 10% of an employee's base
compensation, including commissions, bonuses, and overtime, at a price equal to
85% of the fair market value of the common stock at the beginning or the end of
a purchase period, whichever is lower. Unless terminated sooner, the stock
purchase plan will terminate 10 years from its effective date. The board of
directors has authority to amend or terminate the stock purchase plan, provided
no such action may adversely affect the rights of any participant.
43
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of August 27, 1999 and as adjusted to reflect
the sale of the shares offered by us in this offering for:
- each person who is known by us to own beneficially more than 5% of our
outstanding shares of common stock,
- each director and named executive officer, and
- all directors and executive officers as a group.
As of August 27, 1999, there were 12,787,325 shares of outstanding common
stock prior to giving effect to the shares to be sold in this offering and after
giving effect to the conversion of all outstanding convertible preferred stock.
Unless otherwise indicated below, to our knowledge, all persons listed below
have sole voting and investment power with respect to their shares of common
stock, except to the extent authority is shared by spouses under applicable law.
Unless otherwise indicated below, each entity or person listed below maintains a
mailing address of c/o Century Electronics Manufacturing, Inc., 274 Cedar Hill
Road, Marlborough, Massachusetts 01752.
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF COMMON STOCK
BENEFICIALLY --------------------------------------
NAME OF BENEFICIAL OWNER(1) OWNED PRIOR TO OFFERING AFTER OFFERING
- ---------------------------------------------------------- ----------------- ----------------- -------------------
<S> <C> <C> <C>
HarbourVest Partners V-Direct Fund, L.P.(2)............... 3,698,630 28.9% 22.0%
Ofer Nemirovsky(3)........................................ 3,698,630 28.9% 22.0%
Leslie J. Sainsbury(4).................................... 1,230,600 9.4% 7.2%
Yoon Jung Park(5)......................................... 1,709,168 13.4% 10.2%
Myung Ho Park(6).......................................... 1,709,168 13.4% 10.2%
Thomas DePetrillo(7)...................................... 893,533 7.0% 5.3%
Ian McEwan(8)............................................. 880,600 6.8% 5.2%
Century Electronics Holdings Limited(9)................... 850,000 6.6% 5.0%
Centennial Technologies, Inc.(10)......................... 666,667 5.2% 4.0%
Walter J. Conroy, Jr.(11)................................. 251,000 1.9% 1.5%
Robert F. Wennerstand(12)................................. 30,000 * *
All Directors and Executive Officers as a Group (9
persons)................................................ 6,229,603 45.8% 35.4%
</TABLE>
- ------------------------
* Indicates beneficial ownership of less than 1% of the issued and outstanding
common stock.
(1) The number of shares beneficially owned by each stockholder is determined in
accordance with the rules of the Securities and Exchange Commission and is
not necessarily indicative of beneficial ownership for any other purpose.
Under these rules, beneficial ownership includes those shares of common
stock that the stockholder has sole or shared voting or investment power and
any shares of common stock that the stockholder has a right to acquire
within sixty (60) days after August 13, 1999 through the exercise of any
option, warrant or other right. The percentage ownership of the outstanding
common stock, however, is based on the assumption, expressly required by the
rules of the Securities and Exchange Commission, that only the person or
entity whose ownership is being reported has converted options or warrants
into shares of common stock.
(2) c/o HarborVest Partners, LLC, One Financial Center, 44th Floor, Boston,
Massachusetts 02111. Includes 3,671,233 shares of series A preferred stock
convertible into shares of common stock and 27,397 shares of series A
preferred stock, or common stock, following this offering, subject to a
warrant exercisable within 60 days. The sole general partner of HarbourVest
Partners V-Direct Fund L.P. is HVP-Direct Associates L.L.C., the managing
member of which is HarbourVest
44
<PAGE>
Partners, LLC Mr. Nemirovsky is a Managing Director of HarbourVest Partners,
LLC as well as a member of HVP-Direct Associates L.L.C. The members of
HVP-Direct Associates L.L.C. and HarbourVest Partners, L.L.C., including Mr.
Nemirovsky, may be deemed to have an indirect pecuniary interest (within the
meaning of Rule 16a-1 under the Securities Exchange Act of 1934) in an
indeterminate portion of the shares beneficially owned by HarbourVest
Partners V-Direct Fund L.P. Such members disclaim beneficial ownership of
these shares within the meaning of Rule 13d-3 of the Exchange Act.
(3) c/o HarborVest Partners, LLC, One Financial Center, 44th Floor, Boston,
Massachusetts 02111. Includes of 3,671,233 shares of series A preferred
stock held by HarbourVest Partners V-Direct Fund L.P. and 27,397 shares of
series A preferred stock subject to a warrant exercisable within 60 days
held by Fund V. Mr. Nemirovsky is a member of the general partner of Fund V
and a member of the managing member of the general partner of Fund V. As
such, he may be considered to share beneficial ownership of the shares held
by Fund V. Mr. Nemirovsky disclaims beneficial ownership of these shares
within the meaning of Rule 13d-3 of the Exchange Act.
(4) Includes 275,000 shares of common stock subject to options exercisable
within 60 days.
(5) c/o Amitek Corporation, 1701 Clint Moore Road, Boca Raton, Florida 33487.
Includes 624,119 shares held by Myung Ho Park, Mrs. Park's spouse.
(6) c/o Amitek Corporation, 1701 Clint Moore Road, Boca Raton, Florida 33487.
Includes 1,085,049 shares held by Yoon Jung Park, Mr. Park's spouse.
(7) c/o Providence Capital Group, 988 Centerville Road, Providence, Rhode Island
02886. Includes 200,000 shares owned by Kellygreen Ltd., a wholly-owned
corporation of Mr. DePetrillo, 50,000 shares held by Carol Keefe, Mr.
DePetrillo's wife, and 18,000 shares held by other family members.
(8) Includes 150,000 shares of common stock subject to options exercisable
within 60 days.
(9) Includes 100,000 shares of common stock subject to a warrant exercisable
within 60 days.
(10) 7 Lopez Road, Wilmington, Massachusetts. Includes 666,667 shares of series
B preferred stock convertible into shares of common stock.
(11) Includes 191,000 shares of common stock subject to options exercisable
within 60 days.
(12) Includes 30,000 shares of common stock subject to options exercisable
within 60 days.
45
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1996, all of the stockholders of Design Circuits Inc., or DCI,
exchanged their shares in DCI for an aggregate of 6,256,332 shares of our common
stock. Consequently, we became the parent company of DCI. As a result of this
transaction, Thomas DePetrillo and members of his family exchanged 6,300 shares
of DCI stock for an aggregate 315,000 shares of our common stock and Centennial
Technologies, Inc., or Centennial, exchanged 94,270.08 shares of DCI stock for
4,713,504 shares of our common stock. Mr. DePetrillo and Centennial became 5%
stockholders as a result of this transaction.
In November 1996, we purchased all of the outstanding capital stock of TRIAX
Technology Group, Ltd. from the TRIAX shareholders for a purchase price of
approximately $5.0 million in cash, including transaction costs and 2,119,500
shares of our common stock. Of the shares of our common stock issued in
connection with such purchase to the selling shareholders of TRIAX, Messrs.
Sainsbury, McEwan and Raymond Stanley each received 605,600 shares of our common
stock. As a result of this transaction, Messrs. Sainsbury, McEwan and Stanley
each became a 5% stockholder. Each of Messrs. Sainsbury and McEwan currently
serves as an officer and director of Century. In addition, to help finance the
cash portion of the purchase price and certain transaction costs, we issued
3,073,130 shares of our common stock, for an aggregate of $5.0 million, to
Centennial. Finally, as a fee for his services in connection with the
transaction, Mr. DePetrillo received 120,000 shares of our common stock and
25,000 shares of Centennial common stock.
During the period in which we were a majority owned subsidiary of
Centennial, there were intercompany transactions between us and Centennial that
are customary in parent-subsidiary relationships. These included office and
equipment sharing arrangements. In November 1996, we and DCI, as then
subsidiaries of Centennial, entered into guaranties pursuant to which we
guaranteed the payment of all obligations of Centennial to BankBoston, N.A.
pursuant to a revolving credit agreement. To secure our guaranties, we and DCI
granted a security interest in all of our assets to BankBoston. BankBoston
released us and DCI from our guarantees and its security interest in our assets
in July 1997. At this time, we also purchased certain assets from Centennial
valued at $2.2 million.
In March 1997, DCI issued a promissory note to Centennial in the aggregate
principal amount of $4,129,099 payable on demand at a rate of 8.25% to evidence
intercompany indebtedness. This note was paid in full in June 1997.
In July 1997, we repurchased 3,000,000 shares of our common stock held by
Centennial in exchange for a 6% convertible subordinated debenture in the amount
of $6,000,000 and due June 25, 2007. As a result, we reduced Centennial's
ownership of our common stock to below 50%. In order to secure payment of that
$6,000,000 debenture, DCI granted a security interest in certain of its assets
to Centennial. At the same time, Centennial transferred 928,000 shares of common
stock to a trust for the benefit of former owners of TRIAX in exchange for their
delivery of a mutual general release executed by them, TRIAX, DCI, and us. As a
result, Centennial and its officers and directors were released from any claims
or suits by any of the parties executing the mutual release. Also, we entered
into an Indemnification Agreement with Centennial acknowledging that three of
our stockholders failed to sign the mutual release and agreeing to indemnify
Centennial for any adverse consequences which occurred as a result of that
failure. Of the 928,000 shares transferred by Centennial to former owners of
TRIAX, 350,000 are beneficially owned by Mr. Sainsbury, 150,000 are beneficially
owned by Mr. McEwan, 200,000 are beneficially owned by Mr. DePetrillo through
Kellygreen Ltd., 50,000 are beneficially owned by Raymond Stanley and 50,000 are
beneficially owned by Mr. Conroy. Mr. Conroy is both an officer and director of
Century. In addition, we issued 75,000 shares of our common stock to Mr.
DePetrillo as a fee for his services in connection with these transactions.
In July 1997, we acquired from Centennial a 51% interest in Centennial
Technologies (Thailand) Limited (now, Century Electronics Manufacturing
(Thailand) Limited), our Thailand subsidiary, from
46
<PAGE>
Centennial Technologies, Inc. for $1,250,000. To finance the transaction, we
issued to Centennial a promissory note in the face amount of $1,891,125 at a
rate of 9% due January 1999 and a warrant to purchase 250,000 shares of our
common stock at $3.00 per share. In November 1997, we purchased the remaining
49% interest in Centennial Technologies (Thailand) Limited from CTN Thailand
Holdings Limited (now Century Electronics Holdings Limited) in exchange for
750,000 shares of our common stock and a warrant to purchase 100,000 shares of
our common stock at $5.00 per share at any time prior to September 2000.
In February 1998, we issued 666,667 shares of series B preferred stock to
Centennial for a purchase price of $6.00 per share (an aggregate purchase price
of $4,000,000) and paid approximately $9.72 million in cash in exchange for the
redemption of 3,683,635 shares of our common stock owned by Centennial,
cancellation of the $6,000,000 convertible subordinated debenture due on June
25, 2007, cancellation of the promissory note issued by us to Centennial on July
1, 1997 in the face amount of $1,891,125, and cancellation of the warrant to
purchase 250,000 shares of our common stock at $3.00 per share. In addition, Mr.
DePetrillo received 175,000 shares of our common stock as a fee for his services
in connection with the transaction.
In February 1998, we also sold 2,739,726 shares of series A preferred stock
to HarbourVest Partners V--Direct Fund, L.P. for a purchase price of $3.65 per
share (an aggregate purchase price of $10,000,000). As a result of this
transaction, HarbourVest Partners V became a 5% stockholder. In August 1998, we
also issued a 10% promissory note due September 30, 1998 to HarbourVest in the
aggregate principal amount of $400,000. In November 1998, we issued a 10%
promissory note due November 1, 1999 or earlier to HarbourVest Partners V in the
aggregate principal amount of $1,000,000 and a warrant to purchase 27,397 shares
of series A preferred stock at an exercise price of $3.65 per share at any time
on or before December 31, 2003. Both notes were repaid in December 1998 as part
of the purchase price when we sold an additional 931,507 shares of series A
preferred stock to HarbourVest Partners V for a purchase price of $3.65 per
share (an aggregate purchase price of approximately $3,400,000). Mr. Nemirovsky,
one of our directors, is a member of the general partner of HarbourVest Partners
V, and a member of the managing member of the general partner of Direct Fund.
In February 1998, Mr. DePetrillo purchased the securities of several
companies owned by Centennial. In order to finance part of the transaction, we
loaned Mr. DePetrillo $410,000 evidenced by a note to us which accrues interest
at the IRS safe harbor imputed interest rate and matured in June 1998. The note
is collateralized by 175,000 shares of our common stock owned by Mr. DePetrillo.
There is currently outstanding $310,000 on the note due to us.
In January 1999, we repurchased 200,000 shares of our common stock from Mr.
Stanley for an aggregate purchase price of $400,000. Prior to this time, Mr.
Stanley had been a 5% stockholder since the TRIAX transaction.
In July 1999, we purchased all of the outstanding capital stock of Amitek
for a total purchase price of approximately $27.0 million, subject to
adjustment, of which we paid approximately $5.7 million in cash, approximately
$7.2 million in notes, $724,000 in vested stock options and 2,127,548 shares of
our common stock valued at approximately $13.3 million. Of those shares of our
common stock issued to the selling shareholders of Amitek, Myung Ho Park
received 624,119 shares of our common stock and Yoon Jung Park received
1,085,049 shares of our common stock. As of result of this transaction, Myung Ho
Park and Yoon Jung Park each became 5% stockholders.
In connection with the acquisition of Amitek, we entered into an employment
agreement with Mr. Park which provides for a base salary of $210,000 per year.
He is entitled to participate in our health, group insurance plan, or pension
insurance and benefits, and to the reimbursement of all reasonable business
expenses incurred by Mr. Park in the performance of his duties and
responsibilities for us. Mr. Park's employment agreement terminates on December
31, 1999, but is subject to earlier
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termination. Mr. Park's employment agreement provides that if he is terminated
by us, whether or not for cause, or by him for good reason, we will pay him on
the date of termination a lump sum severance payment equal to his base salary
for the remainder of the term of his employment agreement. In the event Mr. Park
terminates his employment without good reason, his employment agreement provides
that we will pay him on the date of termination any base salary earned but not
paid through the date of termination and pay for any vacation time accrued but
not used to that date. In the event of any termination of Mr. Park's employment
through December 31, 1999, we will continue, at our expense, his participation,
and, that of his eligible dependents, in all benefit plans, programs and
perquisites in which he, or they, were eligible to participate immediately prior
to the termination of his employment.
In connection with the Amitek transaction, we assumed obligations of Amitek
to its employees, including compensatory arrangements with three past or current
employees and a consultant pursuant to which Amitek agreed to pay an aggregate
of approximately $1.8 million to such individuals, including $808,000 to Mr.
Lombardo, President of our Amitek operations. The amounts are payable over a
five-year schedule or, if sooner, upon the closing of this offering. In
addition, as part of the acquisition, we issued options to acquire an aggregate
of 147,905 shares of our common stock at an exercise price of $1.31 per share,
including 113,773 options to Mr. Lombardo. The options were issued in exchange
for Amitek options and are immediately exercisable.
Prior to our acquisition of Amitek, Mr. Park and his affiliates did business
with Amitek, including the provision of certain services by Amitek for Mr.
Park's affiliated companies. We anticipate that Amitek may continue to provide
electronic manufacturing services on an arm's-length basis for entities
affiliated with Mr. Park in the future.
We will require that all future transactions with parties affiliated with
us, including loans between us and our officers, directors, principal
stockholders and their affiliates, be approved by a majority of the board of
directors, including a majority of independent and disinterested directors, and
that such transactions will need to be on terms no less favorable to us than
could be obtained from unaffiliated third parties.
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DESCRIPTION OF SECURITIES
GENERAL
Our amended and restated certificate of incorporation, which will become
effective upon the closing of this offering, authorizes the issuance of up to
50,000,000 shares of common stock, par value $0.01 per share, and 1,000,000
shares of preferred stock, par value $0.01 per share, the rights and preferences
of which may be established from time to time by our board of directors. As of
August 31, 1999, 8,449,425 shares of common stock were outstanding, held of
record by 70 stockholders, assuming no shares of convertible preferred stock are
converted.
COMMON STOCK
Under our certificate of incorporation, holders of our common stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of the stockholders, including the election of directors. They do not have
cumulative voting rights. Subject to preferences that may be applicable to any
outstanding series of preferred stock, holders of our common stock are entitled
to share ratably in any dividends that may be declared by the board of directors
out of legally available funds. In case of a liquidation, dissolution or winding
up of Century, the holders of common stock will be entitled to share ratably in
the net assets legally available for distribution to shareholders, in each case
after payment of all of our liabilities and subject to preferences that may be
applicable to any series of preferred stock then outstanding. The holders of
common stock have no preemptive or conversion rights or other subscription
rights. There are no redemption or sinking fund provisions applicable to the
common stock. The rights, preferences and privileges of holders of common stock
are subject to the rights of the holders of shares of any series of preferred
stock that we may designate and issue in the future. After the closing of this
offering, there will be no shares of preferred stock outstanding.
PREFERRED STOCK
Under our certificate of incorporation, our board of directors has the
authority, without further action by the stockholders, to issue from time to
time, shares of preferred stock in one or more series. The board of directors
may fix the number of shares, designations, preferences, powers and other
special rights of the preferred stock. The preferences, powers, rights and
restrictions of different series of preferred stock may differ. The issuance of
preferred stock could decrease the amount of earnings and assets available for
distribution to holders of common stock or affect adversely the rights and
powers, including voting rights, of the holders of common stock. The issuance
may also have the effect of discouraging, delaying or preventing a change in
control of Century, regardless of whether the transaction may be beneficial to
stockholders. We have no current plans to issue any additional shares of
preferred stock.
WARRANTS
In July 1999, we granted Guaranty Business Credit Corporation a warrant to
purchase 60,000 shares of our common stock at an exercise price of $6.00 per
share. The warrant is exercisable at any time prior to July 15, 2004, and may be
put to us at any time on or after the first anniversary of the grant date and
prior to July 15, 2004 for $360,000. The warrant is subject to anti-dilution
protection and includes piggyback registration rights.
In November 1997, we granted a warrant to purchase 100,000 shares of our
common stock to Century Electronics Holdings Limited. This warrant is
exercisable at $5.00 per share at any time prior to September 2000. In November
1998, we granted a warrant to purchase 27,397 shares of our series A preferred
stock to HarbourVest Partners V. This warrant is exercisable at $3.65 per share
at any time prior to December 31, 2003. These warrants are also described under
the section entitled "Certain Relationships and Related Transactions."
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LIABILITY OF DIRECTORS
Our certificate of incorporation provides that our directors shall not be
liable to us or our stockholders for monetary damages for any breach of
fiduciary duty, except to the extent otherwise required by the Delaware General
Corporation Law. This provision will not prevent our stockholders from obtaining
injunctive or other relief against our directors. This provision also does not
shield our directors from liability under federal or state securities laws.
REGISTRATION RIGHTS
In connection with the private placement of an aggregate of 3,671,233 shares
of series A preferred stock and a warrant to acquire 27,397 shares of our common
stock in February 1998 and December 1998, we granted HarbourVest registration
rights. At any time after this offering, if demanded by the holders of more than
50% of the common stock issued upon conversion of our series A preferred stock,
we must use our diligent best efforts to effect a registration statement under
the Securities Act covering all registrable shares requested to be included. We
are required to effect up to two such demand registrations. Also, if any of our
directors or officers holding other securities requests inclusion in any such
registration initiated by the investor, or if a holder of our securities is
entitled by contract to have securities included in such registration, the
investor shall include the securities of such officers, directors and other
shareholders in the underwriting. In addition, such holders have piggyback
registration rights. If we propose to register any of our securities under the
Securities Act after this offering, then such holders may have the right to
include all or a portion of their shares in such registration. The underwriter
of any such offering has the right to limit the number of shares in such
registration. We will bear all registration expenses in connection with any
registration, excluding underwriting discounts, selling commissions and transfer
taxes applicable to the sale of registrable securities. We have agreed to
indemnify the holders in connection with the registration of their shares of
common stock.
In connection with our private placement of an aggregate of 666,667 shares
of series B preferred stock in February 1998, we granted the investor,
Centennial Technologies, Inc., registration rights. At any time after this
offering of our securities, if requested by the holders of more than 50% of the
common stock issued upon conversion of our series B preferred stock, then we
must use our diligent best efforts to effect a registration statement under the
Securities Act covering all registrable shares requested to be included by such
holders. We are required to effect up to two such demand registrations. Also, if
any of our directors or officers holding other securities request inclusion in
any such registration initiated by the investor, or if a holder of our
securities is entitled by contract to have securities included in such
registration, the investor shall include the securities of such officers,
directors and other shareholders in the underwriting. In addition, such holders
have piggyback registration rights. If we propose to register any of our
securities under the Securities Act then such holders may require us to include
all or a portion of their shares in such registration. The underwriter of any
such offering has the right to limit the number of shares in such registration.
All registration expenses incurred by us in connection with any registration
shall generally be borne by us, except underwriting discounts, selling
commissions and transfer taxes applicable to the sale of registrable securities.
We have agreed to indemnify the holders in connection with the registration of
their shares of common stock.
In connection with the issuance of notes in July 1997 that were converted
into an aggregate 705,424 shares of our common stock, we granted the holders of
such notes demand registration rights. At any time after six months after this
offering, the holders of at least 20% of these converted securities may
collectively demand only one registration of these securities. In addition, we
granted the holders of such notes piggyback registration rights. If we propose
to register any of our securities under the Securities Act after this offering,
then such holders may require us to include all or a portion of their shares in
such registration. The managing underwriter of any such piggyback registration
has the right to limit the number of shares in such registration. We have agreed
to bear all registration
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expenses incurred in connection with any registration, excluding underwriting
discounts or commissions and filing fees related to the securities to be
registered. We have also agreed to indemnify the holders in connection with the
registration of their shares of common stock.
In connection with our acquisition of Amitek, we granted Myung Ho Park, Yoon
Jung Park and Sung Woo Kwon registration rights with respect to 2,127,548 shares
of our common stock owned by them. At any time after six months after this
offering, one or more holders holding at least 50% of the securities issued in
connection with the acquisition may request registration of such securities. We
are required to effect only one such demand registration. The managing
underwriter has the right to limit the number of shares included in such
registration. Additionally, at any time after we become eligible to file a
registration statement on Form S-3, any of the holders may request us to effect
the registration on Form S-3 of such number of their securities having a market
value of not less than $100,000, but we are not required to effect more than one
such registration per year. We may postpone for a period of up to 60 days the
filing of any such registration if our board of directors in good faith
determines that such registration is likely to have an adverse effect on any
present or future financing, acquisition, recapitalization, reorganization, or
other material transaction. The managing underwriter of any such registration
has the right to limit the number of shares included in such registration. We
have also granted the holders piggyback registration rights. If we propose to
register any of our securities under the Securities Act, then the holders may
have the right to include all or a portion of their shares in such registration.
The managing underwriter of any such registration has the right to limit the
number of shares in such registration. We shall bear all registration expenses
incurred by us in connection with any registration, including the fees and
disbursements of one counsel for the holders, but excluding underwriting
discounts, applicable transfer taxes, and commissions and filing fees related to
the securities to be registered. We have agreed to indemnify the holders in
connection with the registration of their securities.
In connection with our grant of a warrant to Guaranty Business Credit
Corporation, an affiliate of our senior lender, we granted Guaranty piggyback
registration rights. If we propose to register any of our securities under the
Securities Act after this offering, Guaranty may have the right to include all
or a portion of the shares underlying their warrant. The underwriter of any such
offering has the right to limit the number of shares included in such offering.
We have agreed to cover all registration expenses, excluding underwriting
discounts and commissions and fees and expenses of Guaranty's counsel. We have
agreed to indemnify Guaranty in connection with the registration of its common
stock.
ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND OUR AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION AND BYLAWS
Certain provisions of the Delaware General Corporation Law and our
certificate of incorporation and by-laws may be deemed to have an anti-takeover
effect and may discourage, delay or prevent a tender offer or takeover attempt
that a stockholder might consider in its best interest, including those attempts
that might result in a premium over the market price for the shares held by
stockholders. These provisions are summarized in the following paragraphs.
BUSINESS COMBINATIONS
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Section 203 prohibits a publicly-held Delaware corporation from
engaging in a business combination with an interested stockholder for a period
of three years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. A "business combination" includes mergers, asset sales and
other transactions resulting in a financial benefit to the interested
stockholder. Subject to limited exceptions, an "interested stockholder" is:
- a person who together with affiliates and associates owns 15% or more of
the voting stock of the corporation or,
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- an affiliate or associate of the corporation who within the three years
preceding the date of the proposed transaction owned 15% or more of the
voting stock of the corporation.
CLASSIFIED BOARD OF DIRECTORS
Our board of directors is divided into three classes of directors, as nearly
equal in size as possible, serving staggered three-year terms. Upon expiration
of the term of a class of directors, the directors in that class will be elected
for three-year terms at the annual meeting of stockholders in the year in which
the term for that class of directors expires. In addition, our certificate of
incorporation and by-laws provide that directors may be removed only for cause
by the affirmative vote of the holders of two-thirds of the shares of capital
stock entitled to vote. Under our certificate of incorporation and the by-laws,
any vacancy on the board of directors, however occurring, including a vacancy
resulting from an enlargement of the board of directors, may only be filled by
vote of a majority of the directors then in office. The classification of the
board of directors and the limitations on the removal of directors and filling
of vacancies could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from acquiring, control of us.
CUMULATIVE VOTING
Our certificate of incorporation expressly denies stockholders the right to
cumulate votes in the election of directors.
STOCKHOLDER ACTION; SPECIAL MEETING OF STOCKHOLDERS
Our certificate of incorporation eliminates the ability of stockholders to
act by written consent. It further provides that special meetings of our
stockholders may be called only by the chairman of the board of directors, the
chief executive officer or, if none, the president, or a majority of the board
of directors. These provisions could have the effect of delaying until the next
annual meeting of stockholders those actions which are favored by the holders of
a majority of our outstanding voting securities. These provisions may also
discourage another person from making a tender offer for our common stock,
because that person, even if it acquired a majority of our outstanding voting
securities, would be able to take action as a stockholder, such as electing new
directors or approving a merger, only at a duly called meeting of stockholders
and not by written consent.
ADVANCE NOTICE REQUIREMENTS FOR STOCKHOLDER PROPOSALS AND DIRECTORS
NOMINATIONS
Our by-laws provide that stockholders seeking to bring business before an
annual meeting of stockholders, or to nominate candidates for election as
directors at an annual meeting of stockholders, must provide timely notice
thereof in writing. To be timely, a stockholder's notice must be received at our
principal executive offices not less than 60 days nor more than 90 days prior to
the anniversary date of the immediately preceding annual meeting of
stockholders. In the event that the annual meeting is called for a date that is
not within 30 days before or after the anniversary date, in order to be timely,
notice from the stockholder must be received no later than the tenth day
following the date on which notice of the annual meeting was mailed to
stockholders or made public, whichever occurred earlier. In the case of a
special meeting of stockholders called for the purpose of electing directors,
notice by the stockholder in order to be timely must be received not later than
the close of business on the tenth day following the day on which notice was
mailed or public disclosure of the date of the special meeting was made,
whichever first occurs. Our by-laws also specify certain requirements as to the
form and content of a stockholder's notice. These provisions may preclude
stockholders from bringing matters before an annual meeting of stockholders or
from making nominations for directors at an annual meeting of stockholders.
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AUTHORIZED BUT UNISSUED SHARES
The authorized but unissued shares of common stock and preferred stock are
available for future issuance without stockholder approval. These additional
shares may be utilized for a variety of corporate purposes, including future
public offerings to raise additional capital, corporate acquisitions and
employee benefit plans. The existence of authorized but unissued shares of
common stock and preferred stock could render more difficult or discourage an
attempt to obtain control of us by means of a proxy contest, tender offer,
merger or otherwise.
AMENDMENTS; SUPERMAJORITY VOTE REQUIREMENTS
The Delaware General Corporation Law provides generally that the affirmative
vote of a majority of the shares entitled to vote on any matter is required to
amend a corporation's certificate of incorporation or by-laws, unless a
corporation's certificate of incorporation or by-laws, as the case may be,
requires a greater percentage. Our certificate of incorporation imposes
supermajority vote requirements in connection with the amendment of provisions
of our amended and restated certificate of incorporation and by-laws, including
those provisions relating to the classified board of directors and the ability
of our stockholders to take action by written consent or to call special
meetings. The supermajority vote would be in addition to any separate class vote
required in accordance with the terms of any then outstanding preferred stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is EquiServe, L.P.
LISTING OF COMMON STOCK
We have applied to list our common stock on the Nasdaq National Market under
the trading symbol "CEMI."
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SHARES ELIGIBLE FOR FUTURE SALE
The sale of a substantial amount of our common stock in the public market
after this offering, or the perception that such sales could occur, could
adversely affect the prevailing market price of our common stock. Furthermore,
because only a limited number of shares will be available for sale for a short
period after this offering due to the contractual and legal restrictions on
resale described below, the sale of a substantial amount of common stock in the
public market after these restrictions lapse could adversely affect the
prevailing market price of our common stock and our ability to raise equity
capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
16,787,325 shares of our common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants. Of
these shares, all of the shares sold in this offering will be freely tradable
without restriction or further registration under the Securities Act, unless the
shares are purchased by "affiliates" as that term is defined in Rule 144 under
the Securities Act. Any shares purchased by an affiliate may not be resold
except pursuant to an effective registration statement or an applicable
exemption from registration, including an exemption under Rule 144 of the
Securities Act. The remaining 12,787,325 shares of common stock held by existing
stockholders are "restricted securities" as that term is defined in Rule 144
under the Securities Act. These restricted securities may be sold in the public
market only if they are registered or if they qualify for an exemption from
registration under Rule 144 or Rule 701 under the Securities Act. These rules
are summarized below.
Upon the expiration of the lock-up agreements described below and subject to
the provisions of Rule 144 and Rule 701, restricted shares totaling will
be available for sale in the public market 90 days after the date of this
prospectus, and an additional restricted shares will be available for sale
in the public market immediately after the date of this prospectus pursuant to
Rule 144(k). The sale of these restricted securities is subject, in the case of
shares held by affiliates, to the volume restrictions contained in those rules.
LOCK-UP AGREEMENTS
We and our directors and executive officers and some of our stockholders and
option and warrantholders, who own in the aggregate shares of our common
stock and options and warrants to acquire an aggregate of shares of common
stock, have entered into lock-up agreements with the underwriters. Under those
agreements, neither we nor any of our directors or executive officers nor any of
those stockholders may dispose of or hedge any shares of common stock or
securities convertible into or exchangeable or exercisable for shares of common
stock. These restrictions will be in effect for a period of 180 days after the
date of this prospectus. At any time and without notice, Advest may, in its sole
discretion, release all or some of the securities from these lock-up agreements.
Transfers or dispositions can be made sooner, provided the transferee becomes
bound to the terms of the lockup:
- with the prior written consent of Advest;
- in the case of some transfers to affiliates;
- as a bona fide gift; or
- to any trust.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year from the later of the date those shares of
common stock were acquired from us or from an affiliate of ours
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would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of:
- one percent of the number of shares of common stock then outstanding,
which will equal approximately 167,873 shares immediately after this
offering; or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to the sale of any shares of common stock.
The sales of any shares of common stock under Rule 144 are also subject to
manner of sale provisions and notice requirements and to the availability of
current public information about us.
RULE 144(K)
Under Rule 144(k), a person who is not one of our affiliates at any time
during the three months preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years from the later of the date
such shares of common stock were acquired from us or from an affiliate of ours,
including the holding period of any prior owner other than an affiliate, is
entitled to sell those shares without complying with the manner of sale, public
information, volume limitation or notice provisions of Rule 144. Therefore,
unless otherwise restricted pursuant to the lock-up agreements or otherwise,
those shares may be sold immediately upon the completion of this offering.
RULE 701
In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchased shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell those shares 90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with some of the restrictions,
including the holding period, contained in Rule 144.
No precise prediction can be made as to the effect, if any, that market
sales of shares or the availability of shares for sale will have on the market
price of our common stock prevailing from time to time. We are unable to
estimate the number of our shares that may be sold in the public market pursuant
to Rule 144 or Rule 701 because this will depend on the market price of our
common stock, the personal circumstances of the sellers and other factors.
Nevertheless, sales of significant amounts of our common stock in the public
market could adversely affect the market price of our common stock.
STOCK PLANS
We intend to file a registration statement under the Securities Act covering
2,000,000 shares of common stock reserved for issuance under our 1996 Stock
Option Plan and 300,000 shares reserved for issuance under our 1999 Employee
Stock Purchase Plan. This registration statement is expected to be filed and
become effective as soon as practicable after the effective date of this
offering.
Currently, there are options to purchase 1,341,905 shares outstanding under
our 1996 Stock Option Plan and otherwise. All of these shares will be eligible
for sale in the public market from time to time, subject to vesting provisions,
Rule 144 volume limitations applicable to our affiliates and, in the case of
some of the options, the expiration of lock-up agreements.
REGISTRATION RIGHTS
Please see "Description of Securities--Registration Rights" for a
description of registration rights held by some of our current stockholders.
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UNDERWRITING
Advest, Inc., J.C. Bradford & Co. and Needham & Company, Inc. are acting as
representatives of each of the underwriters named below. Subject to the terms
and conditions set forth in an underwriting agreement between us and the
underwriters, we have agreed to sell to the underwriters, and each of the
underwriters severally and not jointly has agreed to purchase from us, the
number of shares of our common stock set forth opposite its name below.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ---------------------------------------------------------------------------------- -----------------
<S> <C>
Advest, Inc.......................................................................
J.C. Bradford & Co................................................................
Needham & Company, Inc............................................................
-
Total.........................................................................
-
-
</TABLE>
In the underwriting agreement, the several underwriters have agreed, subject
to the terms and conditions set forth therein, to purchase all of the shares of
common stock being sold pursuant to the underwriting agreement if any of the
shares of common stock being sold pursuant to such agreements are purchased. In
some circumstances the commitments of non-defaulting underwriters may be
increased or the underwriting agreement may be terminated.
The underwriters propose initially to offer the shares of our common stock
in part directly to the public at the offering price set forth on the cover page
of this prospectus and in part to some securities dealers at such price less a
concession not in excess of $ per share of common stock. The
underwriters may allow, and such dealers may reallow, a discount not in excess
of $ per share of common stock on sales to some other securities
dealers. After the offering, the offering price, concession and discount may be
changed.
We have granted options to the underwriters, exercisable for 30 days after
the date of this prospectus, to purchase up to an aggregate of 600,000
additional shares of common stock at the offering price set forth on the cover
page of this prospectus, less the underwriting discount. The underwriters may
exercise these options solely to cover over-allotments, if any, made on the sale
of the common stock offered hereby. If the underwriters exercise these options,
each underwriter severally will be obligated, subject to some conditions, to
purchase a number of additional shares of common stock proportionate to such
underwriter's initial amount reflected in the foregoing table.
The following table shows the per share and total underwriting discounts to
be paid by us to the underwriters and the proceeds before expenses to us. The
expenses of the offering are estimated at $1,000,000 and are payable by us. This
information is presented assuming either no exercise or full exercise by the
underwriters of their over-allotment options.
<TABLE>
<CAPTION>
WITHOUT WITH
PER SHARE OPTION OPTION
----------- ----------- ---------
<S> <C> <C> <C>
Public offering price.......................................... $ $ $
Underwriting discount.......................................... $ $ $
Proceeds, before expenses, to Century.......................... $ $ $
</TABLE>
The shares of common stock are being offered by the several underwriters,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of some legal matters by counsel for the underwriters and some other
conditions. The underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part.
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We, our directors and executive officers and some of our stockholders and
holders of outstanding options and warrants have entered into lock-up agreements
with the underwriters. Under those agreements, neither we nor any of our
directors or executive officers nor any of those stockholders may dispose of or
hedge any shares of common stock or securities convertible into or exchangeable
or exercisable for shares of common stock. These restrictions will be in effect
for a period of 180 days after the date of this prospectus. At any time and
without notice, Advest may, in its sole discretion, release all or some of the
securities from these lock-up agreements.
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for the common stock
offered by this prospectus has been determined through negotiations between us
and the representatives of the underwriters. Among the factors considered in
these negotiations were prevailing market conditions, our financial information,
market valuations of other companies that we and the representatives believe to
comparable to us, estimates of our business potential, the current state of our
development and other factors deemed relevant.
The underwriters do not expect sales of the common stock to any accounts
over which they exercise discretionary authority to exceed five percent of the
number of shares being offered in this offering.
We have agreed to indemnify the underwriters against some liabilities,
including liabilities under the Securities Act, or to contribute to payments the
underwriters may be required to make in respect thereof.
In connection with the offering, the underwriters may purchase and sell the
common stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover short positions created by
the underwriters in connection with the offering. Stabilizing transactions
consist of certain bids or purchases for the purpose of preventing or retarding
a decline in the market price of the common stock; and syndicate short positions
involve the sale by the underwriters of a greater number of shares of common
stock than they are required to purchase from us in the offering. The
underwriters also may impose a penalty bid, whereby selling concessions allowed
to broker-dealers in respect of the securities sold in the offering may be
reclaimed by the underwriters if such shares of common stock are repurchased by
the underwriters in stabilizing or covering transactions. These activities may
stabilize, maintain, or otherwise affect the market price of the common stock,
which may be higher than the price that may otherwise prevail in the open
market; and these activities, if commenced, may be discounted at any time. These
transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters makes any representation that the representatives
will engage in these transactions or that these transactions, once commenced,
will not be discontinued without notice.
Advest provided investment banking services to Amitek in connection with its
acquisition by us for which Advest received customary fees. The underwriters or
their affiliates may provide investment or commercial banking services to us in
the future for which they will receive customary fees and commissions.
57
<PAGE>
VALIDITY OF COMMON STOCK
The validity of the common stock offered hereby will be passed upon for
Century by Ropes & Gray, Boston, Massachusetts. Certain legal matters in
connection with this offering will be passed upon for the underwriters by
Choate, Hall & Stewart, Boston, Massachusetts.
EXPERTS
KPMG LLP, independent auditors, have audited our consolidated financial
statements at June 30, 1998, 1999 and the years ended June 30, 1997, 1998 and
1999 as set forth in their report. We have included our financial statements and
schedule in the prospectus and elsewhere in the registration statement in
reliance on KPMG LLP's report, given on their authority as experts in accounting
and auditing.
The financial statements of Amitek as of December 31, 1998 and 1997 and for
the years then ended included in this prospectus have been so included in
reliance on the report (which includes a paragraph of emphasis regarding
Amitek's transactions and relationships with affiliates as described in Notes 5
and 7 to the financial statements) of PricewaterhouseCoopers LLP, independent
certified public accountants, given on the authority of said firm as experts in
auditing and accounting.
Lawrence N. Legg, CPA, PA, an independent auditor, has audited Amitek
Corporation's financial statements as of and for the year ended December 31,
1996 as set forth in his report dated March 20, 1997, except for notes 9 and 10,
as to which the date is June 30, 1999. We have included required financial
statements in the prospectus in reliance on Lawrence N. Legg, CPA, PA's report,
given on his authority as an expert in accounting and auditing.
58
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1, including exhibits and schedules, under the Securities
Act with respect to the common stock to be sold in this offering. This
prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement or the
exhibits and schedules which are part of the registration statement. Any
statements made in this prospectus as to the contents of our certificate of
incorporation and by-laws and any contract, agreement or other document are
necessarily incomplete. With respect to our certificate of incorporation and
by-laws and each such contract, agreement or other document filed as an exhibit
to the Registration Statement we refer you to the exhibit for a more complete
description of the matter involved, and each statement in this prospectus shall
be deemed qualified in its entirety by this reference.
You may read and copy all or any portion of the Registration Statement or
any reports, statements or other information in the files at the public
reference facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C., 20549 and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can
request copies of these documents upon payment of a duplicating fee by writing
to the Commission. You may call the Commission at 1-800-SEC-0330 for further
information on the operation of its public reference rooms. Our filings,
including the Registration Statement, will also be available to you on the
Internet site maintained by the Commission at http://www.sec.gov.
We intend to furnish our stockholders with annual reports containing
financial statements audited by our independent auditors and to make available
to our stockholders quarterly reports containing unaudited financial data for
the first three quarters of each fiscal year.
59
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
CENTURY ELECTRONICS MANUFACTURING, INC.
Independent Auditors' Report............................................................................... F-2
Consolidated Balance Sheets at June 30, 1998, and 1999..................................................... F-3
Consolidated Statements of Operations for the years ended June 30, 1997, 1998 and 1999..................... F-4
Consolidated Statements of Stockholders' Equity and Comprehensive Income for the years ended June 30, 1997,
1998 and 1999............................................................................................ F-5
Consolidated Statements of Cash Flows for the years ended June 30, 1997, 1998 and 1999..................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
AMITEK CORPORATION
Report of Independent Certified Public Accountants......................................................... F-23
Independent Auditor's Report............................................................................... F-24
Balance Sheets as of December 31, 1997, 1998 and June 30, 1999 (Unaudited)................................. F-25
Statements of Operations for the years ended December 31, 1996, 1997 and 1998 and six months ended June 30,
1999 (Unaudited)......................................................................................... F-26
Statement of Changes in Stockholders' Equity for the years ended December 31, 1996, 1997 and 1998 and six
months ended June 30, 1999 (Unaudited)................................................................... F-27
Statements of Cash Flows for the years ended December 31, 1996, 1997 and 1998 and six months ended June 30,
1999 (Unaudited)......................................................................................... F-28
Notes to Financial Statements.............................................................................. F-29
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Century Electronics Manufacturing, Inc.
We have audited the accompanying consolidated balance sheets of Century
Electronics Manufacturing, Inc. and subsidiaries as of June 30, 1998 and 1999,
and the related consolidated statements of operations, stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended June 30, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Century Electronics
Manufacturing, Inc. and subsidiaries as of June 30, 1998 and 1999, and the
results of their operations and their cash flows, for each of the years in the
three-year period ended June 30 1999, in conformity with generally accepted
accounting principles.
KPMG LLP
August 27, 1999
Boston, Massachusetts
F-2
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash................................................. $ 1,629,655 $ 1,219,939
Trade accounts receivable, net of allowance for
doubtful receivables of approximately $320,000 and
$240,000 in 1998 and 1999, respectively (note
10)............................................... 11,526,110 20,152,494
Inventories (notes 2 and 5).......................... 6,433,521 14,877,572
Prepaid expenses..................................... 520,514 1,473,238
Related party note receivable........................ 451,346 326,940
Deferred income taxes (note 7)....................... 98,622 380,091
----------- -----------
Total current assets............................... 20,659,768 38,430,274
Property, plant and equipment, net of accumulated
depreciation and amortization (notes 3, 5 and 6)..... 15,143,382 17,162,225
Goodwill, net of accumulated amortization (note 11).... 123,678 498,121
Other assets (note 5).................................. 893,884 1,140,696
----------- -----------
Total assets....................................... $36,820,712 $57,231,316
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving note payable (note 5)...................... $ 3,811,798 $ 7,782,774
Current portion of term notes payable, bank (note
5)................................................ 200,000 485,400
Current portion of capital leases (notes 6 and 13)... 1,860,341 1,070,462
Accounts payable..................................... 11,843,200 22,402,073
Income taxes payable (note 7)........................ 718,162 450,762
Accrued expenses and other current liabilities (note
4)................................................ 1,823,243 2,630,098
----------- -----------
Total current liabilities.......................... 20,256,744 34,821,569
Long-term note payable (note 5)........................ 2,556,200 3,133,429
Capital lease payable, less current installments (notes
6 and 13)............................................ 1,422,178 1,090,834
Deferred income taxes (note 7)......................... 457,968 434,560
----------- -----------
Total liabilities.................................. 24,693,090 39,480,392
----------- -----------
Stockholders' equity (notes 9 and 13):
Series A preferred stock, $.01 par value, authorized
3,726,027 shares, 2,739,726 and 3,671,233 shares
issued and outstanding at June 30, 1998 and 1999,
respectively. Aggregate liquidation value of
$20,000,000 and $26,800,000, respectively......... 9,900,000 13,281,971
Series B preferred stock, $.01 par value, 666,667
shares authorized, issued and outstanding at June
30, 1998 and 1999. Aggregate liquidation value of
$4,000,000........................................ 4,000,000 4,000,000
Common stock $.01 par value. Authorized 17,593,607
shares, 6,521,877 and 6,321,877 issued and
outstanding in 1998 and 1999, respectively........ 65,219 63,219
Additional paid-in capital........................... 12,093,574 11,716,675
Accumulated deficit.................................. (13,914,396) (11,100,548)
Accumulated other comprehensive income............... (16,775) (210,393)
----------- -----------
Total stockholders' equity......................... 12,127,622 17,750,924
----------- -----------
Commitments and contingencies (notes 6, 8, 10 and 12)
Subsequent events (note 14)
Total liabilities and stockholders' equity......... $36,820,712 $57,231,316
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------
1997 1998 1999
------------- -------------- --------------
<S> <C> <C> <C>
Net sales......................................................... $ 70,744,344 $ 69,944,592 $ 121,677,408
Cost of sales..................................................... 63,427,776 65,078,570 107,617,612
------------- -------------- --------------
Gross profit.................................................. 7,316,568 4,866,022 14,059,796
Selling, marketing, general and administrative expenses........... 2,493,061 5,988,707 7,623,948
Stock compensation (notes 1, 9 and 13)............................ 1,775,000 1,186,000 --
Goodwill write-off (note 11)...................................... -- 7,488,942 --
Goodwill amortization............................................. 788,000 18,000 94,525
------------- -------------- --------------
Operating income (loss)....................................... 2,260,507 (9,815,627) 6,341,323
Other deductions (income):
Interest expense, net........................................... 557,926 1,136,782 1,872,592
Other, net...................................................... (26,049) (280,109) (33,608)
------------- -------------- --------------
Income (loss) before income tax expense (benefit)............. 1,728,630 (10,672,300) 4,502,339
Income tax expense (benefit) (note 7)............................. 1,451,445 (218,439) 1,688,491
------------- -------------- --------------
Net income (loss)............................................. $ 277,185 $ (10,453,861) $ 2,813,848
------------- -------------- --------------
------------- -------------- --------------
Net income (loss) per share-basic................................. $ 0.03 $ (1.33) $ 0.44
------------- -------------- --------------
------------- -------------- --------------
Net income (loss) per share-diluted............................... $ 0.03 $ (1.33) $ 0.24
------------- -------------- --------------
------------- -------------- --------------
Weighted average common shares outstanding-basic.................. 9,889,000 7,870,000 6,447,050
------------- -------------- --------------
------------- -------------- --------------
Weighted average common shares outstanding-diluted................ 9,889,000 7,870,000 11,516,994
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
PREFERRED PREFERRED PREFERRED ADDITIONAL
STOCK STOCK STOCK COMMON PAID-IN
SERIES A SERIES B SERIES C STOCK CAPITAL
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1996..................... -- 2 5 3 4,523,123
Capital contributions by stockholder to
fund payment of stock options buy out and
debt repayment........................... -- -- -- -- 3,868,455
Recapitalization of DCI into Century....... -- (2 ) (5) 62,560 (689,621)
Issuance of common stock to Centennial
(note 1)................................. -- -- -- 30,732 4,991,439
Issuance of common stock for acquisition of
TRIAX (note 1)........................... -- -- -- 22,395 4,456,605
Exercise of options........................ -- -- -- 261 45,457
Comprehensive income
Net income............................... -- -- -- -- --
Foreign currency translation
adjustment.............................. -- -- -- -- --
---------- ---------- ---------- ---------- -----------
Total comprehensive income................. -- -- -- -- --
---------- ---------- ---------- ---------- -----------
Balance as of June 30, 1997.................. -- -- -- 115,951 17,195,458
July 1, 1997 repurchase and retirement of
3,000,000 shares of common stock
including legal costs of $61,364 and
75,000 common shares issued to a
financial intermediary (note 13)......... -- -- -- (29,250) (3,498,741)
Issuance of common stock in connection with
acquisition of Century Thailand (note
13)...................................... -- -- -- 7,500 1,856,500
Issuance of 80,000 common shares in
settlement of legal claim................ -- -- -- 800 223,200
February 1998 repurchase and retirement of
3,683,635 shares of common stock (note
13)...................................... -- -- -- (36,836) (1,792,039)
Issuance of 2,739,726 shares of Series A
preferred stock net of issuance costs
(note 13)................................ 9,900,000 -- -- -- --
Issuance of 666,767 shares of Series B
preferred stock in connection with
February 1998 repurchase and retirement
of common stock (note 13)................ -- 4,000,000 -- -- (4,000,000)
Conversion of notes payable to 705,424
shares of common stock (note 13)......... -- -- -- 7,054 2,109,196
Comprehensive income
Net loss................................. -- -- -- -- --
Foreign currency translation
adjustment.............................. -- -- -- -- --
---------- ---------- ---------- ---------- -----------
Total comprehensive income................. -- -- -- -- --
---------- ---------- ---------- ---------- -----------
Balance as of June 30, 1998.................. 9,900,000 4,000,000 -- 65,219 12,093,574
Issuance of Series A preferred stock net of
issuance costs........................... 3,381,971 -- -- -- --
Stock compensation related to stock option
grant.................................... -- -- -- -- 21,101
Repurchase and retirement of 200,000 shares
of common stock from officer at $2 per
share.................................... -- -- (2,000) (398,000)
Comprehensive income
Net income............................... -- -- -- -- --
Foreign currency translation
adjustment.............................. -- -- -- -- --
---------- ---------- ---------- ---------- -----------
Total comprehensive income................. -- -- -- -- --
---------- ---------- ---------- ---------- -----------
Balance as of June 30, 1999.................. 13,281,971 4,000,000 -- 63,219 11,716,675
---------- ---------- ---------- ---------- -----------
---------- ---------- ---------- ---------- -----------
<CAPTION>
ACCUMULATED
OTHER
ACCUMULATED COMPREHENSIVE TREASURY
DEFICIT INCOME STOCK TOTAL
----------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Balance at June 30, 1996..................... (3,737,720 ) -- (627,068) 158,345
Capital contributions by stockholder to
fund payment of stock options buy out and
debt repayment........................... -- -- -- 3,868,455
Recapitalization of DCI into Century....... -- -- 627,068 --
Issuance of common stock to Centennial
(note 1)................................. -- -- -- 5,022,171
Issuance of common stock for acquisition of
TRIAX (note 1)........................... -- -- -- 4,479,000
Exercise of options........................ -- -- -- 45,718
Comprehensive income
Net income............................... 277,185 -- -- 277,185
Foreign currency translation
adjustment.............................. -- 50,368 -- 50,368
----------- ------------- --------- -----------
Total comprehensive income................. -- -- -- 327,553
----------- ------------- --------- -----------
Balance as of June 30, 1997.................. (3,460,535 ) 50,368 -- 13,901,242
July 1, 1997 repurchase and retirement of
3,000,000 shares of common stock
including legal costs of $61,364 and
75,000 common shares issued to a
financial intermediary (note 13)......... -- -- -- (3,527,991)
Issuance of common stock in connection with
acquisition of Century Thailand (note
13)...................................... -- -- -- 1,864,000
Issuance of 80,000 common shares in
settlement of legal claim................ -- -- -- 224,000
February 1998 repurchase and retirement of
3,683,635 shares of common stock (note
13)...................................... -- -- -- (1,828,875)
Issuance of 2,739,726 shares of Series A
preferred stock net of issuance costs
(note 13)................................ -- -- -- 9,900,000
Issuance of 666,767 shares of Series B
preferred stock in connection with
February 1998 repurchase and retirement
of common stock (note 13)................ -- -- -- --
Conversion of notes payable to 705,424
shares of common stock (note 13)......... -- -- -- 2,116,250
Comprehensive income
Net loss................................. (10,453,861) -- -- (10,453,861)
Foreign currency translation
adjustment.............................. -- (67,143) -- (67,143)
----------- ------------- --------- -----------
Total comprehensive income................. -- -- -- (10,521,004)
----------- ------------- --------- -----------
Balance as of June 30, 1998.................. (13,914,396) (16,775) -- 12,127,622
Issuance of Series A preferred stock net of
issuance costs........................... -- -- -- 3,381,971
Stock compensation related to stock option
grant.................................... -- -- -- 21,101
Repurchase and retirement of 200,000 shares
of common stock from officer at $2 per
share.................................... -- -- -- (400,000)
Comprehensive income
Net income............................... 2,813,848 -- -- 2,813,848
Foreign currency translation
adjustment.............................. -- (193,618) -- (193,618)
----------- ------------- --------- -----------
Total comprehensive income................. -- -- -- 2,620,230
----------- ------------- --------- -----------
Balance as of June 30, 1999.................. (11,100,548) (210,393) -- 17,750,924
----------- ------------- --------- -----------
----------- ------------- --------- -----------
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................... $ 277,185 $(10,453,861) $ 2,813,848
Adjustments to reconcile net income (loss) to net cash used in
operating activities
Depreciation and amortization........................................ 1,846,575 2,218,416 3,064,051
Write-off of TRIAX goodwill (note 11)................................ -- 7,488,942 --
Provision for doubtful accounts...................................... -- 40,000 30,618
Compensation expense related to option grant......................... -- -- 21,100
Change in assets and liabilities, net of effects of acquisition:
(Increase) decrease in accounts receivable......................... (2,456,658) (1,144,068) (8,633,196)
Increase in other receivables...................................... (250,631) -- --
Decrease (increase) in inventories................................. (3,408,811) 7,418,379 (8,560,333)
(Increase) decrease in prepaid expenses and other assets........... (99,001) (260,015) (939,974)
Increase (decrease) in accounts payable............................ (148,804) (5,484,810) 12,629,694
(Decrease) increase in income taxes payable........................ 1,077,573 (759,596) (204,459)
Increase (decrease) in accrued expenses and other current
liabilities...................................................... 1,258,688 (1,331,496) 732,141
Change in deferred taxes........................................... 304,786 326,591 (279,584)
------------ ------------ ------------
Net cash (used in) provided by operating activities.............. (1,599,098) (1,941,518) 673,906
------------ ------------ ------------
Cash flows from investing activities
Capital expenditures................................................. (2,680,900) (2,523,384) (3,363,120)
Cash paid for acquisitions, less cash acquired....................... (4,483,383) -- (384,599)
Cash assumed from acquirees, net of cash paid for acquisitions....... -- 891,076 --
Increase (decrease) in other long-term assets........................ (183,473) (7,188) (193,677)
------------ ------------ ------------
Net cash used in investing activities.............................. (7,347,756) (1,639,496) (3,941,396)
------------ ------------ ------------
Cash flows from financing activities:
Net proceeds (payments) from revolving note payable.................. (1,936,655) 3,731,298 2,273,659
Net proceeds from term and convertible notes payable................. -- 3,000,000 1,532,521
Principal payments on notes payable.................................. -- (238,576) (1,349,573)
Principal payments on capital lease obligation....................... -- (3,578,499) (2,552,646)
Proceeds from issuance of preferred stock
(note 13).......................................................... -- 9,900,000 3,381,971
Repurchase and retirement of common stock (note 13).................. -- (5,663,875) (400,000)
Change in related party note receivable.............................. (60,978) (397,958) 98,006
Proceeds from issuance of (payment of) related party note payable.... 4,129,099 (4,129,099) --
Capital contributions from shareholder (note 1)...................... 3,868,455 -- --
Issuance of common stock to Centennial for acquisition of TRIAX (note
1)................................................................. 5,025,190 -- --
Proceeds from issuance of common stock............................... 45,718 -- --
------------ ------------ ------------
Net cash provided by financing activities.......................... 11,070,829 2,623,291 2,983,938
------------ ------------ ------------
Effect of exchange rate changes on cash................................ 50,368 31,033 (126,164)
------------ ------------ ------------
Net increase (decrease) in cash...................................... 2,174,343 (926,690) (409,716)
Cash at beginning of year.............................................. 382,002 2,556,345 1,629,655
------------ ------------ ------------
Cash at end of year.................................................... $ 2,556,345 $ 1,629,655 $ 1,219,939
------------ ------------ ------------
------------ ------------ ------------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest........................................................... $ 629,838 $ 870,430 $ 1,760,850
------------ ------------ ------------
------------ ------------ ------------
Income taxes....................................................... $ -- $ 107,279 $ 2,374,978
------------ ------------ ------------
------------ ------------ ------------
Property, plant and equipment; acquired through capital lease...... $ -- $ 1,140,770 $ 321,100
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) ORGANIZATION AND BUSINESS
The consolidated financial statements present the operations of Century
Electronics Manufacturing, Inc. ("Century"), formerly known as Century
Industries, Inc., and its wholly-owned subsidiaries Century Electronics
Manufacturing (NE) Inc. ("Century New England"), formerly known as Design
Circuits, Inc. ("DCI"), TRIAX Technology Group, Ltd. ("TRIAX"), Century Thailand
(see note 13), Quality Manufacturing Services, Inc. (see note 13) ("QMS") and
YMC Manufacturing Services, Inc. (see note 13) ("YMC"), collectively referred to
as the "Company". The Company is a worldwide provider of electronics
manufacturing services to leading original equipment manufacturers principally
in the communications and networking markets. The Company offers a broad range
of integrated electronics manufacturing services from product design and
prototyping through volume production and order fulfillment.
The financial results for 1997 include the results of operations of Century
from July 24, 1996 (date of inception) to June 30, 1997, as well as the results
of operations of DCI for the year ended June 30, 1997.
On July 10, 1996, Centennial and other outside investors acquired all of the
outstanding common stock of DCI, and redeemed all of the outstanding preferred
stock, common stock warrants, and common stock options then outstanding. A
portion of the total consideration paid by Centennial and the other outside
investors for the DCI acquisition was paid to DCI employees by DCI in
consideration for their stock options. The cash for these payments,
approximating $1.8 million, was contributed by Centennial and the outside
investors and has been included as additional paid-in capital and as stock
compensation expense in the year ended June 30, 1997. Concurrent with and
shortly after the acquisition of DCI, Centennial repaid a portion of DCI's
third-party debt of approximately $2.1 million, which has been reflected as
additional paid-in capital at July 10, 1996. As a result of these transactions,
Centennial's ownership of DCI shares outstanding was approximately 75%.
On July 24, 1996, Centennial formed Century and on October 18, 1996,
Centennial and the outside investors transferred their shares in DCI to Century
in exchange for shares of Century. Consequently, Century became the parent
company of DCI. DCI was then later renamed Century Electronics Manufacturing
(NE) Inc.
On November 5, 1996 Century purchased all of the outstanding class "A"
ordinary stock of TRIAX in exchange for 2,239,500 shares of Century's common
stock valued at approximately $4.5 million, and approximately $5.0 million in
cash, including transaction costs. Century also purchased $492,400 of preferred
stock in TRIAX. The cash to purchase TRIAX, as well as payment of certain
transaction costs, was obtained from Centennial through the issuance of
3,073,130 shares of Century common stock to Centennial, valued at approximately
$5.0 million. The transaction was accounted for under the purchase method of
accounting and consequently goodwill of $8.3 million was recorded on the
transaction. Amortization of goodwill was approximately $788,000 in 1997. There
was no amortization recorded in 1998 as the goodwill was considered impaired and
was written off entirely in July 1997. (See note 11). The results of operations
of TRIAX have been included from its acquisition date.
The following table presents pro forma summary results of operations as if
the TRIAX acquisition had occurred on July 1, 1996, and accordingly, includes
adjustments for additional goodwill amortization and related income taxes. It
does not purport to be indicative of what would have actually
F-7
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
occurred had the acquisition occurred on July 1, 1996 nor is it indicative of
results which may occur in the future:
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED JUNE 30,
1997
-----------------------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C>
Net sales...................................................................... $ 80,861
Net income..................................................................... $ 487
Net income per share--basic and diluted........................................ $ 0.05
</TABLE>
(b) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Century
Electronics Manufacturing, Inc. and its wholly-owned subsidiaries, Century New
England, TRIAX, Century Thailand, QMS and YMC. All intercompany balances and
transactions have been eliminated in consolidation.
The financial statements of the Company's non-U.S. subsidiaries are
translated into U.S. dollars in accordance with Statement of Financial
Accounting Standards No. 52, FOREIGN CURRENCY TRANSLATION. Net assets of
non-U.S. subsidiaries whose "functional" currencies are other than the U.S.
dollar are translated at current rates of exchange. Income and expense items are
translated at the average exchange rate for the period. The resulting
translation adjustments are recorded directly into a separate component of
stockholders' equity.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(c) STATEMENT OF CASH FLOWS
In accordance with Statement of Financial Accounting Standards No. 95,
Statement of Cash Flows, cash flows from the Company's non-U.S. subsidiaries are
calculated based on their reporting currency. As a result, amounts related to
assets and liabilities reported on the statement of consolidated cash flows will
not necessarily agree to changes in the corresponding balances on the statement
of consolidated financial position. The effect of exchange rate changes on cash
balances held in foreign currencies is reported on a separate line below cash
from financing activities.
(d) REVENUE RECOGNITION
The Company recognizes revenue from product sales and accrues for
anticipated warranty returns at time of shipment.
(e) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market
(net realizable value).
F-8
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(f) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation of property,
plant and equipment is provided over the estimated useful lives of the
respective assets using the straight-line method. Amortization of leased capital
equipment is provided for over the estimated useful life of the assets, or the
lease term for assets under leases which do not provide for title to pass at the
end of the lease, if shorter. Estimated useful lives are as follows:
<TABLE>
<S> <C>
Buildings......................................................... 50 years
Machinery and equipment........................................... 7-10
Furniture, fixtures and office equipment.......................... 3-5
Leasehold improvements............................................ 3
Motor vehicles.................................................... 4-5
</TABLE>
(g) OTHER ASSETS
Other assets consists primarily of the cash surrender value of an insurance
policy in support of the long-term mortgage note on the building housing the
TRIAX facility as well as various lease deposits on buildings and equipment as
well as utility deposits.
(h) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(i) GOODWILL
Goodwill relating to the Company's acquisitions represents the excess of
cost over the fair value of net assets acquired and is amortized on a
straight-line basis over the period of expected benefit. Determination of the
straight-line period is dependent on the nature of the operations acquired. For
acquisitions completed to date, the Company is utilizing periods of five to
fifteen years. The Company evaluates the recoverability of goodwill on a
periodic basis to assure that changes in facts and circumstances do not suggest
that recoverability has been impaired. This analysis relies on a number of
factors, including operating results, business plans, budgets, economic
projections, and changes in management's strategic direction or market emphasis.
The test of recoverability for goodwill is a comparison of the unamortized
balance to expected forecasted undiscounted cash flows of the acquired business
or enterprise over the remaining portion of the amortization period. If the book
value of goodwill exceeds undiscounted future operating cash flows, the
writedown is computed as the excess of the unamortized balance of the asset over
the present value of operating cash flows discounted at the Company's weighted
average cost of capital over the remaining amortization period.
F-9
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) LONG-LIVED ASSETS
Long-lived assets are reviewed for impairment, based upon undiscounted
future cash flows, and appropriate losses are recognized whenever the carrying
amount of an asset may not be recovered in accordance with Statement of
Financial Accounting Standards No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS TO BE DISPOSED OF. Impairment is measured by the amount by
which the carrying amount of the assets exceed the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.
(k) NET INCOME (LOSS) PER SHARE
Basic income (loss) per share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding during the period.
Diluted net income (loss) per share is computed by dividing net income (loss) by
the weighted average number of common shares and dilutive potential common
shares outstanding, including convertible preferred stock assumed converted,
during the period. Under the treasury stock method, unexercised options and
warrants are assumed to be exercised at the beginning of the period or at
issuance, if later. The assumed proceeds are then used to purchase common shares
at the average market price during the period. Dilutive potential common shares
outstanding at June 30, 1999 consisted of approximately 704,647 from unexercised
options and warrants and 4,365,297 million of convertible preferred stock.
Potential common shares for all other periods have been excluded from income
(loss) per share as their inclusion would have the effect of increasing or
decreasing diluted income or loss, respectively, per share (i.e.,
anti-dilutive).
(l) NEW ACCOUNTING PRONOUNCEMENTS
On July 1, 1998, the Company adopted SFAS No. 130, REPORTING COMPREHENSIVE
INCOME. SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income and its components in a full set of financial statements.
Comprehensive income consists of net income and foreign currency translation
adjustment and is presented in the consolidated statements of stockholder's
equity and comprehensive income. The Statement requires only additional
disclosures in the consolidated financial statements; it does not affect the
Company's financial position or results of operations. Prior year financial
statements have been reclassified to conform to the requirements of SFAS No.
130.
In June 1998, the Financial Accounting Standards Board issued SFAS 133,
"Accounting for Derivative Financial Instruments and Hedging Activities." This
statement establishes accounting and reporting standards for derivative
instruments and hedging, requiring recognition of all derivatives as either
assets or liabilities in the statement of financial position measured at fair
value. This statement, as amended by SFAS 137, is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. The effects of adopting
SFAS 133 are not expected to have a material impact on the Company's financial
condition, results of operations or cash flows.
F-10
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) INVENTORIES
The components of inventories at June 30, 1998 and 1999 were as follows:
<TABLE>
<CAPTION>
1998 1999
------------ -------------
<S> <C> <C>
Finished goods................................................... $ 65,933 $ --
Work-in-process.................................................. 933,083 2,765,078
Raw materials.................................................... 5,434,505 12,112,494
------------ -------------
$ 6,433,521 $ 14,877,572
------------ -------------
------------ -------------
</TABLE>
(3) PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment at June 30, 1998 and 1999
were as follows:
<TABLE>
<CAPTION>
1998 1999
------------- -------------
<S> <C> <C>
Buildings...................................................... $ 2,381,329 $ 2,237,798
Machinery and equipment........................................ 15,093,877 19,220,057
Computer equipment............................................. 989,510 1,085,834
Furniture and fixtures......................................... 325,743 472,383
Leasehold improvements......................................... 953,422 1,570,209
Motor vehicles................................................. 217,244 229,218
------------- -------------
19,961,125 24,815,499
Less accumulated depreciation and amortization................. 4,817,743 7,653,274
------------- -------------
$ 15,143,382 $ 17,162,225
------------- -------------
------------- -------------
</TABLE>
(4) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities at June 30, 1998 and 1999
were as follows:
<TABLE>
<CAPTION>
1998 1999
------------ ------------
<S> <C> <C>
VAT and customs duty payable...................................... $ 778,816 $ 852,075
Accrued expenses.................................................. 554,204 979,404
Accrued payroll................................................... 490,223 798,619
------------ ------------
Total............................................................. $ 1,823,243 $ 2,630,098
------------ ------------
------------ ------------
</TABLE>
(5) LONG-TERM NOTES PAYABLE
The Company has a long-term note payable to a lender in the United Kingdom
with an outstanding balance converted in U.S. dollars of $1,939,534 and
$1,831,724 at June 30, 1998 and 1999, respectively, which is secured by the
building housing one of the TRIAX facilities. Interest on the note is payable
monthly at approximately 12% per annum. The note does not require monthly
principal payments but is due in full in December 2007. The Company currently
makes monthly payments into an insurance/investment vehicle designed to
accumulate monthly payments and investment earnings thereon which are intended
to be sufficient to retire the note in full upon its maturity. At June 30, 1998
and 1999, the accumulated cash value of the insurance policy was approximately
$732,000 and $788,000, respectively. In addition, TRIAX has a cash overdraft
facility with a United Kingdom bank
F-11
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) LONG-TERM NOTES PAYABLE (CONTINUED)
which provides for advances based upon eligible accounts receivable and
inventory and is secured by substantially all the assets of TRIAX. The current
loan agreement underlying this facility expired in October 1998. At June 30,
1998, the outstanding balance had exceeded the maximum borrowing limit. In
December 1998, the outstanding balance on this facility was repaid.
In July 1997 and as discussed in note 13, Century New England entered into a
loan facility with Congress Financial (the "Loan Agreement") which provided for
a $1.0 million term loan at prime plus 1.5%, payable in 60 installments, and a
$6.0 million revolving facility at prime plus 1.5% and a $3.0 million letter of
credit facility. The amount of credit available under the revolving facility was
based upon the levels of eligible receivables and raw materials inventory. The
total availability of the loans and letter of credit facility could not exceed
$7.0 million, and the total of the revolving and letter of credit facilities
could not exceed $6.75 million. At June 30, 1998, the amount outstanding on the
revolving facility and the term loan were $3,731,298 and $816,666, respectively.
The loan and credit facility was secured by substantially all the assets of
Century and was cross collateralized and secured by substantially all assets of
Century New England. However, the security did not extend to the assets of the
other subsidiaries of Century. Also, the loan agreement contained various
restrictive covenants which were measured at the Century New England level. At
June 30, 1998, Century New England was not in compliance with a covenant to
maintain at all times a certain level of adjusted net worth; however, a waiver
was obtained from the bank through October 30, 1998. Effective October 31, 1998,
the adjusted net worth covenant was revised to require Century New England to
maintain minimum net worth of $3.25 million.
In December, 1998, Century New England, YMC and QMS collectively entered
into a three year loan facility with Fidelity Funding, Inc., the proceeds of
which were utilized to payoff the Congress Financial facility and provide
further working capital. The Fidelity facility provides for up to a $2.0 million
term loan at prime plus 1%, with all advances payable in 48 equal monthly
principle installments with final payment of outstanding balances no later than
November 30, 2001, and a $12.0 million revolving facility at prime plus 1%. The
amount of credit available under the revolving facility is based upon the levels
of eligible receivables and inventory. The total outstanding loans may not
exceed $14.0 million (See also note 14). At June 30, 1999, the amounts
outstanding on the revolving facility and the term loan were approximately $7.8
million and $1.8 million, respectively. The facility is secured by substantially
all the assets of Century, YMC and QMS. In addition, the loan agreement contains
various restrictive covenants with respect to net worth, debt service coverage
and net profit requirements which are measured against Century New England, YMC
and QMS individually and collectively. At June 30, 1999, the Company was in
violation of one of these covenants for which a waiver has been received.
As of June 30, 1998, one of the Company's subsidiaries, QMS, had a line of
credit agreement with a bank that was guaranteed by the Small Business
Administration. The line provided for a maximum credit availability of $50,000
with interest on the outstanding balance charged at the bank's prime rate plus
2.25%. The rate of interest charged on the outstanding balance of $37,500 at
June 30, 1998 was 10.9%. The credit agreement was to expire in November 2002 and
was secured by all the assets of QMS and was personally guaranteed by the
officers of QMS. Additionally, QMS had another line of credit facility at June
30, 1998 with an outstanding balance of $43,000. Under this facility, QMS had a
total availability of $60,000. Interest was charged at the bank's prime rate
plus 2.25%. During the
F-12
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) LONG-TERM NOTES PAYABLE (CONTINUED)
twelve months ended June 30, 1999, both of the QMS line of credit facilities
were paid off and canceled.
Aggregate maturities of all of the Company's long term debt, are as follows:
<TABLE>
<S> <C>
2000............................................ $ 485,400
2001............................................ 485,400
2002............................................ 485,400
2003............................................ 330,905
2004............................................ --
Thereafter...................................... 1,831,724
---------
$3,618,829
---------
---------
</TABLE>
(6) LEASES
The Company leases various machinery and equipment pursuant to capital
leases. As of June 30, 1997, certain machinery and equipment was sub-leased from
Centennial for a three year term at lease rates which approximated fair market
rates. These sub-leases were bought out by the Company on July 1, 1997 as
discussed in note 13. The Company has also entered into operating leases for
plant and office space. The lease commitments for the plant and office space are
for terms of up to 15 years.
The future minimum lease payments related to these leases are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDED JUNE 30: LEASES LEASES
- -------------------------------------------------------------------------------------- ------------ ------------
<S> <C> <C>
2000............................................................................ $ 1,332,664 $ 1,639,712
2001............................................................................ 777,505 1,535,118
2002............................................................................ 245,252 1,541,978
2003............................................................................ 169,957 1,195,950
2004............................................................................ 85,948 1,215,028
Thereafter...................................................................... -- 2,471,536
------------ ------------
Total minimum lease payments.......................................................... 2,611,326 $ 9,599,322
------------
------------
Less amount representing interest..................................................... 450,030
------------
Net minimum lease payments............................................................ 2,161,296
Less current installments............................................................. 1,070,462
------------
Obligations under capital leases, excluding current installments...................... $ 1,090,834
------------
------------
</TABLE>
The total cost capitalized and accumulated amortization for assets under
capital leases at June 30, 1999 was approximately $4.5 million and $1.1 million,
respectively.
Total rent expense for the years ended June 30, 1997, 1998 and 1999 was
approximately $250,000, $583,000 and $1,568,000, respectively.
F-13
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) INCOME TAXES
Income tax expense consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------------ ----------- ------------
<S> <C> <C> <C>
1997:
Federal................................................................ $ -- $ -- $ --
State.................................................................. -- -- --
Foreign................................................................ 1,082,080 369,365 1,451,445
------------ ----------- ------------
$ 1,082,080 $ 369,365 $ 1,451,445
------------ ----------- ------------
------------ ----------- ------------
1998:
Federal................................................................ $ 316,864 $ -- $ 316,864
State.................................................................. 110,985 -- 110,985
Foreign................................................................ (829,199) 182,911 (646,288)
------------ ----------- ------------
$ (401,350) $ 182,911 $ (218,439)
------------ ----------- ------------
------------ ----------- ------------
1999:
Federal................................................................ $ 1,556,953 $ (322,626) $ 1,234,327
State.................................................................. 560,219 (100,490) 459,729
Foreign................................................................ (123,804) 118,239 (5,565)
------------ ----------- ------------
$ 1,993,368 $ (304,877) $ 1,688,491
------------ ----------- ------------
------------ ----------- ------------
</TABLE>
The effective tax rate differs from the "expected" tax rate (computed as the
U.S. Federal corporate income tax rate of 34%) as follows:
<TABLE>
<CAPTION>
1997 1998 1999
------------ ------------- -------------
<S> <C> <C> <C>
Computed "expected"................................................... $ 587,734 $ (3,628,582) $ 1,530,795
State tax, net of federal benefit..................................... -- 73,250 303,421
Non-deductible goodwill amortization.................................. 268,025 2,610,408 32,139
Stock Compensation.................................................... -- 403,240 7,174
Change in valuation allowance......................................... 687,312 (248,856) (636,123)
Foreign losses not benefited.......................................... -- 202,730 139,022
Difference in foreign statutory tax rate.............................. (72,427) 246,097 30,612
Other, net............................................................ (19,199) 123,274 281,451
------------ ------------- -------------
Income tax expense (benefit)........................................ $ 1,451,445 $ (218,439) $ 1,688,491
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
F-14
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 30,
1998 and 1999 are presented below:
<TABLE>
<CAPTION>
1998 1999
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.................................................... $ 1,487,126 $ 1,378,045
Intercompany profit................................................................. 207,602 207,945
Inventory reserves.................................................................. 160,285 158,762
Inventory principally due to additional cost for tax purposes....................... 85,580 173,103
Accounts receivable reserves........................................................ 60,000 73,972
Accrued liabilities................................................................. 59,300 231,747
Tax credits......................................................................... 145,256 136,023
Other............................................................................... 42,808 28,539
------------ ------------
Total gross deferred tax assets................................................... 2,247,957 2,388,136
Less valuation allowance.............................................................. 1,600,589 964,466
------------ ------------
Net deferred tax assets............................................................... 647,368 1,423,670
------------ ------------
Deferred tax liabilities:
Property, plant and equipment, principally due to differences in depreciation....... 1,006,714 1,478,139
------------ ------------
Total gross deferred tax liabilities.............................................. 1,006,714 1,478,139
------------ ------------
Net deferred tax liability........................................................ $ 359,346 $ 54,469
------------ ------------
------------ ------------
</TABLE>
The valuation allowance for deferred tax assets as of July 1, 1997 was
approximately $2.2 million.
On December 25, 1996 the Company's operation in Thailand, Century Thailand,
was granted an exemption from income taxes for a period of seven years from the
date operating income is first derived. For the year ended June 30, 1999,
Century Thailand generated a net loss of approximately $400,000.
In assessing the realizability of deferred tax assets, the Company considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which these temporary differences become deductible. The Company considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment. Based upon the level of
historical taxable income and projections for future taxable income over which
the deferred tax assets are deductible, the Company believes that the ultimate
realization of the net deferred tax assets for federal and state tax purposes
appear to be more likely than not.
At June 30, 1999, the Company has net operating loss carryforwards for U.S.
and state income tax purposes of approximately $3.3 million and $1.8 million,
respectively, which are available to offset future taxable income, if any,
through 2111 and 2001, respectively; however, the total amount that can be
utilized on an annual basis is limited to approximately $571,000 per year due to
a change in ownership of the Company.
F-15
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) EMPLOYEE BENEFIT PLAN
Beginning January 1, 1996, the Company sponsors a 401(k) Retirement Plan
under which substantially all employees of the Company's U.S. subsidiaries are
eligible to participate in the Plan. Under the Plan, employees may contribute up
to the lesser of 15% of their compensation or $10,000. The Company, at its
discretion, may contribute an amount up to 7 1/2% of employees' compensation,
and may also, at its discretion, contribute a bonus, which would be determined
using a uniform percentage of the compensation of each employee. No
discretionary contributions were made by the Company in 1997, 1998, or 1999.
(9) STOCK OPTIONS
In 1995, DCI sponsored an option plan ("1995 Option Plan") which was a
non-qualified compensatory stock option plan for certain employee groups.
Options issued under the 1995 Option Plan vested immediately upon issuance and
had an exercise price of $0.50 per share. The options expired ten years from the
date of grant. Compensation expense related to the 1995 Option Plan charged to
operations in 1995 was $98,000 and is included in the accompanying consolidated
statements of operations.
On July 10, 1996, all of the outstanding options issued pursuant to this
option plan were repurchased by DCI in connection with the acquisition of all
the outstanding common shares of DCI by Centennial and other outside investors
as discussed in note 1. The total cost of buying out these options of
approximately $1.8 million has been recorded as stock compensation expense in
the accompanying consolidated statements of operations.
Pursuant to an agreement ratified in August 1996, the Company established
the 1996 Stock Option Plan (the "Plan"), which permits the grant of options to
acquire common stock to officers and key employees of the Company. At June 30,
1998 and 1999, 2,000,000 shares of common stock were reserved for issuance
pursuant to the Plan. The Plan includes various vesting criteria, including
service time and change of control.
During the period from July 1, 1996 to June 30, 1997, the Company granted
756,500 options with exercise prices of between $1.75 and $2.00, which
approximated the fair value per share on the grant dates. 26,125 options were
exercised and 6,875 options were canceled during the period from July 1, 1996 to
June 30, 1997. During the year ended June 30, 1998, options to acquire 221,000
shares were granted to employees with exercise prices ranging from $2.00 to
$4.00. During the year ended June 30, 1999, options to acquire 24,000 shares
were granted to employees at a weighted average exercise price of $2.65,
563,000, 626,000 and 871,000 options were exercisable at June 30, 1997, 1998 and
1999, respectively.
The Company applies Accounting Principles Board Opinion No 25, ACCOUNTING
FOR STOCK ISSUED TO EMPLOYEES "APB 25"), and related Interpretations in
accounting for its Plan.
Had compensation expense for the options granted been determined based on
the fair value of the options at the grant date consistent with the optional
fair value based method of Statement of Financial Accounting Standards Statement
No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION ("SFAS 123"), the Company's net
income (loss) for the year ended June 30, 1997, 1998 and 1999 would
F-16
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) STOCK OPTIONS (CONTINUED)
have been approximately $107,000, ($10,472,000), and $2,795,000 on a pro forma
basis. Pro forma basic and diluted income (loss) per share for the years ended
June 30, 1997, 1998 and 1999 are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Pro forma net income (loss) per share:....................................................
Basic................................................................................... $ 0.01 (1.33) 0.43
Diluted................................................................................. $ 0.01 (1.33) 0.24
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions: no
dividend yield, no price volatility, risk-free interest rate of approximately
6%, expected life of options of up to 4 years, and fair value of the Company's
shares between $1.75 and $6.00. The fair market value of options granted in
1997, 1998 and 1999 under this method was between $0.46 and $0.37, $0.45 and
$0.40 and between $0.31 and $0.94 per option, respectively.
F-17
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) CONCENTRATION OF RISK
SEGMENT AND GEOGRAPHIC DATA
The Company is engaged in one line of business, electronic manufacturing
services. The following table presents information about the Company by
geographic area.
<TABLE>
<CAPTION>
1997 1998 1999
------------- -------------- --------------
<S> <C> <C> <C>
Net revenues:
United States................................................... $ 31,539,433 $ 45,745,101 $ 113,173,351
United Kingdom.................................................. 39,204,911 23,274,212 22,365,776
Thailand........................................................ -- 925,279 2,150,638
------------- -------------- --------------
70,744,344 69,944,592 137,689,765
Elimination of interdivision revenues........................... -- -- (16,012,357)
------------- -------------- --------------
$ 70,744,344 $ 69,944,592 $ 121,677,408
------------- -------------- --------------
------------- -------------- --------------
Operating profit:
United States................................................... $ (1,462,170) $ (32,311) $ 6,319,316
United Kingdom.................................................. 3,190,800 (10,043,724) (447,370)
Thailand........................................................ -- (596,265) (408,887)
------------- -------------- --------------
1,728,630 (10,672,300) 5,463,059
Elimination of interdivision operating profit................... -- -- (960,720)
------------- -------------- --------------
$ 1,728,630 $ (10,672,300) $ 4,502,339
------------- -------------- --------------
------------- -------------- --------------
Identifiable assets:
United States................................................... $ 16,980,777 $ 22,065,584 $ 41,460,776
United Kingdom.................................................. 29,969,517 14,119,437 15,786,520
Thailand........................................................ -- 3,944,065 3,646,571
------------- -------------- --------------
46,950,294 40,129,086 60,893,867
Elimination of interdivision receivables........................ (602,684) (3,308,374) (3,662,551)
------------- -------------- --------------
$ 46,347,610 $ 36,820,712 $ 57,231,316
------------- -------------- --------------
------------- -------------- --------------
</TABLE>
OTHER INFORMATION
During 1997, 1998 and 1999, sales to customers in excess of 10% of total
consolidated sales were as follows (as a percentage of total consolidated
sales):
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Nortel 30% 42% 72%
3Com 51% 31% --
--- --- ---
81% 73% 72%
--- --- ---
--- --- ---
</TABLE>
Accounts receivable at June 30, 1999 from Nortel were approximately $11.6
million.
F-18
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(10) CONCENTRATION OF RISK (CONTINUED)
In 1998 and 1999, certain Asia Pacific countries, including Thailand, the
location for Century Thailand, were experiencing economic difficulties relating
to currency devaluation and slowdown in growth. Accordingly, the Thai government
sought assistance from the International Monetary Fund to alleviate the economic
crisis and improve the economy over time. At June 30, 1999, total assets,
revenues and operating profit for Century Thailand were as shown in the table
above.
(11) GOODWILL IMPAIRMENT
Of net worldwide sales, 55% and 33% of the revenue for fiscal 1997 and 1998,
respectively, was generated by TRIAX, the Company's United Kingdom operation.
Substantially all of these amounts represented sales under a contract with 3Com
in Israel. In July of 1997, management of TRIAX was notified by 3Com that
production of products for 3Com under this contract would be greatly reduced
from fiscal 1997 levels and would end by March 1998. Shortly before June 30,
1998, such production for 3Com ended.
Upon being notified in July 1997 of the loss of TRIAX's significant
customer, 3Com, the Company performed an analysis of TRIAX's undiscounted future
cash flows without this significant customer to determine if the reforecasted
cash flows would be sufficient to cover all or part of the remaining carrying
value of the goodwill. Based on this analysis, the Company concluded that the
entire remaining carrying value of TRIAX goodwill of approximately $7.5 million
was impaired. Consequently, the entire remaining carrying value of $7.5 million
was written off in July 1997.
(12) CONTINGENCIES
On February 11, 1998, the Company received a notice from the United Kingdom
Inland Revenue ("Inland Revenue") stating that the Company's operation in St.
Albans had violated various customs, duty and value-added tax ("VAT")
regulations. The Inland Revenue claimed that the amounts due to be paid by the
Company were approximately $740,000 and $3,300,000, plus interest for customs
and duty, and for VAT, respectively, for the period from February 1996 to
January 1998.
During fiscal 1998, the Company conducted a detailed review of its import
procedures with the help of its importer, its primary customer 3Com, and in
conjunction with Inland Revenue as part of a process of determining the ultimate
liability and negotiating a settlement with the Inland Revenue.
Late in fiscal 1998, after completing a review of its import procedures and
reviewing the results with Inland Revenue, the Company concluded that there was
a liability to Inland Revenue for customs and duty. No final assessment has been
made by Inland Revenue to date; however, based on negotiations with Inland
Revenue, the Company estimates such liability to be approximately $760,000, of
which $623,000 was recorded in 1998 and the remainder in 1999. This amount has
been recorded in cost of sales in the June 30, 1998 and 1999 consolidated
statements of operations. However, the Company continues to appeal this amount.
At this time, the Company continues to negotiate with Inland Revenue
regarding the payment of VAT. As the final amount payable to Inland Revenue
would be refundable to the Company by Inland Revenue under the VAT regulations,
no amount has been accrued.
The Company is party to various claims, legal actions and complaints arising
in the ordinary course of business. In the opinion of management, all such
matters are adequately covered by insurance or, if
F-19
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(12) CONTINGENCIES (CONTINUED)
not so covered, are without merit or are of such kind, or involve such amounts,
that unfavorable disposition would not have a material effect on the
consolidated financial position of the Company.
(13) EQUITY TRANSACTIONS AND ACQUISITIONS
On July 1, 1997, the Company consummated a series of related transactions
pursuant to a Stock Purchase Agreement between the Company and Centennial dated
May 6, 1997, and as amended on June 25, 1997 (the "Stock Agreement"). Pursuant
to this agreement, the Company repurchased and retired 3,000,000 shares of
Century common stock held by Centennial in exchange for a $6 million 6%
convertible debenture due June 25, 2007 and acquired Centennial's 51% interest
in Centennial Thailand, later renamed Century Thailand for a cash payment of
$1,250,000. The Company also purchased certain assets under capital sub-leases
between the Company and Centennial with an estimated fair market value of $2.2
million. An additional 928,000 shares of the Century stock were transferred
directly from Centennial to former stockholders of TRIAX to settle potential
litigation. A charge of approximately $1.2 million is included in the statement
of operations for the year ended June 30, 1998. In addition, 75,000 shares of
Century stock were issued to a shareholder as a fee for structuring the
transaction. The value of these shares was recorded as a cost of the shares
reacquired. Century also repaid its $4.13 million note to Centennial prior to
the transaction.
The acquisition of the 51% interest in Century Thailand was recorded under
the purchase method of accounting and resulted in the consolidation of Century
Thailand from the date of acquisition.
To fund the cash requirements in the transaction, the Company entered into
the following financing activities.
- The Company issued a note payable to Centennial with a face value of $1.89
million due January 1999. The note carries interest at 9%, and has
prepayment requirements based on certain future equity financings. In
addition, the Company provided warrants to Centennial for the purchase of
250,000 Century common shares at $3 per share. The number of warrants is
reduced based on pre-payment of the related note. These warrants were
re-acquired by the Company in February 1998 as a part of the preferred
stock transaction discussed below.
F-20
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(13) EQUITY TRANSACTIONS AND ACQUISITIONS (CONTINUED)
- The Company issued $2.0 million of convertible notes to unrelated
investors with an interest rate of 7.5% due at maturity, which was June
30, 1998. The notes were convertible into Century common shares at a
conversion of $3 per share. As of June 30, 1998, the notes have been fully
converted into common shares. A total of 705,424 shares have been issued
as of June 30, 1998.
- DCI entered into the Loan Agreement discussed in Note 5.
In September 1997, the Company entered into a purchase and sales agreement
to acquire the remaining 49% interest in Century Thailand for 750,000 shares of
Century common stock and 100,000 warrants for the purchase of Century common
stock at $5 per share. This transaction was accounted for under the purchase
method of accounting.
In February 1998, a venture fund invested $10 million for 2,739,726 shares
of Series A Convertible Preferred stock ("Series A"). Series A stock has voting
rights equal to the number of shares upon which the stock may convert into, as
well as a liquidation preference of $20 million. Series A stock also has
conversion priviledges upon any public offering of common stock of the Company.
The Company utilized the proceeds of the Series A offering, as well as the
issuance of 666,667 shares of Series B Convertible Preferred stock ("Series B")
to Centennial, to repurchase and retire 3,683,635 shares of Century common stock
held by Centennial. Also pursuant to this transaction, the Company repaid the
$1.89 million note to Centennial, reacquired the related 250,000 common stock
warrants, and repaid the $6 million convertible debenture to Centennial. Of the
total 3,858,634 shares held by Centennial on the date of the transaction,
175,000 shares were distributed by Centennial to a shareholder acting as a
financial intermediary as a brokerage fee.
Subsequent to this transaction, Centennial held only Series B stock. Series
B stock is convertible into common shares of the Company. The stock has no
dividend, and is non-voting. It has liquidation preferences of $4 million senior
to the common shareholders and subordinate to the Series A holders as well as
conversion priviledges.
On April 15, 1998, the Company completed the acquisition of all of the
outstanding capital stock of Quality Manufacturing Services, Inc., a California
contract manufacturing company. The total purchase price consists of $300,000
and the issuance of 200,000 common stock options at an exercise price of $4.00
per share. This transaction was recorded under the purchase method of accounting
and the statement of operations includes the results of this entity's operations
from the date of acquisition. Goodwill of approximately $140,000 was recorded
from the transaction and will be amortized over a period of five years. The
Company is contingently obligated to make additional payments to the former
shareholders of QMS of no more than $200,000. Payment of this amount is
contingent upon the value of the Company's common stock underlying stock options
granted to the former shareholders and will only be paid if these individuals
are employees of the Company on the third anniversary of the QMS acquisition.
These payments will be accounted for as compensation expense over the three year
service period.
On August 27, 1998, the Company completed the acquisition of all of the
outstanding capital stock of YMC Manufacturing Inc., a contract manufacturing
company located in California. The purchase price consists of approximately
$250,000 cash. Goodwill of approximately $390,000 was recorded from the
transaction and will be amortized over five years.
F-21
<PAGE>
CENTURY ELECTRONICS MANUFACTURING, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(13) EQUITY TRANSACTIONS AND ACQUISITIONS (CONTINUED)
In December 1998, the venture fund noted above invested an additional $3.4
million for an additional 931,507 shares of Series A Convertible Preferred
stock. As noted above, Series A stock has voting rights equal to the number of
shares upon which the stock may convert into, as well as a liquidation
preference for these shares of $6.8 million, bringing the total liquidation
value on Series A shares to $26.8 million. Series A stock also has preference in
conversion upon any public offering of common stock of the Company. Proceeds of
this offering were used to retire $1.4 million of bridge financing, plus accrued
interest, provided by the venture fund to the Company in August and November
1998. The remaining proceeds were transferred to TRIAX as a capital contribution
to fund this subsidiary's operations.
During the year ended June 30, 1999, the Company repurchased and retired
200,000 of its common shares from employees at a total cost of $400,000.
(14) SUBSEQUENT EVENT
In July 1999, the Company acquired all of the outstanding common stock of
Amitek Corporation ("Amitek"). The acquisition will be accounted for using the
purchase method of accounting. The purchase price is $5.7 million in cash, $7.2
million in notes, $724,000 in vested options and 2.1 million shares of Century
common stock, subject to adjustment in certain circumstances. In addition, the
Company will assume approximately $15.7 million of indebtedness (based on
Amitek's June 30, 1999 balance sheet). The notes payable to former Amitek
shareholders bear interest at prime plus 1% and are payable on a quarterly basis
over a 5 year period or, if sooner, upon the completion of an initial public
offering by the Company. The indebtedness assumed is under a $14.0 million
revolving credit agreement with National Bank of Canada that the Company
anticipates will remain in place to fund the operations of Amitek. We have
agreed to guaranty all of Amitek's obligations under the revolving credit
facility. The amount of credit available under the revolving credit facility is
based upon the levels of eligible receivables and inventory. Borrowings under
the facility bear interest at prime plus 1.5% and are secured by substantially
all of the assets of Amitek. The loan agreement contains various restrictive
covenants with respect to certain financial ratios and restrict the payment of
dividends.
Also in July, 1999, in connection with the acquisition of Amitek, the
Company amended its loan facility with Fidelity Funding to increase the
revolving credit facility to $15 million. In addition, the Company entered into
a $3.5 million term loan with Suntrust Bank. The term loan bears interest at
prime plus 1% and is payable over two years and contains covenants and
restrictions substantially identical to those under the Company's revolving
credit facility. Proceeds from the term loan and additional borrowings on the
revolving credit facility were utilized to make the cash payment for the
acquisition.
F-22
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Amitek Corporation
In our opinion, the accompanying balance sheets and the related statements
of operations, of changes in stockholders' equity and of cash flows present
fairly, in all material respects, the financial position of Amitek Corporation
at December 31, 1997 and 1998, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above. The financial statements for the Company for the year ended December 31,
1996 were audited by other auditors, whose report dated March 20, 1997 expressed
an unqualified opinion.
The Company is a member of a group of affiliated entities and, as disclosed
in Notes 5 and 7 to the accompanying financial statements, has extensive
transactions and relationships with members of the group. Because of these
relationships, it is possible that the terms of these transactions are not the
same as those that would result from transactions among wholly unrelated
parties.
/s/ PRICEWATERHOUSECOOPERS LLP
- ---------------------------------------------
PricewaterhouseCoopers LLP
June 15, 1999, except as to the fifth paragraph of Note 5,
which is as of June 25, 1999
F-23
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Directors and Stockholders of
Amitek Corporation
Boca Raton, Florida
I have audited the accompanying balance sheet of Amitek Corporation (an S
Corporation) as of December 31, 1996, and the related statements of operations,
accumulated deficit, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Amitek Corporation as of
December 31, 1996, and the results of its operations and its cash flows for the
year then ended in conformity with general accepted accounting principles.
The Company is a member of a group of affiliated entities and, as disclosed
in Notes 5 and 7 to the financial statements, has extensive transactions and
relationship with members of the group. Because of these relationships, it is
possible that the terms of these relationships are not the same as those that
would result from transactions among wholly unrelated parties.
As discussed in Note 9 to the financial statements, the Company's December
31, 1996 inventory, as previously reported, was $1,080,667; however, this amount
should have been $1,272,000. Additionally, the Company's previously reported
accumulated deficit as of January 1, 1996 was $2,218,408; however, this amount
should have been $2,043,408. This discovery was made subsequent to the issuance
of the financial statements. The financial statements have been restated to
reflect this correction.
/s/ Lawrence N. Legg CPA, PA
Hollywood, Florida
March 20, 1997, except for Notes 9 and 10, as to which the date is June 30, 1999
F-24
<PAGE>
AMITEK CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30, 1999
1997 1998 (UNAUDITED)
--------- --------- --------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 277 $ -- $ 1,560
Accounts receivable, net of allowance for doubtful accounts of $64 in
1997, 1998 and June 30, 1999............................................ 3,638 6,657 10,856
Due from affiliates....................................................... 517 1,197 1,926
Inventories............................................................... 2,137 3,100 10,974
Prepaid expenses and other current assets................................. 161 71 41
--------- --------- --------------
Total current assets...................................................... 6,730 11,025 25,357
Due from affiliates......................................................... 532 -- --
Property and equipment, net................................................. 2,393 4,182 4,614
Other....................................................................... 33 117 122
--------- --------- --------------
Total assets.............................................................. $ 9,688 $ 15,324 $ 30,093
--------- --------- --------------
--------- --------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses, including bank overdraft of $16 in
1998.................................................................... $ 672 $ 702 $ 668
Due to affiliates......................................................... 2,155 4,872 10,730
Borrowings under lines of credit.......................................... 2,516 4,293 13,517
Current portion of capital lease obligations.............................. 630 709 782
Current portion of long term debt......................................... -- 96 83
--------- --------- --------------
Total current liabilities................................................. 5,973 10,672 25,780
Long term debt.............................................................. -- 267 493
Capital lease obligations................................................... 655 1,005 691
Note payable to stockholder................................................. 1,641 1,641 1,641
--------- --------- --------------
Total liabilities......................................................... 8,269 13,585 28,605
--------- --------- --------------
Commitments and contingencies (Note 6)...................................... -- -- --
--------- --------- --------------
Stockholders' equity:
Common stock $1 par, 1,000 shares authorized issued and outstanding....... 1 1 1
Additional paid in capital................................................ 3,229 2,700 2,700
Accumulated deficit....................................................... (1,811) (962) (1,213)
--------- --------- --------------
Total stockholders' equity.............................................. 1,419 1,739 1,488
--------- --------- --------------
Total liabilities and stockholders' equity.............................. $ 9,688 $ 15,324 $ 30,093
--------- --------- --------------
--------- --------- --------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE>
AMITEK CORPORATION
STATEMENTS OF OPERATIONS
FOR YEAR ENDED
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
DECEMBER 31, ENDED
------------------------------- JUNE 30, 1999
1996 1997 1998 (UNAUDITED)
--------- --------- --------- --------------
<S> <C> <C> <C> <C>
Net sales......................................................... $ 7,849 $ 23,796 $ 45,181 $ 32,624
Cost of sales..................................................... (7,577) (20,743) (42,456) (30,624)
--------- --------- --------- -------
Gross profit...................................................... 272 3,053 2,725 2,000
Selling, general and administrative expenses...................... (654) (1,848) (1,258) (1,547)
--------- --------- --------- -------
(Loss) income from operations..................................... (382) 1,205 1,467 453
Other income (expense):
Interest expense................................................ (218) (317) (621) (704)
Other income (expense).......................................... (54) -- 3 --
--------- --------- --------- -------
Net (loss) income................................................. $ (654) $ 888 $ 849 $ (251)
--------- --------- --------- -------
--------- --------- --------- -------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE>
AMITEK CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
FOR THE YEAR ENDED
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------------- PAID ACCUMULATED
SHARES AMOUNT IN CAPITAL DEFICIT TOTAL
----------- ------------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995................................. 1000 $ 1 $ 3,368 $ (2,045) $ 1,324
Net loss................................................... -- -- -- (654) (654)
Dividends and distributions................................ -- -- (1) -- (1)
--
----- ----------- ------------ ---------
Balance, December 31, 1996................................. 1,000 1 3,367 (2,699) 669
Net income................................................. -- -- -- 888 888
Dividends and distributions................................ -- -- (138) -- (138)
--
----- ----------- ------------ ---------
Balance, December 31, 1997................................. 1,000 1 3,229 (1,811) 1,419
Net income................................................. -- -- -- 849 849
Dividends and distributions................................ -- -- (529) -- (529)
--
----- ----------- ------------ ---------
Balance, December 31, 1998................................. 1,000 1 2,700 (962) 1,739
Net income (Unaudited)..................................... -- -- -- (251) (251)
--
----- ----------- ------------ ---------
Balance, June 30, 1999 (Unaudited)......................... 1,000 $ 1 $ 2,700 $ (1,213) $ 1,488
--
----- ----------- ------------ ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-27
<PAGE>
AMITEK CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
DECEMBER 31, ENDED
------------------------------- JUNE 30, 1999
1996 1997 1998 (UNAUDITED)
--------- --------- --------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income................................................ $ (654) $ 888 $ 849 $ (251)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization.................................. 207 292 532 427
Loss on disposal of fixed assets............................... 65 -- 26 --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable, net................ 40 (2,728) (3,019) (4,199)
Increase in inventory, net..................................... (181) (865) (963) (7,874)
Increase in receivables from affiliated companies.............. (61) (502) (148) (729)
Decrease (increase) in prepaid expenses and other assets....... (7) (116) 6 25
Increase in accounts payable, accrued expenses and commissions
payable...................................................... 1,250 541 30 (34)
Increase in due to affiliates.................................. 44 214 2,717 10,999
--------- --------- --------- -------------
Net cash provided by (used in) operating activities................ 703 (2,276) 30 (1,636)
--------- --------- --------- -------------
Cash flows from investing activities:
Purchases of property and equipment................................ (85) (296) (700) (646)
--------- --------- --------- -------------
Net cash used in investing activities.............................. (85) (296) (700) (646)
--------- --------- --------- -------------
Cash flows from financing activities:
Net increase (decrease) in line of credit........................ (250) 1,825 1,777 4,083
Proceeds from note payable to stockholder........................ -- 1,600 -- --
Payments on stockholder note payable............................. (39) -- -- --
Repayment of capital lease obligations........................... (395) (450) (855) (241)
Dividends and other distributions................................ (1) (138) (529) --
--------- --------- --------- -------------
Net cash (used in) provided by financing activities................ (685) 2,837 393 3,842
--------- --------- --------- -------------
Net (decrease) increase in cash and cash equivalents............... (67) 265 (277) 1,560
Cash and cash equivalents, beginning of year....................... 79 12 277 --
--------- --------- --------- -------------
Cash and cash equivalents, end of year............................. $ 12 $ 277 $ -- $ 1,560
--------- --------- --------- -------------
--------- --------- --------- -------------
Supplemental disclosure of cash flow information:
Cash paid during the year for interest........................... $ 220 $ 377 $ 792 $ 686
--------- --------- --------- -------------
--------- --------- --------- -------------
Supplemental disclosure of non cash investing and financing
activities:
Property and equipment acquired through debt financing........... $ -- $ -- $ 363 $ 142
--------- --------- --------- -------------
--------- --------- --------- -------------
Property and equipment acquired under capital leases............. $ -- $ 1,237 $ 1,284 $ --
--------- --------- --------- -------------
--------- --------- --------- -------------
Transfer of debt from affiliate.................................. -- -- -- $ 5,141
--------- --------- --------- -------------
--------- --------- --------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-28
<PAGE>
AMITEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. PRINCIPAL BUSINESS ACTIVITIES
Amitek Corporation (the "Company") was formed on June 30, 1987 as a Florida
corporation and is primarily engaged in technology manufacturing, specializing
in turnkey contract manufacturing of instrumentation, communications, computer,
industrial, government and consumer electronics. The Company conducts business
activities, mainly in the United States, with communications, computer,
industrial, government and consumer electronics customers.
The Company is a member of a group of affiliated entities under common
control and management. The Company purchases the majority of its raw materials
requirements from, and has certain borrowing relationships with, M&K
Technologies, Inc. ("M&K"), an entity owned by the Company's stockholders. See
Notes 5 and 7.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
INVENTORY
Inventory is stated at the lower of cost or market using a first-in,
first-out basis. As the Company manufactures custom products according to
customer specifications only after orders for such products have been secured,
the Company's reserves for obsolete inventory have historically been
insignificant.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation is computed using
the straight line and accelerated methods over the estimated useful lives of the
assets. When assets are sold, replaced or otherwise retired, the costs and
related accumulated depreciation are removed from the accounts and any related
gains or losses are included in operations. Leased manufacturing equipment
meeting certain criteria is capitalized and the present value of the minimum
lease payments is recorded as a liability. Amortization of capitalized leased
assets is computed using the straight line method over the shorter of the lease
term or the estimated useful lives of the assets.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company records impairment losses on long-lived assets used in
operations when events or changes in circumstances indicate that, based on
estimated future cash flows, the carrying amount of an asset may not be
recoverable. Management reviews long-lived assets for impairment whenever events
or changes in circumstances indicate the assets may be impaired.
REVENUE RECOGNITION
The Company recognizes revenue from product sales at the time of shipment in
accordance with the terms agreed upon by the parties. The Company records a
provision for estimated returns which has historically been insignificant.
F-29
<PAGE>
AMITEK CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ALLOCATION OF EXPENSES
The Company had an informal agreement with M&K to acquire management
services from month to month until current management could assume all
administrative functions on its own. During 1996, total charges for these
services totaled approximately $86. The Company assumed all administrative
functions in 1997.
The Company allocates a portion of its salaries, fringe benefits, utilities
and other expenses to certain of its affiliates based on the level of effort and
amount of resources dedicated to support the operations of these affiliates.
During 1997, the Company allocated approximately $110 of the previously
described expenses to its affiliates. During 1998, these expenses were properly
assumed and recorded by the Company's affiliates.
The Company is allocated freight and interest expenses by M&K based on
charges incurred by M&K relating to purchases of raw materials for the Company's
contract manufacturing operation. See notes 5 and 7.
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
INCOME TAXES
The Company has elected S Corporation status under the Internal Revenue
Code. As an S Corporation, the Company is generally not subject to federal
income taxes since its operating results are included in the tax returns of its
individual stockholders. The Company is directly liable for state income and
franchise taxes in certain jurisdictions.
INTERIM FINANCIAL DATA
The interim financial data of the Company is unaudited; however, in the
opinion of the Company's management, the interim financial data includes all
adjustments, consisting of only normal recurring adjustments, necessary for a
fair statement of results of the interim periods. The results of operations for
the period ended June 30, 1999 are not necessarily indicative of the results
that could be expected for the entire fiscal year ending December 31, 1999.
F-30
<PAGE>
AMITEK CORPORATION
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
3. INVENTORIES
Inventory consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------- -----------
1997 1998 1999
--------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials................................................ $ -- $ -- $ 6,043
Work in process.............................................. 2,037 2,492 3,748
Finished goods............................................... 100 608 1,183
--------- --------- -----------
Total........................................................ $ 2,137 $ 3,100 $ 10,974
--------- --------- -----------
--------- --------- -----------
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, ESTIMATED
-------------------- USEFUL
1997 1998 LIVES
--------- --------- -----------
<S> <C> <C> <C>
Manufacturing equipment.......................................................... $ 873 $ 1,602 5-10 years
Manufacturing equipment under capital lease...................................... 2,105 3,433 5-10 years
Leasehold improvements........................................................... 38 177 7 years
Furniture and fixtures........................................................... 86 93 5-7 years
Office equipment................................................................. 39 61 5-7 years
--------- --------- -----------
3,141 5,366
Less accumulated depreciation and amortization................................... (748) (1,184)
Total property and equipment, net................................................ $ 2,393 $ 4,182
</TABLE>
Depreciation expense for the years ended December 31, 1996, 1997 and 1998
totaled $223, $139 and $241, respectively. Accumulated amortization of capital
lease assets totaled $276 and $567 at December 31, 1997 and 1998, respectively,
and amortization of capitalized leases for the years ended December 31, 1997 and
1998 totaled $153 and $291, respectively.
5. DEBT
At December 31, 1997 the Company had borrowings outstanding of $2,516 under
an asset based revolving line of credit which the Company and M&K entered into
with a lender. Borrowings under this line of credit bore interest at prime plus
3.0%. At December 31, 1997, the Company and M&K were not in compliance with
certain covenants under the revolving line of credit and in May 1998 received a
waiver from the lender regarding the instances of noncompliance.
On June 4, 1998, the Company and M&K refinanced amounts outstanding under
the then existing line of credit with an $8,000 revolving credit agreement with
a bank. This agreement was amended on September 23, 1998 and February 8, 1999 to
increase the revolving credit agreement to $10,000 and $14,000, respectively.
The Company and M&K are allowed to borrow under the revolving credit agreement
based on eligible accounts receivable and inventory, subject to certain
restrictions. Borrowings under the revolving credit agreement bear interest at
prime plus 1.5% (9.25% at
F-31
<PAGE>
AMITEK CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
5. DEBT (CONTINUED)
December 31, 1998). The revolving credit agreement expires on June 24, 2001. At
December 31, 1998, the unused portion of the revolving credit agreement totaled
approximately $566.
Borrowings under the revolving credit agreement are collateralized by the
inventory, accounts receivable and substantially all other assets of the Company
and M&K and by a personal guarantee of the stockholders of the Company. The
Company and M&K have a combined borrowing base of $10,888 at December 31, 1998
of which $6,541 relates to assets recorded in the accounts of the Company and
$4,347 to those in the accounts of M&K. Borrowings by M&K totaled $5,141 at
December 31, 1998. The borrowing bases were calculated by dividing the borrowing
base between the Company and M&K based on their respective eligible inventory
and accounts receivable levels as of December 31, 1998. The revolving credit
agreement further states that if either the Company or M&K become insolvent that
the property of either may be set-off and applied towards the payment of
indebtedness.
The Company agreed to absorb $200 and $78 of interest charges for the years
ended December 31, 1998 and 1997, respectively, related to borrowings by M&K.
These interest costs are included in cost of sales as they are considered to be
related to the inventory which the Company purchases from M&K (see Note 7).
The Company's revolving credit agreement is subject to certain restrictive
financial covenants, which among others, require the Company and M&K, in the
aggregate, to maintain certain financial ratios and restrict the payment of
dividends to shareholders and loans to officers, directors and employees. At
December 31, 1998, the Company and M&K were not in compliance with certain of
the financial covenants under their revolving credit agreement. On June 25,
1999, the Company and M&K obtained a waiver from the lender stating that the
instances of noncompliance were waived through the earlier of January 1, 2000 or
such time as the lender and the Company enter into an amended and restated
revolving credit agreement.
Long-term debt consists of the following at December 31, 1998:
<TABLE>
<S> <C>
Capital expenditures line of credit, interest rate at 1.75% above
prime rate (9.5% at December 31, 1998), line converts to promissory
note on June 4, 1999 with a seven year amortization of principal
balance, collateralized by substantially all of the assets of the
Company. .......................................................... $ 363
Less current portion................................................. (96)
---------
$ 267
---------
---------
</TABLE>
F-32
<PAGE>
AMITEK CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
6. COMMITMENTS AND CONTINGENCIES
CAPITAL LEASES
The Company leases various manufacturing equipment under capital lease
agreements. Future minimum lease payments, by year, and in the aggregate, under
capital leases are as follows:
<TABLE>
<S> <C>
1999................................................................ $ 839
2000................................................................ 624
2001................................................................ 247
2002................................................................ 208
2003................................................................ 36
Total Minimum lease payments........................................ 1,954
Less amount representing interest................................... (240)
---------
Present value of future net minimum lease payments.................. 1,714
Less current portion................................................ (709)
---------
$ 1,005
---------
---------
</TABLE>
OPERATING LEASES
The Company has entered into operating leases for office space and
automobiles. Future minimum payments, by year and in the aggregate, under
noncancelable operating leases with initial or remaining terms in excess of one
year are as follows:
<TABLE>
<S> <C>
1999................................................................................ $ 310
2000................................................................................ 322
2001................................................................................ 335
2002................................................................................ 349
2003................................................................................ 362
Thereafter.......................................................................... 185
---------
$ 1,863
---------
---------
</TABLE>
Rent expense totaled approximately $264 and $422 for the years ended
December 31, 1997 and 1998, respectively. There was no rent expense for the year
ended December 31, 1996.
7. RELATED PARTY TRANSACTIONS
The Company is a member of a group of affiliated entities and, as disclosed
below and in Note 5, has extensive transactions and relationships with members
of the group. Because of these relationships, it is possible that the terms of
these transactions are not the same as those that would result from transactions
among wholly unrelated parties.
The Company's majority stockholder has loaned the Company $1,641 as of
December 31, 1997 and 1998. The loan is interest free and has no formal
repayment terms. Principal payments on the loan are not scheduled to begin prior
to January 2000.
F-33
<PAGE>
AMITEK CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
7. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company purchases the majority of its raw materials inventory from M&K,
a member of the affiliated group, at M&K's cost plus a mark-up of five percent.
These transactions are in the normal course of business and reflect payment
terms of net 30 days. Purchases from M&K totaled $5,150, $17,711 and $34,869 for
the years ended December 31, 1996, 1997 and 1998, respectively. Amounts due to
M&K at December 31, 1997 and 1998 totaled $2,155 and $4,872, respectively.
In January 1999, the Company acquired from M&K all of the raw materials
inventory, at M&K's cost plus five percent (approximately $6,700), relating to
the Company's contract manufacturing operation. In addition, the Company assumed
M&K's portion of the Company's revolving credit agreement at December 31, 1998,
totaling approximately $5,141.
During 1997 and 1998, the Company was allocated approximately $230 and $447,
respectively, of freight costs incurred by M&K relating to purchases of raw
materials for the Company's contract manufacturing operation.
Although not significant to operations, the Company sells electronic
components to and performs services for other companies owned by the Company's
stockholders or members of their families. These transactions are in the normal
course of business and the related receivables are recorded as due from
affiliates. Sales to affiliates totaled approximately $523, $664 and $896 for
the years ended December 31, 1996, 1997 and 1998, respectively.
8. SIGNIFICANT CUSTOMER
The Company has business activities with communications, computer,
industrial, government and consumer electronics customers. The Company is
subject to a significant concentration of credit risk with respect to accounts
receivable as one customer accounted for 87% and 73% of accounts receivable at
December 31, 1997 and 1998, respectively. This customer has a long term
relationship with the Company. The Company has adopted credit policies and
standards intended to accommodate industry growth and inherent risk. The Company
performs ongoing credit evaluations of its customers' financial condition and
requires collateral as deemed necessary. There can be no assurance that the
credit quality of the customers with which the Company transacts business will
be stable or that efforts to diversify receivables will prevent the Company from
incurring material losses.
During 1996, 1997 and 1998, the previously described customer individually
accounted for approximately 61%, 80% and 88%, respectively, of the Company's net
sales.
9. RESTATEMENT OF FINANCIAL STATEMENTS
The Company's December 31, 1996 inventory, as previously reported, was
$1,081; however, this
amount should have been $1,272. Additionally, the Company's previously reported
accumulated deficit as of January 1, 1996 was $2,218; however, this amount
should have been a deficit of $2,043. Both restatements resulted from
insufficient capitalization of manufacturing overhead in beginning and ending
inventories. This resulted in a reduction of net loss in the amount of $16 for
the year ended December 31, 1996, reflecting a restated net loss of $654. This
discovery was made subsequent to the issuance of the financial statements. The
financial statements have been restated to reflect this correction.
10. SUBSEQUENT EVENT (UNAUDITED)
On July 30, 1999, the Company was acquired by Century Electronics
Manufacturing, Inc.
F-34
<PAGE>
Inside back cover:
[picture of a Bizfon small business phone system]
[picture of a Nortel cable modem]
[picture of a Motorola phone]
[picture of a printed circuit board]
<PAGE>
[outside back cover]
------------------------
[Century Logo]
------------------------
Until , all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates, except
the Securities and Exchange Commission registration fee and the National
Association of Securities Dealers, Inc. filing fee.
<TABLE>
<CAPTION>
ITEM AMOUNT
- -------------------------------------------------------------------------------- ------------
<S> <C>
Securities and Exchange Commission Registration Fee............................. $ 12,788
National Association of Securities Dealers Filing Fee........................... 5,100
Nasdaq National Market Listing Fee.............................................. 95,000
Blue Sky Fees and Expenses...................................................... 20,000
Transfer Agent and Registrar Fees............................................... 5,000
Accounting Fees and Expenses.................................................... 300,000
Legal Fees and Expenses......................................................... 350,000
Printing Expenses............................................................... 150,000
Miscellaneous................................................................... 62,112
------------
Total....................................................................... $ 1,000,000
------------
------------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant's Amended and Restated Certificate of Incorporation provides
that the Registrant's Directors shall not be liable to the Registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except to the extent that the exculpation from liabilities is not permitted
under the Delaware General Corporation Law as in effect at the time such
liability is determined. The Amended and Restated By-Laws provide that the
Registrant shall indemnify its directors to the full extent permitted by the
laws of the State of Delaware.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years preceding the filing of this Registration Statement, the
Registrant has issued the following securities which were not registered under
the Securities Act of 1933, as amended (the "Securities Act"):
In October 1996 we issued 6,256,332 shares of common stock to the following
stockholders in exchange for their shares in Design Circuits, Inc. pursuant to a
Share Exchange Agreement among us and the selling stockholders listed below:
<TABLE>
<CAPTION>
SHARES OF OUR SHARES OF
STOCKHOLDER COMMON STOCK RECEIVED DCI SURRENDERED
- ----------------------------------------------------- --------------------- ---------------
<S> <C> <C>
Thomas L. DePetrillo................................. 247,000 4,940.00
S. Marcus Finkle..................................... 271,739 5,434.78
Gibraltor Management Corp............................ 271,739 5,434.78
Centennial Technologies.............................. 4,713,504 94,270.08
Robert Cohen......................................... 135,870 2,717.39
Arthur Reichstetter.................................. 135,870 2,717.39
Anasarzi Partners.................................... 108,696 2,173.91
S. Wilson............................................ 67,935 1,358.70
James Kelly.......................................... 67,935 1,358.70
Stephanie Rubin...................................... 54,348 1,086.96
Carol Keefe.......................................... 50,000 1,000.00
Leonore Katz......................................... 27,174 543.48
Jeffrey Cohen........................................ 27,174 543.48
CP Baker Venture Fund................................ 27,174 543.48
Allyson Cohen........................................ 27,174 543.48
Paul DePetrillo...................................... 5,000 100.00
Erin DePetrillo...................................... 5,000 100.00
Thomas DePetrillo, Custodian for..................... 3,000 60.00
Amber Rose
Thomas Chadronet..................................... 2,500 50.00
Kimberly Gagne....................................... 2,500 50.00
Thomas M. DePetrillo................................. 5,000 100.00
</TABLE>
These shares were issued pursuant to Section 4(2) under the Securities Act.
In November 1996 we issued an aggregate of 2,119,500 shares of our common
stock to the following individuals as part of the purchase price in connection
with the purchase of all of the outstanding stock of TRIAX Technology Group,
Ltd.:
<TABLE>
<CAPTION>
SHARES OF OUR
STOCKHOLDER COMMON STOCK RECEIVED
- ----------------------------------------------------- ---------------------
<S> <C> <C>
Raymond Stanley...................................... 605,600
Les Sainsbury........................................ 605,600
Ian McEwan........................................... 605,600
Gerald Hayburn....................................... 302,700
</TABLE>
In addition, to help finance the cash portion of the purchase price and
certain transaction costs of the TRIAX purchase, we issued 3,073,130 shares of
our common stock, valued at approximately $5.0 million, to Centennial
Technologies, Inc. In addition, as a brokers' fee for his services in connection
with the TRIAX transaction, we issued 120,000 shares of our common stock to
Thomas DePetrillo. These shares were issued pursuant to Section 4(2) under the
Securities Act.
II-2
<PAGE>
In June 1997 we issued a convertible subordinated debenture in the amount of
$6,000,000 at a rate of 6% due June 25, 2007 to Centennial Technologies, Inc. as
payment for the repurchase of 3,000,000 shares of our common stock from
Centennial. We also issued 75,000 shares of our common stock to Thomas
DePetrillo as a brokers' fee for his services in connection with the repurchase
of shares from Centennial. These shares and the debenture were issued pursuant
to Section 4(2) under the Securities Act.
In July 1997 we issued a promissory note to Centennial in the face amount of
$1,891,125 at an interest rate of 9% due January 1999 and a warrant to purchase
250,000 shares of our common stock at $3.00 per share. This note and warrant
were issued pursuant to Section 4(2) under the Securities Act.
In July 1997 we also issued 7.5% Convertible Notes due June 30, 1998 to the
following individuals in the aggregate principal amount of $2,000,000 which were
converted in June 1998 into an aggregate of 705,424 shares of common stock as
follows:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT SHARES OF COMMON STOCK
OF NOTE RECEIVED UPON CONVERSION OF
NOTEHOLDER ISSUED NOTE
- ------------------------------------------------ ------------- -----------------------------
<S> <C> <C>
Robert Cohen.................................... $ 350,000 125,417
Leonore Katz.................................... $ 100,000 35,834
Ellen Cohen..................................... $ 100,000 35,834
Meryl Cohen..................................... $ 300,000 107,500
S&R Holdings.................................... $ 100,000 35,834
Gary Kaplowitz.................................. $ 100,000 35,834
Allen Rothstein................................. $ 100,000 35,834
Louis Silverman................................. $ 100,000 35,834
Stephanie Ruben................................. $ 150,000 53,750
Allen Cohen, Robert............................. $ 100,000 35,834
Cohen, Jeffrey Rubin
Jeffrey Rubin................................... $ 50,000 17,917
Richard Feldman................................. $ 100,000 33,334
Ilana Brodt..................................... $ 150,000 50,000
Abbey Cohen May................................. $ 50,000 16,667
Jennifer Cohen.................................. $ 50,000 16,667
Richard Cohen................................... $ 50,000 16,667
Edward Cohen.................................... $ 50,000 16,667
</TABLE>
These notes and shares were issued pursuant to Section 4(2) under the
Securities Act.
In March 1997 we issued 26,125 shares of our common stock to Sheik Ahmed
pursuant to the exercise of his stock options at $1.75 per share. These shares
were issued pursuant to Section 4(2) and Rule 701 under the Securities Act.
In November 1997 we issued to CTN Thailand Holdings Limited (now Century
Electronics Holdings Limited) 750,000 shares of our common stock and a warrant
to purchase 100,000 shares of our common stock at $5.00 per share in connection
with the purchase of 49% of the stock of Centennial Technologies (Thailand)
Limited. These shares and warrant were issued pursuant to Section 4(2) under the
Securities Act.
In November 1997 we issued 80,000 shares of our common stock to DDL
Electronics, Inc. as part of a Settlement Agreement resulting from a failed
merger attempt. These shares were issued pursuant to Section 4(2) under the
Securities Act.
In February 1998 we issued 666,667 shares of our Series B Preferred Stock to
Centennial Technologies, Inc. for a purchase price of $6.00 per share (an
aggregate purchase price of $4,000,000).
II-3
<PAGE>
We also sold 2,739,726 shares of Series A Preferred Stock to HarbourVest Venture
Partners V--Direct Fund, L.P. for a purchase price of $3.65 per share (an
aggregate purchase price of $10,000,000) in February 1998 and another 931,507
shares of Series A Preferred Stock to HarbourVest Partners V-- Direct Fund, L.P.
for a purchase price of $3.65 per share (an aggregate purchase price of
$3,400,000.50) in December 1998. Every one share of series A preferred stock
will convert into one share of common stock upon consummation of this offering.
These shares were issued pursuant to Section 4(2) under the Securities Act.
In February 1998 we issued 175,000 shares of common stock to Thomas
DePetrillo as a brokers' fee for his services in connection with the repurchase
of shares of common stock from Centennial. These shares were issued pursuant to
Section 4(2) under the Securities Act.
In August 1998 we issued a promissory note in the principal amount of
$400,000 at an interest rate of 10% due September 30, 1998 to HarbourVest
Venture Partners V--Direct Fund, L.P. In November, 1998, we issued to
HarbourVest Venture Partners V--Direct Fund, L.P. a promissory note in the
principal amount of $1,000,000 at an interest rate of 10% due November 1, 1999
or earlier and a warrant to purchase 27,397 shares of Series A Convertible
Preferred Stock at an exercise price of $3.65 per share. These notes and this
warrant were issued pursuant to Section 4(2) under the Securities Act.
In July 1999 we issued an aggregate of 2,127,548 shares of our common stock
and notes in the aggregate principal amount of $7,219,000 to the following
individuals as part of the purchase price in connection with the purchase of all
of the outstanding stock of Amitek Corporation:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AMOUNT OF
OUR NOTES
STOCKHOLDER COMMON STOCK RECEIVED RECEIVED
- ------------------------------------------------------ ---------------------- -------------
<S> <C> <C>
Myung Ho Park......................................... 624,119 $ 2,117,701
Yoon Jung Park........................................ 1,085,049 $ 3,681,690
Sung Woo Kwon......................................... 418,380 $ 1,419,609
</TABLE>
These notes and shares were issued pursuant to Section 4(2) under the
Securities Act.
No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof relative to sales by an
issuer not involving any public offering or the rules and regulations
thereunder, or, in the case of options to purchase common stock, Rule 701 under
the Securities Act. All of the foregoing securities are deemed restricted
securities for purposes of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following is a list of exhibits filed as a part of this registration
statement.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
**1.1 Proposed Form of Underwriting Agreement
*2.1 Agreement and Plan of Merger, dated July 30, 1999 by and among the Registrant and the other parties
thereto
*3.1 Form of Amended and Restated Certificate of Incorporation of Registrant
*3.2 Form of Amended and Restated By-Laws of the Registrant
**4.1 Specimen Certificate for shares of the Registrant's Common Stock.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
**5.1 Opinion of Ropes and Gray, counsel to the Registrant, regarding the legality of the shares of common
stock
*10.1 1996 Stock Option Plan
*10.2 Preferred Stock Purchase Agreement dated February 4, 1998 by and between Registrant and Centennial
Technologies, Inc.
*10.3 Preferred Stock Purchase Agreement dated February 4, 1998 by and between Registrant and HarbourVest
Partners V--Direct Fund L.P.
*10.4 Preferred Stock Purchase Agreement dated December 1, 1998 by and between Registrant and HarbourVest
Partners V--Direct Fund L.P.
*10.5 Waiver of Rights and Amendment under Purchase Agreements dated July 30, 1999 by and between Registrant
and HarbourVest Partners V--Direct Fund L.P.
*10.6 Waiver of Rights and Amendment under Purchase Agreement dated July 30, 1999 by and between Registrant
and Centennial Technologies, Inc.
*10.7 Registration Rights Agreement dated June 30, 1997 by and among the Registrant and the parties listed on
the signature page thereto.
*10.8 Registration Rights Agreement dated July 30, 1999 by and among the Registrant, and Myung Ho Park, Yoon
Jung Park and Sung Woo Kwon.
*10.9 Employment Agreement, dated November 5, 1997, by and between the Registrant and Les Sainsbury
*10.10 Employment Agreement, dated July 1999, by and between the Registrant and Mark Lombardo
*10.11 Warrant to purchase shares of Registrant's Common Stock issued to CTN Thailand Holdings Ltd dated
November, 1997.
*10.12 Warrant to purchase shares of the Registrant's Series A Preferred Stock, issued to HarbourVest
PartnersV--Direct Fund L.P. dated November 1998
*10.13 Warrant to purchase shares of the Registrant's Common Stock, issued to Guaranty Business Credit
Corporation dated July 30, 1999.
*10.14 Amended and Restated Loan Agreement dated July 30, 1999 by and between Amitek Corporation and National
Bank of Canada
*10.15 Absolute Unconditional and Continuing Guaranty dated as of July 30, 1999 executed by Registrant in
favor of National Bank of Canada
*10.16 Loan and Security Agreement dated December 22, 1998 by and among Century Electronics Manufacturing
(NE), Inc., YMC Manufacturing Company, Quality Manufacturing Services, Inc. and Fidelity Funding,
Inc.
*10.17 First Amendment to Loan and Security Agreement entered into effective July 30, 1999 by and among
Century Electronics Manufacturing (NE), Inc., YMC Manufacturing Company, Quality Manufacturing
Services, Inc. and Guaranty Business Credit Corporation
*10.18 General Continuing Guaranty dated December 22, 1998 executed by Registrant
*10.19 Term Note in amount of $3,500,000 dated July 16, 1999 issued by Suntrust Bank, Atlanta.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------------------
<C> <S>
*10.20 Amended and Restated Security Agreement dated July 30, 1999 between Amitek Corporation and National
Bank of Canada.
*10.21 Assumption and Modification Master Revolving Promissory Note in the Amount of $14,000,000 dated July
30, 1999 issued by Amitek Corporation.
*10.22 Assumption Capex Line/Term Promissory Note in the amount of $576,306.54 dated July 30, 1999 issued by
Amitek Corporation.
*10.23 Secured Promissory Note dated July 30, 1999 in the amount of $1,419,609 issued by Registrant.
*10.24 Secured Promissory Note dated July 30, 1999 in the amount of $2,117,701 issued by Registrant.
*10.25 Secured Promissory Note dated July 30, 1999 in the amount of $3,681,690 issued by Registrant.
**10.26 1999 Employee Stock Purchase Plan
+21.1 Subsidiaries of the Registrant
*23.1 Consent of KPMG LLP
*23.2 Consent of Lawrence N. Legg
*23.3 Consent of PricewaterhouseCoopers, LLP
**23.4 Consent of Ropes & Gray, counsel to the Registrant (included in Exhibit 5.1)
+24.1 Power of Attorney
*27.1 Financial Data Schedule (6/30/98) and (6/30/99)
</TABLE>
- ------------------------
* Filed herewith
** To be filed by amendment
+ Previously Filed
(b) Financial Statement Schedules
All schedules are omitted because they are not applicable or the required
information is shown in the consolidated financial statements or notes to those
statements.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under "Item 14--Indemnification
of Directors and Officers" above, or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the
II-6
<PAGE>
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(b) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Boston,
Massachusetts on this 31st day of August, 1999.
<TABLE>
<CAPTION>
CENTURY ELECTRONICS MANUFACTURING, INC.
<S> <C> <C>
By: /s/ JAMES M. ROLLER
----------------------------------------
James M. Roller
Vice President of Finance (Principal
Financial Officer and Principal
Accounting Officer)
</TABLE>
Pursuant to the requirements of the Securities Act of 1993, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ---------------------------------------------- ----------------------------------------------
<C> <S> <C>
* Chairman of the Board, Chief Executive Officer
------------------------------------ and President (Principal Executive Officer);
Leslie J. Sainsbury Director
* Vice President of Finance (Principal Financial
------------------------------------ Officer and Principal Accounting Officer)
James M. Roller
* Director
------------------------------------
Walter J. Conroy
* Director
------------------------------------
Ian McEwan
* Director
------------------------------------
Ofer Nemirovsky
</TABLE>
<TABLE>
<S> <C> <C>
By: /s/ James M. Roller
-------------------------------
James M. Roller
Attorney-in-fact
Dated: August 31, 1999
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
**1.1 Proposed Form of Underwriting Agreement
*2.1 Agreement and Plan of Merger, dated July 30, 1999 by and among the Registrant and
the other parties thereto
*3.1 Form of Amended and Restated Certificate of Incorporation of Registrant
*3.2 Form of Amended and Restated By-Laws of the Registrant
**4.1 Specimen Certificate for shares of the Registrant's Common Stock.
**5.1 Opinion of Ropes and Gray, counsel to the Registrant, regarding the legality of the
shares of common stock
*10.1 1996 Stock Option Plan
*10.2 Preferred Stock Purchase Agreement dated February 4, 1998 by and between Registrant
and Centennial Technologies, Inc.
*10.3 Preferred Stock Purchase Agreement dated February 4, 1998 by and between Registrant
and HarbourVest Partners V--Direct Fund L.P.
*10.4 Preferred Stock Purchase Agreement dated December 1, 1998 by and between Registrant
and HarbourVest Partners V--Direct Fund L.P.
*10.5 Waiver of Rights and Amendment under Purchase Agreements dated July 30, 1999 by and
between Registrant and HarbourVest Partners V--Direct Fund L.P.
*10.6 Waiver of Rights and Amendment under Purchase Agreement dated July 30, 1999 by and
between Registrant and Centennial Technologies, Inc.
*10.7 Registration Rights Agreement dated June 30, 1997 by and among the Registrant and
the parties listed on the signature page thereto.
*10.8 Registration Rights Agreement dated July 30, 1999 by and among the Registrant, and
Myung Ho Park, Yoon Jung Park and Sung Woo Kwon.
*10.9 Employment Agreement, dated November 5, 1997, by and between the Registrant and Les
Sainsbury
*10.10 Employment Agreement, dated July 1999, by and between the Registrant and Mark
Lombardo
*10.11 Warrant to purchase shares of Registrant's Common Stock issued to CTN Thailand
Holdings Ltd dated November, 1997.
*10.12 Warrant to purchase shares of the Registrant's Series A Preferred Stock, issued to
HarbourVest PartnersV--Direct Fund L.P. dated November 1998
*10.13 Warrant to purchase shares of the Registrant's Common Stock, issued to Guaranty
Business Credit Corporation dated July 30, 1999.
*10.14 Amended and Restated Loan Agreement dated July 30, 1999 by and between Amitek
Corporation and National Bank of Canada
*10.15 Absolute Unconditional and Continuing Guaranty dated as of July 30, 1999 executed
by Registrant in favor of National Bank of Canada
*10.16 Loan and Security Agreement dated December 22, 1998 by and among Century
Electronics Manufacturing (NE), Inc., YMC Manufacturing Company, Quality
Manufacturing Services, Inc. and Fidelity Funding, Inc.
</TABLE>
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<TABLE>
<C> <S>
*10.17 First Amendment to Loan and Security Agreement entered into effective July 30, 1999
by and among Century Electronics Manufacturing (NE), Inc., YMC Manufacturing
Company, Quality Manufacturing Services, Inc. and Guaranty Business Credit
Corporation
*10.18 General Continuing Guaranty dated December 22, 1998 executed by Registrant
*10.19 Term Note in amount of $3,500,000 dated July 16, 1999 issued by Suntrust Bank,
Atlanta.
*10.20 Amended and Restated Security Agreement dated July 30, 1999 between Amitek
Corporation and National Bank of Canada.
*10.21 Assumption and Modification Master Revolving Promissory Note in the Amount of
$14,000,000 dated July 30, 1999 issued by Amitek Corporation.
*10.22 Assumption Capex Line/Term Promissory Note in the amount of $576,306.54 dated July
30, 1999 issued by Amitek Corporation.
*10.23 Secured Promissory Note dated July 30, 1999 in the amount of $1,419,609 issued by
Registrant.
*10.24 Secured Promissory Note dated July 30, 1999 in the amount of $2,117,701 issued by
Registrant.
*10.25 Secured Promissory Note dated July 30, 1999 in the amount of $3,681,690 issued by
Registrant.
**10.26 1999 Employee Stock Purchase Plan
+21.1 Subsidiaries of the Registrant
*23.1 Consent of KPMG LLP
*23.2 Consent of Lawrence N. Legg
*23.3 Consent of PriceWaterhouse Coopers, LLP
**23.4 Consent of Ropes & Gray, counsel to the Registrant (included in Exhibit 5.1)
+24.1 Power of Attorney
*27.1 Financial Data Schedule (6/30/98) and (6/30/99)
</TABLE>
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* Filed herewith
** To be filed by amendment
+ Previously filed
<PAGE>
Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
AMONG
CENTURY ELECTRONICS MANUFACTURING, INC.
AND
AMITEK CORPORATION
MYUNG HO PARK
YOON JUNG PARK
July 30, 1999
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<PAGE>
TABLE OF CONTENTS
1. Definitions............................................................1
2. The Merger............................................................11
2.1. Constituent Corporations; Surviving Corporation...........12
2.2. Certificate of Incorporation, By-Laws and Name of the
Surviving Corporation.....................................12
2.3. Directors and Officers of the Surviving Corporation.......12
2.4. Conversion of the Amitek Shares...........................12
2.5. Merger Consideration......................................13
2.6. The Closing...............................................13
2.7. Deliveries at the Closing.................................13
2.8. Surrender of Amitek Shares; Stock Transfer Books..........13
2.9. Amitek Stock Options......................................14
2.10. Closing Date Purchase Price Adjustment....................15
2.11. Post-Closing Purchase Price Adjustment....................15
2.12. Further Assurances........................................18
3. Representations and Warranties of the Principal Sellers...............18
3.1. Organization of Amitek....................................18
3.2. Capitalization and Ownership of Amitek....................19
3.3. Authorization of Transaction..............................19
3.4. Noncontravention..........................................19
3.5. Brokers' Fees.............................................20
3.6. Title to Assets...........................................20
3.7. Assets....................................................20
3.8. No Subsidiaries...........................................20
3.9. Amitek Financial Statements...............................20
3.10. Indebtedness and Guarantees...............................21
3.11. Absence of Certain Changes and Events....................21
3.12. [Reserved]................................................23
3.13. Legal and Other Compliance................................23
3.14. No Material Adverse Change................................23
3.15. Taxes.....................................................23
3.16. Property, Plant and Equipment.............................24
3.17. Intellectual Property.....................................26
3.18. Inventories...............................................26
3.19. Contracts.................................................26
3.20. Notes and Accounts Receivable.............................28
3.21. Powers of Attorney........................................28
3.22. Insurance and Risk Management.............................28
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3.23. Litigation................................................29
3.24. Product Warranties Defects Liability......................29
3.25. Employees.................................................29
3.26. Employee Benefits.........................................29
3.27. Environment, Health, and Safety...........................31
3.28. Affiliated Transactions...................................33
3.29. Government Contracts......................................33
3.30. Distributors, Customers, Suppliers........................33
3.31. No Illegal Payments, Etc..................................33
3.32. Consents..................................................34
3.33. Disclosure................................................34
3.34. Qualification of Principal Sellers........................34
3.35. Disclaimer of Other Representations and Warranties........34
4. Representations and Warranties of the Buyer...........................34
4.1. Organization of the Buyer and NewSub......................35
4.2. Capitalization and Ownership of the Buyer and NewSub......35
4.3. Authorization of Transaction..............................36
4.4. Noncontravention..........................................36
4.5. Brokers' Fees.............................................36
4.6. Title to Assets...........................................36
4.7. Assets....................................................37
4.8. No Subsidiaries...........................................37
4.9. Financial Statements of the Buyer.........................37
4.10. Indebtedness and Guarantees...............................37
4.11. Absence of Certain Changes and Events....................37
4.12. [Reserved]................................................39
4.13. Legal and Other Compliance................................39
4.14. No Material Adverse Change................................40
4.15. Taxes.....................................................40
4.16. Property, Plant and Equipment.............................41
4.17. Intellectual Property.....................................43
4.18. Inventories...............................................43
4.19. Contracts.................................................43
4.20. Notes and Accounts Receivable.............................45
4.21. Powers of Attorney........................................45
4.22. Insurance and Risk Management.............................45
4.23. Litigation................................................46
4.24. Product Warranties Defects Liability......................46
4.25. Employees.................................................46
4.26. Employee Benefits.........................................46
4.27. Environment, Health, and Safety...........................48
4.28. Affiliated Transactions...................................50
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4.29. Government Contracts......................................50
4.30. Distributors, Customers, Suppliers........................50
4.31. No Illegal Payments, Etc..................................50
4.32. Consents..................................................50
4.33. Disclosure................................................51
4.34. Disclaimer of Other Representations and Warranties..............51
4.35. Interim Operations of NewSub..............................51
5. Covenants.............................................................51
5.1. General...................................................51
5.2. Notices and Consents......................................51
5.3. Operation of Business.....................................52
5.4. Preservation of Business..................................52
5.5. Full Access...............................................52
5.6. Notice of Developments....................................53
5.7. Exclusivity...............................................53
5.8. Access to Records after Closing...........................53
5.9. Future Assurances.........................................53
5.10. Certain Tax Matters.......................................54
5.11. National Bank of Canada Loan Obligations..................55
5.13. Certain Amitek Trade Payables.............................56
5.14. Removal of Non-Amitek Assets and Personnel. .............56
5.15. "Drop Down" of Amitek Assets and Liabilities to NewSub. ..56
6. Conditions to Obligation to Close.....................................57
6.1. Conditions to Obligation of the Buyer.....................57
6.2. Conditions to Obligations of the Principal Sellers........58
7. Noncompetition........................................................61
8. Confidentiality.......................................................61
9. Indemnification.......................................................62
9.1. Exclusive Remedy. .......................................62
9.2. Survival of Representations and Warranties................62
9.3. Indemnity by Principal Sellers. .........................62
9.4. Indemnity by Buyer........................................64
9.5. Matters Involving Third Parties...........................64
9.6. Matters Not Involving Third Party Claims..................66
9.7. Set-Off for Final Judgment of Fraud Only..................66
10. Termination...........................................................66
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10.1. Termination of Agreement.................................67
10.2. Effect of Termination....................................67
11. Miscellaneous.........................................................67
11.1. Press Releases and Public Announcements..................67
11.2. No Third Party Beneficiaries.............................67
11.3. Entire Agreement.........................................68
11.4. Succession and Assignment................................68
11.5. Counterparts.............................................68
11.6. Headings.................................................68
11.7. Notices..................................................68
11.8. Governing Law............................................69
11.9. Consent to Jurisdiction..................................69
11.10. Waiver of Jury Trial.....................................70
11.11. Reliance.................................................70
11.12. Amendments and Waivers...................................70
11.13. Severability.............................................71
11.14. Expenses.................................................71
11.15. Construction.............................................71
11.16. Incorporation of Exhibits and Schedules..................71
11.17. Specific Performance.....................................71
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Exhibits
A-1 - Sellers
A-2 - Restated Certificate of Incorporation of Buyer
A-3 - Amended and Restated By-laws of Buyer
A-4 - Directors and Officers of Buyer
B - Form of Buyer's Note
C-1 - Certificate of Merger
C-2 - Articles of Merger
D-1 - Amitek Financial Statements
D-2 - Buyer Financial Statements
E - Capital Leases
F - Description of Assumed Payables
G - Form of Lombardo Employment, Consulting and Noncompetition Agreement
H - Instrument of Joinder to Buyer's Stockholders Agreement
I - Form of Opinion of Ropes & Gray
J - Waiver of Rights and Amendment under Stockholders Agreement
K - Form of Park Employment Agreement
L - Form of Stock Pledge Agreement
M - Form of Registration Rights Agreement
N - Form of Opinion of Hemenway & Barnes
O - Form of Waiver of Rights and Amendment under Purchase Agreements
P - Purchase Price Adjustment Methodology
Q - Non-Amitek Assets and Personnel
R - Assignment and Assumption Agreement
S - Adjusted Year End Balance Sheet
Schedules
Disclosure Schedule -- Exceptions to Representations and Warranties
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<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into on
July 30, 1999, by and among Century Electronics Manufacturing, Inc., a Delaware
corporation (the "Buyer"), Amitek Corporation, a Florida corporation ("Amitek"),
and Myung Ho Park and Yoon Jung Park (the "Principal Sellers"). The Buyer,
Amitek and the Principal Sellers collectively are referred to herein as the
"Parties."
This Agreement contemplates a transaction in which Amitek will be merged
with and into Buyer as a result of which Buyer will be the surviving corporation
(the "Merger"), upon the terms and subject to the conditions set forth herein
and pursuant to the General Corporation Law of the State of Delaware (the "DE
Corporation Law") and the Business Corporation Act of the State of Florida (the
"FL Corporation Law"). The Parties intend that the Merger be treated as a
"tax-free" reorganization under section 368(a)(1)(A) of the Code (as hereafter
defined).
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
1. Definitions.
"AA Account" has the meaning set forth in Section 5.3.
"AA Distribution" has the meaning set forth in Section 5.3.
"Action" shall mean any claim, action, cause of action or suit (in
contract or tort or otherwise), arbitration, inquiry, investigation or
proceeding by or before any governmental authority.
"Additional Amount" has the meaning set forth in Section 2.11(d).
"Adjusted Year End Balance Sheet" shall mean the balance sheet attached
hereto as Exhibit S, consisting of the audited balance sheet of Amitek as of the
year ended December 31, 1998.
"Advest" shall mean Advest, Inc., a Delaware corporation, and its
Affiliates.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
Section 1504(a) or any similar group defined under a similar provision of state,
local, or foreign law.
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"Agreement" has the meaning set forth in the preamble above.
"Amitek" has the meaning set forth in the preamble above.
"Amitek Common Stock" has the meaning set forth in Section 3.2.
"Amitek Financial Statements" shall have the meaning set forth in Section
3.9.
"Amitek Shares" has the meaning set forth in Section 2.4(a).
"Amitek Stock Options" has the meaning set forth in Section 2.9(a).
"Appeal" shall mean any pleading seeking review or modification of a
Judgment of Fraud by means of any right of appeal as may be established by law
or any application addressed to the discretion of a court (for example, a
petition for a writ of certiorari to the United States Supreme Court or an
application for rehearing or reargument).
"Articles of Merger" means the articles of merger attached as Exhibit C-2
hereto.
"Assignment and Assumption Agreement" has the meaning set forth in Section
5.15.
"Assumed Payables" has the meaning set forth in Section 5.13.
"Award Amount" shall have the meaning given to such term in the definition
of "Judgment of Fraud."
"Bonus and Settlement for Past Services Agreements" shall mean the Bonus
and Settlement for Past Services Agreements by and between Amitek and each of
Donald A. Winans, Milton Dropkin, Lawrence J. Simmons and Mark A. Lombardo dated
as of July 29, 1999.
"Bonus Plan" shall mean the 1999 Amitek Bonus Plan, dated as of July 29,
1999.
"Buyer" has the meaning set forth in the preamble above.
"Buyer Financial Statements" shall have the meaning set forth in Section
4.9.
"Buyer's Notes" has the meaning set forth in Section 2.5(b).
"Buyer Shares" has the meaning set forth in Section 2.5(c).
"Century Common Stock" has the meaning set forth in Section 4.2.
"Certificate of Merger" means the certificate of merger attached as
Exhibit C-1 hereto.
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"Certificates" has the meaning set forth in Section 2.8(a).
"Chemical Substance" means any chemical substance, including but not
limited to any: (i) pollutant, contaminant, irritant, chemical, raw material,
intermediate, product, by-product, slag, construction debris; (ii) industrial,
solid, liquid or gaseous toxic or hazardous substance, material or waste; (iii)
petroleum or any fraction thereof; (iv) asbestos or asbestos-containing
material; (v) polychlorinated biphenyl; (vi) chlorofluorocarbons; and, (vii) any
other substance, material or waste, which is identified or regulated under any
Environmental Law or Safety Law, as now and hereinafter in effect, or other
comparable laws.
"Claim Notice" has the meaning set forth in Section 9.6(a).
"Closing" has the meaning set forth in Section 2.6.
"Closing Date" has the meaning set forth in Section 2.6.
"Closing Date Balance Sheet" has the meaning set forth in Section 2.11(a).
"Closing Date Downward Adjustment" has the meaning set forth in Section
2.10(b).
"Closing Date Net Book Value" shall mean the Net Book Value set forth in
the Closing Date Balance Sheet, plus an amount equal to the sum of the
Transaction and Compensation Expenses.
"Closing Date Upward Adjustment" has the meaning set forth in Section
2.10(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" means, with respect to any Party, any and all
information concerning the businesses and affairs of such Party other than that
information which is already generally or readily obtainable by the public or is
publicly known or becomes publicly known through no fault of any other Party.
"DE Corporation Law" has the meaning set forth in the preamble above.
"Disclosure Schedule" has the meaning set forth in Section 3.
"Draft Closing Date Balance Sheet" has the meaning set forth in Section
2.11(a).
"EBIT" shall mean consolidated Net Income (i) before (a) interest expense,
whether cash or noncash of the Buyer and its Subsidiaries determined on a
consolidated basis and, (b) provisions for taxes based upon income and (ii)
determined without giving effect to
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extraordinary gains or losses, nonrecurring or unusual gains or losses, or gains
or losses from sales of assets other than from inventory sold in the Ordinary
Course of Business.
"EBITDA" shall mean, for any period, EBIT, adjusted by adding thereto the
amount of all depreciation expense and amortization expense that were deducted
in determining EBIT for such period as determined in accordance with GAAP.
"Effective Date" means the date on which the Effective Time occurs.
"Effective Time" means the time at which the Certificate of Merger shall
be duly filed in the office of the Secretary of State of the State of Delaware
in accordance with Section 251 of the DE Corporation Law (or such later time as
is specified in the Certificate of Merger) and the Articles of Merger shall be
duly filed in the office of the Secretary of State of the State of Florida in
accordance with Section 607.1105 of the FL Corporation Law, which in any event
shall be as soon as practicable immediately following the Closing.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program or (e) profit sharing, stock option, stock purchase,
equity, stock appreciation, bonus, incentive deferred compensation, severance
plan or other benefit plan.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA Section
3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA Section
3(l).
"Environment" means soil, land surface or subsurface strata, real
property, surface waters (including navigable waters, ocean waters, streams,
ponds, drainage basins and wetlands), groundwater, water body sediments,
drinking water supply, stream sediments, ambient air (including indoor air),
plant and animal life and any other environmental medium or natural resource.
"Environmental Laws" mean the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, and
the Clean "Air Act, the Clean Water Act, each, as amended or hereinafter in
effect, and any other law or legal requirement, as now or hereinafter in effect,
relating to: (a) the Release, containment, removal, remediation, response,
cleanup or abatement of any sort of any Chemical Substance; (b) the manufacture,
generation, formulation, processing, labeling, distribution, introduction into
commerce, use, treatment, handling, storage, recycling, disposal or
transportation of any Chemical Substance; (c) exposure of persons, including
employees, to any Chemical Substance; (d) the physical structure, use or
condition of a building, facility, fixture or other structure,
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including, without limitation, those relating to the management, use, storage,
disposal, cleanup or removal of asbestos, asbestos-containing materials,
polychlorinated biphenyls or any other Chemical Substance; (e) the pollution,
protection or clean up of the Environment; or (f) noise.
"Environmental Liabilities and Costs" means all Losses incurred: (i) to
comply with any Environmental Law; (ii) as a result of a Release of any Chemical
Substance; or (iii) as a result of any environmental conditions present at,
created by or arising out of the past or present operations of Amitek through
the Closing Date or of any prior owner or operator of a facility or site at
which Amitek now operates or has previously operated.
"Environmental Permit" means any Permit or authorization from any
governmental authority required under, issued pursuant to, or authorized by any
Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Estimated Closing Date Balance Sheet" has the meaning set forth in
Section 2.10(a).
"Estimated Closing Date Net Book Value" shall mean the Net Book Value set
forth in the Estimated Closing Date Balance Sheet, plus an amount equal to the
sum of the Transaction and Compensation Expenses.
"Extremely Hazardous Substance" has the meaning set forth in Section 302
of the Emergency Planning and Community Right-to-Know Act of 1986, as amended.
"Fair Value" shall mean, with respect to each share of the Century Common
Stock (i) as of any date after an Initial Public Offering, the average of the
last per share sale prices of the Century Common Stock on Nasdaq for the 30
trading days immediately prior to such date, as reported by the Wall Street
Journal (Eastern Edition), or (ii) as of any date prior to an Initial Public
Offering, (A) the product of eight multiplied by Buyer's EBITDA for the twelve
full months immediately preceding the Time of Measurement (B) divided by the
number of outstanding shares of Century Common Stock on a fully-diluted basis
(without regard to the exercise price or other consideration due to the Company
upon conversion or exercise of any option, warrant, or convertible security).
"Fiduciary" has the meaning set forth in ERISA Section 3(21).
"Final Judgment of Fraud" shall mean a Judgment of Fraud as to which (i)
no Appeal is pending, (ii) neither the Judgment of Fraud, nor the operation or
effect thereof, has been stayed, reversed, modified, satisfied, vacated or
amended and (iii) the time to file an Appeal has expired, no application for an
extension of the time to file an Appeal is pending, and the time to file an
application or motion for an extension of time to file an Appeal has expired.
"FL Corporation Law" has the meaning set forth in the preamble above.
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"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
"Indebtedness" has the meaning set forth in Section 3.10.
"Indemnified Party" has the meaning set forth in Section 9.6(a).
"Indemnifying Party" has the meaning set forth in Section 9.6(a).
"Independent Firm" has the meaning set forth in Section 2.11(a).
"Initial Public Offering" shall mean the initial public offering and sale
of Century Common Stock for cash pursuant to an effective registration statement
on Form S-1 (or any successor form) under the Securities Act.
"Intellectual Property" means, with respect to the Buyer or Amitek, as the
case may be, the entire right, title and interest in and to all proprietary
rights of every kind and nature, including Patents, copyrights, Trademarks, mask
works, trade secrets and proprietary information, all applications for any of
the foregoing, and any license or agreements granting rights related to the
foregoing (i) subsisting in, covering, reading on, directly applicable to or
existing in the Products or the Technology, including, without limitation, all
Intellectual Property of such Party identified in the Disclosure Schedule; (ii)
that are owned, licensed or controlled in whole or in part by such Party and
relate to the business of such Party; or (iii) that are used in or necessary to
the development, manufacture, sales, marketing or testing of the Products.
"Interim Amitek Financials" has the meaning set forth in Section 3.9.
"Interim Buyer Financials" has the meaning set forth in Section 4.9.
"Judgment of Fraud" shall mean a judgment rendered by a court of competent
jurisdiction in favor of the Buyer and against the Principal Sellers (i)
adjudicating that one or more of the Principal Sellers breached a representation
or warranty in Section 3 hereof and such breach constitutes the commission of
common-law fraud by such Principal Sellers in connection with the Merger, (ii)
adjudicating that the Buyer is entitled to indemnification under Section 9.3 for
Losses arising therefrom and (iii) awarding a specific amount of damages in
respect of the Losses based upon or arising out of such commission of common-law
fraud, which amount the Principal Sellers shall not have paid to the Buyer on or
prior to the date of the entry of such judgment (the "Award Amount").
"Knowledge" of an individual means the actual knowledge of such
individual, and knowledge of any other party means the actual knowledge of any
executive officer of such party or knowledge that such executive officer should
have known after reasonable investigation in the normal course of performance of
his or her duties.
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<PAGE>
"Laws" means all laws, rules, regulations, codes, injunctions, judgments,
decrees, rulings, interpretations, constitution, ordinance, common law, treaty,
regulations, or orders, of any federal, state, local, municipal and foreign,
international, or multinational governments or administration and all related
agencies.
"Lien" means any mortgage, pledge, lien, security interest, charge, claim,
equitable interest, encumbrance, restriction on transfer, conditional sale or
other title retention device or arrangement (including, without limitation, a
capital lease), transfer for the purpose of subjection to the payment of any
Indebtedness, or restriction on the creation of any of the foregoing, whether
relating to any property or right or the income or profits therefrom; provided,
however, that the term "Lien" shall not include (i) statutory liens for Taxes to
the extent that the payment thereof is not in arrears or otherwise due, (ii)
encumbrances in the nature of zoning restrictions, easements, rights or
restrictions of record on the uses of real property if the same do not detract
from the value of the property encumbered thereby or impair the use of such
property in the business of the company as currently conducted, (iii) statutory
or common law liens to secure landlords, lessors or renters under leases or
rental agreements confined to the premises rented to the extent that no payment
or performance under any such lease or rental agreement is in arrears or is
otherwise due, (iv) deposits or pledges made in connection with, or to secure
payment of, worker's compensation, unemployment insurance, old age pension
programs mandated under applicable laws or other social security regulations and
(v) statutory or common law liens in favor of carriers, warehousemen, mechanics
and materialmen, statutory or common law liens to secure claims for labor,
materials or supplies and other like liens, which secure obligations to the
extent that payment thereof is not in arrears or otherwise due in the case of
(i)-(v), which have been incurred in the Ordinary Course of Business.
"Losses" has the meaning set forth in Section 9.3.
"M&K" means M&K Technology Inc., a Florida corporation.
"Material Adverse Effect" means (a) with respect to Amitek, a material
adverse effect on the business, financial condition, operations, results of
operations or prospects of Amitek, and (b) with respect to the Buyer, a material
adverse effect on the business, financial condition, operations, results of
operations or prospects of the Buyer and its Subsidiaries, taken as a whole.
"Merger" has the meaning set forth in the preamble.
"Merger Consideration" has the meaning set forth in Section 2.5.
"Most Recent Balance Sheet" means, with respect to the Buyer or Amitek, as
the case may be, the balance sheet contained within the Most Recent Financial
Statements of such Party.
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"Most Recent Financial Statements" means, with respect to the Buyer or
Amitek, as the case may be, the audited Financial Statements for the Most Recent
Fiscal Year End of such Party.
"Most Recent Fiscal Year End" has the meaning set forth in Section 3.9 and
Section 4.9, depending upon the Party referenced thereby.
"Multiemployer Plan" has the meaning set forth in ERISA Section 3(37).
"NBC" has the meaning set forth in Section 5.11.
"NBC Loan Documents" has the meaning set forth in Section 5.11.
"Net Book Value" shall mean the excess of total assets over total
liabilities of Amitek, determined on a basis consistent with the Purchase Price
Adjustment Methodology and otherwise in accordance with GAAP applied in a manner
consistent with the preparation of Amitek's Most Recent Financial Statements.
"Net Income" shall mean the consolidated net income (or loss) after
provision for taxes of the Buyer and its Subsidiaries on a consolidated basis.
"NewSub" shall mean Amitek Corporation, a newly-formed Delaware
corporation wholly-owned by the Buyer.
"Notice Period" has the meaning set forth in Section 9.6(b).
"Objections" has the meaning set forth in Section 2.11(a).
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" and "Parties" have the meanings set forth in the preamble above.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"Pre-Closing Tax Returns" has the meaning set forth in Section 5.10(b)
hereof.
"Principal Sellers" has the meaning set forth in the preamble above.
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"Products" means, with respect to each of the Buyer or Amitek, as the case
may be, all current products and services of such Party, any subsequent versions
of such products currently being developed, any products currently being
developed by such Party which are designed to supersede, replace or function as
a component of such products, and any upgrades, enhancements, improvements and
modifications to the foregoing.
"Prohibited Transaction" has the meaning set forth in ERISA Section 406
and Code Section 4975.
"Purchase Price Adjustment Methodology" shall mean the statement of the
methodology on which the Parties have agreed that the Estimated Closing Date
Balance Sheet and the Closing Date Balance Sheet shall be prepared, which is
attached hereto as Exhibit P.
"Refund Amount" has the meaning set forth in Section 2.11(d).
"Related Agreements" means the Buyer's Notes, the Lombardo Employment,
Consulting and Noncompetition Agreement, the Buyer's Stockholders Agreement, the
Park Employment Agreement, the Stock Pledge Agreement, the Registration Rights
Agreement, the Stock Option Agreements, the Bonus Plan, the Bonus and Settlement
for Past Services Agreements and the Assignment and Assumption Agreement.
"Release" means any actual, threatened or alleged spilling, leaking,
pumping, pouring, emitting, dispersing, emptying, discharging, injecting,
escaping, leaching, dumping, or disposing of any Chemical Substance into the
Environment that may cause an Environmental Liability and Cost (including the
disposal or abandonment of barrels, containers, tanks or other receptacles
containing or previously containing any Chemical Substance).
"Reportable Event" has the meaning set forth in ERISA Section 4043.
"Safety Laws" means the Occupational Safety and Health Act and any other
federal, state, local and foreign law, regulation or legal requirement relating
to health or safety, each as now or hereinafter in effect, including any such
law, regulation or legal requirement relating to the (a) exposure of employees
to any Chemical Substance, air quality or working conditions or noise or (b) the
physical structure, use or condition of a building, facility, fixture or other
structure, including, without limitation, those relating to equipment or
manufacturing processes, or the management, use, storage, disposal, cleanup or
removal of any Chemical Substances, air quality or working conditions.
"Safety Liabilities and Costs" means, with respect to each of the Parties,
all Losses incurred to comply with any Safety Law or as a result of any health
or safety conditions present at, created by or arising out of the past or
present operations of such Party through the Closing Date.
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"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Sellers" shall mean the holders of all of the outstanding shares of
capital stock of Amitek, as listed on Exhibit A-1 hereto.
"Set-Off Date" shall mean the tenth business day after the date on which
the Buyer gives the Principal Seller notice certifying, accompanied by an
unqualified opinion of Debevoise & Plimpton, Hemenway & Barnes or other counsel
reasonably satisfactory to the Principal Sellers opining, that each of the
criteria for a Final Judgment of Fraud has been satisfied.
"Stock Option Agreements" shall mean the Non-Statutory Stock Option Award
for Mark A. Lombardo and the Non-Statutory Stock Option Award for Lawrence J.
Simmons, each of which was executed by Amitek on July 29, 1999.
"Subsidiary" means with respect to any Person, (i) any corporation at
least a majority of whose outstanding voting stock is owned, directly or
indirectly, by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries, (ii) any general partnership, joint
venture or similar entity, at least a majority of whose outstanding partnership
or similar interests shall at the time be owned by such Person, or by one or
more of its Subsidiaries, or by such Person and one or more of its Subsidiaries
and (iii) any limited partnership of which such Person or any of its
Subsidiaries is a general partner. For the purposes of this definition, "voting
stock" means shares, interests, participations or other equivalents in the
equity interest (however designated) in such Person having ordinary voting power
for the election of a majority of the directors (or the equivalent) of such
Person, other than shares, interests, participations or other equivalents having
such power only by reason of contingency.
"Surviving Corporation" has the meaning set forth in Section 2.1.
"Tax" or "Taxes" means (i) any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar, including
FICA), unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not, and (ii) any liability for the
payment of any amount of the type described in the immediately preceding clause
(i) as a result of (A) membership in an affiliated, consolidated or combined
group at any time on or prior to the Closing Date or (B) liability as a
transferee or successor, by contract or otherwise.
"Tax Distributions" shall have the meaning set forth in Section 5.3.
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"Tax Return" shall have the meaning set forth in Section 3.15(a) and
Section 4.15(a), depending upon the Party referenced thereby.
"Technology" means all inventions, copyrightable works, discoveries,
innovations, know-how, information (including ideas, research and development,
know-how, formulas, compositions, processes and techniques, technical data,
designs, drawings, specifications, customer and supplier lists, pricing and cost
information, business and marketing plans and proposals, documentation, and
manuals), computer software, computer hardware, integrated circuits and
integrated circuit masks, electronic, electrical and mechanical equipment and
all other forms of technology, including improvements, modifications,
derivatives or changes, whether tangible or intangible, embodied in any form,
whether or not protectible or protected by patent, copyright, mask work right,
trade secret law or otherwise.
"Third Party Claim" has the meaning set forth in Section 9.5(a).
"Time of Measurement" shall mean the first day of the month immediately
preceding the month in which Fair Value is being measured.
"Trademarks" means any trademarks, service marks, trade dress, and logos,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith.
"Transaction and Compensation Expenses" means the sum of (i) the fees and
expenses of PricewaterhouseCoopers LLP, Lawrence N. Legg, CPA, Advest and Ropes
& Gray incurred by Amitek, whether or not then paid, in connection with the
Merger and the proposed Initial Public Offering, to the extent expensed by
Amitek in periods prior to and including the Closing Date and so reflected in
the Estimated Closing Date Balance Sheet or the Closing Date Balance Sheet, as
the case may be, (ii) any amounts relating to the Bonus and Settlement for Past
Services Agreements and the Bonus Plan expensed by Amitek in periods prior to
and including the Closing Date and so reflected in the Estimated Closing Date
Balance Sheet or the Closing Date Balance Sheet, as the case may be, (iii) any
AA Distribution to the Sellers pursuant to Section 5.3 that has been reflected
in the Estimated Closing Date Balance Sheet or the Closing Date Balance Sheet,
as the case may be, as a reduction to the Net Book Value, and (iv) the amount of
any fees, expenses or other costs relating to obtaining the consent or other
approval of any third parties (including without limitation, Amitek's landlord,
lenders, capital lessors and insurers) in connection with the Merger, to the
extent expensed by Amitek in periods prior to and including the Closing Date and
so reflected in the Estimated Closing Date Balance Sheet or the Closing Date
Balance Sheet, as the case may be.
"Year End Net Book Value" shall mean $1,739,000.
2. The Merger.
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2.1. Constituent Corporations; Surviving Corporation. Buyer and Amitek
shall be the constituent corporations to the Merger. Subject to the terms and
conditions of this Agreement, at the Effective Time, Amitek shall be merged with
and into Buyer in accordance with the DE Corporation Law and the FL Corporation
Law, and Buyer shall be the surviving corporation of the Merger (the "Surviving
Corporation"). At the Effective Time, the identity and separate existence of
Amitek shall cease, and the Surviving Corporation shall continue its corporate
existence under the laws of the State of Delaware. Without limiting the
generality of the foregoing, from and after the Effective Time, the Surviving
Corporation shall possess all of the rights, privileges, powers, franchises,
properties and other interests of Buyer and Amitek.
2.2. Certificate of Incorporation, By-Laws and Name of the Surviving
Corporation. From and after the Effective Time and thereafter until amended as
provided by law, (i) the Certificate of Incorporation of the Surviving
Corporation shall be the Restated Certificate of Incorporation of Buyer
immediately prior to the Merger in the form annexed hereto as Exhibit A- 2, (ii)
the Bylaws of the Surviving Corporation shall be the Amended and Restated
By-laws of Buyer in the form annexed hereto as Exhibit A-3, and (iii) the name
of the Surviving Corporation shall be "Century Electronics Manufacturing, Inc."
2.3. Directors and Officers of the Surviving Corporation. The directors
and officers of the Surviving Corporation immediately following the Merger shall
be as set forth in Exhibit A-4, and all such directors and officers shall hold
office until their respective successors are duly elected and qualified, or
until their earlier death, resignation or removal.
2.4. Conversion of the Amitek Shares. At the Effective Time by virtue of
the Merger and without any action on the part of the holders thereof:
(a) Each share of Amitek capital stock (each, an "Amitek Share" and
collectively, the "Amitek Shares") issued and outstanding immediately
prior to the Effective Time (other than any Amitek Shares to be canceled
pursuant to Section 2.4(b)) shall be canceled and shall be converted
automatically into the right to receive the Merger Consideration (as
defined in Section 2.5 below).
(b) Each Amitek Share held in the treasury of Amitek immediately
prior to the Effective Time shall be canceled without any conversion
thereof and no payment or distribution shall be made with respect thereto.
(c) Each share of Buyer's common stock, par value $.01 per share,
issued and outstanding immediately prior to the Effective Time shall
remain issued and outstanding and shall constitute one validly issued,
fully paid and nonassessable share of common stock, par value $.01 per
share, of the Surviving Corporation.
(d) Each share of Buyer's preferred stock, par value $.01 per share,
issued and outstanding immediately prior to the Effective Time shall
remain issued and outstanding
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and shall constitute one validly issued, fully paid and nonassessable
share of preferred stock, par value $.01 per share, of the Surviving
Corporation.
2.5. Merger Consideration. The Buyer agrees to pay to the Sellers at the
Closing, subject to adjustment pursuant to Sections 2.10 and 2.11, the aggregate
amount of merger consideration (the "Merger Consideration") consisting of:
(a) $5,654,000 in cash payable by wire transfer to the Sellers in
the amounts set forth opposite each Seller's name on Exhibit A-1 and in
accordance with written instructions of such Seller given to the Buyer at
least two business days prior to the Closing Date;
(b) the execution and delivery to the Sellers of Buyer's Secured
Promissory Notes ("Buyer's Notes") in the aggregate principal amount of
$7,219,000 (each individual note to be in the amount set forth opposite
each Seller's name on Exhibit A-1 and to be in the form of Exhibit B
hereto); and
(c) 2,127,548 shares of common stock (the "Buyer Shares"), $.01 par
value per share, of the Buyer, computed as set forth on the 7/30/99
spreadsheet agreed to by the Parties (each Seller to receive the number of
shares set forth opposite such Seller's name on Exhibit A-1).
2.6. The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Ropes & Gray in
Boston, Massachusetts, commencing at 10:00 a.m. eastern time on July 30, 1999 or
such other date as the Parties may mutually determine (the "Closing Date").
2.7. Deliveries at the Closing. At the Closing, (a) the Principal Sellers
will deliver to the Buyer the various certificates, instruments and documents
referred to in Section 2.8 and Section 6.1 below, and (b) the Buyer will deliver
to the Sellers the various certificates, instruments and documents referred to
in Section 6.2 below and the Merger Consideration as set forth in Section 2.5
above.
2.8. Surrender of Amitek Shares; Stock Transfer Books.
(a) At the Closing, each Seller shall surrender the certificates
evidencing ownership of the Amitek Shares (the "Certificates") to the
Surviving Corporation and shall be entitled to receive in exchange
therefor the Merger Consideration for each Amitek Share formerly evidenced
by each such Certificate, payable to such holder in accordance with the
provisions of Sections 2.4 and 2.5 hereof, and such Certificate shall then
be canceled. If payment of the Merger Consideration is to be made to a
Person other than the Person in whose name the surrendered Certificate is
registered on the stock transfer books of Amitek, it shall be a condition
of payment that the Certificate so
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surrendered shall be endorsed properly or otherwise be in proper form for
transfer and that the Person requesting such payment shall have paid all
transfer and other taxes required by reason of the payment of the Merger
Consideration to a Person other than the registered holder of the
Certificate surrendered or shall have established to the satisfaction of
the Surviving Corporation that such taxes either have been paid or are not
applicable.
(b) If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and subject to such other
conditions as the Board of Directors of the Surviving Corporation may
impose, the Surviving Corporation shall issue in exchange for such lost,
stolen or destroyed Certificate the Merger Consideration deliverable in
respect thereof as determined in accordance herewith. When authorizing
such issue of the Merger Consideration in exchange therefor, the Board of
Directors of the Surviving Corporation (or any authorized officer thereof)
may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed Certificate
to give the Surviving Corporation a bond in such sum as the Board of
Directors may direct as indemnity against any claim that may be made
against the Surviving Corporation with respect to the Certificate alleged
to have been lost, stolen or destroyed.
(c) At the close of business on the Effective Date, the stock
transfer books of Amitek shall be closed, and no transfer of Amitek Shares
shall thereafter be made on such books. From and after the Effective Time
the holders of Amitek Shares outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to such shares
except as otherwise provided herein or by applicable law.
2.9. Amitek Stock Options.
(a) At the Effective Time, the outstanding options to purchase duly
authorized Amitek Common Stock granted to Mark A. Lombardo and Lawrence J.
Simmons under the Stock Option Agreements (the "Amitek Stock Options"),
shall be assumed by Buyer and shall constitute options to acquire (i) in
the case of Mark A. Lombardo, 113,773 shares of Century Common Stock at an
exercise price of $1.31 per share, and (ii) in the case of Lawrence J.
Simmons, 34,132 shares of Century Common Stock at an exercise price of
$1.31 per share, in each case on the same terms and conditions set forth
in their respective Stock Option Agreement.
(b) At or before the Effective Time, Buyer shall take all corporate
action necessary to authorize and reserve for issuance a sufficient number
of shares of Century Common Stock for delivery pursuant to the terms set
forth in this Section 2.9 and Sections 5.10.5 and Section 9.
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(c) As soon as practicable following the closing of an Initial
Public Offering, subject to any applicable limitations under the
Securities Act, Buyer shall file a Registration Statement on Form S-8 (or
any successor form), with respect to the shares of Century Common Stock
issuable upon exercise of the Amitek Stock Options, and the Buyer shall
use all reasonable efforts to maintain the effectiveness of such
registration statement (and maintain the current status of the prospectus
or prospectuses relating thereto) for so long as such options shall remain
outstanding.
2.10. Closing Date Purchase Price Adjustment.
(a) Three business days prior to the Closing Date, the Principal
Sellers will deliver to the Buyer a draft balance sheet (the "Estimated Closing
Date Balance Sheet") for Amitek as of the close of business on the Closing Date,
prepared (to the extent practicable given its estimated nature) in accordance
with the Purchase Price Adjustment Methodology.
(b) In the event that the Estimated Closing Date Net Book Value
exceeds 110% of the Year End Net Book Value, the Purchase Price shall be
increased in an amount equal to the amount by which such Estimated Closing Date
Net Book Value exceeds 110% of the Year End Net Book Value (the "Closing Date
Upward Adjustment"). In the event that the Estimated Closing Date Net Book Value
is less than 90% of the Year End Net Book Value, the Purchase Price shall be
reduced by an amount equal to the amount by which such Estimated Closing Date
Net Book Value is less than 90% of the Year End Net Book Value (the "Closing
Date Downward Adjustment"). Any increase or reduction to the Purchase Price
pursuant to this Section 2.10 shall be implemented by proportionately adjusting
each of the three elements of Merger Consideration provided for in Sections
2.5(a)-(c), such that the value of each of the three elements constitutes the
same percentage of the value of the aggregate Merger Consideration as was the
case prior to such adjustment, with the Century Common Stock being valued as set
forth in the valuation opinion contemplated by Section 6.2(m) hereof.
Notwithstanding anything to the contrary in this Agreement, in no event shall
any adjustment to the Merger Consideration under this Section 2.10 exceed
$1,000,000 in the aggregate.
2.11. Post-Closing Purchase Price Adjustment.
(a) Whether or not any adjustment to the Merger Consideration has
been made pursuant to Section 2.10 hereof, within 60 days after the Closing
Date, the Buyer may prepare and deliver to the Principal Sellers a balance sheet
(the "Draft Closing Date Balance Sheet") for Amitek as of the close of business
on the Closing Date, prepared in accordance with the Purchase Price Adjustment
Methodology and specifically identifying line item by line item any differences
from the Estimated Closing Date Balance Sheet. If the Buyer fails to deliver the
Draft Closing Date Balance Sheet within such 60-day period, this Section 2.11
shall have no further force and effect. If the Principal Sellers have any
objections to the Draft Closing Date Balance Sheet, they will deliver a detailed
statement describing their objections (the "Objections") to the Buyer within 20
days after receiving the Draft Closing Date Balance
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Sheet. The Buyer and the Principal Sellers will use reasonable efforts to
resolve any Objections themselves. If the Buyer and the Principal Sellers do not
obtain a final resolution within 20 days after the Buyer has received the
statement of Objections, however, the Buyer and the Principal Sellers will
select an accounting firm mutually acceptable to them to resolve any unresolved
Objections. If the Buyer and the Principal Sellers are unable to agree on the
choice of an accounting firm, they will select a nationally-recognized
accounting firm by lot (after excluding any accounting firm that has performed
services for the Buyer or any of the Principal Sellers within the last three
years). The review of any accounting firm selected pursuant to the prior two
sentences (the "Independent Firm") shall be made in accordance with the
standards set forth in this Section 2.11 and the Purchase Price Adjustment
Methodology, and shall be limited to the Objections not previously resolved by
the Principal Sellers and the Buyer. The determination of the Independent Firm
(i) shall be made in accordance with the standards set forth in this Section
2.11 and the Purchase Price Adjustment Methodology, (ii) shall be set forth in
writing and (iii) shall be conclusive and binding upon the Principal Sellers and
the Buyer, shall have the legal effect of an arbitral award and shall be subject
only to the judicial review permitted by the Federal Arbitration Act. Judgment
on the ruling of the Independent Firm may be entered and enforced in any court
having jurisdiction over the Parties and their assets. The Buyer shall revise
the Draft Closing Date Balance Sheet as appropriate to reflect the resolution of
any Objections pursuant to this Section 2.11. The "Closing Date Balance Sheet"
shall mean the Draft Closing Date Balance Sheet together with any revisions
thereto made pursuant to this Section 2.11.
(b) In the event that the Principal Sellers and the Buyer submit any
unresolved Objections to the Independent Firm for resolution as provided in
Section 2.11(a) above, the Buyer and the Principal Sellers will share
responsibility for the fees and expenses of the Independent Firm as follows:
(i) if the Independent Firm resolves all of the remaining
Objections in favor of the Buyer, the Principal Sellers will be
responsible for all of the fees and expenses of the Independent Firm;
(ii) if the Independent Firm resolves all of the remaining
Objections in favor of the Principal Sellers, the Buyer will be
responsible for all of the fees and expenses of the Independent Firm; and
(iii) if the Independent Firm resolves some of the remaining
Objections in favor of the Buyer and some in favor of the Principal
Sellers, the Principal Sellers and the Buyer will share responsibility for
the fees and expenses of the Independent Firm pro rata, based on the
relative economic value of the Objections resolved in favor of the
Principal Sellers and the Buyer, respectively.
(c) The Buyer will make the work papers and back-up materials used
in preparing the Draft Closing Date Balance Sheet, and the books, records, and
financial staff of
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Amitek, available to the Principal Sellers and their accountants and other
representatives at reasonable times and upon reasonable notice at any time
during (A) the preparation by the Buyer of the Draft Closing Date Balance Sheet,
(B) the review by the Principal Sellers of the Draft Closing Date Balance Sheet,
and (C) the resolution by the Principal Sellers and the Buyer of any Objections.
(d) After completion of the procedures set forth above:
(i) In the event that the Closing Date Net Book Value exceeds
110% of the Year End Net Book Value, the Buyer will pay to the Sellers, as
additional Merger Consideration, an amount (the "Additional Amount") equal
to the positive difference between (X) the amount by which such Closing
Date Net Book Value exceeds 110% of the Year End Net Book Value, plus the
amount of any Closing Date Downward Adjustment erroneously made minus (Y)
the amount of any Closing Date Upward Adjustment, within three business
days after the date on which the Closing Date Net Book Value finally is
determined pursuant to Section 2.11(a) above; provided, that in the event
that the above calculation of the Additional Amount results in a negative
number (the "Excessive Upward Adjustment Amount"), the Sellers shall pay
to the Buyer the Excessive Upward Adjustment Amount pursuant to clause
(ii) of this subsection (d). The Additional Amount shall be allocated
among the Sellers in proportion to their respective shares of the Merger
Consideration on the Closing Date and shall be paid 50% in cash or
immediately available funds and 50% by the Buyer issuing or transferring
to the Sellers validly issued, fully paid and nonassessable shares of
Century Common Stock, such stock to be valued at its Fair Value as of the
time of payment. In no event shall the Additional Amount plus any Closing
Date Upward Adjustment pursuant to Section 2.10 above exceed $1,000,000 in
the aggregate.
(ii) In the event that the Closing Date Net Book Value is less
than 90% of the Year End Net Book Value, the Sellers shall pay to the
Buyer, as a reduction in the Merger Consideration, an amount (the "Refund
Amount") equal to the positive difference between (X) the amount by which
such Closing Date Net Book Value is less than 90% of the Year End Net Book
Value, plus the amount of any Closing Date Upward Adjustment erroneously
made minus (Y) the amount of any Closing Date Downward Adjustment, within
three business days after the date on which the Closing Date Net Book
Value finally is determined pursuant to Section 2.11(a) above; provided,
that in the event the above calculation of the Refund Amount results in a
negative number (the "Excessive Downward Adjustment Amount"), the Buyer
shall pay to the Sellers the Excessive Downward Adjustment Amount pursuant
to clause (i) of this subsection (d). The Refund Amount shall be paid (A)
if prior to the closing of an Initial Public Offering, at the option of
the Sellers, by either: (i) payment of the full Refund Amount in cash or
immediately available funds, or (ii) permitting the Buyer to offset the
Refund Amount against the outstanding principal balance of, and any
accrued and unpaid interest on, the Buyer's Notes held by the Sellers (in
inverse order of
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maturity) and, to the extent the outstanding principal balance of, and any
accrued and unpaid interest on, such Buyer's Notes is less than the Refund
Amount, then such deficit shall be paid by the Sellers in cash or
immediately available funds; or (B) if following the closing of an Initial
Public Offering, (i) in the manner set forth in clause (A) (ii) above, if
any principal of or interest on the Buyer's Notes remain unpaid at that
time, or (ii) at the option of the Buyer, by either: (X) payment of the
Refund Amount in cash or immediately available funds, or (Y) payment of
the Refund Amount in a combination of the payments described in clause
(B)(ii)(X) above and the transfer and assignment by the Sellers to the
Buyer of shares of Century Common Stock, such stock to be valued at its
Fair Value as of the time of such payment and the value of such stock in
no event to exceed 50% of the aggregate payment being made.
Notwithstanding anything to the contrary in this Agreement, in no event
shall the Refund Amount plus any Closing Date Downward Adjustment pursuant
to Section 2.10 above exceed $1,000,000 in the aggregate.
2.12. Further Assurances. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other acts or things are necessary or
desirable to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, its right, title or interest in or to any of the rights, properties
or assets of Amitek or Buyer or otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its officers and directors shall be
authorized to execute and deliver, in the name and on behalf of the Amitek or
Buyer, all such deeds, bills of sale, assignments and assurances and to do, in
the name and on behalf of the Amitek or Buyer, all such other acts and things
necessary or desirable to vest, perfect or confirm any and all right, title or
interest in, to or under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out the purposes of this Agreement.
3. Representations and Warranties of the Principal Sellers. The Principal
Sellers jointly and severally represent and warrant to the Buyer that the
statements contained in this Section 3, in so far as they relate to Amitek, the
Principal Sellers or the Amitek Shares, are correct and complete as of the date
of this Agreement and, unless a date is specified in such representation and
warranty, will be correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 3), except as set forth in the disclosure
schedule accompanying this Agreement (the "Disclosure Schedule"). The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 3 and in Section 4 below.
3.1. Organization of Amitek. Amitek is a Florida corporation, duly
organized, validly existing, and in good standing under the laws of the State of
Florida. Copies of the articles of incorporation and bylaws of Amitek as amended
to date have been heretofore delivered to Buyer and are accurate and complete.
Amitek is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction listed in Section 3.1 of the Disclosure
Schedule, which such jurisdictions are the only jurisdictions where the nature
of the activities conducted by it or
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the character of the property owned, leased or operated by it make such
qualification necessary or appropriate except for those jurisdictions where the
failure to be so qualified will not have a Material Adverse Effect on Amitek.
3.2. Capitalization and Ownership of Amitek. The authorized capital stock
of Amitek consists of 1,000 shares of common stock, $1.00 par value per share
(the "Amitek Common Stock"). As of the date hereof, there are issued and
outstanding 1,000 shares of Amitek Common Stock, of which no shares are held as
treasury stock, and, except as set forth in Section 3.2 of the Disclosure
Schedule, all of such shares are held of record and beneficially by the persons
and in the respective amounts set forth on Section 3.2 of the Disclosure
Schedule, free and clear of any Liens. All of the outstanding shares of capital
stock of Amitek have been validly issued, are fully paid and nonassessable.
Except as set forth in Section 3.2 to the Disclosure Schedule, there are no
agreements restricting the transfer of, or affecting the rights of any holder
of, the Amitek Shares, there are no preemptive rights on the part of any holder
of any class of securities of Amitek and no outstanding options, warrants,
rights, or other agreements or commitments of any kind obligating Amitek,
contingently or otherwise, to issue or sell any shares of its capital stock or
any securities or obligations convertible into, or exchangeable for, any shares
of its capital stock, and no authorization therefor has been given. Section 3.2
of the Disclosure Schedule sets forth the names of the record holders of all
outstanding options, warrants or other rights to purchase, sell or otherwise
dispose of, or rights to exchange or convert into, any shares of Amitek's
capital stock and the number of shares, exercise prices and expiration dates of
such options, warrants or other rights. Except as set forth in Section 3.2 of
the Disclosure Schedule, the Sellers own beneficially and of record all of the
Amitek Shares, free and clear of all Liens and each Seller has full right, power
and authority to transfer the Amitek Shares in the respective amounts as set
forth on Exhibit A-1 to Buyer, free and clear of any Liens.
3.3. Authorization of Transaction. Each of the Sellers and Amitek has the
legal capacity, power and authority (including full corporate power and
authority) to execute and deliver this Agreement and the Related Agreements
being executed by each of them and to perform their respective obligations
hereunder and thereunder. The board of directors of Amitek has duly authorized
the execution, delivery and performance of this Agreement and the Related
Agreements being executed by Amitek. All corporate and other actions or
proceedings to be taken by or on the part of each of the Sellers and Amitek to
authorize and permit the execution and delivery by them of this Agreement and
the Related Agreements and the instruments required to be executed and delivered
by them pursuant hereto and thereto, the performance by them of their respective
obligations hereunder and thereunder, and the consummation by them of the
transactions contemplated herein and therein, have been duly and properly taken.
This Agreement and each of the Related Agreements being executed by the Sellers
and Amitek has been duly executed and delivered by them and constitutes the
legal, valid and binding obligation of them, enforceable in accordance with its
terms and conditions.
3.4. Noncontravention. Except as set forth in Section 3.4 of the
Disclosure Schedule, neither the execution and the delivery of this Agreement
and the Related Agreements being
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executed by the Sellers and Amitek, nor the consummation of the transactions
contemplated hereby or thereby (including any of the agreements and instruments
required to be delivered pursuant to Section 2 above), will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Sellers or Amitek or any of their property is subject or any
provision of the charter or by-laws of Amitek or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Amitek or any of the Sellers is a party or by which any of
them is bound or to which any of their assets is subject (or result in the
imposition of any Lien upon any of their assets), which in any case could have a
Material Adverse Effect on Amitek. Except as set forth in Section 3.4 of the
Disclosure Schedule, none of Amitek or the Sellers needs to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement except for the filing of the
Certificate of Merger with the Secretary of State of Delaware and the filing of
the Articles of Merger with the State of Florida.
3.5. Brokers' Fees. Except as set forth in Section 3.5 of the Disclosure
Schedule, none of Amitek or the Sellers has any liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which the Buyer or Amitek could
become liable or obligated.
3.6. Title to Assets. Except as set forth in Section 3.6 of the Disclosure
Schedule, Amitek has good title to, or a valid and binding leasehold interest
in, the properties and assets used by it, located on its premises, or reflected
on the Most Recent Balance Sheet or acquired after the date thereof, free and
clear of all Liens, except for properties and assets disposed of in the Ordinary
Course of Business since the date of the Most Recent Balance Sheet.
3.7. Assets. Except as set forth in Section 3.7 of the Disclosure
Schedule, the assets, properties and rights of Amitek reflected in the Most
Recent Financial Statements comprise all of the assets, properties and rights of
every type and description, real, personal, tangible and intangible used by
Amitek in the conduct of its business as currently conducted.
3.8. No Subsidiaries. Amitek has no Subsidiaries, and does not own,
directly or indirectly, any capital stock of, any partnership or other ownership
interest in, or any other security issued by, any other corporation,
organization, association or entity.
3.9. Amitek Financial Statements. Attached hereto as Exhibit D-1 are the
following financial statements (collectively the "Amitek Financial Statements"):
(i) The Amitek Group audited Combined Balance Sheet as of December 31, 1997,
(ii) The Amitek Group audited Combined Balance Sheet as of December 31, 1998,
Combined Statement of Operations and Retained Earnings for the year ended
December 31, 1998 and Combined Statement of Cash
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Flows for the year ended December 31, 1998 (the "Most Recent Fiscal Year End"),
and (iii) the unaudited Amitek Corporation Balance Sheet as of March 31, 1999
and the unaudited Amitek Corporation Statement of Operations for the three
months ended March 31, 1999 (the "Interim Amitek Financials"). The Amitek
Financial Statements (including, with respect to the audited financial
statements only, the notes thereto) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby and present
fairly the financial condition of Amitek (or the Amitek Group (as defined
therein) as the case may be) in all material respects as of such dates and the
results of operations of Amitek (or the Amitek Group, as the case may be) for
such periods and are consistent with the books and records of Amitek (or the
Amitek Group, as the case may be), subject to normal and recurring year end
adjustments and in the case of the unaudited financial statements, the absence
of notes.
3.10. Indebtedness and Guarantees. Except as set forth in the Most Recent
Financial Statements and in Section 3.10 of the Disclosure Schedule, Amitek has
no indebtedness for borrowed money or for the deferred purchase price of
property or services (other than trade payables and other accrued current
liabilities incurred in the Ordinary Course of Business), or capital lease
obligations, conditional sale or other title retention agreements
("Indebtedness"). Amitek is not a guarantor or otherwise liable for any
liability or obligation of any other Person.
3.11. Absence of Certain Changes and Events. Since the Most Recent Fiscal
Year End, and except as disclosed in Section 3.11 of the Disclosure Schedule or
set forth in the Interim Amitek Financials, Amitek has conducted its business
only in the Ordinary Course of Business and there has not been:
(a) any sale, lease, transfer, or assignment of any of Amitek's
assets, tangible or intangible, other than sales of inventory for a fair
consideration in the Ordinary Course of Business;
(b) any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) entered into other than in
the Ordinary Court of Business and in an amount not in excess of $25,000;
(c) acceleration, termination, modification, or cancellation of any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) to which Amitek is a party or by which
Amitek is bound;
(d) creation or imposition of any Lien upon Amitek's assets,
tangible or intangible;
(e) made any capital expenditure (or series of related capital
expenditures) involving more than $25,000 singly or $75,000 in the
aggregate;
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(f) made any capital investment in, any loan to, or any acquisition
of the securities or assets of, any other Person (or series of related
capital investments, loans, and acquisitions);
(g) any issuance of any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or capitalized lease obligation;
(h) any delay or postponement of the payment of accounts payable and
other liabilities outside the Ordinary Course of Business;
(i) any cancellation, compromise, waiver, or release any right or
claim or Indebtedness (or series of related rights and claims);
(j) any grant of any license or sublicense of any rights or modified
any rights under or with respect to, or entered into any settlement
regarding any infringement of its rights to, any Intellectual Property;
(k) any issuance, sale, or other disposition of any of its capital
stock, or grant of any options, warrants, or other rights to purchase or
obtain (including upon conversion, exchange, or exercise) any capital
stock;
(l) any dividend or distribution (whether in cash or in kind) or
repurchase, redemption or retirement of any of its capital stock, except
to the extent provided in Section 5.3;
(m) any damage, destruction, or loss (whether or not covered by
insurance) to its property;
(n) any loan to, or enter into any other transaction with its
directors, officers, and employees outside the Ordinary Course of
Business;
(o) any employment contract or collective bargaining agreement,
written or oral, or modification or change of the terms of any existing
such contract or agreement;
(p) any increase, modification or change in the compensation of any
of the officers or employees of Amitek outside the Ordinary Course of
Business;
(q) any adoption, amendment modification or termination of any
Employee Benefit Plan of any of director, officer, or employee of Amitek
(or taken any such action with respect to any other Employee Benefit
Plan);
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(r) any payment pursuant to any Employee Benefit Plan or other plan,
contract or commitment for the benefit of any of the directors, officers
and employees of Amitek;
(s) any pledge to make or make any charitable or other capital
contribution outside the Ordinary Course of Business;
(t) any amount paid to any third party with respect to any liability
(excluding any costs and expenses incurred or which may be incurred in
connection with this Agreement and the transactions contemplated hereby)
other than in the Ordinary Course of Business;
(u) any modification or change of the application of GAAP from the
manner in which it was applied in the Most Recent Financial Statements;
(v) any other material adverse occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business
involving Amitek; and
(w) any commitment by Amitek or the Sellers to any of the foregoing.
3.12. [Reserved]
3.13. Legal and Other Compliance. Except as set forth in Section 3.13 of
the Disclosure Schedule, Amitek is in compliance in all material respects with
all applicable Laws the violation of which, either singularly or in the
aggregate, could have a Material Adverse Effect on Amitek and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against Amitek alleging any failure so to comply.
Neither the transfer of the Amitek Shares to the Buyer or consummation of the
transactions contemplated hereby conflicts with the rights of any other Person
or violates, or with the giving of notice or the passage of time or both will
violate, conflict with or result in a default, right to accelerate or loss of
rights under, any terms or provisions of Amitek's charter or by-laws or any
Lien, lease, license, agreement, understanding, law, ordinance, rule or
regulation, or any order, judgment or decree to which Amitek is a party or by
which it may be bound, in each case, which violation, conflict, default, right
to accelerate or loss of rights, either singularly or in the aggregate, could
have a Material Adverse Effect on Amitek.
3.14. No Material Adverse Change. Since the date of the Most Recent
Financial Statements, Amitek has not experienced any change which has resulted
in a Material Adverse Effect on Amitek and, to the Principal Sellers' and
Amitek's Knowledge, no event has occurred that may result in such a Material
Adverse Effect on Amitek.
3.15. Taxes. Except as set forth in Section 3.15 of the Disclosure
Schedule:
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(a) Amitek has filed all material returns, declarations of estimated
tax, tax reports, information returns and statements required to be filed
by it prior to the Closing Date relating to any material Taxes with
respect to any income, assets or operations of Amitek, other than those
for which extensions shall have been granted prior to the Closing Date
(collectively, the "Tax Returns");
(b) Amitek has made available to the Buyer correct and complete
copies of all state and federal income Tax Returns, examination reports
and statements of deficiencies assessed against or agreed to by Amitek for
the last three taxable years;
(c) Amitek has paid, or made adequate provision in accordance with
GAAP, for the payment of all Taxes for the periods ending on or before the
Closing Date;
(d) Amitek has not waived any statute of limitations affecting any
Tax liability or agreed to any extension of time during which a Tax
assessment or deficiency assessment may be made;
(e) there are no pending examinations by any taxing authority of any
Tax Returns of Amitek and Amitek has not received written notice of any
unresolved questions or claims concerning its Tax liability;
(f) Amitek is not and has not been a party to any Tax allocation or
sharing agreement or a member of an Affiliated Group filing a consolidated
federal income Tax Return. Amitek has no liability for the Taxes of any
other Person under Treas. Reg. Section 1.1502-6 (or any similar provision
of state, local or foreign law), as a transferee or successor, by
contract, or otherwise;
(g) Amitek has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
shareholder, employee, creditor, independent contractor, or other third
party;
(h) other than Liens for Taxes not yet due and payable, there are no
Liens on any of the assets of Amitek that arose in connection with any
failure (or alleged failure) to pay any Tax; and
(i) Amitek has duly elected to be treated as an S corporation within
the meaning of the subchapter S of the Code and for state Tax law
purposes, except in those states which do not recognize S corporation
status.
3.16. Property, Plant and Equipment.
(a) Amitek does not own any real property.
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(b) Section 3.16(b) of the Disclosure Schedule lists all real
property leased or subleased to Amitek. Amitek has delivered to the Buyer
correct and complete copies of the leases and subleases listed in Section
3.16(b) of the Disclosure Schedule (as amended to date) which such leases
and subleases have not been amended or modified since the date thereof.
Except as set forth in Section 3.16(b) of the Disclosure Schedule, with
respect to each lease and sublease listed therein:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on materially
identical terms following the consummation of the transactions
contemplated hereby;
(iii) neither the Principal Sellers nor Amitek nor to their
Knowledge any other party to the lease or sublease, is in breach or
default in any material respect, and, to their Knowledge, no event
has occurred which, with notice or lapse of time, would constitute a
breach or default in any material respect or permit termination,
material modification, or acceleration thereunder;
(iv) no party to the lease or sublease has repudiated any
provision thereof;
(v) there are no disputes, oral or written agreements, or
forbearance program in effect as to the lease or sublease;
(vi) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (v) above are, to
the Knowledge of the Principal Sellers and Amitek, true and correct
with respect to the underlying lease;
(vii) Amitek has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold; and
(viii) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including
licenses and permits) required in connection with the operation
thereof, the failure of which to obtain could have a Material
Adverse Effect on Amitek and have been operated and maintained in
all material respects in accordance with applicable laws, rules, and
regulations.
(c) Except as set forth in Section 3.16(c) of the Disclosure
Schedule, the buildings, real property, improvements, machinery,
equipment, and other tangible assets owned by Amitek or used by it in the
conduct of its business as presently conducted are in good operating
condition and repair in all material respects, normal wear and tear
excepted.
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3.17. Intellectual Property.
(a) Section 3.17(a) of the Disclosure Schedule identifies each item
of Intellectual Property that Amitek owns or has the right to use pursuant
to license, sublicense, agreement, or permission.
(b) Except as set forth in Section 3.17(b) of the Disclosure
Schedule, Amitek owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property used in the
operation of its business as presently conducted.
(c) To the Knowledge of each of the Principal Sellers and Amitek,
Amitek has not interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of
third parties and there has never been any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation. To the Knowledge of each of the Principal
Sellers and Amitek, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual
Property rights of Amitek.
(d) To the Knowledge of each of the Principal Sellers and Amitek,
Amitek will not interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property rights of
third parties as a result of the continued operation of their respective
businesses as presently conducted.
3.18. Inventories. Except as set forth in Section 3.18 of the Disclosure
Schedule, the inventory of Amitek reflected in the Most Recent Balance Sheet and
books and records of Amitek is valued at the lower of cost (on a first-in,
first-out basis) or market in accordance with GAAP, consistently applied, and
does not include any material amount of obsolete items or any material
accumulation of slow moving items of below standard quality which, in each case,
cannot be used or returned in the Ordinary Course of Business.
3.19. Contracts. Section 3.19 of the Disclosure Schedule lists the
following contracts and other agreements (including any contracts and agreements
listed in Sections 3.11, 3.16, 3.17 and 3.28 of the Disclosure Schedule but
excluding any contracts or agreements that are terminable by Amitek on not more
than 30 days notice without penalty) to which Amitek is a party:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $25,000 per year;
(b) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products, or other
personal property, or for the
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furnishing or receipt of services, the performance of which will extend
over a period of more than one year, result in a material loss to Amitek
or involve consideration in excess of $25,000;
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any Indebtedness in excess
of $25,000 or under which it has imposed a Lien on any of its assets,
tangible or intangible;
(e) any agreement concerning confidentiality or noncompetition;
(f) any agreement relating to Amitek, its assets, liabilities and
business, or relating to the Amitek Shares, between or among Amitek or any
Principal Seller and any of their Affiliates;
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(h) any collective bargaining agreement;
(i) any agreement providing for the employment or consultancy with
any individual on a full-time, part-time, consulting or other basis in
excess of $25,000 per year or providing severance or retirement benefits;
(j) any agreement under which it has advanced or loaned any amount
to any of its stockholders, Affiliates, directors, officers, or employees
other than in the Ordinary Course of Business;
(k) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on Amitek; or
(l) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000 per year.
The Principal Sellers have delivered to the Buyer a correct and complete copy of
each written agreement listed in Section 3.19 of the Disclosure Schedule and a
written summary setting forth the terms and conditions of each oral agreement
referred to in Section 3.19 of the Disclosure Schedule. Except as disclosed in
Section 3.19 of the Disclosure Schedule, with respect to each such agreement:
(i) the agreement is legal, valid, binding, enforceable, and in full force and
effect; (ii) subject to the Buyer obtaining the necessary consents disclosed in
Section 3.32 of the Disclosure Schedule, the agreement will continue to be
legal, valid, binding, enforceable, and in
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full force and effect on materially identical terms following the consummation
of the transactions contemplated hereby; (iii) no party is in breach or default
in any material respect, and, to the Knowledge of the Principal Sellers and
Amitek, no event has occurred which with notice or lapse of time would
constitute a breach or default in any material respect, or permit termination,
material modification, or acceleration, under the agreement; and (iv) no party
has repudiated any provision of the agreement.
3.20. Notes and Accounts Receivable. Except as set forth in Section 3.20
of the Disclosure Schedule, all notes and accounts receivable of Amitek are
reflected properly on its books and records in accordance with GAAP, and arose
from bona fide transactions in the Ordinary Course of Business subject to no
setoffs or counterclaims except as recorded as accounts payable.
3.21. Powers of Attorney. Except as set forth in Section 3.21 of the
Disclosure Schedule and except pursuant to this Agreement, there are no
outstanding powers of attorney executed on behalf of Amitek or the Sellers in
respect of Amitek, its assets, liabilities or business or the Amitek Shares.
3.22. Insurance and Risk Management. Section 3.22 of the Disclosure
Schedule sets forth the following information with respect to each insurance
policy (including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which the business
operations of Amitek is a party, a named insured, or otherwise the beneficiary
of coverage on the date hereof:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(c) the policy number, the period of coverage and premium; and
(d) a description of any retrospective premium adjustments or other
loss-sensitive premium arrangements.
Except as set forth in Section 3.22 of the Disclosure Schedule, with respect to
each such insurance policy: (i) the policy is in full force and effect; (ii) the
transactions contemplated hereby will not result in the cancellation or
modification of such policies; (iii) neither Amitek nor any other party to the
policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), which would permit termination, material
modification, or acceleration, under the policy; (iv) the Principal Sellers have
delivered true and complete copies of all policies and related indemnity or
premium payment agreements to Buyer; and (v) no party to the policy has
repudiated any provision thereof. Section 3.22 of the Disclosure Schedule
describes any self-insurance arrangements affecting Amitek.
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3.23. Litigation. Except as disclosed in Section 3.23 of the Disclosure
Schedule, there are no judicial or administrative actions, claims, suits,
proceedings or investigations pending or, to the Principal Sellers' or Amitek's
Knowledge, threatened, that if determined adversely to Amitek would be
reasonably likely to result in a Material Adverse Effect on Amitek, or that
question the validity of this Agreement or any of the Related Agreements or of
any action taken or to be taken pursuant to or in connection with the provisions
of this Agreement or any of the Related Agreements nor, to the Principal
Sellers' or Amitek's Knowledge, is there any basis for any such action, claim,
suit, proceeding or investigation. There are no judgments, orders, decrees,
citations, fines or penalties heretofore assessed against Amitek affecting
adversely in any material respect any of its assets, businesses or operations
under any federal, state or local law.
3.24. Product Warranties Defects Liability. Except as set forth in Section
3.24 of the Disclosure Schedule, to the Knowledge of Amitek and the Principal
Sellers, substantially all products manufactured, sold, leased, or delivered by
Amitek have been in conformity in all material respects with all applicable
contractual commitments and all express and implied warranties, and Amitek has
no liability for replacement or repair thereof, subject only to the reserve for
product warranty claims set forth on the face of the Most Recent Balance Sheet.
Section 3.24 of the Disclosure Schedule includes copies of the standard terms
and conditions of sale or lease for Amitek's products generating$1,000,000 in
annual net sales since January 1, 1996 (containing applicable guaranty,
warranty, and indemnity provisions). Except as set forth in Section 3.24 of the
Disclosure Schedule, to the Knowledge of Amitek and the Principal Sellers,
Amitek has no liability arising out of any injury to individuals or property as
a result of the ownership, possession, or use of any product manufactured, sold,
leased, or delivered by it and there has been no inquiry or investigation made
in respect thereof by any Person including any governmental or administrative
agency, other than such liability for which Amitek has obtained insurance
coverage pursuant to insurance policies listed in Section 3.22 of the Disclosure
Schedule which such policies will remain in full force and effect without
material modification or increase in premium as a result of the transactions
contemplated hereby.
3.25. Employees. Except as set forth in Section 3.25 to the Disclosure
Schedule, to the Knowledge of Amitek and the Principal Sellers, no executive,
key employee, or group of employees has any plans to terminate employment with
Amitek. Amitek has not experienced any labor disputes or work stoppage due to
labor disagreements. Amitek is not nor has ever been a party to any collective
bargaining agreements or the subject of any organizational activity.
3.26. Employee Benefits.
(a) Section 3.26 of the Disclosure Schedule lists each Employee
Benefit Plan that Amitek maintains or to which Amitek contributes relating
to its current or former employees, officers or directors.
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(i) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) materially complies in form and in
operation in all respects with the applicable requirements of ERISA,
the Code, and other applicable laws.
(ii) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, and Summary Plan
Descriptions) have been filed or distributed appropriately with
respect to each such Employee Benefit Plan. The requirements of Part
6 of Subtitle B of Title I of ERISA and of Code Section 4980B have
been met with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan subject to such Part.
(iii) The Principal Sellers have delivered to the Buyer
correct and complete copies of the plan documents and summary plan
descriptions, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan that Amitek maintains
or ever has maintained or to which it contributes, ever has contributed,
or ever has been required to contribute, there have been no Prohibited
Transactions. No Fiduciary has any liability for breach of fiduciary duty
or any other failure to act or comply in connection with the
administration or investment of the assets of any such Employee Benefit
Plan. No action, suit, proceeding, hearing, or investigation with respect
to the administration or the investment of the assets of any such Employee
Benefit Plan (other than routine claims for benefits) is pending or
threatened. None of the Principal Sellers or the Amitek has any Knowledge
of any basis for any such action, suit, proceeding, hearing, or
investigation.
(c) Amitek does not maintain, nor ever has maintained, nor
contributes, nor ever has contributed, nor ever has been required to
contribute, to any Employee Welfare Benefit Plan providing medical,
health, or life insurance or other welfare-type benefits for current or
future retired or terminated employees, their spouses, or their dependents
(other than in accordance with Code Section 4980B).
(d) Amitek does not maintain, nor ever has maintained, nor
contributes, nor has ever contributed, nor has ever been required to
contribute, to any Employee Pension Benefit Plan.
(e) No promise or commitment to amend or improve any Employee
Benefit Plan for the benefit of current or former directors, officers, or
employees which is not reflected in the documentation provided to Buyer
has been made.
(f) The transactions contemplated by this Agreement shall not alone
or upon the occurrence of any additional or subsequent event, result in
any payment, of severance
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or otherwise, or acceleration, vesting or increase in benefits under any
Employee Benefit Plan for the benefit of any current or former director,
officer, or employee of Amitek.
3.27. Environment, Health, and Safety.
(a) Except as disclosed in Section 3.27 of the Disclosure Schedule:
(i) Amitek is and has been in compliance with all applicable
Environmental Laws and Safety Laws, the violation of which could
have a Material Adverse Effect on Amitek;
(ii) Amitek has obtained, and is and has been in material
compliance with the conditions of, all Environmental Permits
required for the continued conduct of its business in the manner now
conducted and presently proposed to be conducted;
(iii) Amitek has filed all required applications, notices and
other documents necessary to effect the timely renewal or issuance
of all Environmental Permits for the continued conduct of its
business in the manner now conducted and presently proposed to be
conducted;
(iv) there are, to the Knowledge of Amitek and the Principal
Sellers, no circumstances or conditions present at or arising out of
the present or former assets, properties, leaseholds, businesses or
operations of Amitek in respect of off-site storage, transportation
or disposal of, or any off-site Release of, a Chemical Substance
which reasonably may be expected to give rise to any Environmental
Liabilities and costs;
(v) there are, to the Knowledge of Amitek and the Principal
Sellers, no circumstances or conditions present at or arising out of
the present or former assets, properties, leaseholds, businesses or
operations of Amitek, including but not limited to any on-site
Storage, use, disposal or Release of a Chemical Substance, which
reasonably may be expected to give rise to any Environmental
Liabilities and Costs or Safety Liability and Costs;
(vi) none of Amitek, the Principal Sellers or the present or
past assets, properties, businesses, leaseholds or operations of
Amitek has received or is subject to, or within the past three years
has been subject to, any outstanding order, decree, judgment,
complaint, agreement, claim, citation, or notice or is subject to
any ongoing judicial or administrative proceeding indicating that
either Amitek, the Principal Sellers or the past and present assets
Amitek are or may be: (A) in violation of any Environmental Law; (B)
in violation of any Safety Laws; (C) responsible for the on-site or
off-site storage or Release of any Chemical
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Substance; or, (D) liable for any Environmental Liabilities and
Costs or Safety Liabilities and Costs;
(vii) no investigation or review with respect to the matters
identified in subsection (vi) is pending or, to the Knowledge of
Amitek or the Principal Sellers, is threatened, nor has any
Authority or other third-party indicated an intention to conduct the
same;
(viii) neither the business of Amitek nor any of its
properties or assets is subject to, or as a result of the
transactions contemplated by this Agreement will be subject to, the
requirements of any Environmental Laws which require notice,
disclosure, cleanup or approval prior to transfer of the Amitek
Shares, or the business of Amitek or which will impose Liens on any
such asset or property or otherwise interfere with or affect the
business of Amitek;
(ix) Section 3.27 of the Disclosure Schedule lists all
property presently or previously leased, owned or operated by Amitek
and identifies all such property (and the area within that property)
that has been used by Amitek or by any other Person (including a
prior owner or operator) for the storage or disposal of Chemical
Substances;
(x) Section 3.27 of the Disclosure Schedule lists all off-site
locations, including, without limitation, commercial waste disposal
facilities or municipal landfills, to which or at which Chemical
Substances originating from Amitek, or its assets, properties or
business have been sent (or otherwise have come to be located) in
amounts that would require a waste manifest under the Resource
Conservation and Recovery Act of 1976 as now in effect for
treatment, storage, disposal, reuse or recycling;
(xi) Section 3.27 of the Disclosure Schedule sets forth a list
of all underground storage tanks owned or operated at any time by
Amitek and, except as disclosed in Section 3.27 of the Disclosure
Schedule, no such tank is leaking or has leaked at any time in the
past, and there is no pollution or contamination of the Environment
caused by or contributed to or threatened by a Release of a Chemical
Substance from any such tank; and
(xii) Section 3.27 of the Disclosure Schedule lists all
environmental audits, inspections, assessments, investigations or
similar reports in Amitek's possession or of which Amitek is aware
relating to Amitek's assets, properties or business or the
compliance of the same with applicable Environmental Laws and Safety
Laws.
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(b) For purposes of this Section 3.27 only, all references to
"Amitek" is intended to include any and all other entities to which Amitek
may be considered a successor under applicable Environmental Laws. The
representations and warranties in this section are the only
representations and warranties with respect to Environmental Laws or
Environmental Liabilities and Costs, or Safety Laws or Safety Liabilities
and Costs notwithstanding any other language in this Agreement of general
applicability.
3.28. Affiliated Transactions. Except as set forth in Section 3.28 of the
Disclosure Schedule, Amitek is not party to or bound by any contract, commitment
or understanding with any of its stockholders, directors or officers or any of
their Affiliates or any member of their family and none of its stockholders,
directors or officers or those of Affiliates or any member of their family owns
or otherwise has any rights to or interests in any asset, tangible or
intangible, which is used in the business of Amitek.
3.29. Government Contracts. Except as set forth in Section 3.29 of the
Disclosure Schedule, Amitek has not been nor is a party to any contract or
arrangement with any federal, state or local government agency.
3.30. Distributors, Customers, Suppliers. Section 3.30 of the Disclosure
Schedule sets forth a complete and accurate list of (i) the ten largest
customers (by dollar volume) of Amitek during the Most Recent Fiscal Year,
indicating the existing contractual arrangements with each such customer by
product, (ii) all suppliers of significant materials or services to Amitek,
indicating the contractual arrangements for continued supply from such Person
and (iii) the ten largest distributors (by dollar sales volume) of products of
Amitek. Except as set forth in Section 3.30 of the Disclosure Schedule, Amitek
has not been threatened or notified, orally or in writing, by one or more of the
distributors, customers or suppliers listed in Section 3.30 of the Disclosure
Schedule that such Persons have terminated or intend to terminate or are
considering terminating their respective business relationships with Amitek or
are modifying such relationships with Amitek in a manner which is less favorable
to the Amitek.
3.31. No Illegal Payments, Etc. To the Knowledge of the Principal Sellers,
none of the Principal Sellers, nor Amitek, nor any of the directors, officers,
employees or agents of Amitek, has (a) directly or indirectly given or agreed to
give any illegal gift, contribution, payment or similar benefit to any supplier,
customer, governmental official or employee or other person who was, is or may
be in a position to help or hinder Amitek (or assist in connection with any
actual or proposed transaction) or made or agreed to make any illegal
contribution, or reimbursed any illegal political gift or contribution made by
any other person, to any candidate for federal, state, local or foreign public
office (i) which would subject Amitek to any damage or penalty in any civil,
criminal or governmental litigation or proceeding or (ii) the non-continuation
of which has had or might have, individually or in the aggregate, a Material
Adverse Effect on Amitek or (b) established or maintained any unrecorded fund or
asset or made any false entries on any books or records for any purpose.
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3.32. Consents. Section 3.32 of the Disclosure Schedule sets forth a true,
correct and complete list of any Person whose consent or approval is required
and the matter, agreement or contract to which such consent relates in
connection with the consummation of the transactions contemplated by this
Agreement.
3.33. Disclosure. The representations and warranties contained in this
Section 3 (including the Disclosure Schedule and any other schedules and
exhibits required to be delivered by the Principal Sellers to Buyer pursuant to
this Agreement) and any certificate required to be furnished by the Principal
Sellers to Buyer at the Closing do not contain and will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements contained therein not misleading.
3.34. Qualification of Principal Sellers. Each Principal Seller represents
and warrants, with respect to itself and not with respect to any other Principal
Seller, that: (a) such Principal Seller is acquiring the Buyer Shares for his,
her or its own account and not with a view to or for resale in connection with
any distribution thereof; (b) such Principal Seller understands that such shares
of Common Stock have not been registered under the Securities Act or any state
securities laws by reason of specified exemptions from the registration
provisions of the Securities Act which depend upon, among other things, the bona
fide nature of his or its investment intent as expressed herein; (c) such
Principal Seller is an "accredited investor" within the meaning of Rule 501 of
the Securities Act; (d) such Principal Seller is able to bear the economic risk
of investment in the Buyer Shares and is experienced and has such knowledge and
experience in financial and business matters that he or it is capable of
evaluating the risks and merits of the transactions contemplated by this
Agreement; and (e) such Principal Seller acknowledges that the Buyer Shares will
bear a legend restricting transfer unless (i) the transfer is exempt from the
registration requirements of the Securities Act and an opinion of counsel
reasonably satisfactory to Buyer that such transfer is exempt therefrom is
delivered to the Buyer, or (ii) the transfer is made pursuant to an effective
registration statement under the Securities Act.
3.35. Disclaimer of Other Representations and Warranties. Except as
expressly set forth in this Section 3, the Principal Sellers and Amitek make no
representation or warranty, express or implied, at law or in equity, in respect
of the Principal Sellers or Amitek or any of their respective assets,
liabilities or operations, including, without limitation, with respect to
merchantability or fitness of any asset or product for any particular purpose,
and any such other representations or warranties are hereby expressly
disclaimed.
4. Representations and Warranties of the Buyer. The Buyer represents and
warrants to the Principal Sellers that the statements contained in this Section
4 are correct and complete as of the date of this Agreement and, unless a date
is specified in such representation and warranty, will be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4), except as
set forth in the Disclosure Schedule.
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4.1. Organization of the Buyer and NewSub. Each of the Buyer and NewSub is
a Delaware corporation, duly organized, validly existing, and in good standing
under the laws of the State of Delaware. Copies of the certificate of
incorporation and bylaws of each of the Buyer and NewSub as amended to date have
been heretofore delivered to the Principal Sellers and are accurate and
complete. Each of the Buyer and NewSub is qualified to do business and is in
good standing as a foreign corporation in each jurisdiction listed in Section
4.1 of the Disclosure Schedule, which such jurisdictions are the only
jurisdictions where the nature of the activities conducted by it or the
character of the property owned, leased or operated by it make such
qualification necessary or appropriate, except for those jurisdictions where the
failure to be so qualified will not have a Material Adverse Effect on the Buyer.
4.2. Capitalization and Ownership of the Buyer and NewSub. The authorized
capital stock of the Buyer consists of 17,593,607 shares of common stock, $.01
par value per share (the "Century Common Stock"), 3,726,027 shares of Series A
Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"), and
666,667 shares of Series B Preferred Stock, $.01 par value per share (the
"Series B Preferred Stock"). As of the date hereof, there are issued and
outstanding 6,321,877 shares of Century Common Stock, 3,698,630 shares of Series
A Preferred Stock and 666,667 shares of Series B Preferred Stock, of which no
shares are held as treasury stock and, except as set forth in Section 4.2 of the
Disclosure Schedule, all of such shares are held of record and beneficially by
the persons and in the respective amounts set forth on Section 4.2 of the
Disclosure Schedule, free and clear of any Liens, and are convertible into the
respective amounts of shares of Century Common Stock set forth on Section 4.2 of
the Disclosure Schedule. The authorized capital stock of NewSub consists of
1,000 shares of common stock, $.01 par value per share. As of the date hereof,
there are issued and outstanding 1,000 shares of common stock of NewSub, of
which no shares are held as treasury stock and all of such shares are held of
record and beneficially by the Buyer, free and clear of any Liens. All of the
outstanding shares of capital stock of each of the Buyer and NewSub have been
validly issued, are fully paid and nonassessable. The Buyer Shares to be issued
in the Merger have been duly authorized and, upon consummation of the Merger,
will be validly issued, fully paid and nonassessable. Except as set forth in
Section 4.2 to the Disclosure Schedule, there are no agreements restricting the
transfer of, or affecting the rights of any holder of, the Century Common Stock,
Series A Preferred Stock or Series B Preferred Stock, there are no preemptive
rights on the part of any holder of any class of securities of the Buyer or
NewSub and no outstanding options, warrants, rights, or other agreements or
commitments of any kind obligating the Buyer or NewSub, contingently or
otherwise, to issue or sell any shares of its capital stock or any securities or
obligations convertible into, or exchangeable for, any shares of its capital
stock, and no authorization therefor has been given. Section 4.2 of the
Disclosure Schedule sets forth the names of the record holders of all
outstanding options, warrants or other rights to purchase, sell or otherwise
dispose of, or rights to exchange or convert into, any shares of the Buyer's or
NewSub's capital stock and the number of shares (including the number of shares
of capital stock into which any option, warrant or other convertible security is
exercisable or convertible), exercise prices and expiration dates of such
options, warrants or other rights.
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4.3. Authorization of Transaction. The Buyer has the legal capacity, power
and authority (including full corporate power and authority) to execute and
deliver this Agreement and the Related Agreements being executed by it and to
perform its obligations hereunder and thereunder. The board of directors of the
Buyer has duly authorized the execution, delivery and performance of this
Agreement and the Related Agreements being executed by the Buyer. All corporate
and other actions or proceedings to be taken by or on the part of the Buyer to
authorize and permit the execution and delivery by it of this Agreement and the
Related Agreements and the instruments required to be executed and delivered by
it pursuant hereto and thereto, the performance by it of its obligations
hereunder and thereunder, and the consummation by it of the transactions
contemplated herein and therein, have been duly and properly taken. This
Agreement and each of the Related Agreements being executed by the Buyer,
including but not limited to the Buyer's Notes, has been duly executed and
delivered by the Buyer and constitutes the legal, valid and binding obligation
of the Buyer, enforceable in accordance with its terms and conditions.
4.4. Noncontravention. Except as set forth in Section 4.4 of the
Disclosure Schedule, neither the execution and the delivery of this Agreement
and the Related Agreements being executed by the Buyer, nor the consummation of
the transactions contemplated hereby or thereby (including any of the agreements
and instruments required to be delivered pursuant to Section 2 above), will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Buyer or NewSub or any of their
property is subject or any provision of the charter or by-laws of the Buyer or
NewSub or (ii) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which the Buyer or
NewSub is a party or by which either of them is bound or to which any of their
assets is subject (or result in the imposition of any Lien upon any of their
assets), which in any case could have a Material Adverse Effect on the Buyer.
Except as set forth in Section 4.4 of the Disclosure Schedule, neither the Buyer
nor NewSub needs to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement, except for the filing of the Certificate of Merger with the Secretary
of State of Delaware and the filing of the Articles of Merger with the State of
Florida.
4.5. Brokers' Fees. Except as set forth in Section 4.5 of the Disclosure
Schedule, neither the Buyer nor NewSub has any liability or obligation to pay
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
4.6. Title to Assets. Except as set forth in Section 4.6 of the Disclosure
Schedule, the Buyer has good title to, or a valid and binding leasehold interest
in, the properties and assets used by it, located on its premises, or reflected
on the Most Recent Balance Sheet or acquired after the
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date thereof, free and clear of all Liens, except for properties and assets
disposed of in the Ordinary Course of Business since the date of the Most Recent
Balance Sheet.
4.7. Assets. The assets, properties and rights of the Buyer reflected in
the Most Recent Financial Statements comprise all of the assets, properties and
rights of every type and description, real, personal, tangible and intangible
used by the Buyer in the conduct of its business as currently conducted.
4.8. No Subsidiaries. Except as set forth in Section 4.8 of the Disclosure
Schedule, the Buyer has no Subsidiaries other than NewSub, nor does the Buyer
own, directly or indirectly, any capital stock of, any partnership or other
ownership interest in, or any other security issued by, any other corporation,
organization, association or entity other than NewSub.
4.9. Financial Statements of the Buyer. Attached hereto as Exhibit D-2 are
the following financial statements (collectively the "Buyer Financial
Statements"): (i) audited consolidated balance sheets and statements of income,
changes in stockholders' equity, and cash flow as of and for the fiscal years
ended June 30, 1997 and June 30, 1998 (the "Most Recent Fiscal Year End") for
the Buyer, and (ii) unaudited consolidated balance sheets and statements of
income, changes in stockholders' equity and cash flows for the nine months ended
March 31, 1999 for the Buyer (the "Interim Buyer Financials"). The Buyer
Financial Statements (including, with respect to the audited financial
statements only, the notes thereto) have been prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby and present
fairly the financial condition of the Buyer in all material respects as of such
dates and the results of operations of the Buyer for such periods and are
consistent with the books and records of the Buyer, subject to normal and
recurring year end adjustments and in the case of the unaudited financial
statements, the absence of notes.
4.10. Indebtedness and Guarantees. Except as set forth in the Most Recent
Financial Statements, the Buyer has no Indebtedness. Except as set forth in
Section 4.10 of the Disclosure Schedule, the Buyer is not a guarantor or
otherwise liable for any liability or obligation of any other Person.
4.11. Absence of Certain Changes and Events. Since the Most Recent Fiscal
Year End and except as disclosed in Section 4.11 of the Disclosure Schedule or
set forth in the Interim Buyer Financials, the Buyer has conducted its business
only in the Ordinary Course of Business and there has not been:
(a) any sale, lease, transfer, or assignment of any of the Buyer's
assets, tangible or intangible, other than sales of inventory for a fair
consideration in the Ordinary Course of Business;
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(b) any agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) entered into other than in
the Ordinary Court of Business and in an amount not in excess of $25,000;
(c) acceleration, termination, modification, or cancellation of any
agreement, contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) to which the Buyer is a party or by which
the Buyer is bound;
(d) creation or imposition of any Lien upon either of the Buyer's
assets, tangible or intangible;
(e) made any capital expenditure (or series of related capital
expenditures) involving more than $25,000 singly or $75,000 in the
aggregate;
(f) made any capital investment in, any loan to, or any acquisition
of the securities or assets of, any other Person (or series of related
capital investments, loans, and acquisitions);
(g) any issuance of any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed
money or capitalized lease obligation;
(h) any delay or postponement of the payment of accounts payable and
other liabilities outside the Ordinary Course of Business;
(i) any cancellation, compromise, waiver, or release any right or
claim or Indebtedness (or series of related rights and claims);
(j) any grant of any license or sublicense of any rights or modified
any rights under or with respect to, or entered into any settlement
regarding any infringement of its rights to, any Intellectual Property;
(k) any issuance, sale, or other disposition of any of its capital
stock, or grant of any options, warrants, or other rights to purchase or
obtain (including upon conversion, exchange, or exercise) any capital
stock;
(l) any dividend or distribution (whether in cash or in kind) or
repurchase, redemption or retirement of any of its capital stock;
(m) any damage, destruction, or loss (whether or not covered by
insurance) to its property;
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(n) any loan to, or enter into any other transaction with its
directors, officers, and employees outside the Ordinary Course of
Business;
(o) any employment contract or collective bargaining agreement,
written or oral, or modification or change of the terms of any existing
such contract or agreement;
(p) any increase modification or change in the compensation of any
of the officers or employees of the Buyer outside the Ordinary Course of
Business;
(q) any adoption, amendment modification or termination of any
Employee Benefit Plan of any of director, officer, or employee of the
Buyer (or taken any such action with respect to any other Employee Benefit
Plan);
(r) any payment pursuant to any Employee Benefit Plan or other plan,
contract or commitment for the benefit of any of the directors, officers
and employees of the Buyer;
(s) any pledge to make or make any charitable or other capital
contribution outside the Ordinary Course of Business;
(t) any amount paid to any third party with respect to any liability
(excluding any costs and expenses incurred or which may be incurred in
connection with this Agreement and the transactions contemplated hereby)
other than in the Ordinary Course of Business;
(u) any modification or change of the application of GAAP from the
manner in which it was applied in the Most Recent Financial Statements;
(v) any other material adverse occurrence, event, incident, action,
failure to act, or transaction outside the Ordinary Course of Business
involving the Buyer; and
(w) any commitment by the Buyer to any of the foregoing.
4.12. [Reserved]
4.13. Legal and Other Compliance. Except as set forth in Section 4.13 of
the Disclosure Schedule, the Buyer is in compliance in all material respects
with all applicable Laws the violation of which, either singularly or in the
aggregate, could have a Material Adverse Effect on the Buyer and no action,
suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or
notice has been filed or commenced against it alleging any failure so to comply.
Neither the transfer of the Buyer Shares to the Sellers, nor the consummation of
the transactions contemplated hereby, conflicts with the rights of any other
Person or violates, or with the giving of notice or the passage of time or both
will violate, conflict with or result in a default, right to
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accelerate or loss of rights under, any terms or provisions of the Buyer's
charter or by-laws or any Lien, lease, license, agreement, understanding, law,
ordinance, rule or regulation, or any order, judgment or decree to which the
Buyer is a party or by which it may be bound, in each case, which violation,
conflict, default, right to accelerate or loss of rights, either singularly or
in the aggregate, could have a Material Adverse Effect on the Buyer.
4.14. No Material Adverse Change. Since the date of the Most Recent
Financial Statements, the Buyer has not experienced any change which has
resulted in a Material Adverse Effect on the Buyer and, to the Buyer's
Knowledge, no event has occurred that may result in such a Material Adverse
Effect on the Buyer.
4.15. Taxes. Except as set forth in Section 4.15 of the Disclosure
Schedule:
(a) The Buyer has filed all material returns, declarations of
estimated tax, tax reports, information returns and statements required to
be filed by it prior to the Closing Date relating to any material Taxes
with respect to any income, assets or operations of the Buyer, other than
those for which extensions shall have been granted prior to the Closing
Date (collectively, the "Tax Returns");
(b) the Buyer has made available to the Principal Sellers correct
and complete copies of all federal and state income Tax Returns,
examination reports and statements of deficiencies assessed against or
agreed to by the Buyer for the last three taxable years;
(c) the Buyer has paid, or made adequate provision in accordance
with GAAP, for the payment of all Taxes for the periods ending on or
before the Closing Date;
(d) the Buyer has not waived any statute of limitations affecting
any Tax liability or agreed to any extension of time during which a Tax
assessment or deficiency assessment may be made;
(e) there are no pending examinations by any taxing authority of any
Tax Returns of the Buyer and the Buyer has not received written notice of
any unresolved questions or claims concerning its Tax liability;
(f) the Buyer is not and has not been a party to any Tax allocation
or sharing agreement or a member of an Affiliated Group filing a
consolidated federal income Tax Return. The Buyer has no liability for the
Taxes of any other Person under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise;
(g) the Buyer has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
shareholder, employee, creditor, independent contractor, or other third
party;
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(h) other than Liens for Taxes not yet due and payable, there are no
Liens on any of the assets of the Buyer that arose in connection with any
failure (or alleged failure) to pay any Tax; and
(i) the Buyer has not made any payments, is not obligated to make
any payments, and is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G or will be subject to the excise tax of
Code Section 4999.
4.16. Property, Plant and Equipment.
(a) Section 4.16(a) of the Disclosure Schedule lists all real
property that the Buyer owns. Except as set forth in Section 4.16(a) of
the Disclosure Schedule, with respect to each such parcel of owned real
property:
(i) the Buyer has good and marketable title to the parcel of
real property, free and clear of any Lien;
(ii) there are no pending or, to the Buyer's knowledge,
threatened condemnation proceedings, lawsuits, or administrative
actions relating to the property which would adversely affect the
use, occupancy, or value thereof;
(iii) each facility on such parcel has received all approvals
of governmental authorities (including licenses and permits)
required in connection with the ownership or operation thereof, the
failure of which to obtain could have a Material Adverse Effect on
the Buyer, and have been operated and maintained in all material
respects in accordance with applicable laws, rules, and regulations;
(iv) there are no leases, subleases, licenses, concessions, or
other agreements, written or oral, granting to any party or parties
the right of use or occupancy of the parcel or any portion thereof;
(v) there are no outstanding options or rights of first
refusal to purchase such parcel or any portion thereof or interest
therein;
(vi) there are no parties (other than the Buyer) in possession
of such parcel;
(b) Section 4.16(b) of the Disclosure Schedule lists all real
property leased or subleased to the Buyer. The Buyer has delivered to the
Principal Sellers correct and complete copies of the leases and subleases
listed in Section 4.16(b) of the Disclosure
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Schedule (as amended to date) which such leases and subleases have not
been amended or modified since the date thereof. Except as set forth in
Section 4.16(b) of the Disclosure Schedule, with respect to each lease and
sublease listed therein:
(i) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) the lease or sublease will continue to be legal, valid,
binding, enforceable, and in full force and effect on materially
identical terms following the consummation of the transactions
contemplated hereby;
(iii) Neither the Buyer, nor to its Knowledge any other party
to the lease or sublease, is in breach or default in any material
respect, and, to its Knowledge, no event has occurred which, with
notice or lapse of time, would constitute a breach or default in any
material respect, or permit termination, material modification, or
acceleration thereunder;
(iv) no party to the lease or sublease has repudiated any
provision thereof;
(v) there are no disputes, oral or written agreements, or
forbearance program in effect as to the lease or sublease;
(vi) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (v) above are, to
the Knowledge of the Buyer, true and correct with respect to the
underlying lease;
(vii) the Buyer has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold; and
(viii) all facilities leased or subleased thereunder have
received all approvals of governmental authorities (including
licenses and permits) required in connection with the operation
thereof, the failure of which to obtain could have a Material
Adverse Effect on the Buyer, and have been operated and maintained
in all material respects in accordance with applicable laws, rules,
and regulations.
(c) The buildings, real property, improvements, machinery,
equipment, and other tangible assets owned by the Buyer or used by it in
the conduct of its business as presently conducted are in good operating
condition and repair in all material respects, normal wear and tear
excepted.
4.17. Intellectual Property.
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(a) Section 4.17(a) of the Disclosure Schedule identifies each item
of Intellectual Property that the Buyer owns or has the right to use
pursuant to license, sublicense, agreement, or permission.
(b) Except as set forth in Section 4.17(b) of the Disclosure
Schedule, the Buyer owns or has the right to use pursuant to license,
sublicense, agreement, or permission all Intellectual Property used in the
operation of its business as presently conducted.
(c) To the Knowledge of the Buyer, the Buyer has not interfered
with, infringed upon, misappropriated, or otherwise come into conflict
with any Intellectual Property rights of third parties and there has never
been any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation. To the
Knowledge of the Buyer, no third party has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of the Buyer.
(d) To the Knowledge of the Buyer, the Buyer will not interfere
with, infringe upon, misappropriate, or otherwise come into conflict with,
any Intellectual Property rights of third parties as a result of the
continued operation of its business as presently conducted.
4.18. Inventories. Except as set forth in Section 4.18 of the Disclosure
Schedule, the inventory of the Buyer, taken as a whole, reflected in the Most
Recent Balance Sheet and books and records of the Buyer is valued at the lower
of cost (on a first-in, first-out basis) or market in accordance with GAAP,
consistently applied, and does not include any material amount of obsolete items
or any items or any material accumulation of slow moving items or below standard
quality which, in each case, cannot be used or returned in the Ordinary Courses
of Business.
4.19. Contracts. Section 4.19 of the Disclosure Schedule lists the
following contracts and other agreements (including any contracts and agreements
listed in Sections 4.11, 4.16, 4.17, and 4.28 of the Disclosure Schedule but
excluding any contracts or agreements that are terminable by the Buyer on not
more than 30 days notice without penalty) to which the Buyer is a party:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in
excess of $25,000 per year;
(b) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of
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more than one year, result in a material loss to the Buyer or involve
consideration in excess of $25,000;
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any Indebtedness in excess
of $25,000 or under which it has imposed a Lien on any of its assets,
tangible or intangible;
(e) any agreement concerning confidentiality or noncompetition;
(f) any agreement relating to the Buyer, its assets, liabilities and
business between or among the Buyer and any of its Affiliates;
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers,
and employees;
(h) any collective bargaining agreement;
(i) any agreement providing for the employment or consultancy with
any individual on a full-time, part-time, consulting or other basis in
excess of $25,000 per year or providing severance or retirement benefits;
(j) any agreement under which it has advanced or loaned any amount
to any of its stockholders, Affiliates, directors, officers, or employees
other than in the Ordinary Course of Business;
(k) any agreement under which the consequences of a default or
termination could have a Material Adverse Effect on the Buyer; or
(l) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000 per year.
The Buyer has delivered to the Principal Sellers a correct and complete copy of
each written agreement listed in Section 4.19 of the Disclosure Schedule and a
written summary setting forth the terms and conditions of each oral agreement
referred to in Section 4.19 of the Disclosure Schedule. Except as disclosed in
Section 4.19 of the Disclosure Schedule, with respect to each such agreement:
(i) the agreement is legal, valid, binding, enforceable, and in full force and
effect; (ii) subject to the Buyer obtaining the necessary consents disclosed in
Section 4.32 of the Disclosure Schedule, the agreement will continue to be
legal, valid, binding, enforceable, and in full force and effect on materially
identical terms following the consummation of the transactions contemplated
hereby; (iii) no party is in breach or default in any material respect, and, to
the
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Knowledge of the Buyer, no event has occurred which with notice or lapse of time
would constitute a breach or default in any material respect, or permit
termination, material modification, or acceleration, under the agreement; and
(iv) no party has repudiated any provision of the agreement.
4.20. Notes and Accounts Receivable. Except as set forth in Section 4.20
of the Disclosure Schedule, all notes and accounts receivable of the Buyer are
reflected properly on its books and records in accordance with GAAP, are valid
receivables, arose from bona fide transactions in the Ordinary Course of
Business subject to no setoffs or counterclaims except as recorded as accounts
payable.
4.21. Powers of Attorney. Except as set forth in Section 4.21 of the
Disclosure Schedule and except pursuant to this Agreement, there are no
outstanding powers of attorney executed on behalf of the Buyer in respect of the
Buyer, its assets, liabilities or business.
4.22. Insurance and Risk Management. Section 4.22 of the Disclosure
Schedule sets forth the following information with respect to each insurance
policy (including policies providing property, casualty, liability, and workers'
compensation coverage and bond and surety arrangements) to which the business
operations of the Buyer is a party, a named insured, or otherwise the
beneficiary of coverage on the date hereof:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder, and the
name of each covered insured;
(c) the policy number, the period of coverage and premium; and
(d) a description of any retrospective premium adjustments or other
loss-sensitive premium arrangements.
Except as set forth in Section 4.22 of the Disclosure Schedule, with respect to
each such insurance policy: (i) the policy is in full force and effect; (ii) the
transactions contemplated hereby will not result in the cancellation or
modification of such policies; (iii) neither the Buyer nor any other party to
the policy is in breach or default (including with respect to the payment of
premiums or the giving of notices), which would permit termination, material
modification, or acceleration, under the policy; (iv) the Buyer has delivered
true and complete copies of all policies and related indemnity or premium
payment agreements to the Principal Sellers; and (v) no party to the policy has
repudiated any provision thereof. Section 4.22 of the Disclosure Schedule
describes any self-insurance arrangements affecting the Buyer.
4.23. Litigation. Except as disclosed in Section 4.23 of the Disclosure
Schedule, there are no judicial or administrative actions, claims, suits,
proceedings or investigations pending or,
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to the Buyer's Knowledge, threatened, that if determined adversely to the Buyer
would be reasonably likely to result in a Material Adverse Effect on the Buyer,
or that question the validity of this Agreement or any of the Related Agreements
or of any action taken or to be taken pursuant to or in connection with the
provisions of this Agreement or any of the Related Agreements nor, to the
Buyer's Knowledge, is there any basis for any such action, claim, suit,
proceeding or investigation. There are no judgments, orders, decrees, citations,
fines or penalties heretofore assessed against the Buyer affecting adversely in
any material respect any of their respective assets, businesses or operations
under any federal, state or local law.
4.24. Product Warranties Defects Liability. Except as set forth in Section
4.24 of the Disclosure Schedule, to the Knowledge of the Buyer, substantially
all products manufactured, sold, leased, or delivered by the Buyer have been in
conformity in all material respects with all applicable contractual commitments
and all express and implied warranties, and the Buyer has no liability for
replacement or repair thereof, subject only to the reserve for product warranty
claims set forth on the face of the Most Recent Balance Sheet. Section 4.24 of
the Disclosure Schedule includes copies of the standard terms and conditions of
sale or lease for each of the Buyer's products generating $1,000,000 in annual
net sales, since January 1, 1996 (containing applicable guaranty, warranty, and
indemnity provisions). Except as set forth in Section 4.24 of the Disclosure
Schedule, to the Knowledge of the Buyer, the Buyer has no liability arising out
of any injury to individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold, leased, or delivered by
the Buyer and there has been no inquiry or investigation made in respect thereof
by any Person including any governmental or administrative agency, other than
such liability for which the Buyer has obtained insurance coverage pursuant to
insurance policies listed in Section 4.22 of the Disclosure Schedule which such
policies will remain in full force and effect without material modification or
increase in premium as a result of the transactions contemplated hereby.
4.25. Employees. To the Knowledge of the Buyer, no executive, key
employee, or group of employees has any plans to terminate employment with the
Buyer. The Buyer has not experienced any labor disputes or work stoppage due to
labor disagreements. The Buyer is not, nor has ever been, a party to any
collective bargaining agreements or the subject of any organizational activity.
4.26. Employee Benefits.
(a) Section 4.26 of the Disclosure Schedule lists each Employee
Benefit Plan that the Buyer maintains or to which the Buyer contributes
relating to its current or former employees, officers or directors.
(i) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) materially complies in form and in
operation in all respects with the applicable requirements of ERISA,
the Code, and other applicable laws.
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(ii) All required reports and descriptions (including Form
5500 Annual Reports, Summary Annual Reports, and Summary Plan
Descriptions) have been filed or distributed appropriately with
respect to each such Employee Benefit Plan. The requirements of Part
6 of Subtitle B of Title I of ERISA and of Code Section 4980B have
been met with respect to each such Employee Benefit Plan which is an
Employee Welfare Benefit Plan subject to such Part.
(iii) The Buyer has delivered to the Principal Sellers correct
and complete copies of the plan documents and summary plan
descriptions, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan that the Buyer
maintains or ever has maintained or to which it contributes, ever has
contributed, or ever has been required to contribute, there have been no
Prohibited Transactions. No Fiduciary has any liability for breach of
fiduciary duty or any other failure to act or comply in connection with
the administration or investment of the assets of any such Employee
Benefit Plan. No action, suit, proceeding, hearing, or investigation with
respect to the administration or the investment of the assets of any such
Employee Benefit Plan (other than routine claims for benefits) is pending
or threatened. The Buyer has no Knowledge of any basis for any such
action, suit, proceeding, hearing, or investigation.
(c) The Buyer does not maintain, nor ever has maintained, nor
contributes, nor ever has contributed, nor ever has been required to
contribute, to any Employee Welfare Benefit Plan providing medical,
health, or life insurance or other welfare-type benefits for current or
future retired or terminated employees, their spouses, or their dependents
(other than in accordance with Code Section 4980B).
(d) The Buyer does not maintain, nor ever has maintained, nor
contributes, nor ever has contributed, nor has ever been required to
contribute, to any Employee Pension Benefit Plan.
(e) No promise or commitment to amend or improve any Employee
Benefit Plan for the benefit of current or former directors, officers, or
employees which is not reflected in the documentation provided to the
Principal Sellers has been made.
(f) The transactions contemplated by this Agreement shall not alone
or upon the occurrence of any additional or subsequent event, result in
any payment, of severance or otherwise, or acceleration, vesting or
increase in benefits under any Employee Benefit Plan for the benefit of
any current or former director, officer, or employee of the Buyer.
4.27. Environment, Health, and Safety.
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(a) Except as disclosed in Section 4.27 of the Disclosure Schedule:
(i) The Buyer is and has been in compliance with all
applicable Environmental Laws and Safety Laws the violation of which
could have a Material Adverse Effect on the Buyer;
(ii) The Buyer has obtained, and is and has been in material
compliance with the conditions of, all Environmental Permits
required for the continued conduct of its business in the manner now
conducted and presently proposed to be conducted;
(iii) The Buyer has filed all required applications, notices
and other documents necessary to effect the timely renewal or
issuance of all Environmental Permits for the continued conduct of
its business in the manner now conducted and presently proposed to
be conducted;
(iv) there are, to the knowledge of the Buyer, no
circumstances or conditions present at or arising out of the present
or former assets, properties, leaseholds, businesses or operations
of the Buyer in respect of off-site storage, transportation or
disposal of, or any off-site Release of, a Chemical Substance which
reasonably may be expected to give rise to any Environmental
Liabilities and costs;
(v) there are, to the knowledge of the Buyer, no circumstances
or conditions present at or arising out of the present or former
assets, properties, leaseholds, businesses or operations of the
Buyer, including but not limited to any on-site Storage, use,
disposal or Release of a Chemical Substance, which reasonably may be
expected to give rise to any Environmental Liabilities and Costs or
Safety Liability and Costs;
(vi) none of the Buyer or the present or past assets,
properties, businesses, leaseholds or operations of the Buyer has
received or is subject to, or within the past three years has been
subject to, any outstanding order, decree, judgment, complaint,
agreement, claim, citation, or notice or is subject to any ongoing
judicial or administrative proceeding indicating that Buyer or the
past and present assets of the Buyer are or may be: (A) in violation
of any Environmental Law; (B) in violation of any Safety Laws; (C)
responsible for the on-site or off-site storage or Release of any
Chemical Substance; or, (D) liable for any Environmental Liabilities
and Costs or Safety Liabilities and Costs;
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(vii) no investigation or review with respect to the matters
identified in subsection (vi) is pending or, to the Knowledge of the
Buyer, is threatened, nor has any Authority or other third-party
indicated an intention to conduct the same;
(viii) neither the business of the Buyer nor any of its
properties or assets is subject to, or as a result of the
transactions contemplated by this Agreement will be subject to, the
requirements of any Environmental Laws which require notice,
disclosure, cleanup or approval prior to transfer of the Buyer
Shares or the business of the Buyer or which will impose Liens on
any such asset or property or otherwise interfere with or affect the
business of the Buyer;
(ix) Section 4.27 of the Disclosure Schedule lists all
property presently or previously leased, owned or operated by the
Buyer and identifies all such property (and the area within that
property) that has been used by the Buyer or by any other Person
(including a prior owner or operator) for the storage or disposal of
Chemical Substances;
(x) Section 4.27 of the Disclosure Schedule lists all off-site
locations, including, without limitation, commercial waste disposal
facilities or municipal landfills, to which or at which Chemical
Substances originating from the Buyer or its assets, properties or
business have been sent (or otherwise have come to be located) in
amounts that would require a waste manifest under the Resource
Conservation and Recovery Act of 1976 as now in effect for
treatment, storage, disposal, reuse or recycling;
(xi) Section 4.27 of the Disclosure Schedule sets forth a list
of all underground storage tanks owned or operated at any time by
the Buyer and, except as disclosed in Section 4.27 of the Disclosure
Schedule, no such tank is leaking or has leaked at any time in the
past, and there is no pollution or contamination of the Environment
caused by or contributed to or threatened by a Release of a Chemical
Substance from any such tank; and
(xii) Section 4.27 of the Disclosure Schedule lists all
environmental audits, inspections, assessments, investigations or
similar reports in the Buyer's possession or of which the Buyer is
aware relating to the Buyer's assets, properties or business or the
compliance of the same with applicable Environmental Laws and Safety
Laws.
(b) For purposes of this Section 4.27 only, all references to "the
Buyer" are intended to include any and all other entities to which the
Buyer may be considered a successor under applicable Environmental Laws.
The representations and warranties in this section are the only
representations and warranties with respect to Environmental
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Laws or Environmental Liabilities and Costs, or Safety Laws or Safety
Liabilities and Costs notwithstanding any other language in this Agreement
of general applicability.
4.28. Affiliated Transactions. Except as set forth in Section 4.28 of the
Disclosure Schedule, the Buyer is not party to or bound by any contract,
commitment or understanding with any of its stockholders, directors or officers
or any of their Affiliates or any member of their family and none of its
stockholders, directors or officers or those of Affiliates or any member of
their family owns or otherwise has any rights to or interests in any asset,
tangible or intangible, which is used in the business of the Buyer.
4.29. Government Contracts. Except as set forth in Section 4.29 of the
Disclosure Schedule, the Buyer has not been and is not a party to any contract
or arrangement with any federal, state or local government agency.
4.30. Distributors, Customers, Suppliers. Section 4.30 of the Disclosure
Schedule sets forth a complete and accurate list of (i) the ten largest
customers (by dollar volume) of the Buyer during the Most Recent Fiscal Year,
indicating the existing contractual arrangements with each such customer by
product, (ii) all suppliers of significant materials or services to the Buyer,
indicating the contractual arrangements for continued supply from such Person
and (iii) the ten largest distributors (by dollar sales volume) of products of
the Buyer. Except as set forth in Section 4.30 of the Disclosure Schedule, the
Buyer has not been threatened or notified, orally or in writing, by one or more
of the distributors, customers or suppliers listed in Section 4.30 of the
Disclosure Schedule that such Persons have terminated or intend to terminate or
are considering terminating their respective business relationships with the
Buyer, or are modifying such relationships with the Buyer in a manner which is
less favorable to the Buyer.
4.31. No Illegal Payments, Etc. To the Knowledge of the Buyer, neither the
Buyer, nor any of the directors, officers, employees or agents of the Buyer, has
(a) directly or indirectly given or agreed to give any illegal gift,
contribution, payment or similar benefit to any supplier, customer, governmental
official or employee or other person who was, is or may be in a position to help
or hinder the Buyer (or assist in connection with any actual or proposed
transaction) or made or agreed to make any illegal contribution, or reimbursed
any illegal political gift or contribution made by any other person, to any
candidate for federal, state, local or foreign public office (i) which would
subject the Buyer to any damage or penalty in any civil, criminal or
governmental litigation or proceeding or (ii) the non-continuation of which has
had or might have, individually or in the aggregate, a Material Adverse Effect
on the Buyer or (b) established or maintained any unrecorded fund or asset or
made any false entries on any books or records for any purpose.
4.32. Consents. Section 4.32 of the Disclosure Schedule sets forth a true,
correct and complete list of any Person whose consent or approval is required
and the matter, agreement or contract to which such consent relates in
connection with the consummation of the transactions contemplated by this
Agreement.
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4.33. Disclosure. The representations and warranties contained in this
Section 4 (including the Disclosure Schedule and any other schedules and
exhibits required to be delivered by the Buyer to the Sellers pursuant to this
Agreement) and any certificate required to be furnished by the Buyer to the
Sellers at the Closing do not contain and will not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements contained therein not misleading.
4.34. Disclaimer of Other Representations and Warranties. Except as
expressly set forth in this Section 4, the Buyer makes no representation or
warranty, express or implied, at law or in equity, in respect of the Buyer and
NewSub, or any of their respective assets, liabilities or operations, including,
without limitation, with respect to merchantability or fitness of any asset or
product for any particular purpose, and any such other representations or
warranties are hereby expressly disclaimed.
4.35. Interim Operations of NewSub. NewSub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted its operations only as contemplated
hereby. As of the date hereof and the Effective Time, except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated by this Agreement, NewSub has not and will not
have incurred, directly or indirectly, through any Subsidiary, any obligations
or liabilities or engaged in any business activities of any type or kind
whatsoever or entered into any agreements or arrangements with any Person.
5. Covenants. The Parties agree as follows:
5.1. General. Each of the Parties will use its respective commercially
reasonable best efforts to take all action and to do all things necessary,
proper, or advisable in order to consummate and make effective (a) the Merger
and the other transactions contemplated by this Agreement (including
satisfaction, but not waiver, of the closing conditions set forth in Section 6
below) and (b) the offer and sale by the Buyer, as soon as practicable after the
Closing Date, in an underwritten Initial Public Offering, of common stock issued
by the Buyer at a price per share currently anticipated to be $11.00, with
aggregate net proceeds to the Buyer from such public offering currently
anticipated to be $44 million.
5.2. Notices and Consents. From and after the date of this Agreement
through the Effective Time, each of the Parties has given any notices to third
parties, and will use its or his commercially reasonable best efforts to obtain
any third party consents that are required in connection with the transactions
contemplated by this Agreement, as set forth in Section 3.32 and Section 4.32 to
the Disclosure Schedule, including without limitation.
5.3. Operation of Business. From and after the date of this Agreement
through the Effective Time, each of Amitek and Buyer will not (and will not
cause or permit any of its
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Subsidiaries to) engage in any practice, take any action, or enter into any
transaction outside the Ordinary Course of Business. Without limiting the
generality of the foregoing, each of Amitek and Buyer (i) will not (and will not
cause or permit any of its Subsidiaries to) (A) change or amend its charter or
by-laws; (B) issue, sell or otherwise dispose of any of its capital stock or
grant any options, warrants or other rights to purchase or obtain (including
upon conversion, exchange or exercise) any of its capital stock, declare, set
aside, or pay any dividend or make any distribution with respect to its capital
stock or redeem, purchase, or otherwise acquire any of its capital stock, (C)
will not pay any amount to any third party with respect to any liability or
obligation (including any costs and expenses that have been incurred or may be
incurred in connection with this Agreement and the transactions contemplated
hereby) outside the Ordinary Course of Business or in excess of $25,000 or (D)
otherwise engage in any practice, take any action, or enter into any transaction
of the sort described in Section 3.11 or Section 4.11 above, as the case may be,
and (ii) Amitek will use its commercially reasonable best efforts to (A) keep
available to the Surviving Company and the Buyer, the services of its present
officer's, employees, agents and independent contractors, (B) preserve for the
benefit of Buyer the goodwill of Amitek's customers, suppliers, landlords and
others having business relations with it; (C) cooperate with Buyer in assisting
it to obtain the financing of the cash portion of the Merger Consideration.
Notwithstanding anything to the contrary in this Section 5.3 or elsewhere
in this Agreement, the Sellers, in their capacity as stockholders of Amitek,
shall be entitled to receive cash distributions ("Tax Distributions") that fully
cover their tax liability attributable to Amitek's income for the period
commencing January 1, 1999 and ending on the Closing Date calculated by assuming
that the highest marginal individual tax rate applicable to Florida residents
applies to that income. If there is an outstanding balance in Amitek's
accumulated adjustments account (the "AA Account") within the meaning of Section
1368 of the Code after such Tax Distributions are made, the Sellers may elect to
take a distribution to the extent of the outstanding AA Account balance (the "AA
Distribution").
5.4. Preservation of Business. From and after the date of this Agreement
through the Effective Time, each of Amitek and the Buyer will use its
commercially reasonable best efforts to keep (and will cause each of its
Subsidiaries to use its commercially reasonable best efforts to keep) its
business and properties substantially intact, including its present operations,
physical facilities, working conditions, and relationships with lessors,
licensors, suppliers, customers, and employees.
5.5. Full Access. From and after the date of this Agreement through the
Effective Time, each of Amitek and the Buyer will permit (and will cause each of
its Subsidiaries to permit) representatives of the other Parties to have full
access at all reasonable times, and in a manner so as not to interfere with the
normal business operations, to all of its premises, properties, personnel,
books, records (including Tax records), contacts, and documents.
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5.6. Notice of Developments. From and after the date of this Agreement
through Effective Time, each Party will give prompt written notice to the other
Party of any development causing a breach of any of its own representations and
warranties in Section 3 or Section 4 above. No disclosure by any Party pursuant
to this Section 5.6, however, shall be deemed to amend or supplement the
Disclosure Schedule or to prevent or cure any misrepresentations, breach of
warranty, or breach of covenant.
5.7. Exclusivity. From and after the date of this Agreement through the
Effective Time, none of Amitek, the Principal Sellers or the Buyer will (and
each of them will not cause or permit any of its Subsidiaries, or any of their
officers, directors, employees, agents or Affiliates to) (i) solicit, initiate,
or encourage the submission of any proposal or offer from any Person relating or
enter into or consummate any transaction relating to the acquisition of any
capital stock or other voting securities, or any substantial portion of the
assets, of any of Amitek, the Buyer or any of their respective Subsidiaries
(other than sales of inventory for a fair value in the Ordinary Course of
Business) (including any acquisition structured as a merger, consolidation, or
share exchange) or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing. Amitek and the Principal Sellers will notify the Buyer
immediately if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing, and the Buyer will notify Principal Sellers
immediately if any Person makes any proposal, offer, inquiry, or contact with
respect to any of the foregoing
5.8. Access to Records after Closing. For a period of three years after
the Closing Date, the Principal Sellers and their representatives shall have
reasonable access to all of the books and records Amitek to the extent that such
access may reasonably be required by the Principal Sellers in connection with
matters relating to or affected by the operations of Amitek prior to the Closing
Date. Such access shall be afforded by Buyer upon receipt of reasonable advance
notice and during normal business hours. The Principal Sellers shall be solely
responsible for any costs or expenses incurred by them pursuant to this Section
5.8. If Buyer shall desire to dispose of any of such books and records prior to
the expiration of such three-year period, Buyer shall, prior to such
disposition, give the Principal Sellers a reasonable opportunity, at the
Principal Sellers' expense, to segregate and remove such books and records as
the Principal Sellers may select.
5.9. Future Assurances. At any time and from time to time after the
Closing, at the request of Buyer and without further consideration, the
Principal Sellers will execute and deliver such other instruments of sale,
transfer, conveyance, assignment and confirmation and take such action as Buyer
may reasonably determine is necessary to transfer, convey and assign to Buyer,
and to confirm Buyer's title to or interest in Amitek, to put Buyer in actual
possession and operating control thereof and to assist Buyer in exercising all
rights with respect thereto. The Principal Sellers hereby constitute and appoint
Buyer and its successors and assigns as their true and lawful attorney in fact
in connection with the transactions contemplated by this instrument, with full
power of substitution, in the name and stead of the Principal Sellers but on
behalf of and
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for the benefit of the Buyer and its successors and assigns, to demand and
receive any and all of the assets, properties, rights and business hereby
conveyed, assigned, and transferred or intended so to be, and to give receipt
and releases for and in respect of the same and any part thereof, and from time
to time to institute and prosecute, in the name of the Principal Sellers or
otherwise, for the benefit of the Buyer or its successors and assigns,
proceedings at law, in equity, or otherwise, which the Buyer or its successors
or assigns reasonably deem proper in order to collect or reduce to possession or
any of the assets of Amitek to do all acts and things in relation to the assets
which the Buyer or its successors or assigns reasonably deem desirable.
5.10. Certain Tax Matters.
(a) Tax Treatment. The Parties shall use their respective best
efforts to cause the transactions contemplated hereby to qualify as a
reorganization under the provisions of Section 368(a) of the Code. Without
limiting the foregoing, (i) all Parties hereto agree to comply with the
reporting requirements of Treasury Regulation Section 1.368-3, (ii) all
Parties hereto agree to provide customary representation letters in
connection with the provision of the Tax Opinions contemplated by Section
6.1 and 6.2 hereof, and (iii) the Buyer, the Buyer's Affiliates and the
Principal Sellers agree not to take any action before or after the date
hereof to cause the Merger contemplated hereby not to be qualify as a
tax-free reorganization.
(b) Pre-Closing Tax Returns. The Principal Sellers shall prepare (or
cause to be prepared) and the Surviving Corporation shall timely file all
Tax Returns ("Pre-Closing Tax Returns") for Amitek that are required to be
filed after the Closing Date and that relate to any taxable period (or
portion thereof) ending on or before the Closing Date. The Principal
Sellers shall permit the Buyer to review and comment on each Pre-Closing
Tax Return at least ten (10) business days prior to the filing thereof.
(c) Cooperation. The Buyer, the Surviving Corporation, Amitek and
the Principal Sellers shall cooperate fully, as and to the extent
reasonably requested by the other parties, in connection with the filing
of Pre-Closing Tax Returns pursuant to this Section 5.10 and any audit,
litigation or other proceeding with respect to Taxes. Such cooperation
shall include (x) the retention and, upon any other Party's request, the
provision of records and information which are reasonably relevant to any
such audit, litigation or other proceeding, and (y) making employees
available on a mutually convenient basis to provide additional information
and explanation of any material provided hereunder. Surviving Corporation
shall (A) retain all books and records with respect to tax matters
pertinent to Amitek and/or the Principal Sellers relating to any taxable
period beginning before the Closing Date until the expiration of the
statute of limitations (and, to the extent notified by the Buyer or the
Principal Sellers, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with
any taxing authority, and (B) give all other Parties reasonable written
notice prior to transferring, destroying or discarding any such books
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and records, and, if the records are to be discarded or destroyed and such
other Parties so request, the Surviving Corporation shall allow the
requesting Parties to take possession of such books and records prior to
destroying or discarding them.
(d) Tax Audits and Proceedings Relating to a Pre-Closing Period.
After the Closing, the Buyer or the Surviving Corporation shall promptly
notify the Principal Sellers in writing of any written notice of a
proposed assessment or claim in an audit or administrative or judicial
proceeding of Amitek attributable to any period prior to the Closing Date.
In the case of an audit or administrative or judicial proceeding that
relates to periods (or portions thereof) ending before the Closing Date,
the Principal Sellers shall have the right, at their expense, to
participate in and control such audit or proceeding to the extent that
such audit or proceeding relates to a potential adjustment for which the
Principal Sellers would have liability; the Buyer may participate in, (but
not control) at the Buyer's expense, any such audit or proceeding. Neither
the Buyer, the Surviving Corporation nor the Principal Sellers shall enter
into any compromise or agree to settle any claim pursuant to any tax audit
or proceeding that would have an adverse effect on any other Party without
the written consent of such other Party, which consent may not be
unreasonably withheld or unreasonably delayed. The Buyer, the Surviving
Corporation and the Principal Sellers agree to cooperate in the defense
against or compromise of any claim in any audit or proceeding.
(e) Tax Benefits Relating to Compensatory Payments, Stock Option
Agreement and Bonus Plan. Buyer shall promptly pay to the Principal
Sellers, upon actual realization, as part of the purchase price for the
Amitek Shares, amounts equal to the amounts by which the total Tax
liability of Buyer, Amitek, the Surviving Corporation or any affiliate or
any successor thereto is reduced (i.e. net of any directly related Tax
costs) as a result of Tax deductions or other Tax benefits resulting from
compensatory payments to certain long-term or key employees of Amitek
pursuant to the Bonus and Settlement for Past Services Agreements, the
Stock Option Agreement and the Bonus Plan. Purchaser shall use its
reasonable best efforts to claim such Tax deductions or other Tax benefits
at the earliest possible time (and to mitigate any such directly related
Tax costs). Such payment shall be made 50% in cash and 50% in Century
Common Stock valued at the then Fair Value for such stock.
5.11. National Bank of Canada Loan Obligations. Buyer shall use its best
efforts to cause National Bank of Canada ("NBC") to consent to the consummation
of the Merger and the other transactions contemplated in this Agreement under
the Loan Agreement dated June 4, 1998, as amended, among NBC, Amitek, M&K and
the Principal Sellers, and all related guarantees, security agreements, notes
and mortgages (collectively, the "NBC Loan Documents"), and to release the
Principal Sellers and M&K from all of their respective obligations under the NBC
Loan Documents. Each of Amitek and the Principal Sellers shall cooperate with
Buyer in connection with Buyer obtaining such NBC consents and releases.
Notwithstanding anything to the contrary in Article 9 or otherwise in this
Agreement, Buyer shall
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indemnify and hold the Principal Sellers and M&K harmless from and after the
Closing Date from and against all Losses arising out of or in connection with
the NBC Loan Documents.
5.12. Capital Leases. Notwithstanding anything to the contrary in this
Agreement, Buyer understands and agrees that Amitek shall use its commercially
reasonable best efforts to seek to obtain the consent or approval of the Merger
and the other transactions contemplated by this Agreement from any other party
to the capital leases set forth on Exhibit E hereto, whether or not such capital
leases by their terms require any such consent or approval. Notwithstanding
anything to the contrary in Article 9 or otherwise in this Agreement, in the
event Amitek fails to obtain such consents or approvals, Buyer agrees to
indemnify and hold harmless each of the Principal Sellers and M&K from and after
the Closing Date from and against all Losses arising out of or in connection
with such capital leases. Buyer covenants and agrees to use its best efforts to
obtain any required consents or approvals of any other parties under such
capital leases and to cause the release of the Principal Sellers and M&K from
all of their respective obligations thereunder or relating thereto, all within
one year after the Closing Date, and to provide reasonably satisfactory evidence
thereof to the Principal Sellers. In the event Buyer shall for any reason fail
to obtain any such consents, approvals and releases within such one-year period,
Buyer shall pay in full and discharge and release all outstanding obligations of
Amitek, the Principal Sellers, M&K and the Surviving Corporation under such
capital leases.
5.13. Certain Amitek Trade Payables. Buyer understands and agrees that, as
more fully described in Exhibit F hereto, in consideration for the cancellation
of certain indebtedness owed by Amitek to M&K, Amitek has assumed all liability
for certain trade payables of M&K (and of Amitek and M&K jointly) (the "Assumed
Payables") and agreed to hold harmless M&K and the Principal Sellers from and
against all Losses arising out of or in connection with the Assumed Payables.
Notwithstanding anything to the contrary in Article 9 or otherwise in this
Agreement, Buyer agrees to indemnify and hold harmless the Principal Sellers and
M&K from and after the Closing Date from and against all Losses arising out of
or in connection with the Assumed Payables.
5.14. Removal of Non-Amitek Assets and Personnel. In the interests of a
smooth transition, the Buyer and the Surviving Corporation hereby agree to
permit the Principal Sellers and their affiliates to locate certain non-Amitek
assets and personnel, described in Exhibit Q hereto, at the Amitek facility at
1701 Clint Moore Road, Boca Raton, FL, without further compensation therefor,
until January 15, 2000.
5.15. "Drop Down" of Amitek Assets and Liabilities to NewSub. Immediately
following the Effective Time, the Buyer shall assign to NewSub, and NewSub shall
assume, all of the Buyer's right, title and interest in, to and under all
property, rights, privileges, powers, franchises, contracts, agreements, leases,
undertakings, commitments, and other property and assets of Amitek acquired, and
all debts, liabilities, duties and obligations of Amitek assumed, by the Buyer
in the Merger, all pursuant to an Assignment and Assumption Agreement by and
between the Buyer and NewSub in substantially the form attached hereto as
Exhibit R.
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6. Conditions to Obligation to Close.
6.1. Conditions to Obligation of the Buyer. The obligation of the Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(a) Representations and Warranties. The representations and
warranties set forth in Section 3 above shall be true and correct when
made and shall be deemed to have been made again at and as of the Closing
Date and shall then be true and correct in all material respects, in the
case of those representations and warranties which are not by their
express terms qualified by reference to materiality;
(b) Performance by Sellers. The Sellers shall have performed and
complied with all of their covenants, agreements and obligations hereunder
through the Closing;
(c) Consents. The Sellers shall have (i) procured all of the
governmental approvals, consents or authorizations and third party
consents specified in Section 3.32 and Section 5.2 above;
(d) Absence of Litigation. No action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(i) prevent consummation of any of the transactions contemplated by this
Agreement, (ii) cause any of the transactions contemplated by this
Agreement to be rescinded following consummation, (iii) affect adversely
the right of the Buyer to own the Amitek Shares or have a Material Adverse
Effect on Amitek (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(e) Lombardo Employment Agreement. Mark Lombardo shall have entered
into an Employment, Consulting and Noncompetition Agreement substantially
in the form of Exhibit G hereto and the same shall be in full force and
effect.
(f) Certificates. The Principal Sellers shall have delivered to the
Buyer a certificate to the effect that each of the conditions specified in
Section 6.1(a) and (b) is satisfied in all respects;
(g) Buyer's Stockholders Agreement. Each of the Principal Sellers
shall have executed an instrument of joinder to the Buyer's Stockholders
Agreement, as amended and restated in its entirety in the form of Exhibit
H hereto, agreeing to be bound as a party thereto;
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(h) Opinion. The Buyer shall have received from Ropes & Gray,
counsel to the Principal Sellers, an opinion in form and substance as set
forth in Exhibit I attached hereto, addressed to the Buyer, and dated as
of the Closing Date;
(i) Tax Opinion. The Buyer shall have received from Hemenway &
Barnes, tax counsel to the Buyer, an opinion reasonably satisfactory to
the Buyer that the merger transactions qualify as "tax-free"
reorganizations under Code Sections 368(a)(1)(A) and 368(a)(2)(D);
(j) No Material Adverse Change in Amitek. There shall not have been
any change which has resulted in a Material Adverse Effect on Amitek and
no event has occurred or circumstance exists that may result in such a
Material Adverse Effect.
(k) All Necessary Actions. All actions to be taken by Amitek in
connection with the consummation of the transactions contemplated hereby
and all certificates, opinions, instruments and other documents required
to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
(l) Consent of Fidelity and USA Funding. The Buyer shall have
received any required consent and approvals from Fidelity and USA Funding.
The Buyer may waive any condition specified in this Section 6.1 if it
executes a writing so stating at or prior to the Closing and such waiver
shall not be considered a waiver of any other provision in this Agreement
unless the writing specifically so states.
6.2. Conditions to Obligations of the Principal Sellers and Amitek. The
obligation of the Principal Sellers and Amitek to consummate the transactions to
be performed by them in connection with the Closing is subject to satisfaction
of the following conditions:
(a) Representations and Warranties. The representations and
warranties set forth in Section 4 above shall be true and correct when
made and shall be deemed to have been made again at and as of the Closing
Date and shall then be true and correct in all material respects, in the
case of those representations and warranties which are not by their
express terms qualified by reference to materiality;
(b) Performance by Buyer. The Buyer shall have performed and
complied with all of its covenants, agreements and obligations hereunder
through the Closing;
(c) Absence of Litigation. No action, suit, or proceeding shall be
pending or threatened before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would
(i) prevent consummation of any of the transactions contemplated by this
Agreement or (ii) cause any of the transactions contemplated by this
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Agreement to be rescinded following consummation, (iii) affect adversely
the right of the Sellers to own the Buyer Shares or have a Material
Adverse Effect on the Buyer (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect);
(d) Buyer's Board of Directors. Myung Ho Park shall have been duly
elected, effective as of the Closing, to serve as a director of the Buyer
pursuant to the provisions of the Buyers' Stockholders Agreement;
(e) Buyer's Stockholders Agreement. The Buyer's Stockholders
Agreement shall have been amended by the Waiver of Rights and Amendment
under Stockholders Agreement set forth as Exhibit J hereto, and the same
shall be in full force and effect;
(f) Certificates. The Buyer shall have delivered to Amitek a
certificate to the effect that each of the conditions specified in Section
6.2(a) and (b) is satisfied in all respects;
(g) Employment Agreement. The Buyer and Myung Ho Park shall have
entered into an Employment Agreement substantially in the form of Exhibit
K hereto and the same shall be in full force and effect;
(h) Stock Pledge Agreement. The Buyer shall have executed a Stock
Pledge Agreement substantially in the form of Exhibit L hereto and the
same shall be in full force and effect; and the Buyer shall have duly
authorized, executed, acknowledged, delivered, filed, registered and
recorded such security agreements, notices, financing statements,
memoranda of intellectual property security interests and other
instruments as the Principal Sellers may have reasonably requested in
order to perfect the Liens purported or required pursuant to the Stock
Pledge Agreement and shall have paid all filing or recording fees or taxes
required to be paid in connection therewith, including any recording,
mortgage, documentary, transfer or intangible taxes.
(i) Registration Rights Agreement. The Buyer and the Sellers shall
have executed a Registration Rights Agreement substantially in the form of
Exhibit M hereto and the Buyer and HarbourVest shall have executed a
Waiver of Rights and Amendment in the form of Exhibit O hereto, and each
of the same shall be in full force and effect;
(j) No Material Adverse Change in the Buyer. There shall not have
been any change which has resulted in a Material Adverse Effect on the
Buyer and no event has occurred or circumstance exists that may result in
such a Material Adverse Effect.
(k) Opinion. The Principal Sellers shall have received from counsel
to the Buyer an opinion in form and substance as set forth in Exhibit N
attached hereto, addressed to the Principal Sellers, and dated as of the
Closing Date;
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(l) Tax Opinion. The Principal Sellers shall have received from
Ropes & Gray, tax counsel to the Principal Sellers, an opinion reasonably
satisfactory to the Principal Sellers that the merger transactions qualify
as "tax-free" reorganizations under Code Sections 368(a)(1)(A) and
368(a)(2)(D);
(m) Valuation Opinion. The Principal Sellers shall have received a
valuation opinion of Advest, dated as of the Closing Date, reasonably
satisfactory to the Principal Sellers, valuing the Buyer Shares at no less
than 50% of the total Merger Consideration; and
(n) All Necessary Actions. All actions to be taken by the Buyer in
connection with the consummation of the transactions contemplated hereby
and all certificates, opinions, instruments and other documents required
to effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Principal Sellers.
(o) NBC Loan Documents. The consent of NBC under the NBC Loan
Documents shall have been granted and the obligations of the Principal
Sellers and M&K under the NBC Loan Documents shall have been discharged
and released in accordance with Section 5.11, or all indebtedness and
liens outstanding under the NBC Loan Documents shall have been paid in
full and discharged in accordance with Section 5.11, all to the complete
satisfaction of the Principal Sellers.
(p) Capital Leases. Any required consents or approvals of the
respective lessors under each of the capital leases set forth in Exhibit E
hereto (the "Capital Leases") shall have been obtained and all obligations
of the Principal Sellers and M&K in respect of the Capital Leases shall
have been discharged or released, all to the complete satisfaction of the
Principal Sellers.
(q) Centennial Waiver or Buy-Out. Either (I) the Buyer and
Centennial Technologies, Inc., a Delaware corporation, or any successor or
assignee thereof ("Centennial"), shall have executed a document in
substantially the form of the Waiver of Rights and Amendment attached as
Exhibit O with only such changes as are necessary to reflect that such
agreement refers to the registration rights of Centennial rather than to
those of HarbourVest, or (II) the Buyer shall have repurchased all of the
capital stock of the Company owned by Centennial and all registration
rights shall have been terminated in connection therewith.
The Principal Sellers may waive any condition specified in this Section
6.2 if they all execute a writing so stating at or prior to the Closing and such
waiver shall not be considered a waiver of any other provision in this Agreement
unless the writing specifically so states.
7. Noncompetition.
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(a) Each Principal Seller agrees that, in consideration of the purchase by
Buyer hereunder, it, he or she shall not, on or prior to the date which is three
(3) years after the Closing Date, directly or indirectly, run, own, manage,
operate, control, be employed by, provide consulting services to, be an officer
or director of, participate in, lend his, her or its name to, invest in or be
connected in any manner with the management, ownership, operation or control of
any business, venture or activity which competes with the business being
conducted or proposed to be conducted at the Closing Date by the Buyer, Merger
Sub as the Surviving Corporation or Amitek; provided, however, no Principal
Seller shall be considered to be in default of this Section 7 solely by virtue
of holding for portfolio purposes as a passive investor not more than five
percent (5%) of the issued and outstanding equity securities of a corporation,
the equity securities of which are listed or quoted on a stock exchange or an
over-the-counter market within the United States; provided, further, that no
Principal Seller shall be considered to be in default of this Section 7 by
virtue of his continued participation in any activity which is disclosed in
Section 7 of the Disclosure Schedule; provided, further, that no Principal
Seller shall be considered to be in default of this Section 7 by virtue of his
ownership, operation, control or management of or any other participation with
or in NewSub in connection with the enforcement of the Principal Sellers' rights
under the Stock Pledge Agreement.
(b) Each of the Principal Sellers further agrees that for a period of
three (3) years after the Closing Date such Principal Seller will not directly
or indirectly without the prior written consent of Buyer, recruit, offer
employment, employ, engage as a consultant, lure or entice away or in any other
manner persuade or attempt to persuade any person who is an employee of Amitek,
the Buyer, NewSub or any Subsidiary, group, or division of Buyer, or any
Affiliate thereof, to leave such employment unless such person has been
terminated by such Person.
8. Confidentiality. Each of the Parties will treat and hold as such all of the
Confidential Information of the other Parties, refrain from using any of the
Confidential Information of the other Parties except in connection with this
Agreement (including seeking the approval of any of its institutional or
corporate shareholders, including but not limited to HarbourVest Partners
V-Direct Fund and Centennial Technologies, Inc.), and deliver promptly to such
other Parties or destroy, at the request and option of such other Parties, all
tangible embodiments (and all copies) of such other Parties' Confidential
Information which are in his or its possession. In the event that any Party is
requested or required (by oral question or request for information or documents
in any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process) to disclose any Confidential Information of another Party, such
Party will notify the other Party promptly of the request or requirement so that
the other Party may seek an appropriate protective order or waive compliance
with the provisions of this Section 8. If, in the absence of a protective order
or the receipt of a waiver hereunder, any Party is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or else stand
liable for contempt, that Party may disclose the Confidential Information to the
tribunal; provided, however, that the disclosing Party shall use his or its best
efforts to obtain, at the request of the other Party, an order or other
assurance that confidential treatment will be accorded to such portion of the
Confidential
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Information required to be disclosed as such other Party shall designate.
Notwithstanding the foregoing, each of the Parties acknowledge that each
institutional and corporate shareholder identified above shall be permitted to
disclose summary financial information and narrative descriptions relating to
the Confidential Information to its partners and shareholders and prospective
partners and shareholders.
9. Indemnification.
9.1. Exclusive Remedy. This Section 9 shall provide the sole and exclusive
remedy following the Closing for any and all Losses sustained or incurred by any
Party or its successors and assigns relating to or arising in connection with
(a) any inaccuracy or breach of a representation or warranty made in this
Agreement, (b) any breach or failure to comply with any covenants or agreements
contained herein or in any document delivered hereunder which do not require
performance after the Effective Time, (c) any misrepresentation in or omission
from any certificate, instrument or other document delivered hereunder or in
connection herewith or (d) any other Losses that arise in connection with this
Agreement or with respect to which indemnification is provided in this Section
9.
9.2. Survival of Representations and Warranties. All of the
representations and warranties contained herein or in any document, certificate
or other instrument required to be delivered hereunder shall survive the Closing
and continue in full force and effect for a period of eighteen (18) months after
the Closing Date. Following the termination of any such representation and
warranty, no party shall have the right or be permitted to bring any claim for
breach of such terminated representation or warranty unless written notice
thereof is given to the breaching party or parties prior to such termination
date. All covenants and indemnities of the Parties in this Agreement or in any
document or certificate delivered hereunder shall, unless otherwise specifically
provided therein, remain in full force and effect forever.
9.3. Indemnity by Principal Sellers. The Principal Sellers hereby agree to
jointly and severally indemnify, defend and hold harmless Buyer and each of its
directors, officers and Affiliates against and in respect of all liabilities,
obligations, judgments, Liens, injunctions, charges, orders, decrees, rulings,
damages, dues, assessments, Taxes, losses, fines, penalties, expenses, fees,
costs, amounts paid in settlement (including reasonable attorneys' and expert
witness fees and disbursements in connection with investigating, defending or
settling any action or threatened action), arising out of any claim, damages,
complaint, demand, cause of action, audit, investigation, hearing, action, suit
or other proceeding asserted or initiated or otherwise existing in respect of
any matter, whether or not arising out of a claim by a third party
(collectively, the "Losses") resulting from (a) the inaccuracy of any
representation or warranty made by Amitek or the Principal Sellers herein, (b)
any misrepresentation, breach of warranty or nonfulfillment of any agreement or
covenant of the Principal Sellers or Amitek contained herein or in any agreement
or instrument required to be entered into in connection herewith, or (c) any
misrepresentation in or omission from any schedule, document, certificate or
other instrument required to be furnished by Amitek or the Principal Sellers
hereunder; provided, however, that,
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notwithstanding anything in this Agreement to the contrary, the Principal
Sellers shall be liable under this Section 9.3 in respect of Losses only if the
aggregate of such Losses exceeds $500,000 in which case the Principal Sellers
will be liable under this Section 9.3 for the amount of such Losses in excess of
$250,000, up to a maximum aggregate amount of $7,000,000 (such $7,000,000
aggregate maximum amount to be reduced dollar-for-dollar in the amount of any
decrease in the Merger Consideration pursuant to Section 2.10 or Section 2.11
hereof; provided, that the amount of any such decrease in the Merger
Consideration shall not be counted as a "Loss" for purposes of the $500,000 or
$250,000 thresholds); and provided, further, that such Losses shall be measured
in each case net of (i) the present value (using the applicable federal rate
under Code Section 1274(a)(1)) of any income Tax benefits to the Buyer or NewSub
reasonably expected to be realized by them as a result of such Loss and (ii)
insurance proceeds if and when actually received by the Buyer or NewSub, but
Buyer and NewSub shall retain the right in their sole discretion to determine
whether to pursue such claims by, through or against an insurer or to bring such
claims directly or indirectly against the Principal Sellers pursuant to this
Section 9.3.
Any payment made by the Principal Sellers under this Section 9.3 shall be
payable (A) if prior to the closing of an Initial Public Offering, at the option
of such Principal Sellers, by either: (i) payment of the amount of such
indemnifiable Loss in cash or immediately available funds, or (ii) permitting
the Buyer to offset the amount of such indemnifiable Loss against the
outstanding principal balance of, and any accrued and unpaid interest on, the
Buyer's Notes held by such Principal Sellers (in inverse order of maturity) and,
to the extent the outstanding principal balance of, and any accrued and unpaid
interest on, such Buyer's Notes is less than the amount of such indemnifiable
Loss, then such deficit shall be paid by such Principal Sellers in cash or
immediately available funds; or (B) if following the closing of an Initial
Public Offering, (i) if any principal of or interest on the Buyer's Notes remain
unpaid at that time, at the option of the Principal Sellers in the manner set
forth in (i) or (ii) of clause (A) above, or (ii) if the principal of and
interest on the Buyer's Notes shall have been paid in full at that time, then at
the option of the Buyer, by either: (x) payment of the amount of such
indemnifiable Loss in cash or immediately available funds, or (y) payment of the
amount of such indemnifiable Loss in a combination of the payments described in
clause (B)(ii)(x) above and the transfer and assignment by such Principal
Sellers to the Buyer of shares of Century Common Stock, such stock to be valued
at its Fair Value as of the time of such payment and the value of such stock in
no event to exceed 50% of the aggregate indemnification payment being made.
Notwithstanding anything to the contrary in this Section 9, the Principal
Sellers shall not have any indemnification obligation with respect to (i) any
matter for which an adjustment to the Purchase Price was made pursuant to
Section 2.10 or Section 2.11 hereof and (ii) any matter specifically identified
in the Draft Closing Date Balance Sheet as a difference from the Estimated
Closing Date Balance Sheet (whether or not such matter is reflected in the
Closing Date Balance Sheet). Buyer shall provide the Principal Sellers written
notice for any claim made in respect of the indemnification provided in this
Section 9.3, whether or not arising out of a claim by a third party.
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9.4. Indemnity by Buyer. Buyer hereby agrees to indemnify, defend and hold
harmless the Principal Sellers and each of their directors, officers and
Affiliates against and in respect of all Losses (including but not limited to
any diminution in value of the Buyer Shares) resulting from (a) the inaccuracy
of any representation or warranty made by the Buyer herein, (b) any
misrepresentation, breach of warranty or nonfulfillment of any agreement or
covenant of the Buyer contained herein or in any agreement or instrument
required to be entered into in connection herewith, or (c) any misrepresentation
in or omission from any schedule, document, certificate or other instrument
required to be furnished by the Buyer hereunder; provided, however, that,
notwithstanding anything in this Agreement to the contrary, the Buyer shall be
liable under this Section 9.4 in respect of Losses only if the aggregate of such
Losses exceeds $500,000 in which case the Buyer will be liable under this
Section 9.4 for the amount of such Losses in excess of $250,000, up to a maximum
aggregate amount of $7,000,000; and provided, further, that such Losses shall be
measured in each case net of insurance proceeds if and when actually received by
the Principal Sellers, but the Principal Sellers shall retain the right in their
sole discretion to determine whether to pursue such claims by, through or
against an insurer or to bring such claims directly or indirectly against the
Buyer pursuant to this Section 9.4. Any payment in respect of an indemnifiable
Loss made by the Buyer under this Section 9.4 shall be payable 50% in cash or
immediately available funds and 50% by the Buyer issuing or transferring to the
Principal Sellers validly issued, fully paid and nonassessable shares of Century
Common Stock, such stock to be valued as of the time of such payment. The
Principal Sellers shall provide the Buyer written notice for any claim made in
respect of the indemnification provided in this Section 9.4, whether or not
arising out of a claim by a third party.
9.5. Matters Involving Third Parties.
(a) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (including any proposed or actual Tax
audit) (a "Third Party Claim") which may give rise to a claim for
indemnification against any other Party (the "Indemnifying Party") under
this Section 9, then the Indemnified Party shall promptly, but in no event
more than 15 days following such Indemnified Party's receipt of such
notice, notify each Indemnifying Party thereof in writing (a "Claim
Notice") of such Third Party Claim and the amount or the estimated amount
thereof to the extent then feasible (which estimate shall not be
conclusive of the final amount of such Third Party Claim); provided,
however, that no delay on the part of the Indemnified Party in notifying
any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the
Indemnifying Party thereby is prejudiced.
(b) The Indemnifying Party shall have 90 days from the receipt of
the Claim Notice (the "Notice Period") to notify the Indemnified Party (i)
whether or not the Indemnifying Party disputes the liability of the
Indemnifying Party to the Indemnified Party hereunder with respect to such
claim or demand and (ii) whether or not it elects to defend the
Indemnified Party against such claim or demand. All costs and expenses
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incurred by the Indemnifying Party in defending such claim or demand shall
be a liability of, and shall be paid by, the Indemnifying Party; provided,
however, that the amount of such expenses shall be a liability of the
Indemnifying Party hereunder, subject to the limitations set forth in
Sections 9.3 and 9.4 hereof. In the event that the Indemnifying Party
notifies the Indemnified Party within the Notice Period that it elects to
defend the Indemnified Party against such claim or demand and except as
hereinafter provided, the Indemnifying Party shall have the right to
defend the Indemnified Party by appropriate proceedings with counsel
reasonably satisfactory to the Indemnified Party, but subject in all cases
to consultation in good faith with the Indemnified Party. If any
Indemnified Party desires to participate in any such defense or settlement
it may do so at its sole cost and expense, but control of such defense or
settlement shall remain with the Indemnifying Party.
(c) If the Indemnifying Party assumes the defense of a Third Party
Claim, (i) it will be conclusively established for purposes of this
Agreement that such Third Party Claim constitutes an indemnifiable Loss,
subject to the limitations set forth in Sections 9.3 and 9.4 hereof; and
(ii) no compromise or settlement of such claims may be offered or effected
by the Indemnifying Party without the Indemnified Party's prior written
consent unless (A) the proposed settlement or compromise does not contain
a finding or admission of any violation of law or any violation of the
rights of any Person by the Indemnified Party, (B) the proposed settlement
or compromise imposes on the Indemnified Parties only monetary payment
obligations, (C) there would be no indemnifiable Loss incurred by any
Indemnified Party not paid or fully indemnified by the Indemnifying Party
or any imposition of a consent order, obligation, agreement, injunction or
decree which in the reasonable judgment of the Indemnified Party would
materially restrict or competitively disadvantage the future activity or
conduct of the Indemnified Party or any Subsidiary or Affiliate thereof
(D) the proposed settlement or compromise includes a full release of the
Indemnified Party and all Subsidiaries and Affiliates thereof in respect
of all indemnifiable Losses resulting therefrom, related thereto or
arising therefrom and (E) such settlement or compromise would not result
in a waiver or other release of rights or defenses of the Indemnified
Party in respect of matters not related thereto or arising therefrom.
(d) If the Indemnifying Party elects not to defend the Indemnified
Party against such claim or demand, whether by not giving the Indemnified
Party timely notice as provided above or otherwise, then the amount of any
such claim or demand, or, if the same be contested by the Indemnified
Party, that portion thereof as to which such defense is unsuccessful (and
the reasonable costs and expenses pertaining to such defense) shall be the
liability of the Indemnifying Party hereunder, subject to the limitations
set forth in Sections 9.3 and 9.4 hereof.
(e) To the extent the Indemnifying Party shall control or
participate in the defense or settlement of any Third Party Claim, the
Indemnified Party will cooperate in
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such defense, including giving to the Indemnifying Party and its counsel
any relevant powers of attorney and access to, during normal business
hours and upon prior written notice from the Indemnifying Party, the
relevant business records and other documents, and shall permit them to
consult with the employees and counsel of the Indemnified Party. The
Indemnified Party shall use commercially reasonable efforts in the defense
of all such claims.
9.6. Matters Not Involving Third Party Claims. If a claim for
indemnification by any Indemnified Party hereunder shall be asserted in respect
of any claim other than a Third Party Claim, the Indemnified Party shall deliver
a written notice of such claim to the Indemnifying Party requesting
indemnification and specifying the basis on which indemnification is sought and
the amount of the asserted Losses. In the case of such indemnification claim
involving a matter other than a Third Party Claim, the Indemnifying Party shall
have 60 days to object to such indemnification claim by delivery of a written
notice of objection to the Indemnified Party specifying in reasonable detail the
basis for such objection. Failure to timely so object shall constitute a final
and binding acceptance of such indemnification claim by the Indemnifying Party,
and the indemnification claim shall be paid in accordance with this Section 9.
Upon any final determination of the amount of an indemnification claim under
this Section 9, whether by agreement between the Indemnifying Party and the
Indemnified Party or by an arbitration award or by any other compromise,
settlement or final adjudication, the Indemnifying Party shall pay the amount of
such indemnification claim within 10 days of the date such amount is determined.
9.7. Set-Off for Final Judgment of Fraud Only. Except as set forth in this
Section 9.7, Buyer, as maker of the Buyer's Notes, expressly waives any and all
right of set-off against the Buyer's Notes, including without limitation any and
all right to apply the amount of any Losses referenced in this Section 9 against
any amounts payable on the Buyer's Notes. On or after the Set-Off Date, the
Buyer shall have the right to set-off and apply the Award Amount of any Final
Judgment of Fraud, to the extent not already paid, against the principal balance
of, and accrued and unpaid interest on, the Buyer's Notes outstanding on the
Set-Off Date; provided, however, that prior to the Set-Off Date neither the
pendency of any claim or action asserting, or that may or shall give rise to,
Buyer's right of set-off hereunder, nor the threatened or potential assertion of
such a claim or action, nor any other circumstance, shall entitle Buyer to
assert or exercise any right of set-off against, or delay or withhold any
payment of, or defend against the entry of judgment in the Principal Sellers'
favor for, any scheduled or accelerated installment of principal of or interest
on the Buyer's Notes; and provided, further, that the Buyer shall have no right
of set-off hereunder against any principal of or interest on the Buyer's Notes
if an Event of Default (as defined in the Buyer's Notes) shall have occurred
prior to the Set-Off Date. The amount of the Award Amount of any Final Judgment
of Fraud that Buyer shall have the right to set-off against the Buyer's Notes
hereunder shall be subject to the $7,000,000 (as reduced pursuant to Section
9.3) aggregate maximum amount of Losses for which indemnification is available
under Section 9.3 and the $500,000 and $250,000 thresholds for Losses under
Section 9.3.
10. Termination.
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10.1. Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(b) the Buyer may terminate this Agreement by giving written notice
to the Principal Sellers at any time prior to the Closing (i) in the event
any Principal Seller has breached any material representation, warranty,
or covenant contained in this Agreement in any material respect, the Buyer
has notified the Principal Sellers of the breach, and the breach has
continued without cure for a period of 30 days after the notice of breach
or (ii) if the Closing shall not have occurred on or before August 30,
1999, by reason of the failure of any condition precedent under Section
6.1 hereof (unless the failure results primarily from the Buyer breaching
any representation, warranty, or covenant contained in this Agreement);
and
(c) the Principal Sellers or Amitek may terminate this Agreement by
giving written notice to the Buyer at any time prior to the Closing (i) in
the event the Buyer has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the
Principal Sellers or Amitek, as the case may be, has notified the Buyer of
the breach, and the breach has continued without cure for a period of 30
days after the notice of breach or (ii) if the Closing shall not have
occurred on or before August 30, 1999, by reason of the failure of any
condition precedent under Section 6.2 hereof (unless the failure results
primarily from the Principal Sellers or Amitek breaching any
representation, warranty, or covenant contained in this Agreement).
10.2. Effect of Termination. If any Party terminates this Agreement
pursuant to Section 10. 1 above, all rights and obligations of the Parties
hereunder (except for Section 8) shall terminate without any liability of any
Party to any other Party (except for any liability of any Party then in breach).
11. Miscellaneous.
11.1. Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior approval of the other
Party.
11.2. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
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11.3. Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
11.4. Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party; provided, however, that the Buyer may (i) assign any or all
of its rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder.
11.5. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
11.6. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.7. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (i) upon
confirmation of facsimile, (ii) one business day following the date sent when
sent by overnight delivery and (iii) five business days following the date
mailed when mailed by registered or certified mail return receipt requested and
postage prepaid at the following address:
If to the Sellers:
At the address set opposite their names on Exhibit A-1 hereto, with copies
as specified therein.
If to Amitek:
Amitek Corporation
1701 Clint Moore Road
Boca Raton, FL 334487
Attention: Mr. Myung Ho Park, President
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Copy, in the case of Amitek or the Sellers to:
Ropes & Gray
One International Place
Boston, MA 02110-2624
Attention: Steven A. Wilcox, Esq.
If to the Buyer:
Century Electronics Manufacturing, Inc.
274 Cedar Hill Road
Marlborough, MA 01752
Attention: Mr. Les Sainsbury, Chief
Executive Officer and President
Copy to:
Hemenway & Barnes
60 State Street, 8th Floor
Boston, MA 02109
Attention: John J. Madden, Esq.
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
11.8. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of The Commonwealth of Massachusetts without
giving effect to any choice or conflict of law provision or rule (whether of The
Commonwealth of Massachusetts or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than The Commonwealth of
Massachusetts.
11.9. Consent to Jurisdiction. Each Party to this Agreement, by its
execution hereof, (i) hereby irrevocably submits, and agrees to cause each of
its Subsidiaries to submit, to the exclusive jurisdiction of the state courts of
the State of Delaware or the United States District Court located in the State
of Delaware for the purpose of any Action arising out of or based upon this
Agreement, the Related Agreements or relating to the subject matter hereof or
thereof, in each case whether now existing or hereafter arising, (ii) hereby
waives, and agrees to cause each of its Subsidiaries to waive, to the extent not
prohibited by applicable law, and
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agrees not to assert, and agrees not to allow any of its Subsidiaries to assert,
by way of motion, as a defense or otherwise, in any such Action, any claim that
it is not subject personally to the jurisdiction of the above-named courts, that
its property is exempt or immune from attachment or execution, that any such
Action brought in one of the above-named courts may be removed to any federal
court, should be dismissed on grounds of forum non conveniens, should be
transferred to any court other than one of the above-named courts, or should be
stayed by reason of the pendency of some other proceeding in any other court
other than one of the above-named courts, or that this Agreement, the Related
Agreements or the subject matter hereof or thereof, in each case whether now
existing or hereafter arising, may not be enforced in or by such court, or that
this Agreement, the Related Agreements or the subject matter hereof or thereof
may not be enforced in or by such court and (iii) hereby agrees not to commence
or to permit any of its Subsidiaries to commence any Action arising out of or
based upon this Agreement, the Related Agreements or relating to the subject
matter hereof or thereof, in each case whether now existing or hereafter
arising, other than before one of the above-named courts nor to make any motion
or take any other action seeking or intending to cause the transfer or removal
of any such Action to any court other than one of the above-named courts whether
on the grounds of inconvenient forum or otherwise. Each Party hereby (x)
consents to service of process in any such Action in any manner permitted by
Delaware law; (y) agrees that service of process made in accordance with clause
(x) or by registered or certified mail, return receipt requested, at its address
specified pursuant to Section 11.7, is reasonably calculated to give actual
notice of any such Action; and (z) waives and agrees not to assert (by way of
motion, as a defense, or otherwise) in any such Action any claim that service of
process made in accordance with clause (x) or (y) does not constitute good and
sufficient service of process.
11.10.Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW
THAT CANNOT BE WAIVED, EACH OF THE PARTIES HERETO HEREBY WAIVES, AND AGREES TO
CAUSE EACH OF ITS SUBSIDIARIES TO WAIVE, AND COVENANTS THAT NEITHER IT NOR ANY
OF ITS SUBSIDIARIES WILL ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE)
ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION
ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE RELATED AGREEMENTS OR THE
SUBJECT MATTER HEREOF OR THEREOF, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING. ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION 11.10 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH
PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
11.11.Reliance. Each of the Parties hereto acknowledges that he or it has
been informed by each other Party that the provisions of Sections 11.8, 11.9 and
11.10 constitute a material inducement upon which such Party is relying and will
rely in entering into this Agreement, the Related Agreements and the
transactions contemplated hereby and thereby.
11.12.Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by each
of the Parties. No waiver by
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any Party of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
11.13.Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
11.14. Expenses. Unless otherwise agreed, the Parties shall bear their own
respective expenses (including, but not limited to, all compensation and
expenses of counsel, financial advisers, consultants, actuaries and independent
accountants) incurred in connection with the preparation and execution of this
Agreement and consummation of the transactions contemplated hereby.
11.15.Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The inclusion of any
disclosures in any section of the Disclosure Schedule shall be deemed to be an
inclusion of such disclosures in all other sections of the Disclosure Schedule
to the extent that the failure to so include such disclosures could cause the
related representations or warranties to be inaccurate.
11.16.Incorporation of Exhibits and Schedules. The Exhibits and schedules
(including the Disclosure Schedule) identified in this Agreement are
incorporated herein by reference and made a part hereof.
11.17.Specific Performance. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter in addition to any other remedy to which it may be
entitled, at law or in equity.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
date first above written.
CENTURY ELECTRONICS MANUFACTURING, INC.
By: /s/ Leslie Sainsbury
--------------------
Title: President and CEO
-----------------
AMITEK CORPORATION
By: /s/ Myung Ho Park
-----------------
Title: President
---------
/s/ Myung Ho Park
-----------------
Myung Ho Park
/s/ Yoon Jung Park
------------------
Yoon Jung Park
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Exhibit A-1
Sellers
- --------------------------------------------------------------------------------
Name Number of Amount of Amount of Number of
Amitek Shares Cash from Buyer's Note Buyer's
Held Prior to Buyer Shares
Merger to Receive
- --------------------------------------------------------------------------------
Myung Ho Park 293.351 $1,658,607 $2,117,701 624,119
- --------------------------------------------------------------------------------
Yoon Jung Park 510 $2,883,540 $3,681,690 1,085,049
- --------------------------------------------------------------------------------
Sung Woo Kwon 196.649 $1,111,853 $1,419,609 418,380
- --------------------------------------------------------------------------------
The address for Mr. and Mrs. Park for notice pursuant to Section 11.7 of the
Agreement and Plan of Merger is:
5887 NW 79th Way
Parkland, FL 33067
The address for Mr. Kwon for notice pursuant to Section 11.7 of the Agreement
and Plan of Merger is:
Dae Hye Corp. Ltd.
Backsin Bldg., 2nd Floor
151-2 Samsung-Dong,
Kangnam-ku, Seoul Korea
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CENTURY ELECTRONICS MANUFACTURING, INC.
(THE "CORPORATION")
Century Electronics Manufacturing, Inc., a corporation organized and
existing under the laws of the State of Delaware, does hereby submit this
Amended and Restated Certificate of Incorporation, duly adopted pursuant to
Sections 242 and 245 of the General Corporation Law of the State of Delaware,
for the purpose of amending and restating the Certificate of Incorporation of
this corporation, which was originally filed with the Secretary of State of the
State of Delaware on December 22, 1996 under the name First Communications, Inc.
The text of the Amended and Restated Certificate of Incorporation is hereby
restated and amended to read in its entirety as follows:
ARTICLE I
The name of this corporation is Century Electronics Manufacturing, Inc.
ARTICLE II
The registered office of this corporation in the State of Delaware is
located at 1013 Centre Road, in the City of Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is Corporation
Service Company.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
The total number of shares of all classes of stock which the
corporation shall have authority to issue is 51,000,000 shares, consisting of
(i) 50,000,000 shares of Common Stock, $.01 par value per share ("Common
Stock"), and (ii) 1,000,000 shares of Preferred Stock, $.01 par value per
share ("Preferred Stock").
The following is a statement of the designations and the powers,
privileges and rights,
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and the qualifications, limitations or restrictions thereof in respect of
each class of capital stock of the corporation.
1. Common Stock.
A. GENERAL. The voting, dividend and liquidation rights of the
holders of the Common Stock are subject to and
qualified by the rights of the holders of the
Preferred Stock of any series as may be designated by
the Board of Directors upon any issuance of the
Preferred Stock of any series. The holders of the
Common Stock shall have no preemptive rights to
subscribe for any shares of any class of stock of
this corporation whether now or hereafter authorized.
B. VOTING. The holders of the Common Stock are entitled to one
vote for each share of Common Stock held at all
meetings of stockholders. There shall be no
cumulative voting.
C. NUMBER. The number of authorized shares of Common Stock may be
increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative
vote of the holders of a majority of the stock of the
corporation entitled to vote, irrespective of the
provisions of Section 242(b)(2) of the General
Corporation Law of the State of Delaware.
D. DIVIDENDS. Dividends may be declared and paid on the Common
Stock from funds lawfully available therefor as and
when determined by the Board of Directors and subject
to any preferential dividend rights of any then
outstanding Preferred Stock.
E. LIQUIDATION. Upon the dissolution or liquidation of the
corporation, whether voluntary or involuntary,
holders of Common Stock will be entitled to receive
all assets of the corporation available for
distribution to its stockholders, subject to any
preferential rights of any then outstanding Preferred
Stock.
2. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the corporation
may be reissued except as otherwise provided by law or this
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Certificate of Incorporation. Different series of Preferred Stock shall not be
construed toconstitute different classes of shares for the purposes of voting by
classes unless expressly provided in the resolution or resolutions providing for
the issue of such series adopted by the Board of Directors as hereinafter
provided.
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by resolution or resolutions
providing for the issue of the shares thereof, to determine and fix such voting
powers, full or limited, or no voting powers, and such designations, preferences
and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including without
limitation thereof, dividend rights, conversion rights, redemption privileges
and liquidation preferences, as shall be stated and expressed in such
resolutions, all to the full extent now or hereafter permitted by the General
Corporation Law of the State of Delaware. Without limiting the generality of the
foregoing, the resolutions providing for issuance of any series of Preferred
Stock may provide that such series shall be superior or rank equally or be
junior to the Preferred Stock of any other series to the extent permitted by law
and this Certificate of Incorporation. Except as otherwise provided in this
Certificate of Incorporation, no vote of the holders of the Preferred Stock or
Common Stock shall be a prerequisite to the designation or issuance of any
shares of any series of the Preferred Stock authorized by and complying with the
conditions of this Certificate of Incorporation, the right to have such vote
being expressly waived by all present and future holders of the capital stock of
the corporation.
ARTICLE V
The corporation shall have a perpetual existence.
ARTICLE VI
Unless and except to the extent that the By-Laws of this corporation
shall so require, the election of directors need not be by written ballot.
ARTICLE VII
In furtherance of and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of this corporation, subject to the right of the stockholders
entitled to vote with respect thereto to alter and repeal the By-Laws adopted or
amended by the Board of Directors; PROVIDED, HOWEVER, that the By-Laws shall not
be altered, amended or repealed by the stockholders of the corporation except by
the affirmative vote of holders of not less than seventy five percent (75%) of
the then outstanding shares of capital stock of the corporation entitled to vote
generally in the election of directors.
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ARTICLE VIII
Except to the extent that the General Corporation Law of the State of
Delaware prohibits the elimination or limitation of liability of directors for
breaches of fiduciary duty, no director of the corporation shall be personally
liable to the corporation or its stockholders for monetary damages for any
breach of fiduciary duty as a director, notwithstanding any provision of law
imposing such liability. No amendment to or repeal of this provision shall apply
to or have any effect on the liability or alleged liability of any director of
the corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment.
ARTICLE IX
1. INDEMNIFICATION. The corporation shall, to the maximum extent permitted under
the General Corporation Law of the State of Delaware and except as set forth
below, indemnify and upon request advance expenses to each person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was, or has agreed to become,
a director or officer of the corporation, or is or was serving, or has agreed to
serve, at the request of the corporation, as a director, officer or trustee of,
or in a similar capacity with, another corporation, partnership, joint venture,
trust or other enterprise, including any employee benefit plan (all such persons
being referred to hereafter as an "Indemnitee"), or by reason of any action
alleged to have been taken or omitted in such capacity, against all expenses
(including attorneys' fees), judgment, fines and amounts paid in settlement
actually and reasonably incurred by him or on his behalf in connection with such
action, suit or proceeding and any appeal therefrom, if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Notwithstanding anything to the contrary in this Article, the corporation shall
not indemnify an Indemnitee seeking indemnification in connection with any
action, suit, proceeding, claim or counterclaim, or part thereof, initiated by
the Indemnitee unless the initiation thereof was approved by the Board of
Directors of the corporation.
2. ADVANCE OF EXPENSES. Notwithstanding any other provisions, this Certificate
of Incorporation, the By-Laws of the corporation, or any agreement, vote of
stockholder or disinterested directors, or arrangement to the contrary, the
corporation shall advance payment of expenses incurred by an Indemnitee in
advance of the final disposition of any matter only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the corporation as authorized in this Article.
Such undertaking may be accepted without reference to the financial ability of
the Indemnitee to make such repayment.
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3. SUBSEQUENT AMENDMENT. No amendment, termination or repeal of this Article or
of the relevant provisions of the General Corporation Law of the State of
Delaware or any other applicable laws shall affect or diminish in any way the
rights of any Indemnitee to indemnification under the provisions hereof with
respect to any action, suit, proceeding or investigation arising out of or
relating to any actions, transactions or facts occurring prior to the final
adoption of such amendment, termination or repeal.
4. OTHER RIGHTS. The corporation may, to the extent authorized from time to time
by its Board of Directors, grant indemnification rights to other employees or
agents of the corporation or other persons serving the corporation and such
rights may be equivalent to, or greater or less than, those set forth in this
Article.
5. MERGER OR CONSOLIDATION. If the corporation is merged into or consolidated
with another corporation and the corporation is not the surviving corporation,
the surviving corporation shall assume the obligations of the corporation under
this Article with respect to any action, suit, proceeding or investigation
arising out of or relating to any actions, transactions or facts occurring prior
to the date of such merger or consolidation.
6. SAVINGS CLAUSE. If this Article or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the corporation shall
nevertheless indemnify each Indemnitee as to any expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement in connection with any
action, suit, proceeding or investigation, whether civil, criminal or
administrative, including an action by or in the right of the corporation, to
the fullest extent permitted by any applicable portion of this Article that
shall not have been invalidated and to the fullest extent permitted by
applicable law.
ARTICLE X
The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute and this Certificate of Incorporation, and
all rights conferred upon stockholders herein are granted subject to this
reservation.
ARTICLE XI
This Article is inserted for the management of the business and for the
conduct of the affairs of the corporation.
1. NUMBER OF DIRECTORS. The number of directors of the corporation shall not be
less than three. The exact number of directors within the limitations specified
in the preceding sentence shall be fixed from time to time by, or in the manner
provided in, the By-Laws of the
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corporation.
2. CLASSES OF DIRECTORS. The Board of Directors shall be and is divided into
three classes: Class I, Class II and Class III. No one class shall have more
than one director more than any other class. If a fraction is contained in the
quotient arrived at by dividing the designated number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of
Class III, and if such fraction is two-thirds, one of the extra directors shall
be a member of Class III and one of the extra directors shall be a member of
Class II, unless otherwise provided from time to time by resolution adopted by
the Board of Directors.
3. ELECTION OF DIRECTORS. Elections of directors need not be by written ballot
except as and to the extent provided in the By-Laws of the corporation.
4. TERMS OF OFFICE. Except as provided in Section 8 of this Article XI, each
director shall serve for a term ending on the date of the third annual meeting
following the annual meeting at which such director was elected; PROVIDED,
HOWEVER, that each initial director in Class I shall serve for a term ending on
the date of the annual meeting in 2000; each initial director in Class II shall
serve for a term ending on the date of the annual meeting in 2001; and each
initial director in Class III shall serve for a term ending on the date of the
annual meeting in 2002; and PROVIDED, FURTHER, that the term of each director
shall be subject to the election and qualification of his successor and to his
earlier death, resignation or removal.
5. ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR DECREASES
IN THE NUMBER OF DIRECTORS. In the event of any increase or decrease in the
authorized number of directors, (i) each director then serving as such shall
nevertheless continue as a director of the class of which he is a member and
(ii) the newly created or eliminated directorships resulting from such increase
or decrease shall be apportioned by the Board of Directors among the three
classes of directors so as to ensure that no one class has more than one
director more than any other class. To the extent possible, consistent with the
foregoing rule, any newly created directorships shall be added to those classes
whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
6. REMOVAL. The directors of the corporation may be removed only for cause by
the affirmative vote of the holders of at least seventy five percent (75%) of
the shares of the capital stock of the corporation issued and outstanding and
entitled to vote generally in the election of directors cast at a meeting of the
stockholders called for that purpose.
7. VACANCIES. Any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from an enlargement of the Board, shall be filled
only by vote of a
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majority of the directors then in office, although less than a
quorum, or by a sole remaining director. A director elected to fill a vacancy
shall be elected for the unexpired term of his predecessor in office, and a
director chosen to fill a position resulting from an increase in the number of
directors shall hold office until the next election of the class for which such
director shall have been chosen, subject to the election and qualification of
his successor and to his earlier death, resignation or removal.
8. STOCKHOLDER NOMINATIONS AND INTRODUCTION OF BUSINESS, ETC. Advance notice of
stockholder nominations for election of directors and other business to be
brought by stockholders before either an annual or special meeting of
stockholders shall be given in the manner provided by the By-Laws of this
corporation.
9. AMENDMENT TO ARTICLE. Notwithstanding any other provisions of law, this
Certificate of Incorporation or the By-Laws, each as amended, and
notwithstanding the fact that a lesser percentage may be specified by law, this
Certificate of Incorporation or the By-Laws of the corporation, the affirmative
vote of least seventy five percent (75%) of the then outstanding shares of
capital stock of the corporation entitled to vote generally in the election of
directors shall be required to amend or repeal, or to adopt any provisions
inconsistent with the purpose or intent of, this Article XI.
ARTICLE XII
The books of this corporation may, subject to any stationary
requirements,) be kept outside the State of Delaware as may be designated by the
Board of Directors or by the By-Laws of this corporation.
ARTICLE XIII
At any time during which a class of capital stock of this corporation
is registered under Section 12 of the Securities Exchange Act of 1934 or any
similar successor statute, stockholders of the corporation may not take any
action by written consent in lieu of a meeting. Notwithstanding any other
provisions of law, this Certificate of Incorporation or the By-Laws, each as
amended, and notwithstanding the fact that a lesser percentage may be specified
by law, this Certificate of Incorporation or the By-Laws of the corporation, the
affirmative vote of seventy five percent (75%) of the then outstanding shares of
capital stock of the corporation entitled to vote generally in the election of
directors shall be required to amend or repeal, or to adopt any provisions
inconsistent with the purpose or intent of, this Article XIII.
ARTICLE XIV
Special meetings of stockholders may be called at any time by only the
Chairman of the
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Board of Directors, the Chief Executive Officer (or if there is no Chief
Executive Officer, the President) or the Board of Directors. Any business
transacted at any special meeting of stockholders shall be limited to matters
relating to the purpose or purposes stated in the notice of meeting.
Notwithstanding any other provisions of law, this Certificate of Incorporation
or the By-Laws, each as amended, and notwithstanding the fact that a lesser
percentage may be specified by law, this Certificate of Incorporation or the
By-Laws of the corporation, the affirmative vote of seventy five percent (75%)
of the then outstanding shares of capital stock of the corporation entitled to
vote generally in the election of directors shall be required to amend or
repeal, or to adopt any provisions inconsistent with the purpose or intent of,
this Article XIV.
ARTICLE XV
The Board of Directors of this corporation, when evaluating any offer
of another party to make a tender or exchange offer for any equity security of
the corporation, shall, in connection with the exercise of its judgment in
determining what is in the best interests of the corporation as a whole, be
authorized to give due consideration to any such factors as the Board of
Directors determines to be relevant, including without limitation: (i) the
interests of the stockholders of the corporation; (ii) whether the proposed
transaction might violate federal or state laws; (iii) not only the
consideration being offered in the proposed transaction, in relation of the then
current market price for the outstanding capital stock of the corporation, but
also to the market price for the capital stock of the corporation over a period
of years, the estimated price that might be achieved in a negotiated sale of the
corporation as a whole or in part or through orderly liquidation, the premiums
over market price for the securities of other corporations in similar
transactions, current political, economic and other factors bearing on
securities prices and the Corporation's financial condition and future
prospects; and (iv) the social, legal and economic effects upon employees,
suppliers, customers and others having similar relationships with the
corporation, and the communities in which the corporation conducts its business.
In connection with any such evaluation, the Board of Directors is
authorized to conduct such investigations and to engage in such legal
proceedings as the Board of Directors may determine.
IN WITNESS WHEREOF, the corporation has caused its corporate seal to be
affixed hereto and this Certificate of Incorporation to be signed by its
President this ________ day of 1999.
CENTURY ELECTRONICS MANUFACTURING, INC.
By:
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Exhibit 3.2
AMENDED AND RESTATED
BY-LAWS
OF
CENTURY ELECTRONICS MANUFACTURING, INC.
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TABLE OF CONTENTS
<TABLE>
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Page
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ARTICLE 1 - STOCKHOLDERS..........................................................................................1
1.1 Place of Meetings......................................................................1
1.2 Annual Meeting.........................................................................1
1.3 Special Meeting........................................................................1
1.4 Notice of Meetings.....................................................................1
1.5 Voting List............................................................................1
1.6 Quorum.................................................................................2
1.7 Adjournments...........................................................................2
1.8 Voting and Proxies.....................................................................2
1.9 Action at Meeting......................................................................2
1.10 Nomination of Directors................................................................2
1.11 Notice of Business at Annual Meetings..................................................3
1.12 Action without Meeting.................................................................4
1.13 Organization...........................................................................4
ARTICLE 2 - DIRECTORS.............................................................................................4
2.1 General Powers.........................................................................4
2.2 Number; Election and Qualification.....................................................4
2.3 Classes of Directors...................................................................4
2.4 Terms of Office........................................................................5
2.5 Allocation of Directors Among Classes in the Event of Increases or
Decreases in the Number of Directors...................................................5
2.6 Vacancies..............................................................................5
2.7 Resignation............................................................................5
2.8 Regular Meetings.......................................................................6
2.9 Special Meetings.......................................................................6
2.10 Notice of Special Meetings.............................................................6
2.11 Meetings by Telephone Conference Calls.................................................6
2.12 Quorum.................................................................................6
2.13 Action at Meeting......................................................................6
2.14 Action by Consent......................................................................6
2.15 Removal................................................................................7
2.16 Committees.............................................................................7
2.17 Compensation of Directors..............................................................7
ARTICLE 3 - OFFICERS..............................................................................................7
3.1 Enumeration............................................................................7
3.2 Election...............................................................................7
3.3 Qualification..........................................................................8
</TABLE>
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<TABLE>
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3.4 Tenure.................................................................................8
3.5 Resignation and Removal................................................................8
3.6 Vacancies..............................................................................8
3.7 Chairman of the Board and Vice Chairman of the Board...................................8
3.8 President..............................................................................8
3.9 Vice Presidents........................................................................9
3.10 Secretary and Assistant Secretaries....................................................9
3.11 Treasurer and Assistant Treasurers.....................................................9
3.12 Salaries..............................................................................10
ARTICLE 4 - CAPITAL STOCK........................................................................................10
4.1 Issuance of Stock.....................................................................10
4.2 Certificates of Stock.................................................................10
4.3 Transfers.............................................................................10
4.4 Lost, Stolen or Destroyed Certificates................................................11
4.5 Record Date...........................................................................11
ARTICLE 5 - GENERAL PROVISIONS...................................................................................11
5.1 Fiscal Year...........................................................................11
5.2 Corporate Seal........................................................................11
5.3 Waiver of Notice......................................................................11
5.4 Voting of Securities..................................................................12
5.5 Evidence of Authority.................................................................12
5.6 Certificate of Incorporation..........................................................12
5.7 Transactions with Interested Parties..................................................12
5.8 Severability..........................................................................13
5.9 Pronouns..............................................................................13
ARTICLE 6 - AMENDMENTS...........................................................................................13
6.1 By the Board of Directors.............................................................13
6.2 By the Stockholders...................................................................13
</TABLE>
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ARTICLE 1 - STOCKHOLDERS
1.1 PLACE OF MEETINGS. All meetings of stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors or the President or, if not so
designated, at the registered office of the corporation.
1.2 ANNUAL MEETING. The annual meeting of stockholders for the election
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held at 10:00 a.m. on the second Tuesday in
November each year (unless that day be a legal holiday in the place where the
meeting is to be held in which case the meeting shall be held at the same hour
on the next succeeding day not a legal holiday) or at such other date and time
as shall be fixed by the Board of Directors or the President and stated in the
notice of the meeting. If no annual meeting is held in accordance with the
foregoing provisions, the Board of Directors shall cause the meeting to be held
as soon thereafter as convenient. If no annual meeting is held in accordance
with the foregoing provisions, a special meeting may be held in lieu of the
annual meeting, and any action taken at that special meeting shall have the same
effect as if it had been taken at the annual meeting, and in such case all
references in these By-Laws to the annual meeting of stockholders shall be
deemed to refer to such special meeting.
1.3 SPECIAL MEETING. Special meetings of stockholders may be called at
any time by the Chairman of the Board of Directors, the Chief Executive Officer
(or, if there is no Chief Executive Officer, the President) or the Board of
Directors. Any business transacted at any special meeting of stockholders shall
be limited to matters relating to the purpose or purposes stated in the notice
of meeting.
1.4 NOTICE OF MEETINGS. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder entitled to vote at such meeting. The notices of
all meetings shall state the place, date and hour of the meeting. The notice of
a special meeting shall state, in addition, the purpose or purposes for which
the meeting is called. If mailed, notice is given when deposited in the United
States mail, postage prepaid, directed to the stockholder at his address as it
appears on the records of the corporation.
1.5 VOTING LIST. The officer who has charge of the stock ledger of the
corporation shall prepare, at least ten (10) days before every meeting of
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stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, at a place within the city where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time of the meeting, and may be inspected by any
stockholder who is present.
1.6 QUORUM. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 ADJOURNMENTS. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be held
under these By-Laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than thirty (30) days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
1.8 VOTING AND PROXIES. Each stockholder shall have one vote for each
share of capital stock entitled to vote and held of record by such stockholder
and a proportionate vote for each fractional share so held, unless otherwise
provided by the General Corporation Law of the State of Delaware, the
Certificate of Incorporation or these By-Laws. Each stockholder of record
entitled to vote at a meeting of stockholders may vote in person or may
authorize another person or persons to vote or act for him by written proxy
executed by the stockholder or his authorized agent and delivered to the
Secretary of the corporation. No such proxy shall be voted or acted upon after
three years from the date of its execution, unless the proxy expressly provides
for a longer period.
1.9 PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, objecting
to or voting or participating at a meeting, or expressing consent or dissent
without a meeting. The delivery of a proxy on behalf of a stockholder consistent
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with telephonic or electronically transmitted instructions obtained pursuant to
procedures of the corporation reasonably designed to verify that such
instructions have been authorized by such stockholder shall constitute execution
and delivery of the proxy by or on behalf of the stockholder. No proxy shall be
voted or acted upon after three years from its date unless such proxy provides
for a longer period. A duly executed proxy shall be irrevocable if it states
that it is irrevocable and, if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally. The
authorization of a proxy may but need not be limited to specified action,
provided, however, that if a proxy limits its authorization to a meeting or
meetings of stockholders, unless otherwise specifically provided such proxy
shall entitle the holder thereof to vote at any adjourned session but shall not
be valid after the final adjournment thereof. A proxy purporting to be
authorized by or on behalf of a stockholder, if accepted by the corporation in
its discretion, shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the challenger.
1.10 ACTION AT MEETING. When a quorum is present at any meeting, a
plurality of the votes properly cast for election to any office shall elect to
such office and a majority of the votes properly cast upon any question other
than an election to an office shall decide the question, except when a larger
vote is required by law, by the certificate of incorporation or by the By-laws.
No ballot shall be required for any election unless requested by a stockholder
present or represented at the meeting and entitled to vote in the election.
1.11 NOMINATION OF DIRECTORS. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors. The nomination for election to the Board of Directors of the
corporation at a meeting of stockholders may be made by the Board of Directors
or by any stockholder of the corporation entitled to vote for the election of
directors at such meeting who complies with the notice procedures set forth in
this Section 1.10. Such nominations, other than those made by or on behalf of
the Board of Directors, shall be made by notice in writing delivered or mailed
by first class United States mail, postage prepaid, to the Secretary, and
received at the principal executive offices of the corporation not less than
sixty (60) days nor more than ninety (90) days prior to the anniversary date of
the immediately preceding annual meeting of stockholders; PROVIDED, HOWEVER,
that if the annual meeting is not held within thirty (30) days before or after
such anniversary date, then such nomination shall have been delivered to or
mailed and received by the Secretary not later than the close of business on the
10th day following the date on which the notice of the meeting was mailed or
such public disclosure was made, whichever occurs first. Such notice shall set
forth (a) as to each proposed nominee (i) the name, age, business address and,
if known, residence address of each such nominee, (ii) the principal occupation
or employment of each such nominee, (iii) the number of shares of stock of the
corporation which are
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beneficially owned by each such nominee, and (iv) any other information
concerning the nominee that must be disclosed as to nominees in proxy
solicitations pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended, including such person's written consent to be named as a
nominee and to serve as a director if elected; and (b) as to the stockholder
giving the notice (i) the name and address, as they appear on the corporation's
books, of such stockholder and (ii) the class and number of shares of the
corporation which are beneficially owned by such stockholder. The corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the eligibility of such
proposed nominee to serve as a director of the corporation.
The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
1.12 NOTICE OF BUSINESS AT ANNUAL MEETINGS. At an annual meeting of
the stockholders, only such business shall be conducted as shall have been
properly brought before the meeting. To be properly brought before an annual
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, (c) otherwise properly brought before an annual meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, if such business relates to the election of directors of the
corporation, the procedures in Section 1.10 must be complied with. If such
business relates to any other matter, the stockholder must have given timely
notice thereof in writing to the Secretary. To be timely, a stockholder's notice
must be delivered to or mailed and received at the principal executive offices
of the corporation not less than sixty (60) days nor more than ninety (90) days
prior to the anniversary date of the immediately preceding annual meeting of
stockholders; PROVIDED, HOWEVER, that if the annual meeting is not held within
thirty (30) days before or after such anniversary date, then for the notice by
the stockholder to be timely it must be so received not later than the close of
business on the 10th day following the date on which the notice of the meeting
was mailed or such public disclosure was made, whichever occurs first. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting (a) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (b) the name and address, as
they appear on the corporation's books, of the stockholder proposing such
business, (c) the class and number of shares of the corporation
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which are beneficially owned by the stockholder, and (d) any material interest
of the stockholder in such business. Notwithstanding anything in these By-Laws
to the contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Section 1.11 and except that
any stockholder proposal which complies with Rule 14a-8 of the proxy rules, or
any successor provision, promulgated under the Securities Exchange Act of 1934,
as amended, and is to be included in the corporation's proxy statement for an
annual meeting of stockholders shall be deemed to comply with the requirements
of this Section 1.11.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 1.11, and if he should so
determine, the chairman shall so declare to the meeting and any such business
not properly brought before the meeting shall not be transacted.
1.13 ACTION WITHOUT MEETING. Stockholders may not take any action by
written consent in lieu of a meeting.
1.14 ORGANIZATION. The Chairman of the Board, or in his absence the
Vice Chairman of the Board designated by the Chairman of the Board, or the
President, in the order named, shall call meetings of the stockholders to order,
and act as chairman of such meeting; PROVIDED, HOWEVER, that the Board of
Directors may appoint any stockholder to act as chairman of any meeting in the
absence of the Chairman of the Board. The Secretary of the corporation shall act
as secretary at all meetings of the stockholders; PROVIDED, HOWEVER, that in the
absence of the Secretary at any meeting of the stockholders, the presiding
officer may appoint any person to act as secretary of the meeting.
ARTICLE 2 - DIRECTORS
2.1 GENERAL POWERS. The business and affairs of the corporation shall
be managed by or under the direction of a Board of Directors, who may exercise
all of the powers of the corporation except as otherwise provided by law, the
Certificate of Incorporation or these By-Laws. In the event of a vacancy in the
Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board of Directors until the vacancy is
filled.
2.2 NUMBER; ELECTION AND QUALIFICATION. The number of directors which
shall constitute the whole Board of Directors shall be determined by resolution
of the Board of Directors, but in no event shall be less than three. The number
of directors may be decreased at any time and from time to time by a majority of
the
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directors then in office, but only to eliminate vacancies existing by reason of
the death, resignation, removal or expiration of the term of one or more
directors. The directors shall be elected at the annual meeting of stockholders
by such stockholders as have the right to vote on such election. The directors
need not be stockholders of the corporation.
2.3 CLASSES OF DIRECTORS. The Board of Directors shall be and is
divided into three classes: Class I, Class II and Class III. No one class shall
have more than one director more than any other class. If a fraction is
contained in the quotient arrived at by dividing the designated number of
directors by three, then, if such fraction is one-third, the extra director
shall be a member of Class III, and if such fraction is two-thirds, one of the
extra directors shall be a member of Class III and one of the extra directors
shall be a member of Class II, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
2.4 TERMS OF OFFICE. Except as otherwise provided in the Certificate of
Incorporation or these By-Laws, each director shall serve for a term ending on
the date of the third annual meeting following the annual meeting at which such
director was elected; PROVIDED, HOWEVER, that each initial director in Class I
shall serve for a term ending on the date of the annual meeting of stockholders
in 2000; each initial director in Class II shall serve for a term ending on the
date of the annual meeting of stockholders in 2001; and each initial director in
Class III shall serve for a term ending on the date of the annual meeting of
stockholders in 2002; and PROVIDED, FURTHER, that the term of each director
shall be subject to the election and qualification of his successor and to his
earlier death, resignation or removal.
2.5 ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR
DECREASES IN THE NUMBER OF DIRECTORS. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he is a member
and (ii) the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to ensure that no one class has more than one
director more than any other class. To the extent possible, consistent with the
foregoing rule, any newly created directorships shall be added to those classes
whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
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2.6 VACANCIES. Any vacancy in the Board of Directors, however
occurring, including a vacancy resulting from an enlargement of the Board of
Directors, shall be filled only by vote of a majority of the directors then in
office, although less than a quorum, or by a sole remaining director. A director
elected to fill a vacancy shall be elected for the unexpired term of his
predecessor in office, and a director chosen to fill a position resulting from
an increase in the number of directors shall hold office until the next election
of the class for which such director shall have been chosen, subject to the
election and qualification of his successor and to his earlier death,
resignation or removal.
2.7 RESIGNATION. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.8 REGULAR MEETINGS. The regular meetings of the Board of Directors
may be held without notice at such time and place, either within or without the
State of Delaware, as shall be determined from time to time by the Board of
Directors; PROVIDED, that any director who is absent when such a determination
is made shall be given notice of the determination. A regular meeting of the
Board of Directors may be held without notice immediately after and at the same
place as the annual meeting of stockholders.
2.9 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, the President, two or more directors, or
by one director in the event that there is only a single director in office.
2.10 NOTICE OF SPECIAL MEETINGS. Notice of any special meeting of the
Board of Directors shall be given to each director by the Secretary or by the
officer or one of the directors calling the meeting. The notice shall be duly
given to each director (i) by giving notice to such director in person or by
telephone at least twenty four (24) hours in advance of the meeting, (ii) by
sending a telegram, telecopy, or telex, or delivering written notice by hand, to
his last known business or home address at least twenty four (24) hours in
advance of the meeting, or (iii) by mailing written notice to his last known
business or home address at least seventy two (72) hours in advance of the
meeting. A notice or waiver of notice of a special meeting of the Board of
Directors need not specify the purposes of the meeting.
2.11 MEETINGS BY TELEPHONE CONFERENCE CALLS. The Board of Directors or
any members of any committee of the Board of Directors designated by the
directors may participate in a meeting of the Board of Directors or such
committee
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by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other, and
participation by such means shall constitute presence in person at such meeting.
2.12 QUORUM. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; PROVIDED, HOWEVER, that in no case shall less than one-third
(1/3) of the number of directors so fixed constitute a quorum. In the absence of
a quorum at any such meeting, a majority of the directors present may adjourn
the meeting from time to time without further notice, other than announcement at
the meeting, until a quorum shall be present.
2.13 ACTION AT MEETING. At any meeting of the Board of Directors at
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these By-Laws.
2.14 ACTION BY CONSENT. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board of Directors or
committee of the Board of Directors.
2.15 REMOVAL. The directors of the corporation may be removed only for
cause by the affirmative vote of the holders of seventy five percent (75%) of
the shares of the capital stock of the corporation issued and outstanding and
entitled to vote generally in the election of directors cast at a meeting of the
stockholders called for that purpose.
2.16 COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members of the committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors
and
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subject to the provisions of the General Corporation Law of the State of
Delaware, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the corporation
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Each such committee shall keep minutes and make such reports as
the Board of Directors may from time to time request. Except as the Board of
Directors may otherwise determine, any committee may make rules for the conduct
of its business, but unless otherwise provided by the directors or in such
rules, its business shall be conducted as nearly as possible in the same manner
as is provided in these By-Laws for the Board of Directors.
2.17 COMPENSATION OF DIRECTORS. The directors may be paid such
compensation for their services and such reimbursement for expenses of
attendance at meetings as the Board of Directors may from time to time
determine. No such payment shall preclude any director from serving the
corporation or any of its parent or subsidiary corporations in any other
capacity and receiving compensation for such service.
ARTICLE 3 - OFFICERS
3.1 ENUMERATION. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
3.2 ELECTION. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 QUALIFICATION. No officer need be a stockholder of the corporation.
Any two or more offices may be held by the same person.
3.4 TENURE. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
3.5 RESIGNATION AND REMOVAL. Any officer may resign by delivering his
written resignation to the corporation at its principal office or to the
President or
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Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event. Any officer may be removed at any time, with or without cause, by vote of
a majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resigna tion or removal, or any right to damages on
account of such removal, whether his compensation be by the month or by the year
or otherwise, unless such compensation is expressly provided in a duly
authorized written agreement with the corporation.
3.6 VACANCIES. The Board of Directors may fill any vacancy occurring in
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 CHAIRMAN OF THE BOARD AND VICE CHAIRMAN OF THE BOARD. The Board of
Directors may appoint a Chairman of the Board. If the Board of Directors
appoints a Chairman of the Board, he shall perform such duties and possess such
powers as are assigned to him by the Board of Directors. If the Board of
Directors appoints a Vice Chairman of the Board, he shall, in the absence or
disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall perform such other duties and
possess such other powers as may from time to time be vested in him by the Board
of Directors.
3.8 PRESIDENT. The President shall, subject to the direction of the
Board of Directors, have general charge and supervision of the business of the
corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders and, if he is a director, at all
meetings of the Board of Directors. Unless the Board of Directors has designated
the Chairman of the Board or another officer as Chief Executive Officer, the
President shall be the Chief Executive Officer of the corporation. The President
shall perform such other duties and shall have such other powers as the Board of
Directors may from time to time prescribe.
3.9 VICE PRESIDENTS. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
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Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
3.10 SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall perform
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of the
Secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such
powers as the Board of Directors, the President or the Secretary may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Secretary, the Assistant Secretary (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 TREASURER AND ASSISTANT TREASURERS. The Treasurer shall perform
such duties and shall have such powers as may from time to time be assigned to
him by the Board of Directors or the President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
Treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation. Unless the Board of Directors has designated another officer as
Chief Financial Officer, the Treasurer shall be the Chief Financial Officer of
the corporation.
The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time
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prescribe. In the event of the absence, inability or refusal to act of the
Treasurer, the Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
3.12 SALARIES. Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
ARTICLE 4 - CAPITAL STOCK
4.1 ISSUANCE OF STOCK. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 CERTIFICATES OF STOCK. Every holder of stock of the corporation
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the Board of Directors, certifying the number and class of shares
owned by him in the corporation. Each such certificate shall be signed by, or in
the name of the corporation by, the Chairman or Vice Chairman, if any, of the
Board of Directors, or the President or a Vice President, and the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a facsimile.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
By-Laws, applicable securities laws or any agreement among any number of
stockholders or among such holders and the corporation shall have conspicuously
noted on the face or back of the certificate either the full text of the
restriction or a statement of the existence of such restriction.
4.3 TRANSFERS. Except as otherwise established by rules and regulations
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the corporation or its transfer agent may reasonably require.
Except
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as may be otherwise required by law, by the Certificate of Incorporation or by
these By-Laws, the corporation shall be entitled to treat the record holder of
stock as shown on its books as the owner of such stock for all purposes,
including the payment of dividends and the right to vote with respect to such
stock, regardless of any transfer, pledge or other disposition of such stock,
until the shares have been transferred on the books of the corporation in
accordance with the requirements of these By-Laws.
4.4 LOST, STOLEN OR DESTROYED CERTIFICATES. The corporation may issue a
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.
4.5 RECORD DATE. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than sixty (60) nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) days prior
to any other action to which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
PROVIDED, HOWEVER, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE 5 - GENERAL PROVISIONS
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5.1 FISCAL YEAR. Except as from time to time otherwise designated by the
Board of Directors, the fiscal year of the corporation shall begin on the first
day of July in each year and end on the last day of June in each year.
5.2 CORPORATE SEAL. The corporate seal shall be in such form as shall
be approved by the Board of Directors.
5.3 WAIVER OF NOTICE. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these By-Laws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before, at or after the time stated in such waiver, or
the appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
5.4 VOTING OF SECURITIES. Except as the directors may otherwise
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
5.5 EVIDENCE OF AUTHORITY. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall, as to all persons who rely on the certificate in good faith,
be conclusive evidence of such action.
5.6 CERTIFICATE OF INCORPORATION. All references in these By-Laws to the
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended or restated and in effect from time
to time.
5.7 TRANSACTIONS WITH INTERESTED PARTIES. No contract or transaction
between the corporation and one or more of the directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or a committee of the
Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
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(1) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board of Directors or committee of the Board
of Directors in good faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum;
(2) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified by the Board of Directors,
a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
5.8 SEVERABILITY. Any determination that any provision of these By-Laws
is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.
5.9 PRONOUNS. All pronouns used in these By-Laws shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
ARTICLE 6 - AMENDMENTS
6.1 BY THE BOARD OF DIRECTORS. These By-Laws may be altered, amended or
repealed or new By-Laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
6.2 BY THE STOCKHOLDERS. Notwithstanding any other provision of law, the
Certificate of Incorporation or these By-Laws, and notwithstanding the fact that
a lesser percentage may be specified by law, the affirmative vote of the holders
of at least seventy five percent (75%) of the shares of the capital stock of the
corporation issued and outstanding and entitled to vote shall be required to
alter, amend or repeal any provision of these By-Laws or to adopt new By-Laws.
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Exhibit 10.1
CENTURY INDUSTRIES, INC.
1996 STOCK OPTION PLAN
ARTICLE I
Purpose of the Plan
The purpose of this Plan is to encourage and enable employees,
consultants, directors and others who are in a position to make significant
contributions to the success of CENTURY INDUSTRIES, INC. and of its affiliated
corporations upon whose judgment, initiative and efforts the Corporation depends
for the successful conduct of its business, to acquire a closer identification
of their interests with those of the Corporation by providing them with
opportunities to purchase stock in the Corporation pursuant to options granted
hereunder, thereby stimulating their efforts on behalf of the Corporation and
strengthening their desire to remain involved with the Corporation. Any
employee, consultant or advisor designated to participate in the Plan is
referred to as a "Participant."
ARTICLE II
Definitions
2.1 "Affiliated Corporation" means any stock corporation of which a
majority of the voting common or capital stock is owned directly or indirectly
by the Corporation.
2.2 "Award" means an Option granted under Article V.
2.3 "Board" means the Board of Directors of the Corporation or, if one or
more has been appointed, a Committee of the Board of Directors of the
Corporation.
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2.4 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.5 "Committee" means a Committee of not less than two Non-Employee
Directors appointed by the Board to administer the Plan.
2.6 "Corporation" means CENTURY INDUSTRIES, INC., a Delaware corporation,
or its successor.
2.7 "Employee" means any person who is a regular full-time or part-time
employee of the Corporation or an Affiliated Corporation on or after October 1,
1996.
2.8 "Incentive Stock Option" ("ISO") means an option that qualifies as an
incentive stock option as defined in Section 422 of the Code, as amended.
2.9 "Non-Employee Director" means (unless otherwise provided under Rule
16b-3 of the Securities Exchange Act of 1934) a member of the Board who (i) is
not currently an officer or Employee of the Corporation; (ii) does not receive
direct or indirect compensation from the Corporation or a parent or subsidiary
of the Corporation as a consultant or in any other capacity (except as a
Director) in an amount of more than $60,000 per year, (iii) does not possess an
interest in any other transaction for which proxy statement disclosure would be
required under Regulation S-K Item 404(a) (generally, transactions with the
Corporation involving an amount in excess of $60,000); and (iv) who is not
engaged in a business relationship with the Corporation for which disclosure
would be required pursuant to Regulation S-K Item 404(b) (generally involving,
among others, payments or indebtedness in excess of five percent of the
Corporation's or another entity's gross revenues or total assets, depending on
the transaction at issue).
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2.10 "Non-Qualified Option" means any option not intended to qualify as
an Incentive Stock Option.
2.11 "Option" means an Incentive Stock Option or Non-Qualified Option
granted by the Board under Article V of this Plan in the form of a right to
purchase Stock evidenced by an instrument containing such provisions as the
Board may establish. Except as otherwise expressly provided with respect to an
Option grant, no Option granted pursuant to the Plan shall be an Incentive Stock
Option.
2.12 "Participant" means a person selected by the Board or by the
Committee to receive an award under the Plan.
2.13 "Plan" means this 1996 Stock Option Plan.
2.14 "Reporting Person" means a person subject to Section 16 of the
Securities Exchange Act of 1934 or any successor provision.
2.15 "Restricted Period" means the period of time selected by the
Committee during which an award may be forfeited by the Participant.
2.16 "Stock" means the Common Stock, $.01 par value, of the Corporation
or any successor, including any adjustments in the event of changes in capital
structure of the type described in Article X.
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ARTICLE III
Administration of the Plan
3.1 Administration by Board. This Plan shall be administered by the Board
of Directors of the Corporation. The Board may, from time to time, delegate any
of its functions under this Plan to one or more Committees. All references in
this Plan to the Board shall also include the Committee or Committees, if one or
more have been appointed by the Board. From time to time the Board may increase
the size of the Committee or committees and appoint additional Non-Employee
Directors as members thereto, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies however caused, or remove
all members of the Committee or committees and thereafter directly administer
the Plan. No member of the Board or a Committee shall be liable for any action
or determination made in good faith with respect to the Plan or any options
granted under it.
If a Committee is appointed by the Board, a majority of the members of
the Committee shall constitute a quorum, and all determinations of the Committee
under the Plan may be made without notice or meeting of the Committee by a
writing signed by a majority of Committee members.
3.2 Powers. The Board of Directors and/or any Committee appointed by the
Board shall have full and final authority to operate, manage and administer the
Plan on behalf of the Corporation. This authority includes, but is not limited
to:
(a) The power to grant Awards conditionally or unconditionally,
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(b) The power to prescribe the form or forms of any instruments
evidencing Awards granted under this Plan,
(c) The power to interpret the Plan,
(d) The power to provide regulations for the operation of the incentive
features of the Plan, and otherwise to prescribe and rescind
regulations for interpretation, management and administration of
the Plan,
(e) The power to delegate responsibility for Plan operation, management
and administration on such terms, consistent with the Plan, as the
Board may establish,
(f) The power to delegate to other persons the responsibility of
performing ministerial acts in furtherance of the Plan's purpose,
and
(g) The power to engage the services of persons, companies, or
organizations in furtherance of the Plan's purpose, including but
not limited to, banks, insurance companies, brokerage firms and
consultants.
3.3 Additional Powers. In addition, as to each Option to buy Stock of the
Corporation, the Board or any Committee appointed by it shall have full and
final authority in its discretion: (a) to determine the number of shares of
Stock subject to each Option; (b) to determine the time or times at which
Options will be granted; (c) to determine the option price of the shares of
Stock subject to each Option, which price shall be not less than the minimum
price specified in Article V of this Plan;(d) to determine the time or times
when each Option shall become exercisable and the duration of the exercise
period (including the acceleration of any exercise period), which shall not
exceed the
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maximum period specified in Article V; (e) to determine whether each Option
granted shall be an Incentive Stock Option or a Non-qualified Option; and (f) to
waive compliance by a Participant with any obligation to be performed by him
under an Option, to waive any condition or provision of an Option, and to amend
or cancel any Option (and if an Option is canceled, to grant a new Option on
such terms as the Board may specify), except that the Board may not take any
action with respect to an outstanding option that would adversely affect the
rights of the Participant under such Option without such Participant's consent.
Nothing in the preceding sentence shall be construed as limiting the power of
the Board to make adjustments required by Article X.
In no event may the Company grant an Employee any Incentive Stock Option
that is first exercisable during any one calendar year to the extent the
aggregate fair market value of the Stock (determined at the time the options are
granted) exceeds $100,000 (under all stock option plans of the Corporation and
any Affiliated Corporation); provided, however, that this paragraph shall have
no force and effect if its inclusion in the Plan is not necessary for Incentive
Stock Options issued under the Plan to qualify as such pursuant to Section
422(d)(1) of the Code.
ARTICLE IV
Eligibility
4.1 Eligible Employees. All Employees (including Directors who are
Employees) are eligible to be granted Incentive Stock Option and Non-Qualified
Option Awards under this Plan.
4.2 Consultants, Directors and other Non-Employees. Any Consultant,
Director (whether or not an Employee) and any other Non-Employee is eligible to
be granted Non-Qualified Option
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Awards under the Plan, provided the person has not irrevocably elected to be
ineligible to participate in the Plan.
4.3 Relevant Factors. In selecting individual Employees, Consultants,
Directors and other Non-Employees to whom Awards shall be granted, the Board
shall weigh such factors as are relevant to accomplish the purpose of the Plan
as stated in Article I. An individual who has been granted an Award may be
granted one or more additional Awards, if the Board so determines. The granting
of an Award to any individual shall neither entitle that individual to, nor
disqualify him from, participation in any other grant of Awards.
ARTICLE V
Stock Option Awards
5.1 Number of Shares. Subject to the provisions of Article X of this
Plan, the aggregate number of shares of Stock for which Options may be granted
under this Plan shall not exceed 750,000 shares. The shares to be delivered upon
exercise of Options under this Plan shall be made available, at the discretion
of the Board, either from authorized but unissued shares or from previously
issued and reacquired shares of Stock held by the Corporation as treasury
shares, including shares purchased in the open market.
Stock issuable upon exercise of an Option granted under the Plan may be
subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Board of Directors.
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5.2 Effect of Expiration, Termination or Surrender. If an Option under
this Plan shall expire or terminate unexercised as to any shares covered
thereby, or shall cease for any reason to be exercisable in whole or in part, or
if the Company shall reacquire any unvested shares issued pursuant to Options
under the Plan, such shares shall thereafter be available for the granting of
other Options under this Plan.
5.3 Term of Options. The full term of each Option granted hereunder shall
be for such period as the Board shall determine. In the case of Incentive Stock
Options granted hereunder, the term shall not exceed ten (10) years from the
date of granting thereof. Each Option shall be subject to earlier termination as
provided in Sections 6.3 and 6.4. Notwithstanding the foregoing, the term of
Options intended to qualify as Incentive Stock Options shall not exceed five (5)
years from the date of granting thereof if such Option is granted to any
employee who at the time such Option is granted owns more than ten percent (10%)
of the total combined voting power of all classes of stock of the Corporation.
5.4 Option Price. The Option price shall be determined by the Board at
the time any Option is granted. In the case of Incentive Stock Options, the
exercise price shall not be less than 100% of the fair market value of the
shares covered thereby at the time the Incentive Stock Option is granted (but in
no event less than par value), provided that no Incentive Stock Option shall be
granted hereunder to any Employee if at the time of grant the Employee, directly
or indirectly, owns Stock possessing more than 10% of the combined voting power
of all classes of stock of the Corporation and its Affiliated Corporations
unless the Incentive Stock Option price equals not less than 110% of the fair
market value of the shares covered thereby at the time the Incentive Stock
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Option is granted. In the case of Non-Qualified Stock Options, the exercise
price shall not be less than par value.
5.5 Fair Market Value. "Fair market value" shall be deemed to be the fair
value of the Stock as determined in good faith by the Board after taking into
consideration all factors that it deems appropriate, including without
limitation, recent sale and offer prices of the Stock in private transactions
negotiated at arm's length. If, at the time an Option is granted under the Plan,
the Corporation's Stock is publicly traded, then "fair market value" shall be
determined as of the last business day for which the prices or quotes discussed
in this sentence are available prior to the date such Option is granted and
shall mean (i) the average (on that date) of the high and low prices of the
Stock on the principal national securities exchange on which the Stock is
traded, if the Stock is then traded on a national securities exchange; or (ii)
the last reported sale price (on that date) of the Stock on the NASDAQ National
Market List, if the Stock is not then traded on a national securities exchange;
or (iii) the closing bid price (or average of bid prices) last quoted (on that
date) by an established quotation service for over-the-counter securities, if
the Stock is not reported on the NASDAQ National Market List.
5.6 Non-Transferability of Options. No Option granted under this Plan
shall be transferable by the grantee otherwise than by will or the laws of
descent and distribution, and such Option may be exercised during the grantee's
lifetime only by the grantee.
5.7 Foreign Nationals. Awards may be granted to Participants who are
foreign nationals or employed outside the United States on such terms and
conditions different from those specified in the Plan as the Committee considers
necessary or advisable to achieve the purposes of the Plan or comply with
applicable laws.
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ARTICLE VI
Exercise of Option
6.1 Exercise. Each Option granted under this Plan shall be exercisable on
such date or dates and during such period and for such number of shares as shall
be determined pursuant to the provisions of the instrument evidencing such
Option. The Board shall have the right to accelerate the date of exercise of any
option, provided that the Board shall not accelerate the exercise date of any
Incentive Stock Option granted if such acceleration would violate the annual
vesting limitation contained in Section 422(d)(1) of the Code.
6.2 Notice of Exercise. A person electing to exercise an Option shall give
written notice to the Corporation of such election and of the number of shares
he or she has elected to purchase and shall at the time of exercise tender the
full purchase price of the shares he or she has elected to purchase. The
purchase price can be paid partly or completely in shares of the Corporation's
stock valued at Fair Market Value as defined in Section 5.5 hereof, or by any
such other lawful consideration as the Board may determine. Until such person
has been issued a certificate or certificates for the shares so purchased, he or
she shall possess no rights of a record holder with respect to any of such
shares.
6.3 Option Unaffected by Change in Duties. No Incentive Stock Option
(and, unless otherwise determined by the Board of Directors, no Non-Qualified
Option granted to a person who is, on the date of the grant, an Employee of the
Corporation or an Affiliated Corporation) shall be affected by any change of
duties or position of the optionee (including transfer to or from an Affiliated
Corporation), so long as he or she continues to be an Employee. Employment shall
be considered as continuing uninterrupted during any bona fide leave of absence
(such as those
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attributable to illness, military obligations or governmental service) provided
that the period of such leave does not exceed 90 days or, if longer, any period
during which such optionee's right to reemployment is guaranteed by statute. A
bona fide leave of absence with the written approval of the Board shall not be
considered an interruption of employment under the Plan, provided that such
written approval contractually obligates the Corporation or any Affiliated
Corporation to continue the employment of the optionee after the approved period
of absence.
If the optionee shall cease to be an Employee for any reason other than
death, such Option shall thereafter be exercisable only to the extent of the
purchase rights, if any, which have accrued as of the date of such cessation;
provided that (i) the Board may provide in the instrument evidencing any Option
that the Board may in its absolute discretion, upon any such cessation of
employment, determine (but be under no obligation to determine) that such
accrued purchase rights shall be deemed to include additional shares covered by
such Option; and (ii) unless the Board shall otherwise provide in the instrument
evidencing any Option, upon any such cessation of employment, such remaining
rights to purchase shall in any event terminate upon the earlier of (A) the
expiration of the original term of the Option; or (B) where such cessation of
employment is on account of disability, the expiration of one year from the date
of such cessation of employment and, otherwise, the expiration of three months
from such date. For purposes of the Plan, the term "disability" shall mean
"permanent and total disability" as defined in Section 22(e)(3) of the Code.
In the case of a Participant who is not an employee, provisions relating
to the exercisability of an Option following termination of service shall be
specified in the award. If not so specified, all Options held by such
Participant shall terminate on termination of service to the Corporation.
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6.4 Death of Optionee. Should an optionee die while in possession of the
legal right to exercise an Option or Options under this Plan, such persons as
shall have acquired, by will or by the laws of descent and distribution, the
right to exercise any Options theretofore granted, may, unless otherwise
provided by the Board in any instrument evidencing any Option, exercise such
Options at any time prior to one year from the date of death; provided, that
such Option or Options shall expire in all events no later than the last day of
the original term of such Option; provided, further, that any such exercise
shall be limited to the purchase rights which have accrued as of the date when
the optionee ceased to be an Employee, whether by death or otherwise, unless the
Board provides in the instrument evidencing such Option that, in the discretion
of the Board, additional shares covered by such Option may become subject to
purchase immediately upon the death of the optionee.
ARTICLE VII
Terms and Conditions of Options
Options shall be evidenced by instruments (which need not be identical)
in such forms as the Board may from time to time approve. Such instruments shall
conform to the terms and conditions set forth in Articles V and VI hereof and
may contain such other provisions as the Board deems advisable which are not
inconsistent with the Plan, including restrictions applicable to shares of Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Board may specify that such Non-Qualified Option shall be subject to the
restrictions set forth herein with respect to Incentive Stock Options, or to
such other termination and cancellation provisions as the Board may determine.
The Board may from time to time confer authority and responsibility on one or
more of its own members and/or one or more officers of the Corporation to
execute and deliver
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such instruments. The proper officers of the Corporation are authorized and
directed to take any and all action necessary or advisable from time to time to
carry out the terms of such instruments.
ARTICLE VIII
Benefit Plans
Awards under the Plan are discretionary and are not a part of regular
salary. Awards may not be used in determining the amount of compensation for any
purpose under the benefit plans of the Corporation, or an Affiliated
Corporation, except as the Board may from time to time expressly provide.
Neither the Plan, an Option or any instrument evidencing an Option confers upon
any Participant any right to continue as an Employee of, or consultant or
advisor to, the Company or an Affiliated Corporation or affect the right of the
Corporation or any Affiliated Corporation to terminate them at any time. Except
as specifically provided by the Board in any particular case, the loss of
existing or potential profits granted under this Plan shall not constitute an
element of damages in the event of termination of the relationship of a
Participant even if the termination is in violation of an obligation of the
Corporation to the Participant by contract or otherwise.
ARTICLE IX
Amendment, Suspension or Termination
of the Plan
The Board may suspend the Plan or any part thereof at any time or may
terminate the Plan in its entirety. Awards shall not be granted after Plan
termination. The Board may also amend the Plan from time to time, except that
amendments which affect the following subjects must be approved by stockholders
of the Corporation:
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(a) Except as provided in Article X relative to capital changes, the
number of shares as to which Options may be granted pursuant to
Article V; and
(b) The requirements as to eligibility for participation in the Plan.
Awards granted prior to suspension or termination of the Plan may not be
canceled solely because of such suspension or termination, except with the
consent of the grantee of the Award.
ARTICLE X
Changes in Capital Structure
The instruments evidencing Options granted hereunder shall be subject to
adjustment in the event of changes in the outstanding Stock of the Corporation
by reason of stock dividends, stock splits, recapitalizations, reorganizations,
mergers, consolidations, combinations, exchanges or other relevant changes in
capitalization occurring after the date of an Award to the same extent as would
affect an actual share of Stock issued and outstanding on the effective date of
such change. Such adjustment to outstanding Options shall be made without change
in the total price applicable to the unexercised portion of such options, and a
corresponding adjustment in the applicable option price per share shall be made.
In the event of any such change, the aggregate number and classes of shares for
which Options may thereafter be granted under Section 5.1 of this Plan may be
appropriately adjusted as determined by the Board so as to reflect such change.
Notwithstanding the foregoing, any adjustments made pursuant to this
Article X with respect to Incentive Stock Options shall be made only after the
Board, after consulting with counsel for the Corporation, determines whether
such adjustments would constitute a "modification" of such Incentive Stock
Options (as that term is defined in Section 424 of the Code) or would cause any
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adverse tax consequences for the holders of such Incentive Stock Options. If the
Board determines that such adjustments made with respect to Incentive Stock
Options would constitute a modification of such Incentive Stock Options, it may
refrain from making such adjustments.
In the event of the proposed dissolution or liquidation of the
Corporation, each Option will terminate immediately prior to the consummation of
such proposed action or at such other time and subject to such other conditions
as shall be determined by the Board.
Except as expressly provided herein, no issuance by the Corporation of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares subject to Options. No adjustments
shall be made for dividends paid in cash or in property other than securities of
the Corporation.
No fractional shares shall be issued under the Plan and the optionee shall
receive from the Corporation cash in lieu of such fractional shares.
ARTICLE XI
Effective Date and Term of the Plan
The Plan shall become effective on October 1, 1996. The Plan shall
continue until such time as it may be terminated by action of the Board or the
Committee; provided, however, that no Options may be granted under this Plan on
or after the tenth anniversary of the effective date hereof.
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ARTICLE XII
Conversion of ISOs into Non-Qualified
Options; Termination of ISOs
The Board, at the written request of any optionee, may in its discretion
take such actions as may be necessary to convert such optionee's Incentive Stock
Options, that have not been exercised on the date of conversion, into
Non-Qualified Options at any time prior to the expiration of such Incentive
Stock Options, regardless of whether the optionee is an employee of the
Corporation or an Affiliated Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise price of such Options. At the time of such conversion, the
Board or the Committee (with the consent of the optionee) may impose such
conditions on the exercise of the resulting Non-Qualified Options as the Board
or the Committee in its discretion may determine, provided that such conditions
shall not be inconsistent with the Plan. Nothing in the Plan shall be deemed to
give any optionee the right to have such optionee's Incentive Stock Options
converted into Non-Qualified Options, and no such conversion shall occur until
and unless the Board or the Committee takes appropriate action. The Board, with
the consent of the optionee, may also terminate any portion of any Incentive
Stock Option that has not been exercised at the time of such termination.
ARTICLE XIII
Application of Funds
The proceeds received by the Corporation from the sale of shares pursuant
to Options granted under the Plan shall be used for general corporate purposes.
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ARTICLE XIV
Governmental Regulation
The Corporation's obligation to sell and deliver shares of Stock under
this Plan is subject to the approval of any governmental authority required in
connection with the authorization, issuance or sale of such shares.
ARTICLE XV
Withholding of Additional Income Taxes
Upon the exercise of a Non-Qualified Option or the making of a
Disqualifying Disposition (as defined in Article XVI) the Corporation, in
accordance with Section 3402(a) of the Code, may require the optionee to pay
additional withholding taxes in respect of the amount that is considered
compensation includible in such person's gross income. The Board in its
discretion may condition the exercise of an Option on the payment of such
additional withholding taxes.
ARTICLE XVI
Notice to Company of Disqualifying Disposition
Each Employee who receives an Incentive Stock Option must agree to notify
the Corporation in writing immediately after the employee makes a Disqualifying
Disposition of any Stock acquired pursuant to the exercise of an Incentive Stock
Option. A Disqualifying Disposition is any disposition (including any sale) of
such Stock before the later of (a) two years after the date the employee was
granted the Incentive Stock Option or (b) one year after the date the Employee
acquired Stock by exercising the Incentive Stock Option. If the Employee has
died before such Stock is sold, these holding period requirements do not apply
and no Disqualifying Disposition can occur thereafter.
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ARTICLE XVII
Governing Law; Construction
The validity and construction of the Plan and the instruments evidencing
Options shall be governed by the laws of the State of Delaware (without regard
to the conflict of law principles thereof). In construing this Plan, the
singular shall include the plural and the masculine gender shall include the
feminine and neuter, unless the context otherwise requires.
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Exhibit 10.2
CENTURY ELECTRONICS MANUFACTURING, INC.
Series B Convertible Preferred Stock
-----------------
PREFERRED STOCK PURCHASE AGREEMENT
-----------------
February 4, 1998
<PAGE>
Century Electronics Manufacturing, Inc.
274 Cedar Hill Road
Marlborough, MA 01752
-----------------
PREFERRED STOCK PURCHASE AGREEMENT
Series B Convertible Preferred Stock
Centennial Technologies, Inc.
7 Lopez Road
Wilmington, MA 01887
The undersigned, Century Electronics Manufacturing, Inc., a
Delaware corporation (the "Company"), hereby agrees with you as follows:
SECTION 1
Authorization and Sale of the Shares
1.1 Authorization of the Shares. The Company has, or before the
Closing (as hereinafter defined) will have, authorized the issue and sale of
666,667 shares (the "Shares") of its Series B Convertible Preferred Stock, par
value $.0l per share (the "Preferred"), having the powers, preferences and
rights set forth in the Company's Restated Certificate of Incorporation (the
"Restated Certificate"), a copy of which is attached hereto as Exhibit A.
1.2 Sale of the Shares. Subject to the terms and conditions hereof
and in reliance upon the representations, warranties and agreements contained
herein, the Company will (a) issue and sell to you, at the Closing, 666,667
shares of Preferred for an aggregate purchase price of $4,000,000.00 (calculated
based on a price of $ 6.00 per share) and (b) pay to you $9.72 million in cash,
less those amounts set forth in Exhibit C hereto (the "Cash Consideration"), and
you will transfer to the Company (w) its 6% $6 million convertible subordinated
debenture due on June 25, 2007, (x) its Promissory Note dated July 1, 1997 in
the face amount of $1,891,125.00, (y) that certain Warrant dated July 1, 1997 to
purchase 250,000 shares of the Company's Common Stock, and (z) 3,683,635 shares
of the Company's Common Stock currently held by you.
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SECTION 2
Closing Date; Delivery
2.1 Closing Date. The purchase and sale of the Shares hereunder
(the "Closing") shall be held at the offices of Hemenway & Barnes, 60 State
Street, Boston, Massachusetts 02109, at 10:00 a.m., Boston time, on February 2,
1998 or on such other business day thereafter on or prior to February 6, 1998 as
may be agreed upon by the Company and you. If the Closing does not occur by
February 6, 1997, this Agreement will be terminated forthwith and the parties
hereto will have no further obligations to each other under this Agreement.
2.2 Delivery. At the Closing, the Company will deliver to you the
Cash Consideration and a certificate or certificates (in definitive form) in
such denominations and registered in your name (or the name of your nominee)
representing the number of the shares of Preferred to be purchased by you from
the Company in return for the consideration set forth in Section 1.2 hereof.
SECTION 3
Representations and Warranties of the Company
Except to the extent set forth on the Company's Schedule of
Exceptions attached hereto (the "Schedule of Exceptions"), which Schedule of
Exceptions contains, with respect to each matter disclosed therein, a specific
reference to the representation and warranty to which such matter is an
exception, the Company hereby represents and warrants to you as follows:
3.1 Organization and Standing: Restated Certificate and By-Laws.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Company is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the failure to so qualify would have a material adverse
effect on its business or properties. The Company has furnished you with
complete and correct copies of its Restated Certificate and By-Laws and, in each
case, all amendments to the date of this Agreement.
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3.2 Corporate Power. The Company has all requisite corporate power
and authority to own the properties owned by it and to carry on its business as
now conducted and to enter into this Agreement and the Stockholders Agreement
(as defined below) and will have at the Closing Date all requisite corporate
power to issue and sell the Shares, to issue the Common Stock initially issuable
upon conversion of the Shares and to carry out and perform its obligations under
the terms of this Agreement.
3.3 Subsidiaries. Other than as specified in the Schedule of
Exceptions attached hereto, the Company has no subsidiaries and does not own of
record or beneficially any capital stock or equity interest or investment in any
corporation, association or business entity.
3.4 Capitalization. The Company's authorized capital stock consists
of (a) 17,593,607 shares of Common Stock, par value $.01 per share (the "Common
Stock"), of which 9,500,088 shares are issued and outstanding, and (b) 2,739,726
shares of Series A Preferred (the "Series A Preferred") none of which are issued
and outstanding and (c) 666,667 shares of Preferred none of which are issued and
outstanding. All the aforesaid issued and outstanding shares are duly authorized
and validly issued, fully paid and nonassessable, are owned of record and (to
the best of the Company's knowledge and belief) beneficially by the stockholders
and in the amounts set forth in the Schedule of Exceptions, and have been
offered, issued, sold and delivered by the Company in compliance with applicable
federal and state securities laws. There are no outstanding preemptive,
conversion or other rights, options, warrants or agreements granted or issued by
or binding upon the Company for the purchase or acquisition of any shares of its
capital stock, except with respect to the Preferred and the Series A Preferred
in accordance with the provisions of this Agreement and the Restated Certificate
and except as disclosed in the Schedule of Exceptions. To the best of the
Company's knowledge and belief, no stockholder has granted options or other
rights to purchase any Common Stock from such stockholder other than as set
forth in the Schedule of Exceptions. The Company holds no shares of its capital
stock in its treasury. None of the Common Stock, the Preferred or the Series A
Preferred has been registered under Section 12 of the Securities Exchange Act of
1934, and no such registration is required in connection with the offer, issue
and sale of the Shares to you under the circumstances contemplated by this
Agreement.
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3.5 Authorization. All corporate action on the part of the Company,
its directors and stockholders necessary for the due authorization, execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated herein and therein, and for the due
authorization, issuance and delivery of the Shares and of the Common Stock
issuable upon conversion of the Shares has been taken or will be taken prior to
the Closing. This Agreement contains legal, valid and binding obligations of the
Company, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting enforcement of creditors' rights generally. The
execution, delivery and performance by the Company of this Agreement and
compliance herewith and the issuance and sale of the Shares and the issuance of
the Common Stock issuable upon conversion of the Shares will not result in any
violation of or be in conflict with, or result in a breach of, or constitute a
default under, any term or provision of any state or Federal law, ordinance,
rule or regulation to which the Company is subject, or the Company's Restated
Certificate or By-Laws, as amended and in effect on the date hereof, or any
mortgage, indenture, agreement, instrument, judgment, decree, order or other
restriction to which the Company is a party or by which it is bound, or result
in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of the Company pursuant to any such term. No
stockholder has any preemptive right or rights of first refusal by reason of the
issuance of the Shares. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and the Shares will be free of any liens or encumbrances. The
Common Stock issuable upon conversion of the Shares has been duly authorized and
validly reserved, not subject to any preemptive rights or rights of first
refusal and, upon issuance, will be validly issued, fully paid and
nonassessable.
3.6 Financial Information. The Company has furnished you with (i)
its unaudited balance sheet as of December 31, 1997 and statement of income and
changes in financial position for the six-month period then ended and (ii) its
audited balance sheet as of June 30, 1997 and statements of income and changes
in financial position for the twelve months ended June 30, 1997 (all of which
are collectively referred to as the "Financial Statements"). The Financial
Statements present fairly the financial position and results of operations of
the Company at the
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dates and for the periods to which they relate, have been prepared in accordance
with generally accepted accounting principles consistently followed throughout
the periods involved and show all material liabilities, absolute or contingent,
of the Company required to be recorded thereon in accordance with generally
accepted accounting principles as at the respective dates thereof.
3.7 Outstanding Debt. The Company has no outstanding indebtedness
for borrowed money except as reflected on the Financial Statements and is not a
guarantor or otherwise contingently liable for any such indebtedness. There
exists no default under the provisions of any instrument evidencing any
indebtedness or otherwise or of any agreement relating thereto.
3.8 Absence of Liabilities, The Company has no material liabilities
(fixed or contingent, including without limitation any tax liabilities due or to
become due) which are not fully reflected or provided for on the Financial
Statements, except as listed in the Schedule of Exceptions.
3.9 Absence of Certain Changes. Since June 30, 1997, except to the
extent described in the Schedule of Exceptions, there has not been any event or
condition of any character which has adversely affected the Company's business
or prospects, including but not limited to:
(a) Any material adverse change in the condition, assets,
liabilities or business of the Company;
(b) Any damage, destruction or loss of any of the properties or
assets of the Company (whether or not covered by insurance) materially
adversely affecting the business or plans of the Company;
(c) Any declaration, setting aside or payment or other distribution
in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by
the Company; or
(d) Any labor trouble, or any event or condition of any character,
materially adversely affecting the business or plans of the Company.
3.10 Taxes. The Company has duly filed within the time prescribed
by law (including extensions of time approved by the appropriate taxing
authority) all tax
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returns and reports required to be filed with the United States Internal Revenue
Service and with the commonwealth of Massachusetts, and (except to the extent
that the failure to file would not have a material adverse effect on the
condition or operations of the Company) with all other jurisdictions where such
filing is required by law; all such tax returns are true and correct; and the
Company has paid all taxes, interest, penalties, assessments or deficiencies
shown to be due or claimed to be due or in respect of such tax returns and
reports. The Company knows of (i) no other tax returns or reports which are
required to be filed which have not been so filed and (ii) no unpaid assessment
for additional taxes for any fiscal period or any basis therefor. The company's
federal income tax returns have not been audited by the Internal Revenue
Service.
3.11 Employee Benefits; ERISA. To the best of the Company's
knowledge (a) With respect to each employee benefit plan (as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) (an "Employee Benefit Plan") maintained by the Company or
an "ERISA Affiliate" (as defined below): (i) such plan has been administered and
operated in compliance with its terms and the applicable requirements of ERISA
and the Internal Revenue Code of 1986, as amended (the "Code"); (ii) no event
has occurred and there exists no circumstance under which the Company could
incur liability under ERISA, the Code, or otherwise (other than for
contributions or benefits paid or payable in the ordinary course of operation of
such plan); (iii) there are no actions, suits or claims pending or threatened
with respect to any Employee Benefit Plan or against the assets or a fiduciary
of any Employee Benefit Plan; (iv) no "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) which is not covered by an
applicable exemption has occurred; (v) no "reportable event" (as defined in
Section 4043 of ERISA) has occurred; (vi) all contributions and premiums due
have been paid on a timely basis; and (vii) all contributions made under any
Employee Benefit Plan intended to be tax deductible meet the requirements for
deductibility under the Code. As used herein, the term "ERISA Affiliate" refers
to any organization that is (x) a member of a "controlled group" of which the
Company is a member or (y) under "common control" with the Company within the
meaning of Section 414(b) and (c) of the Code.
(b) Each Employee Benefit Plan maintained by the Company or an
ERISA Affiliate that is intended to qualify
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under Section 401(a) of the Code has received a favorable letter of
determination from the Internal Revenue Service that it so qualifies and that
its related trust is exempt from taxation under Section 501(a) of the Code. No
event has occurred that will or could give rise to disqualification or loss of
tax-exempt status of any such Employee Benefit Plan or trust under Sections
401(a) or 501(a) of the Code.
(c) No Company or ERISA Affiliate benefit plan is a "defined
benefit plan" within the meaning of Section 3(35) of ERISA, a "multiemployer
plan" within the meaning of Section 3(37) of ERISA, or a "multiple employer
plan" within the meaning of Section 413 of the Code.
(d) Except as set forth in the Schedule of Exceptions, neither the
approval or execution of this Agreement nor the consummation of the transactions
contemplated by this Agreement will (i) entitle any individual to severance pay
or (ii) accelerate the time of payment or vesting of, or increase the amount of,
compensation due to any individual.
3.12 Contracts; Insurance. Except as set forth in the Schedule of
Exceptions, the Company has no currently existing contract, obligation,
agreement, plan, arrangement, commitment or the like (written or oral) of any
material nature, including without limitation the following:
(a) Employment, bonus or consulting agreements, pension, profit
sharing, deferred compensation, incentive compensation, perquisite, stock
bonus, retirement, stock option, stock purchase, severance or termination
pay plan, phantom stock or similar plans, including agreements evidencing
rights to purchase securities of the Company and agreements among
shareholders and the Company or any Employee Benefit Plan;
(b) Loan or other agreements, notes, indentures, or instruments
relating to or evidencing indebtedness for borrowed money, or mortgaging,
pledging or granting or creating a lien or security interest or other
encumbrance on any of the Company's property or any agreement or
instrument evidencing any guaranty by the Company of payment or
performance by any other person;
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(c) Agreements with dealers, sales representatives, brokers or
other distributors, jobbers, advertisers or sales agencies;
(d) Agreements with any labor union or collective bargaining
organization or other labor agreements;
(e) Any contract or series of contracts with the same person for
the furnishing or purchase of machinery, equipment, goods or services,
including without limitation agreements with processors and
subcontractors;
(f) Any indenture, agreement or other document (including private
placement brochures) relating to the sale or repurchase of shares;
(g) Any joint venture contract or arrangement or other agreement
involving a sharing of profits or expenses to which the Company is a
party;
(h) Agreements limiting the freedom of the Company to compete in
any line of business or in any geographic area or with any person;
(i) Agreements providing for disposition of the business, assets or
shares of the Company, agreements of merger or consolidation to which the
Company is a party or letters of intent with respect to the foregoing;
(j) Licenses, agreements or arrangements providing for the use of
or limiting the use of Intellectual Property;
(k) Letters of intent or agreements with respect to the acquisition
of the business, assets or shares of any other business; and
(l) Insurance policies, health insurance plans, medical plans or
any benefit plans.
The Company has complied with all the material provisions of all
said contracts, obligations, licenses, agreements, plans, arrangements, and
commitments and is not in default thereunder.
You have been supplied with a true and correct copy of each of the
written contracts and a true and correct description of the oral contracts which
are referred to on
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the Schedule of Exceptions, together with all material amendments, waivers or
other changes to all such documents. The Schedule of Exceptions contains a
complete and correct summary (in the detail therein stated) of the material
terms of all scheduled documents, amendments, waivers or other changes to all
such documents.
The Company maintains insurance which is adequate to protect the
Company and its financial condition against the risks involved in the business
conducted by the Company.
3.13 Stockholders, Directors and Officers; Indebtedness. Set forth
in the Schedule of Exceptions is a correct and complete list or description of
all indebtedness of the Company to its officers, directors or stockholders or
any of their respective spouses or relatives and of all indebtedness of such
persons to the Company and of all contractual arrangements between the Company
and any officer, director or stockholder of the Company or any of their
respective spouses or relatives. Except as set forth in the Schedule of
Exceptions, none of the officers or directors or significant employees or
consultants of the Company, or their respective spouses or relatives, owns
directly or indirectly, individually or collectively, a material interest in any
entity which is a competitor, customer or supplier of (or has any existing
contractual relationship with) the Company.
3.14 Litigation. Except as set forth in the Schedule of Exceptions,
there is no pending or, to the Company's knowledge and belief, threatened
action, suit, proceeding or claim, or any basis therefor, whether or not
purportedly on behalf of the Company, to which the Company is or may be named as
a party or its property is or may be subject and in which an unfavorable
outcome, ruling or finding in any such matter or for all such matters taken as a
whole might have a material adverse effect on the condition, financial or
otherwise, or operations of the Company; and the Company has no knowledge of any
unasserted claim, the assertion of which is likely and which, if asserted, will
seek damages, an injunction or other legal, equitable, monetary or nonmonetary
relief which claim individually or collectively with other such unasserted
claims if granted would have a material adverse effect on the condition,
financial or otherwise, or operations of the Company.
3.15 Consents. No consent, approval, qualification, order
or authorization of, or filing with, any
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governmental authority is required in connection with the Company's valid
execution, delivery or performance of this Agreement and the Stockholders
Agreement, or the offer, issue or sale of the Shares by the Company, the
conversion of the Shares, the issuance of Common Shares upon conversion of the
Shares, or the consummation of any other transaction contemplated on the part of
the Company hereby, except the filing of the Restated Certificate with the
Secretary of State of the State of Delaware.
3.16 Properties; Liens and Encumbrances. The Company owns no real
property and has a valid and indefeasible ownership interest in all its other
property and assets, free from all mortgages, pledges, liens, security
interests, conditional sale agreements, encumbrances or charges, except (i) as
listed on the Schedule of Exceptions hereto; and (ii) tax, materialmen's or like
liens for obligations not yet due or payable or being contested in good faith by
appropriate proceedings.
3.17 Leases. Set forth on the Schedule of Exceptions is a correct
and complete list (including the amount of rents called for and a description of
the leased property) of all material leases, whether for real or personal
property, under which the Company is a lessee. The Company enjoys peaceful and
undisturbed possession under all such leases, all of such leases are valid and
subsisting and none of them is in default in any material respect.
3.18 Business of the Company. There is no pending nor, to the
Company's knowledge and belief, any threatened claim or litigation, or any basis
therefor, against or affecting the Company contesting its right to develop,
produce, manufacture, license, lease, sell or use any product, process, method,
substance, part or other material presently developed, produced, manufactured,
licensed, leased, sold or used or planned to be developed, produced,
manufactured, licensed, leased, sold or used by the Company in connection with
the operations of the Company; and the Company has no knowledge that (i) there
exists, or there is pending or planned, any patent, invention, device,
application or principle, or any statute, rule, law, regulation, standard or
code which would materially adversely affect the condition, financial or
otherwise, or the operations of the Company; or (ii) there is any other factor
(other than fire, flood, accident, act of war or civil commotion, or any other
cause or event beyond the control of the Company) which may materially
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adversely affect the condition, financial or otherwise, or the operations of the
Company.
3.19. Intellectual Property, etc. (a) Schedule 3.18 in the Schedule
of Exceptions sets forth a complete list of all material intellectual property
and proprietary rights owned or used by the Company, including, without
limitation, all franchises, permits, licenses, software, trademarks, service
marks, domain names, trade rights, trade dress, patents, patent applications and
copyrights (together with all inventions, know-how and other confidential
information, "Intellectual Property"). The Company has all franchises, permits,
licenses and other similar authority necessary for the conduct of its business
as now being conducted by it and as planned to be conducted, the lack of which
could materially and adversely affect the operations or condition, financial or
otherwise, of the Company, and it is not in default in any material respect
under any of such franchises, permits, licenses or other similar authority. The
Company is the exclusive owner of all right, title and interest in and or has
the valid and legal right to use all Intellectual Property necessary to conduct
its business as now being conducted and as planned to be conducted without
conflict with or infringement upon any valid rights of others except for
infringements or conflicts which could not materially and adversely affect the
operations or condition, financial or otherwise, of the Company. The Company has
not received any notice that the conduct of the business infringes upon or
conflicts with the asserted rights of others and has no knowledge that any
person is infringing upon or in conflict with its asserted rights.
(b) To the Company's knowledge and belief, all software used in the
business that contains or calls on a calendar function, provides specific dates
or calculates spans of dates is able to record, store, process and provide true
and accurate dates and calculations for dates and spans of dates including and
following January 1, 2000.
3.20 Minute Books. The minute books of the Company provided to your
special counsel contain a complete summary of all meetings of directors and
stockholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
3.21 Offering. Neither the Company nor anyone acting on its behalf
in connection with the offering or sale of the Shares or any similar securities
of the Company has
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directly or indirectly offered the Shares or any part thereof or any similar
securities for sale to, or solicited any offer to buy any of the same from, or
otherwise approached or negotiated in respect thereof with, anyone other than
you and not more than three (3) other institutional investors. The offer,
issuance and sale of the Shares as contemplated by this Agreement are exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act," which term shall include any successor federal statute),
and from any registration or filing requirements of any applicable state
securities laws, and neither the Company nor anyone acting on its behalf will
take any action hereafter that would cause the loss of such exemption.
3.22 Compliance with Other Instruments. The Company is not in
violation of any term of its Restated Certificate or By-Laws, in each case, as
in effect on the date hereof. The Company is not (and consummation of the
transactions contemplated by this Agreement will not cause the Company to be) in
violation of any term of any mortgage, indenture, contract, agreement,
instrument, judgment, decree, order, statute, rule or regulation to which the
Company is subject and a violation of which would have a material adverse effect
on the condition, financial or otherwise, or operations of the Company.
3.23 Employees. To the best of the Company's knowledge and belief,
no employee of the Company is, or is now expected to be, in violation of any
term of any employment contract, patent disclosure agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant or any
other common law obligation to a former employer relating to the right of any
such employee to be employed by the Company because of the nature of the
business conducted or to be conducted by the Company or to the use of trade
secrets or proprietary information of others, and the employment of the
Company's employees does not subject the Company or you to any liability. There
is no pending or, to the Company's knowledge and belief, threatened action,
suit, proceeding or claim, or to its knowledge any basis therefor or threat
thereof, with respect to any contract, agreement, covenant or obligation
referred to in the preceding sentence. The Company does not have any collective
bargaining agreement covering any of its employees, The Schedule of Exceptions
sets forth the names and current base salaries and existing bonus commitments of
the employees of the Company. Except as set forth on the Schedule of Exceptions,
each employee of the Company is an
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"employee at will" and may be terminated by the Company without any payment to
such employee (other than accrued wages).
3.24 Registration Rights. Except as provided for in this Agreement
and as set forth in the Schedule of Exceptions, the Company is not under any
obligation to register (as defined in Section 8.2 below) any of its currently
outstanding securities or any of its securities which may hereafter be issued.
3.25 Environmental and Safety Laws. The Company is not in violation
of any applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.
3.26 Disclosure. This Agreement and the Schedule of Exceptions do
not contain any untrue statement of a material fact and do not omit to state a
material fact necessary in order to make the statements contained therein or
herein not misleading. There is no fact known to the Company which materially
adversely affects or in the future may (so far as the Company can now foresee)
materially adversely affect the business, operations, affairs, condition,
properties or assets of the Company or any of its subsidiaries which has not
been set forth in this Agreement or in the other documents, certificates and
instruments delivered to you by or on behalf of the Company specifically for use
in connection with the transactions contemplated by this Agreement.
SECTION 4
Representations and Warranties of Purchaser
You hereby represent and warrant to the Company as follows:
4.1 Experience. You are experienced in evaluating and investing in
newly organized, emerging companies such as the Company.
4.2 Investment. You are acquiring the Shares to be purchased by you
for investment for your own account and not with the view to, or for resale in
connection with, any distribution thereof, provided that the disposition of your
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property shall at all times be within your control. You understand that the
Shares and the Common Stock issuable upon conversion of the Shares have not been
registered under the Securities Act by reason of specified exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of your investment intent as expressed herein.
4.3 Rule 144. You acknowledge that the Shares to be purchased by
you must be held indefinitely unless they are subsequently registered under the
Act or an exemption from such registration is available. You have been advised
or are aware of the provisions of Rule 144 promulgated under the Act, which
permits limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions and that such Rule may not become available
for resale of the Shares.
4.4 Access to Data. You have had an opportunity to discuss the
Company's business, management and financial affairs with its management and
have had the opportunity to review the Company's facilities.
SECTION 5
Conditions to Closing of Purchaser
Your obligation to purchase the Shares to be purchased by you at
the Closing is subject to the fulfillment to your satisfaction on or prior to
the date of the Closing of each of the following conditions:
5.1 Representations and Warranties Correct. The representations and
warranties made by the Company herein and pursuant hereto shall have been true
and correct in all material respects when made, and shall be true and correct in
all respects on the date of the Closing with the same force and effect as if
they had been made at and as of the date of the Closing, except for such changes
resulting from consummation of the transactions contemplated by this Agreement.
5.2 Performance. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Company on or prior to
the Closing shall have been performed or complied with in all material respects
and at such time the Company shall not be in default in the performance of or
compliance with any of the provisions of this Agreement or of the Restated
Certificate.
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<PAGE>
5.3 Opinion of Company's Counsel. You shall have received from
Hemenway & Barnes, counsel to the Company, an opinion addressed to you, dated
the date of the Closing, and in substantially the form attached as Exhibit B
hereto.
5.4 Legal Investment. At the time of the Closing, the purchase of
the Shares to be purchased by you thereunder shall be legally permitted by all
laws and regulations to which you and the Company are subject.
5.5 Compliance Certificate. The Company shall have delivered to you
a certificate of the President of the Company, dated the date of the Closing,
certifying to the fulfillment of the conditions specified in Sections 5.1 and
5.2 of this Agreement and other matters you reasonably request.
5.6 [Not Used]
5.7 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be satisfactory in substance and
form to you and your counsel.
5.8 Proprietary Information and Inventions, and Non-Competition
Agreements.
(a) Each person employed by the Company who develops or has access
to Intellectual Property and proprietary information of the Company, including,
without limitation, Les Sainsbury, Ian McEwan and Walter J. Conroy, Jr., has
executed and delivered to the Company a Proprietary Information and Inventions
Agreement substantially in the form of Exhibit D hereto.
(b) Les Sainsbury, Ian McEwan and Walter J. Conroy, Jr., and any
other person employed by the Company and designated as a "key person" by you,
shall have executed an Agreement Not to Compete in substantially the form of
Exhibit E hereto.
5.9 Qualifications. All authorizations, approvals or Permits, if
any, of any governmental authority or regulatory body that are now required in
connection with the lawful issuance and sale of the Shares pursuant to this
Agreement, the conversion of the Shares into Common Stock and the issuance of
such Common Stock upon such conversion
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shall have been duly obtained and shall be in full force and effect on and as of
the Closing.
5.10 Certificate of Incorporation. The Company shall have duly filed
with the Secretary of State of the State of Delaware the Restated Certificate
and the Restated Certificate of Incorporation shall be in full force and effect
and shall not have been further amended.
5.11 [Not Used.]
5.12 Key Man Life Insurance. The Company shall have obtained the
life insurance required to be maintained by the Company pursuant to Section 7.7
and shall have furnished evidence satisfactory to you that such insurance is in
full force and effect.
5.13 Issuance Taxes. All taxes imposed by law in connection with the
issuance, sale and delivery of the Shares shall have been fully paid, and all
laws imposing such taxes shall have been fully complied with.
SECTION 6
Conditions to Closing of Company
The Company's obligation to sell the Shares to be purchased at the
Closing is subject to the fulfillment to its satisfaction on or prior to the
Closing Date of each of the conditions set forth in Sections 5.9, 5.10 and 5.11.
SECTION 7
Covenants of the Company
The Company hereby covenants and agrees, so long as you own any
Shares or any Common Stock issued upon conversion of Shares, as follows:
7.1 Basic Financial Information. The Company will furnish the
following reports to you so long as the you (or your representative) is a holder
of Preferred or Common Stock:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred and twenty days thereafter, a
consolidated balance sheet of the Company and its subsidiaries, if any, as at
the
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end of such fiscal year, and consolidated statements of income and sources and
applications of funds of the Company and its subsidiaries, if any, for such
year, prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and certified by
independent public accountants of recognized national standing selected by the
Company.
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company, and in
any event within forty-five days thereafter, a consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of each such quarterly
period, and consolidated statements of income and sources and applications of
funds of the Company and its subsidiaries for such period and for the current
fiscal year to date, prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in comparative form the
figures for the corresponding periods of the previous fiscal year, subject to
changes resulting from year-end audit adjustments, all in reasonable detail and
signed by the principal financial or accounting officer of the Company.
(c) From the date the Company becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in lieu of the financial information required pursuant to Sections
7.1(a) and (b), copies of its annual reports on Form 10-K and its quarterly
reports on Form 10-Q, respectively.
(d) Each of the financial statements referred to in subparagraphs
(a) and (b) of Section 7.1 and subparagraph (a) of Section 7.2 shall be true and
correct in all material respects as of the dates and for the periods stated
therein, subject in the case of the unaudited financial statements to changes
resulting from normal year-end adjustments (none of which would, alone or in the
aggregate, be materially adverse to the financial condition, operating results,
assets, operations or business prospects of the Company and its subsidiaries
taken as a whole).
7.2 [Not Used.]
7.3 [Not Used.]
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7.4 Prompt Payment of Taxes, etc. The Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto; and provided, further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefor. The Company will promptly pay or cause to be paid when due, or in
conformance with customary trade terms, all other indebtedness incident to
operations of the Company.
7.5 ERISA Compliance, The Company and its subsidiaries will operate
and administer each Employee Benefit Plan in compliance with its terms and the
applicable requirements of ERISA and the Code.
7.6 Maintenance of properties and Leases. The Company will keep its
properties and those of its subsidiaries in good repair, working order and
condition, reasonable wear and tear, fire and other extraordinary casualty
excepted, and from time to time make all needful and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company and its
subsidiaries will at all times comply with each provision of all leases to which
any of them is a party or under which any of them occupies property if the
breach of such provision might have a material adverse effect on the condition,
financial or otherwise, or operations of the Company.
7.7 Insurance. The Company will keep its assets and those of its
subsidiaries which are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company's line of business, in
amounts sufficient to prevent the Company or any subsidiary from becoming a
co-insurer and not in any event less than 100% of the insurable value of the
property insured; and the Company will maintain, with financially sound and
reputable insurers, insurance against other hazards and risks and liability to
persons and property to the extent and in the manner customary for companies in
similar businesses similarly situated.
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7.8 Key Man Life Insurance. Unless otherwise agreed by the Board of
Directors, the Company will at all times maintain with financially sound and
reputable insurers term life insurance on the life of Mr. Les Sainsbury, in the
amount of $2 million, and will pay all premiums in connection therewith. Such
policies shall not be cancelable except upon 30 days prior written notice to
you.
7.9 Accounts and Records. The Company will keep true records and
books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.
7.10 Independent Accountants. The Company will retain independent
public accountants of recognized national standing who shall certify the
Company's financial statements at the end of each fiscal year. In the event the
services of the independent public accountants so selected, or any firm of
independent public accountants hereafter employed by the Company are terminated,
the Company will promptly thereafter notify you and will request the firm of
independent public accountants whose services are terminated to deliver to you a
letter of such firm setting forth the reasons for the termination of their
services. In the event of such termination, the Company will promptly thereafter
engage another such firm of independent public accountants. In its notice to
you, the Company shall state whether the change of accountants was recommended
or approved by the Board of Directors or any committee thereof.
7.11 Compliance with Requirements of Governmental Authorities. The
Company and all its subsidiaries shall duly observe and conform to all valid
requirements of governmental authorities relating to the conduct of their
businesses or to their properties or assets.
7.12 Maintenance of Corporate Existence, etc. The Company shall
maintain in full force and effect its corporate existence, rights and franchises
and all licenses and other rights to use patents, processes, licenses,
trademarks, trade names or copyrights owned or possessed by it or any subsidiary
and deemed by the Company to be necessary to the conduct of its business.
7.13 Availability of Common Stock for Conversion. The Company will
not issue or agree to issue any shares of
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Common Stock or options, rights or warrants to purchase Common Stock or
securities convertible into or exchangeable for Common Stock or take any other
action if, after giving effect thereto, the number of shares of Common Stock
remaining unissued and duly reserved for issuance upon conversion of the Shares
shall be insufficient to permit conversion of all the then outstanding shares of
Preferred after giving effect to any adjustment in the Conversion Price as a
result of such action.
7.14 Notice of Record Dates. In the event of any making by the
Company of a record of the holders of any class of securities (other than the
Preferred) for the purpose of determining the holders thereof who are entitled
to receive any dividend or other distribution, the Company shall mail to you at
least ten days prior to such record date, specified herein, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend or distribution.
7.15 Proprietary Information and Inventions and Non-Competition
Agreements. The Company will require each person now or hereafter employed by it
or any subsidiary (other than clerical staff) who develops or has access to
Intellectual Property and proprietary information to enter into a Proprietary
Information and Inventions Agreement in substantially the form of Exhibit D
hereto. The Company will require all persons now or hereafter employed by the
Company or a subsidiary, and designated as a "key person" by the Company's Board
of Directors to execute an agreement in substantially the form annexed hereto as
Exhibit E as a condition precedent to the employment of such individuals.
7.16 Employee Stock Purchase Agreement. The Company will not issue
or grant or agree to issue or grant any shares of its capital stock or any
option, right or warrant to purchase shares of its capital stock or securities
convertible into or exchangeable for shares of its capital stock to any employee
or officer of the Company or a subsidiary except pursuant to a plan adopted by
the Board of on the Board of Directorshaving (a "Plan"); provided, however, no
such issuance or grant shall be made without the approval of a majority of the
members of the Board of Directors. Each such purchase or the exercise of any
such option will be subject to proportionate vesting over at least three years.
7.17 [Not Used.]
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7.18 [Not Used.]
7.19 [Not Used.]
7.20 [Not Used.]
7.21 Termination. The provisions of Sections 7.3 through 7.19 shall
terminate immediately prior to the first sale of Common Stock of the Company in
an underwritten registered (as defined in Section 8.2) public offering with an
offering price per share of at least the then effective Conversion Price, with
net proceeds to the Company of not less than $20 million.
SECTION 8
Restrictions on Transferability of
Securities; Compliance with Securities Act
8.1 Restrictions on Transferability. The Shares shall not be
transferable, except upon the conditions specified in this Section 8, which
conditions are intended to insure compliance with the provisions of the
Securities Act or, in the case of Section 8.15 hereof, to assist in an orderly
distribution. You will cause any proposed transferee of Shares held by you to
agree to take and hold those securities subject to the provisions and upon the
conditions specified in this Section 8.
8.2 Certain Definitions. As used in this Section 8, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Holder" shall mean any holder of the outstanding Shares or
Registrable Securities which have not been sold to the public.
"Initiating Holders" shall mean you or your assignees under Section
8.14 hereof who in the aggregate are Holders of more than 50% of the Registrable
Securities which have not been sold to the public.
"Registrable Securities" shall mean (i) Common Stock issued or
issuable upon conversion of the Preferred
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and (ii) any Common Stock issued in respect of securities issued pursuant to the
conversion of the Shares upon any stock split, stock dividend, recapitalization
or similar event.
The terms "register", "registered" and "registration" shall refer
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by the
Company in compliance with Sections 8.5 and 8.6 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, reasonable
fees and disbursements of one counsel for all the selling Holders and other
security holders, and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
the Company, which shall be paid in any event by the Company).
"Restricted Securities" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 8.3 hereof.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and transfer taxes applicable to the sale of Registrable Securities.
8.3 Restrictive Legend. Each certificate representing (i) the
Preferred, or (ii) the Company's Common Stock issued upon conversion of the
Preferred, or (iii) any other securities issued in respect of the Preferred or
the Common Stock issued upon conversion of the Preferred, upon any stock split,
stock dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted or unless the securities evidenced by such
certificate shall have been registered under the Securities Act or sold pursuant
to Rule 144 or Regulation A thereunder) be stamped or otherwise imprinted with a
legend in the following form (in addition to any legend required under
applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN
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THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN EXEMPTION
FROM SUCH REGISTRATION UNDER SAID ACT.
Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received either the opinion referred to in Section 8.4(i) or
the "no-action" letter referred to in Section 8.4(ii) to the effect that any
transfer by such holder of the securities evidenced by such certificate will not
violate the Securities Act and applicable state securities laws.
8.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 8.4. Prior to any proposed transfer
of any Restricted Securities (other than under circumstances described in
Sections 8.5, 8.6 and 8.8 hereof), the holder thereof shall give written notice
to the Company of such holder's intention to effect such transfer. Each such
notice shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied (except in transactions in
compliance with Rule 144) by either (i) a written opinion of Hale & Dorr, LLP or
legal counsel who shall be reasonably satisfactory to the Company, addressed to
the Company and reasonably satisfactory in form and substance to the Company's
counsel, to the effect that the proposed transfer of the Restricted Securities
may be effected without registration under the Securities Act, or (ii) a "no
action" letter from the Commission to the effect that the proposed transfer of
such securities without registration will not result in a recommendation by the
staff of the Commission that action be taken with respect thereto, whereupon the
holder of such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice delivered by
the holder to the Company. Each certificate evidencing the Restricted Securities
transferred as above provided shall bear the appropriate restrictive legend set
forth in Section 8.3 above, except that such certificate shall not bear such
restrictive legend if the opinion of counsel or "no-action" letter referred to
above is to the further effect that such legend is not required in order to
establish compliance with any provisions of the Securities Act.
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8.5 Requested Registration.
(a) Request for Registration. At any time after the Company has
effected a public offering of its securities under the Securities Act, if the
Company shall receive from Initiating Holders a written request that the Company
effect any registration with respect to all or a part of the Registrable
Securities, the Company will:
(i) promptly give written notice of the proposed registration to all
other Holders; and
(ii) as soon as practicable, use its diligent best efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws, appropriate compliance with
applicable regulations issued under the Securities Act and listing on
appropriate exchanges) as may be so requested and as would permit or facilitate
the sale and distribution of all or such portion of such Registrable Securities
as are specified in such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request as are
specified in a written request given within thirty days after receipt of such
written notice from the Company; provided that the Company shall not be
obligated to effect, or to take any action to effect, any such registration
pursuant to this Section 8.5:
(A) In any jurisdiction in which the Company would be required to
execute a general consent to service of process in effecting such
registration, qualification or compliance, or in which the cost of the
foregoing is unreasonable in light of the number of Registrable Securities
requested to be sold in such jurisdiction, unless the Company is already
subject to service in such jurisdiction and except as may be required by
the Securities Act or applicable rules or regulations thereunder; or
(B) After the Company has effected two such registrations pursuant
to this Section 8.5(a) and such registrations have been declared or
ordered effective and the sales of such Registrable Securities shall have
closed.
Subject to the foregoing clauses (A) and (B), the Company shall file a
registration statement covering the Registrable
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Securities so requested to be registered as soon as practicable, after receipt
of the request or requests of the Initiating Holders.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 8.5(b) below,
include other securities of the Company which are held by officers or directors
of the Company or which are held by persons who, by virtue of agreements with
the Company, are entitled to include their securities in any such registration,
but except as provided in the last sentence of Section 8.5(b) below the Company
shall have no right to include any of its securities in any such registration.
(b) Underwriting. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 8.5 and the Company shall include such information in the written notice
referred to in Section 8.5(a) (i) above. The right of any Holder to registration
pursuant to Section 8.5 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities he holds.
If officers or directors of the Company holding other securities of
the Company shall request inclusion in any registration pursuant to Section 8.5,
or if holders of securities of the Company who are entitled, by contract with
the Company, to have securities included in such a registration (the "Other
Shareholders") request such inclusion, the Initiating Holders shall, on behalf
of all Holders, offer to include the securities of such officers, directors and
Other Shareholders in the underwriting and may condition such offer on their
acceptance of the further applicable provisions of this Section 8. The Company
shall (together with all Holders, officers, directors and Other Shareholders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form (including, without limitation,
customary indemnification and contribution provisions on the part of the
Company) with the representative of the
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underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders and reasonably acceptable to the Company;
provided that such underwriting agreement shall not provide for indemnification
or contribution obligations on the part of Holders greater than the obligations
of the Holders pursuant to Section 8.10(b). Notwithstanding any other provision
of this Section 8.5, if the representative advises the Initiating Holders in
writing that marketing factors require a limitation on the number of shares to
be underwritten, the securities of the Company held by officers or directors of
the Company (other than Registrable Securities) and the securities held by Other
Shareholders (other than Registrable Securities) shall be excluded from such
registration to the extent so required by such limitation and if a limitation of
the number of shares is still required, the Initiating Holders shall so advise
all Holders of Registrable Securities whose securities would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be allocated
among all such Holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities and other securities which they
held at the time of the request for registration made by the Initiating Holders
pursuant to Section 8.5(a). No Registrable Securities or any other securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration. If any Holder of Registrable
Securities, officer, director or Other Shareholder who has requested inclusion
in such registration as provided above disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the underwriter and the Initiating Holders. The securities so
withdrawn shall also be withdrawn from registration. If the underwriter has not
limited the number of Registrable Securities or other securities to be
underwritten, the Company may include its securities for its own account in such
registration if the underwriter so agrees and if the number of Registrable
Securities and other securities which would otherwise have been included in such
registration and underwriting will not thereby be limited.
8.6 Company Registration.
(a) If the Company shall determine to register any of its securities
either for its own account or the account of a security holder or holders
exercising their respective demand registration rights, other than a
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registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction or a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other
state securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by any Holder within fifteen days after receipt of the
written notice from the Company described in clause (i) above, except as
set forth in Section 8.6(b) below. Such written request may specify all or
a part of a Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 8.6(a) (i), In such event the right of any Holder to
registration pursuant to Section 8.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the Other Shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for underwriting by
the Company, provided that such underwriting agreement shall not provide for
indemnification or contribution obligations on the part of Holders greater than
the obligations of the Holders pursuant to Section 8.10(b). Notwithstanding any
other provision of this Section 8.6, if the underwriter determines that
marketing factors require a limitation on the number of shares to be
underwritten, and (a) if such registration is the first registered offering of
the Company's securities to the public and is for the Company's own account, the
underwriter may (subject to the allocation priority set forth below)
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exclude from such registration and underwriting some or all of the Registrable
Securities which would otherwise be underwritten pursuant hereto, and (b) if
such registration is other than the first registered offering of the sale of the
Company's securities to the public for the Company's account, the underwriter
may limit the number of Registrable Securities to be included in the
registration and underwriting to not less than 50% of the securities included
therein (based on aggregate market values). The Company shall so advise all
holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated in the following manner. The securities of the Company held
by officers and directors of the Company (other than Registrable Securities)
shall be excluded from such registration and underwriting to the extent required
by such limitation, and, if a limitation on the number of shares is still
required, the number of shares that may be included in the registration and
underwriting shall be allocated among all such Holders and Other Shareholders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities and other securities which they held at the time the Company gives
the notice specified in Section 8.6(a)(i), provided that if such registration is
other than the first registered offering of the sale of the Company's securities
to the public for the Company's account, the number of Registrable Securities
permitted to be included therein shall in any event be at least 50% of the
securities included therein (based on aggregate market values). If any Holder of
Registrable Securities or any officer, director or Other Shareholder disapproves
of the terms of any such underwriting, he may elect to withdraw therefrom by
written notice to the Company and the underwriter. Any Registrable Securities or
other securities excluded or withdrawn from such underwriting shall be withdrawn
from such registration.
8.7 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Section 8 shall be borne by the Company, and all Selling Expenses shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of their shares so registered; provided, however, that the Company shall
not be required to Pay any Registration Expenses if, as a result of the
withdrawal of a request for registration by Initiating Holders (other than due
to a material adverse change in the business of the Company or any refusal to
proceed based upon the advice of counsel that the registration statement, or
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any prospectus contained therein, contains an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing), the registration statement does not become
effective, in which case the Holders and Other Shareholders requesting
registration shall bear such Registration Expenses pro rata on the basis of the
number of their shares so included in the registration request, and provided,
further, that such registration shall not be counted as a registration pursuant
to Section 8.5(a) (ii) (B).
8.8 Registration on Form S-2 or Form S-3. The Company shall use its
best efforts to qualify for registration on Form S-2 and Form S-3 or any
comparable or successor form or forms; and to that end the Company shall
register (whether or not required by law to do so) the Common Stock under the
Exchange Act in accordance with the provisions of that Act following the
effective date of the first registration of any securities of the Company on
Form S-1 or any comparable or successor form or forms. After the Company has
qualified for the use of either Form S-2 or Form S-3 or both, in addition to the
rights contained in the foregoing provisions of this Section 8, the Holders of
Registrable Securities shall have the right to request registrations on Form S-2
or Form S-3 (such requests shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended methods of
disposition of such shares by such Holder or Holders) provided that the Company
shall not be obligated to effect any such registration pursuant to this Section
8.8 more than twice in any one year.
8.9 Registration Procedures. In the case of each registration
effected by the Company pursuant to Section 8, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of one hundred
twenty days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (i) such 120-day period shall be extended
for a period of time equal to the period the Holder refrains from selling
any securities included in such registration in accordance with provisions
in Section 8.15 hereof; and (ii) in the case of any registration of
Registrable Securities on
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Form S-3 which are intended to be offered on a continuous or delayed
basis, such 120-day period shall be extended, if necessary, to keep the
registration statement effective until all such Registrable Securities are
sold, provided that Rule 415, or any successor rule under the Securities
Act, permits an offering on a continuous or delayed basis, and provided,
further, that applicable rules under the Securities Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which includes any prospectus required by Section
10(a) (3) of the Securities Act, the incorporation by reference of
information contained in periodic reports filed pursuant to Section 13 or
15(d) of the Exchange Act in the registration statement;
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;
(c) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 8.5 hereof, enter into an
underwriting agreement reasonably necessary to effect the offer and sale
of Common Stock, provided such underwriting agreement contains customary
underwriting provisions and provided further that if the underwriter so
requests the underwriting agreement will contain customary contribution
provisions on the part of the Company; and
(d) obtain a comfort letter from the Company's independent public
accountants in customary form and covering such matters of the type
customarily covered by comfort letters and an opinion from the Company's
counsel in customary form and covering such matters of the type
customarily covered in a public issuance of securities, in each case
addressed to the Holders.
8.10 Indemnification.
(a) The Company will, and hereby does, indemnify each Holder, each
of its officers, directors and partners, and each person controlling such
Holder, with respect to which registration, qualification or compliance has been
effected pursuant to this Section 8, and each underwriter, if any, and each
person who controls any underwriter, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
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untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such Holder, each of its officers, directors and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by such Holder or underwriter and stated to
be specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable
Securities held by him are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of the Securities
Act and the rules and regulations thereunder, each other such Holder and Other
Shareholder and each of their officers, directors and partners, and each person
controlling such Holder or Other Shareholder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders, Other
Shareholders, directors, officers, partners, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage,
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<PAGE>
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder or Other Shareholder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders and Other Shareholders hereunder shall be limited to an amount equal to
the proceeds to each such Holder or Other Shareholder of securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this Section 8.10
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
failure of any Indemnified Party to give notice shall not relieve the
Indemnifying Party of its obligation under this Section 8.10. The Indemnifying
Party will be entitled to participate in, and to the extent that it may elect by
written notice delivered to the Indemnified Party promptly after receiving the
aforesaid notice from such Indemnified Party, at its expense to assume, the
defense of any such claim or any litigation resulting therefrom, with counsel
reasonably satisfactory to such Indemnified Party, provided that the Indemnified
Party may participate in such defense at its expense, notwithstanding the
assumption of such defense by the Indemnifying Party, and provided, further,
that if the defendants in any such action shall include both the Indemnified
Party and the Indemnifying Party and the Indemnified Party shall have reasonably
concluded that there may be legal defenses available to it and/or other
Indemnified Parties which are different from or additional to those available to
the Indemnifying Party, the Indemnified Party or Parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Party or
Parties and the fees and expenses of such counsel shall be paid by the
Indemnifying Party. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying
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<PAGE>
Party may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
8.11 Information by Holder. Each Holder of Registrable Securities,
and each Other Shareholder holding securities included in any registration,
shall furnish to the Company such information regarding such Holder or Other
Shareholder and the distribution proposed by such Holder or Other Shareholder as
the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Section 8.
8.12 Limitations on Registration of Issues of Securities. From and
after the date of this Agreement, the Company shall not enter into any agreement
with any holder or prospective holder of any securities of the Company giving
such holder or prospective holder the right to require the Company to initiate
any registration of any securities of the Company, provided that this Section
8.12 shall not limit the right of the Company to enter into any agreements with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder the right to require the Company, upon any
registration of any of its securities, to include, among the securities which
the Company is then registering, securities owned by such holder. Any right
given by the Company to any holder or prospective holder of the Company's
securities in connection with the registration of securities shall be
conditioned such that it shall be subordinate to the rights of the Holders
provided in this Agreement.
8.13 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
from and after ninety days following the effective date of the first
registration under the Securities Act filed by the Company for an offering
of its securities to the general public;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company
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<PAGE>
under the Securities Act and the Exchange Act at any time after it has
become subject to such reporting requirements; and
(c) so long as you own any Restricted Securities, furnish to you
forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from
and after ninety days following the effective date of the first
registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as you may
reasonably request in availing yourself of any rule or regulation of the
Commission allowing you to sell any such securities without registration.
8.14 Transfer or Assignment of Registration Rights. The rights to
cause the Company to register your securities granted to you by the Company
under Sections 8.6 and 8.8 may be transferred or assigned by you to a transferee
or assignee of any of your Restricted Securities, provided that the Company is
given written notice by you at the time of or within a reasonable time after
such transfer or assignment, stating the name and address of such transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and provided, further, that the
transferee or assignee of such rights is not deemed by the board of directors of
the Company, in its reasonable judgment, to be a competitor of the Company; and
provided, further, that the transferee or assignee of such rights assumes your
obligations under this Section 8.
8.15 "Market Stand-off" Agreement. You agree, if requested by the
Company and an underwriter of Common Stock (or other equity securities) of the
Company, not to sell or otherwise transfer or dispose of any Common Stock (or
other equity securities) of the Company held by you during the ninety-day period
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that:
(a) such agreement only applies to the first such registration
statement of the Company including
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<PAGE>
securities to be sold on its behalf to the public in an underwritten
offering; and
(b) all Holders, Other Shareholders and officers and directors and
other shareholders of the Company holding in excess of 1% of the
outstanding Common Stock (on an as converted basis) of the Company enter
into similar agreements.
Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the shares (or securities) subject to the foregoing restriction
until the end of such ninety-day period.
SECTION 9
Miscellaneous
9.1 Governing Law. This Agreement shall be governed in all respects
by the laws of the state of Massachusetts.
9.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive (i) any investigation made by you and (ii)
the Closing.
9.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto; provided, however, the Company may not assign its rights
hereunder.
9.4 Entire Agreement; Amendment. This Agreement (including the
Schedules and Exhibits hereto) and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof. Neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated, except by a
written instrument signed by the Company and you, but in no event shall your
obligations hereunder be increased, except upon your written consent.
9.5 Notices, etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed
by first-class mail, postage
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prepaid, or delivered either by hand or by messenger, addressed to the addresses
set forth at the beginning of this Agreement, or at such other address as you
shall have furnished to the Company in writing, or if to any other holder of any
Shares or any Common Stock issued upon conversion of Shares, at such address as
such holder shall have furnished the Company in writing, or, until any such
holder so furnishes an address to the Company, then to and at the address of the
last holder thereof who has so furnished an address to the Company.
9.6 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Shares, upon any breach or default
of the Company under this Agreement, shall impair any such right, power or
remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any `provisions or
conditions of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
9.7 Rights; Separability. In case any provision of the Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
9.8 Agent's Fees.
(a) Except for your obligation to transfer to Thhomas L. DePetrillo
175,000 shares of the Company's Common Stock held by you, the Company hereby
agrees to indemnify and to hold you harmless from and against any liability for
commission or compensation in the nature of an agent's fee to any broker or
other person or firm (and the costs and expenses of defending against such
liability or asserted liability) arising from any act by the Company or any of
its employees or representatives.
(b) You (i) represent and warrant that you have retained no finder
or broker in connection with the
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transactions contemplated by this Agreement, except as set forth in section
9.8(a) and (ii) hereby agree to indemnify and to hold the Company harmless from
any liability for any commission or compensation in the nature of an agent's fee
to any broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which you, or any of your
employees or representatives, are responsible.
9.9 Expenses. The Company shall bear its own expenses and legal fees
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby.
9.10 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
9.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument. Confirmation of execution by
electronic transmission of a facsimile signature page shall be binding upon any
party so confirming.
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If you are in agreement with the foregoing, please sign where
indicated below and thereupon this letter shall become a binding agreement
between you and the Company. Very truly yours,
Very truly yours,
CENTURY ELECTRONICS MANUFACTURING, INC.
By /s/ Leslie J. Sainsbury
-----------------------------
Name: Leslie J. Sainsbury
Title: President
ACCEPTED AND AGREED TO:
CENTENNIAL TECHNOLOGIES, INC.
By /s/ Donald R. Peck
---------------------
Name: Donald R. Peck
Title: Secretary, Treasurer and General Counsel
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<PAGE>
SCHEDULES AND EXHIBITS
Schedule of Exceptions
Exhibit A -- Restated Certificate of Incorporation
Exhibit B -- Form of Opinion
Exhibit C -- Reconciliation of Cash Consideration
Exhibit D -- Proprietary Information and Inventions Agreement
Exhibit E -- Agreement Not to Compete
<PAGE>
Exhibit 10.3
CENTURY ELECTRONICS MANUFACTURING, INC.
Series A Convertible Preferred Stock
-------------------
PREFERRED STOCK PURCHASE AGREEMENT
-------------------
February 4, 1998
<PAGE>
TABLE OF CONTENT
Page
----
SECTION 1
Authorization and Sale of the Shares
1.1 Authorization of the Shares ......................................... 1
1.2 Sale of the Shares .................................................. 1
SECTION 2
Closing Date; Delivery
2.1 Closing Date ........................................................ 2
2.2 Delivery ............................................................ 2
SECTION 3
Representations and Warranties of the Company2
3.1 Organization and Standing: Restated Certificate
and By-Laws ........................................................ 3
3.2 Corporate Power .................................................... 3
3.3 Subsidiaries ....................................................... 3
3.4 Capitalization ..................................................... 3
3.5 Authorization ...................................................... 4
3.6 Financial Information .............................................. 5
3.7 Outstanding Debt ................................................... 6
3.8 Absence of Liabilities ............................................. 6
3.9 Absence of Certain Changes ......................................... 6
3.10 Taxes .............................................................. 7
3.11 Contracts; Insurance ............................................... 7
3.12 Stockholders, Directors and Officers; Indebtedness ................. 9
3.13 Litigation ......................................................... 10
3.14 Consents ........................................................... 10
3.15 Properties; Liens and Encumbrances ................................. 10
3.16 Leases ............................................................. 11
3.17 Business of the Company ............................................ 11
i
<PAGE>
3.18 Intellectual Property, etc ......................................... 12
3.19 Minute Books ....................................................... 12
3.20 Offering ........................................................... 13
3.21 Compliance with Other Instruments .................................. 13
3.22 Employees .......................................................... 13
3.23 Registration Rights ................................................ 14
3.24 Environmental and Safety Laws ...................................... 14
3.25 Employee Benefits; ERISA ........................................... 14
3.26 Disclosure ......................................................... 16
SECTION 4
Representations and Warranties of Purchaser
4.1 Experience ......................................................... 16
4.2 Investment ......................................................... 16
4.3 Rule 144 ........................................................... 17
4.4 Access to Data ..................................................... 17
SECTION 5
Conditions to Closing of Purchaser
5.1 Representations and Warranties Correct ............................. 17
5.2 Performance ........................................................ 18
5.3 Opinion of Company's Counsel ....................................... 18
5.4 Legal Investment ................................................... 18
5.5 Compliance Certificate ............................................. 18
5.6 Stockholders Agreement ............................................. 18
5.7 Proceedings and Documents .......................................... 18
5.8 Proprietary Information and Inventions, and
Non-Competition Agreements ......................................... 19
5.9 Qualifications ..................................................... 19
5.10 Certificate of Incorporation ....................................... 19
5.11 Amendment of By-Laws ............................................... 19
5.12 Key Man Life Insurance ............................................. 19
5.13 Issuance Taxes ..................................................... 20
5.15 Discharge of Indebtedness .......................................... 20
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<PAGE>
SECTION 6
Conditions to Closing of Company
SECTION 7
Covenants of the Company
7.1 Basic Financial Information ........................................ 21
7.2 Additional Information ............................................. 22
7.3 Right of First Refusal ............................................. 23
7.4 Prompt Payment of Taxes, etc ....................................... 26
7.5 ERISA Compliance ................................................... 26
7.6 Maintenance of Properties and Leases ............................... 26
7.7 Insurance .......................................................... 27
7.8 Key Man Life Insurance ............................................. 27
7.9 Accounts and Records ............................................... 27
7.10 Independent Accountants ............................................ 27
7.11 Compliance with Requirements of Governmental
Authorities ........................................................ 28
7.12 Maintenance of Corporate Existence, etc ............................ 28
7.13 Availability of Common Stock for Conversion ........................ 28
7.14 Notice of Record Dates ............................................. 28
7.15 Proprietary Information and Inventions and
Non-Competition Agreements ......................................... 29
7.16 Employee Stock Purchase Agreement .................................. 29
7.17 Use of Proceeds .................................................... 29
7.18 Replacement Directors .............................................. 30
7.19 Stockholders Agreement ............................................. 30
7.20 Debt ............................................................... 30
7.21 Director's Expenses ................................................ 30
7.22 Termination ........................................................ 30
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SECTION 8
Restrictions on Transferability of
Securities; Compliance with Securities Act
8.1 Restrictions on Transferability .................................... 31
8.2 Certain Definitions ................................................ 31
8.3 Restrictive Legend ................................................. 32
8.4 Notice of Proposed Transfers ....................................... 33
8.5 Requested Registration ............................................. 34
8.6 Company Registration ............................................... 37
8.7 Expenses of Registration ........................................... 40
8.8 Registration on Form S-2 or Form S-3 ............................... 40
8.9 Registration Procedures ............................................ 41
8.10 Indemnification .................................................... 42
8.11 Information by Holder .............................................. 45
8.12 Limitations on Registration of Issues of
Securities ......................................................... 45
8.13 Rule 144 Reporting ................................................. 46
8.14 Transfer or Assignment of Registration Rights ...................... 47
8.15 "Market Stand-off" Agreement ....................................... 47
SECTION 9
Miscellaneous
9.1 Governing Law ...................................................... 48
9.2 Survival ........................................................... 48
9.3 Successors and Assigns ............................................. 48
9.4 Entire Agreement; Amendment ........................................ 48
9.5 Notices, etc ....................................................... 49
9.6 Delays or Omissions ................................................ 49
9.7 Rights; Separability ............................................... 49
9.8 Agent's Fees ....................................................... 50
9.9 Expenses ........................................................... 50
9.10 Titles and Subtitles ............................................... 50
9.11 Counterparts ....................................................... 50
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SCHEDULES AND EXHIBITS
Schedule of Exceptions
Exhibit A -- Restated Certificate of Incorporation
Exhibit B -- Form of Opinion
Exhibit C -- Stockholders Agreement
Exhibit D -- Proprietary Information and Inventions
Agreement
Exhibit E -- Agreement Not to Compete
<PAGE>
Century Electronics Manufacturing, Inc.
274 Cedar Hill Road
Marlborough, MA 01752
PREFERRED STOCK PURCHASE AGREEMENT
Series A Convertible Preferred Stock
HarbourVest Venture Partners V -
Direct Fund, L.P.
c/o HarbourVest Partners, L.L.C.
One Financial Center
Boston, Massachusetts 02111
The undersigned, Century Electronics Manufacturing, Inc., a Delaware
corporation (the "Company"), hereby agrees with you as follows:
SECTION 1
Authorization and Sale of the Shares
1.1 Authorization of the Shares. The Company has, or before the
Closing (as hereinafter defined) will have, authorized the issue and sale of
2,739,726 shares (the "Shares") of its Series A Convertible Preferred Stock, par
value $.01 per share (the "Preferred"), having the powers, preferences and
rights set forth in the Company's Restated Certificate of Incorporation (the
"Restated Certificate"), a copy of which is attached hereto as Exhibit A.
1.2 Sale of the Shares. Subject to the terms and conditions hereof
and in reliance upon the representations, warranties and agreements contained
herein, the Company will issue and sell to you and you will purchase from the
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Company, at the Closing, 2,739,726 shares of Preferred for an aggregate purchase
price of $10,000,000 (calculated based on a price of $3.65 per share).
SECTION 2
Closing Date; Delivery
2.1 Closing Date. The purchase and sale of the Shares hereunder (the
"Closing") shall be held at the offices of Hemenway & Barnes, 60 State Street,
Boston, Massachusetts 02109, at 10:00 a.m., New York City time, on February 4,
1998 or on such other business day thereafter on or prior to February 4, 1998 as
may be agreed upon by the Company and you. If the Closing does not occur by
February 4, 1998, this Agreement will be terminated forthwith and the parties
hereto will have no further obligations to each other under this Agreement,
except that the Company shall nevertheless be obligated to make such payments as
provided for in Section 9.9 hereof.
2.2 Delivery. At the Closing, the Company will deliver to you a
certificate or certificates (in definitive form) in such denominations and
registered in your name (or the name of your nominee), representing the number
of the shares of Preferred to be purchased by you from the Company against
payment of the purchase price therefor by check, wire transfer, or such other
form of payment as shall be mutually agreed upon by you and the Company.
SECTION 3
Representations and Warranties of the Company
Except to the extent set forth on the Company's Schedule of
Exceptions attached hereto (the "Schedule of Exceptions"), which Schedule of
Exceptions contains, with respect to each matter disclosed therein, a specific
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reference to the representation and warranty to which such matter is an
exception, the Company hereby represents and warrants to you as follows:
3.1 Organization and Standing: Restated Certificate and By-Laws. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on its
business or properties. The Company has furnished you with complete and correct
copies of its Restated Certificate and By-Laws and, in each case, all amendments
to the date of this Agreement.
3.2 Corporate Power. The Company has all requisite corporate power
and authority to own the properties owned by it and to carry on its business as
now conducted and to enter into this Agreement and the Stockholders Agreement
(as defined below) and will have at the Closing Date all requisite corporate
power to issue and sell the Shares, to issue the Common Stock initially issuable
upon conversion of the Shares and to carry out and perform its obligations under
the terms of this Agreement and the Stockholders Agreement.
3.3 Subsidiaries. Other than as specified in the Schedule of
Exceptions attached hereto, the Company has no subsidiaries and does not own of
record or beneficially any capital stock or equity interest or investment in any
corporation, association or business entity.
3.4 Capitalization. The Company's authorized capital stock consists
of (a) 17,593,607 shares of Common Stock, par value $.01 per share (the "Common
Stock"), of which 9,500,088 shares are issued and outstanding, and (b) 2,739,726
shares of Preferred none of which are issued and outstanding, and (c) 666,667
shares of Series B Convertible Preferred Stock, par value $.01 per share (the
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"Series B Preferred") none of which are issued and outstanding. All the
aforesaid issued and outstanding shares are duly authorized and validly issued,
fully paid and nonassessable, are owned of record and (to the best of the
Company's knowledge and belief) beneficially by the stockholders and in the
amounts set forth in the Schedule of Exceptions, and have been offered, issued,
sold and delivered by the Company in compliance with applicable federal and
state securities laws. There are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding upon the
Company for the purchase or acquisition of any shares of its capital stock,
except with respect to the Preferred in accordance with the provisions of this
Agreement and the Restated Certificate and except as disclosed in the Schedule
of Exceptions. To the best of the Company's knowledge and belief, no stockholder
has granted options or other rights to purchase any Common Stock from such
stockholder other than as set forth in the Schedule of Exceptions. The Company
holds no shares of its capital stock in its treasury. Neither the Common Stock
nor the Preferred nor the Series B Preferred has been registered under Section
12 of the Securities Exchange Act of 1934, and no such registration is required
in connection with the offer, issue and sale of the Shares to you under the
circumstances contemplated by this Agreement.
3.5 Authorization. All corporate action on the part of the Company,
its directors and stockholders necessary for the due authorization, execution,
delivery and performance by the Company of this Agreement and the Stockholders
Agreement and the consummation of the transactions contemplated herein and
therein, and for the due authorization, issuance and delivery of the Shares and
of the Common Stock issuable upon conversion of the Shares has been taken or
will be taken prior to the Closing. This Agreement and the Stockholders
Agreement are legal, valid and binding obligations of the Company, enforceable
in accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization and
4
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moratorium laws and other laws of general application affecting enforcement of
creditors' rights generally. The execution, delivery and performance by the
Company of this Agreement and the Stockholders Agreement and compliance herewith
and therewith and the issuance and sale of the Shares and the issuance of the
Common Stock issuable upon conversion of the Shares will not result in any
violation of or be in conflict with, or result in a breach of, or constitute a
default under, any term or provision of any state or Federal law, ordinance,
rule or regulation to which the Company is subject, or the Company's Restated
Certificate or By-Laws, as amended and in effect on the date hereof, or any
mortgage, indenture, agreement, instrument, judgment, decree, order or other
restriction to which the Company is a party or by which it is bound, or result
in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of the Company pursuant to any such term. No
stockholder has any preemptive right or rights of first refusal by reason of the
issuance of the Shares. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and the Shares will be free of any liens or encumbrances. The
Common Stock issuable upon conversion of the Shares has been duly authorized and
validly reserved, not subject to any preemptive rights or rights of first
refusal and, upon issuance, will be validly issued, fully paid and
nonassessable.
3.6 Financial Information. The Company has furnished you with (i)
its unaudited balance sheet as of December 31, 1997 and statement of income and
changes in financial position for the six-month period then ended and (ii) its
audited balance sheet as of June 30, 1997 and statements of income and changes
in financial position for the twelve months ended June 30, 1997 (all of which
are collectively referred to as the "Financial Statements"). The Financial
Statements present fairly the financial position and results of operations of
the Company at the dates and for the periods to which they relate, have been
5
<PAGE>
prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods involved and show all material
liabilities, absolute or contingent, of the Company required to be recorded
thereon in accordance with generally accepted accounting principles as at the
respective dates thereof.
3.7 Outstanding Debt. The Company has no outstanding indebtedness
for borrowed money except as reflected on the Financial Statements and is not a
guarantor or otherwise contingently liable for any such indebtedness. There
exists no default under the provisions of any instrument evidencing any
indebtedness or otherwise or of any agreement relating thereto.
3.8 Absence of Liabilities. The Company has no material liabilities
(fixed or contingent, including without limitation any tax liabilities due or to
become due) which are not fully reflected or provided for on the Financial
Statements, except as listed in the Schedule of Exceptions.
3.9 Absence of Certain Changes. Since June 30, 1997, except to the
extent described in the Schedule of Exceptions, there has not been any event or
condition of any character which has adversely affected the Company's business
or prospects, including but not limited to:
(a) Any material adverse change in the condition, assets,
liabilities or business of the Company;
(b) Any damage, destruction or loss of any of the properties or
assets of the Company (whether or not covered by insurance) materially
adversely affecting the business or plans of the Company;
(c) Any declaration, setting aside or payment or other distribution
in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by
the Company; or
6
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(d) Any labor trouble, or any event or condition of any character,
materially adversely affecting the business or plans of the Company.
3.10 Taxes. The Company has duly filed within the time prescribed
by law (including extensions of time approved by the appropriate taxing
authority) all tax returns and reports required to be filed with the United
States Internal Revenue Service and with the states of Massachusetts, and
(except to the extent that the failure to file would not have a material adverse
effect on the condition or operations of the Company) with all other
jurisdictions where such filing is required by law; all such tax returns are
true and correct; and the Company has paid all taxes, interest, penalties,
assessments or deficiencies shown to be due or claimed to be due or in respect
of such tax returns and reports. The Company knows of (i) no other tax returns
or reports which are required to be filed which have not been so filed and (ii)
no unpaid assessment for additional taxes for any fiscal period or any basis
therefor. The Company's federal income tax returns have not been audited by the
Internal Revenue Service.
3.11 Contracts; Insurance. Except as set forth in the Schedule of
Exceptions, the Company has no currently existing contract, obligation,
agreement, plan, arrangement, commitment or the like (written or oral) of any
material nature, including without limitation the following:
(a) Employment, bonus or consulting agreements, pension, profit
sharing, deferred compensation, incentive compensation, perquisite, stock
bonus, retirement, stock option, stock purchase, severance or termination
pay plan, phantom stock or similar plans, including agreements evidencing
rights to purchase securities of the Company and agreements among
shareholders and the Company or any Employee Benefit Plan;
7
<PAGE>
(b) Loan or other agreements, notes, indentures, or instruments
relating to or evidencing indebtedness for borrowed money, or mortgaging,
pledging or granting or creating a lien or security interest or other
encumbrance on any of the Company's property or any agreement or
instrument evidencing any guaranty by the Company of payment or
performance by any other person;
(c) Agreements with dealers, sales representatives, brokers or other
distributors, jobbers, advertisers or sales agencies;
(d) Agreements with any labor union or collective bargaining
organization or other labor agreements;
(e) Any contract or series of contracts with the same person for the
furnishing or purchase of machinery, equipment, goods or services,
including without limitation agreements with processors and
subcontractors;
(f) Any indenture, agreement or other document (including private
placement brochures) relating to the sale or repurchase of shares;
(g) Any joint venture contract or arrangement or other agreement
involving a sharing of profits or expenses to which the Company is a
party;
(h) Agreements limiting the freedom of the Company to compete in any
line of business or in any geographic area or with any person;
(i) Agreements providing for disposition of the business, assets or
shares of the Company, agreements of merger or consolidation to which the
Company is a party or letters of intent with respect to the foregoing;
8
<PAGE>
(j) Licenses, agreements or arrangements providing for the use of or
limiting the use of Intellectual Property;
(k) Letters of intent or agreements with respect to the acquisition
of the business, assets or shares of any other business; and
(l) Insurance policies, health insurance plans, medical plans or any
benefit plans.
The Company has complied with all the material provisions of all
said contracts, obligations, licenses, agreements, plans, arrangements, and
commitments and is not in default thereunder.
You have been supplied with a true and correct copy of each of the
written contracts and a true and correct description of the oral contracts which
are referred to on the Schedule of Exceptions, together with all material
amendments, waivers or other changes to all such documents. The Schedule of
Exceptions contains a complete and correct summary (in the detail therein
stated) of the material terms of all scheduled documents, amendments, waivers or
other changes to all such documents.
The Company maintains insurance which is adequate to protect the
Company and its financial condition against the risks involved in the business
conducted by the Company.
3.12 Stockholders, Directors and Officers; Indebtedness. Set forth
in the Schedule of Exceptions is a correct and complete list or description of
all indebtedness of the Company to its officers, directors or stockholders or
any of their respective spouses or relatives and of all indebtedness of such
persons to the Company and of all contractual arrangements between the Company
and any officer, director or stockholder of the Company or any of their
respective spouses or relatives. Except as set forth in the Schedule of
Exceptions, none of the officers or
9
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directors or significant employees or consultants of the Company, or their
respective spouses or relatives, owns directly or indirectly, individually or
collectively, a material interest in any entity which is a competitor, customer
or supplier of (or has any existing contractual relationship with) the Company.
3.13 Litigation. Except as set forth in the Schedule of Exceptions,
there is no pending or, to the Company's knowledge and belief, threatened
action, suit, proceeding or claim, or any basis therefor, whether or not
purportedly on behalf of the Company, to which the Company is or may be named as
a party or its property is or may be subject and in which an unfavorable
outcome, ruling or finding in any such matter or for all such matters taken as a
whole might have a material adverse effect on the condition, financial or
otherwise, or operations of the Company; and the Company has no knowledge of any
unasserted claim, the assertion of which is likely and which, if asserted, will
seek damages, an injunction or other legal, equitable, monetary or nonmonetary
relief which claim individually or collectively with other such unasserted
claims if granted would have a material adverse effect on the condition,
financial or otherwise, or operations of the Company.
3.14 Consents. No consent, approval, qualification, order or
authorization of, or filing with, any governmental authority is required in
connection with the Company's valid execution, delivery or performance of this
Agreement and the Stockholders Agreement, or the offer, issue or sale of the
Shares by the Company, the conversion of the Shares, the issuance of Common
Shares upon conversion of the Shares, or the consummation of any other
transaction contemplated on the part of the Company hereby, except the filing of
the Restated Certificate with the Secretary of State of the State of Delaware.
3.15 Properties; Liens and Encumbrances. The Company owns no real
property and has a valid and in-
10
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defeasible ownership interest in all its other property and assets, free from
all mortgages, pledges, liens, security interests, conditional sale agreements,
encumbrances or charges, except (i) as listed on the Schedule of Exceptions
hereto; and (ii) tax, materialmen's or like liens for obligations not yet due or
payable or being contested in good faith by appropriate proceedings.
3.16 Leases. Set forth on the Schedule of Exceptions is a correct
and complete list (including the amount of rents called for and a description of
the leased property) of all material leases, whether for real or personal
property, under which the Company is a lessee. The Company enjoys peaceful and
undisturbed possession under all such leases, all of such leases are valid and
subsisting and none of them is in default in any material respect.
3.17 Business of the Company. There is no pending nor, to the
Company's knowledge and belief, any threatened claim or litigation, or any basis
therefor, against or affecting the Company contesting its right to develop,
produce, manufacture, license, lease, sell or use any product, process, method,
substance, part or other material presently developed, produced, manufactured,
licensed, leased, sold or used or planned to be developed, produced,
manufactured, licensed, leased, sold or used by the Company in connection with
the operations of the Company; and the Company has no knowledge that (i) there
exists, or there is pending or planned, any patent, invention, device,
application or principle, or any statute, rule, law, regulation, standard or
code which would materially adversely affect the condition, financial or
otherwise, or the operations of the Company; or (ii) there is any other factor
(other than fire, flood, accident, act of war or civil commotion, or any other
cause or event beyond the control of the Company) which may materially adversely
affect the condition, financial or otherwise, or the operations of the Company.
11
<PAGE>
3.18 Intellectual Property, etc. (a) Schedule 3.18 in the Schedule
of Exceptions sets forth a complete list of all material intellectual property
and proprietary rights owned or used by the Company, including, without
limitation, all franchises, permits, licenses, software, trademarks, service
marks, domain names, trade rights, trade dress, patents, patent applications and
copyrights (together with all inventions, know-how and other confidential
information, "Intellectual Property"). The Company has all franchises, permits,
licenses and other similar authority necessary for the conduct of its business
as now being conducted by it and as planned to be conducted, the lack of which
could materially and adversely affect the operations or condition, financial or
otherwise, of the Company, and it is not in default in any material respect
under any of such franchises, permits, licenses or other similar authority. The
Company is the exclusive owner of all right, title and interest in and or has
the valid and legal right to use all Intellectual Property necessary to conduct
its business as now being conducted and as planned to be conducted without
conflict with or infringement upon any valid rights of others except for
infringements or conflicts which could not materially and adversely affect the
operations or condition, financial or otherwise, of the Company. The Company has
not received any notice that the conduct of the business infringes upon or
conflicts with the asserted rights of others and has no knowledge that any
person is infringing upon or in conflict with its asserted rights.
(b) To the Company's knowledge and belief, all software used in the
business that contains or calls on a calendar function, provides specific dates
or calculates spans of dates is able to record, store, process and provide true
and accurate dates and calculations for dates and spans of dates including and
following January 1, 2000.
3.19 Minute Books. The minute books of the Company provided to your
special counsel contain a complete summary of all meetings of directors and
stockholders since the time of incorporation and reflect all transactions
12
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referred to in such minutes accurately in all material respects.
3.20 Offering. Neither the Company nor anyone acting on its behalf
in connection with the offering or sale of the Shares or any similar securities
of the Company has directly or indirectly offered the Shares or any part thereof
or any similar securities for sale to, or solicited any offer to buy any of the
same from, or otherwise approached or negotiated in respect thereof with, anyone
other than you and not more than 3 other institutional investors. The offer,
issuance and sale of the Shares as contemplated by this Agreement are exempt
from the registration requirements of the Securities Act of 1933, as amended
(the "Securities Act," which term shall include any successor federal statute),
and from any registration or filing requirements of any applicable state
securities laws, and neither the Company nor anyone acting on its behalf will
take any action hereafter that would cause the loss of such exemption.
3.21 Compliance with Other Instruments. The Company is not in
violation of any term of its Restated Certificate or By-Laws, in each case, as
in effect on the date hereof. The Company is not (and consummation of the
transactions contemplated by this Agreement will not cause the Company to be) in
violation of any term of any mortgage, indenture, contract, agreement,
instrument, judgment, decree, order, statute, rule or regulation to which the
Company is subject and a violation of which would have a material adverse effect
on the condition, financial or otherwise, or operations of the Company.
3.22 Employees. To the best of the Company's knowledge and belief,
no employee of the Company is, or is now expected to be, in violation of any
term of any employment contract, patent disclosure agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant or any
other common law obligation to a former employer relating to the right of any
such employee
13
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to be employed by the Company because of the nature of the business conducted or
to be conducted by the Company or to the use of trade secrets or proprietary
information of others, and the employment of the Company's employees does not
subject the Company or you to any liability. There is no pending or, to the
Company's knowledge and belief, threatened action, suit, proceeding or claim, or
to its knowledge any basis therefor or threat thereof, with respect to any
contract, agreement, covenant or obligation referred to in the preceding
sentence. The Company does not have any collective bargaining agreement covering
any of its employees. The Schedule of Exceptions sets forth the names and
current base salaries and existing bonus commitments of the employees of the
Company. Except as set forth on the Schedule of Exceptions, each employee of the
Company is an "employee at will" and may be terminated by the Company without
any payment to such employee (other than accrued wages).
3.23 Registration Rights. Except as provided for in this Agreement
and as set forth in the Schedule of Exceptions, the Company is not under any
obligation to register (as defined in Section 8.2 below) any of its currently
outstanding securities or any of its securities which may hereafter be issued.
3.24 Environmental and Safety Laws. The Company is not in violation
of any applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.
3.25 Employee Benefits; ERISA. To the best of the Company's
knowledge (a) With respect to each employee benefit plan (as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) (an "Employee Benefit Plan") maintained by the Company or
an "ERISA Affiliate" (as defined below): (i) such plan has been administered and
operated in
14
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compliance with its terms and the applicable requirements of ERISA and the
Internal Revenue Code of 1986, as amended (the "Code"); (ii) no event has
occurred and there exists no circumstance under which the Company could incur
liability under ERISA, the Code, or otherwise (other than for contributions or
benefits paid or payable in the ordinary course of operation of such plan);
(iii) there are no actions, suits or claims pending or threatened with respect
to any Employee Benefit Plan or against the assets or a fiduciary of any
Employee Benefit Plan; (iv) no "prohibited transaction" (as defined in Section
406 of ERISA or Section 4975 of the Code) which is not covered by an applicable
exemption has occurred; (v) no "reportable event" (as defined in Section 4043 of
ERISA) has occurred; (vi) all contributions and premiums due have been paid on a
timely basis; and (vii) all contributions made under any Employee Benefit Plan
intended to be tax deductible meet the requirements for deductibility under the
Code. As used herein, the term "ERISA Affiliate" refers to any organization that
is (x) a member of a "controlled group" of which the Company is a member or (y)
under "common control" with the Company within the meaning of Section 414(b) and
(c) of the Code.
(b) Each Employee Benefit Plan maintained by the Company or an ERISA
Affiliate that is intended to qualify under Section 401(a) of the Code has
received a favorable letter of determination from the Internal Revenue Service
that it so qualifies and that its related trust is exempt from taxation under
Section 501(a) of the Code. No event has occurred that will or could give rise
to disqualification or loss of tax-exempt status of any such Employee Benefit
Plan or trust under Sections 401(a) or 501(a) of the Code.
(c) No Company or ERISA Affiliate benefit plan is a "defined benefit
plan" within the meaning of Section 3(35) of ERISA, a "multiemployer plan"
within the meaning of Section 3(37) of ERISA, or a "multiple employer plan"
within the meaning of Section 413 of the Code.
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(d) Except as set forth in the Schedule of Exceptions, neither the
approval or execution of this Agreement nor the consummation of the transactions
contemplated by this Agreement will (i) entitle any individual to severance pay
or (ii) accelerate the time of payment or vesting of, or increase the amount of,
compensation due to any individual.
3.26 Disclosure. This Agreement and the Schedule of Exceptions do
not contain any untrue statement of a material fact and do not omit to state a
material fact necessary in order to make the statements contained therein or
herein not misleading. There is no fact known to the Company which materially
adversely affects or in the future may (so far as the Company can now foresee)
materially adversely affect the business, operations, affairs, condition,
properties or assets of the Company or any of its subsidiaries which has not
been set forth in this Agreement or in the other documents, certificates and
instruments delivered to you by or on behalf of the Company specifically for use
in connection with the transactions contemplated by this Agreement.
SECTION 4
Representations and Warranties of Purchaser
You hereby represent and warrant to the Company as follows:
4.1 Experience. You are experienced in evaluating and investing in
newly organized, emerging companies such as the Company.
4.2 Investment. You are acquiring the Shares to be purchased by you
for investment for your own account and not with the view to, or for resale in
connection with, any distribution thereof, provided that the disposition of your
property shall at all times be within your control. You
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understand that the Shares and the Common Stock issuable upon conversion of the
Shares have not been registered under the Securities Act by reason of specified
exemption from the registration provisions of the Securities Act which depends
upon, among other things, the bona fide nature of your investment intent as
expressed herein.
4.3 Rule 144. You acknowledge that the Shares to be purchased by you
must be held indefinitely unless they are subsequently registered under the Act
or an exemption from such registration is available. You have been advised or
are aware of the provisions of Rule 144 promulgated under the Act, which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions and that such Rule may not become available
for resale of the Shares.
4.4 Access to Data. You have had an opportunity to discuss the
Company's business, management and financial affairs with its management and
have had the opportunity to review the Company's facilities.
SECTION 5
Conditions to Closing of Purchaser
Your obligation to purchase the Shares to be purchased by you at the
Closing is subject to the fulfillment to your satisfaction on or prior to the
date of the Closing of each of the following conditions:
5.1 Representations and Warranties Correct. The representations and
warranties made by the Company herein and pursuant hereto shall have been true
and correct in all material respects when made, and shall be true and correct in
all respects on the date of the Closing with the same force and effect as if
they had been made at and as of the date of the Closing, except for such changes
resulting from
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consummation of the transactions contemplated by this Agreement.
5.2 Performance. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Company on or prior to
the Closing shall have been performed or complied with in all material respects
and at such time the Company shall not be in default in the performance of or
compliance with any of the provisions of this Agreement or of the Restated
Certificate.
5.3 Opinion of Company's Counsel. You, shall have received from
Hemenway & Barnes, counsel to the Company, an opinion addressed to you, dated
the date of the Closing, and in substantially the form attached as Exhibit B
hereto.
5.4 Legal Investment. At the time of the Closing, the purchase of
the Shares to be purchased by you hereunder shall be legally permitted by all
laws and regulations to which you and the Company are subject.
5.5 Compliance Certificate. The Company shall have delivered to you
a certificate of the President of the Company, dated the date of the Closing,
certifying to the fulfillment of the conditions specified in Sections 5.1 and
5.2 of this Agreement and other matters you reasonably request.
5.6 Stockholders Agreement. The Company, you and each of the
stockholders of the Company shall have executed and delivered a stockholders
agreement (the "Stockholders Agreement") substantially in the form of Exhibit C
hereto.
5.7 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be satisfactory in substance and
form to you and your counsel. The Company shall have delivered a check to
Debevoise & Plimpton to satisfy its obligations under Section 9.9, if so
requested prior to the Closing.
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5.8 Proprietary Information and Inventions, and Non-Competition
Agreements.
(a) Each person employed by the Company who develops or has access
to Intellectual Property and proprietary information of the Company, including,
without limitation, Les Sainsbury, Ian McEwan and Walter J. Conroy, Jr., has
executed and delivered to the Company a Proprietary Information and Inventions
Agreement substantially in the form of Exhibit D hereto.
(b) Les Sainsbury, Ian McEwan and Walter J. Conroy, Jr., and any
other person employed by the Company and designated as a "key person" by you,
shall have executed an Agreement Not to Compete in substantially the form of
Exhibit E hereto.
5.9 Qualifications. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body that are now required in
connection with the lawful issuance and sale of the Shares pursuant to this
Agreement, the conversion of the Shares into Common Stock and the issuance of
such Common Stock upon such conversion shall have been duly obtained and shall
be in full force and effect on and as of the Closing.
5.10 Certificate of Incorporation. The Company shall have duly filed
with the Secretary of State of the State of Delaware the Restated Certificate
and the Restated Certificate of Incorporation shall be in full force and effect
and shall not have been further amended.
5.11 Amendment of By-Laws. The Company shall have amended its
By-Laws to provide that persons owning a majority of the Preferred can call
special meetings of stockholders and the director elected by the Preferred can
call special meetings of the Board of Directors.
5.12 Key Man Life Insurance. The Company shall have obtained the
life insurance required to be maintained
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by the Company pursuant to Section 7.7 and shall have furnished evidence
satisfactory to you that such insurance is in full force and effect.
5.13 Issuance Taxes. All taxes imposed by law in connection with the
issuance, sale and delivery of the Shares shall have been fully paid, and all
laws imposing such taxes shall have been fully complied with.
5.14 Directors. Ofer Nemerovsky shall have been elected to the Board
of Directors of the Company as the representative of the holders of the
Preferred. A person mutually agreed on by you and the Company shall have also
been elected to the Board of Directors. The Company shall have amended its
By-Laws to fix the number of directors at five.
5.15 Discharge of Indebtedness. The Company shall have discharged
and shall have been released from any and all indebtedness owed to Centennial
Technologies, Inc. This Section 5.15 shall not be construed to prevent the
Company from issuing up to 666,667 shares of the Company's Series B Preferred
Stock to Centennial Technologies, Inc.
SECTION 6
Conditions to Closing of Company
The Company's obligation to sell the Shares to be purchased at the
Closing is subject to the fulfillment to its satisfaction on or prior to the
Closing Date of each of the conditions set forth in Sections 5.9, 5.10 and 5.11.
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SECTION 7
Covenants of the Company
The Company hereby covenants and agrees, so long as you own any
Shares or any Common Stock issued upon conversion of Shares, as follows:
7.1 Basic Financial Information. The Company will furnish the
following reports to you so long as the you (or your representative) is a holder
of Preferred or Common Stock:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred and twenty days thereafter, a
consolidated balance sheet of the Company and its subsidiaries, if any, as at
the end of such fiscal year, and consolidated statements of income and sources
and applications of funds of the Company and its subsidiaries, if any, for such
year, prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and certified by
independent public accountants of recognized national standing selected by the
Company.
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company, and in
any event within forty-five days thereafter, a consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of each such quarterly
period, and consolidated statements of income and sources and applications of
funds of the Company and its subsidiaries for such period and for the current
fiscal year to date, prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in comparative form the
figures for the corresponding periods of the previous fiscal year, subject to
changes resulting from year-end audit adjustments, all in reasonable
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detail and signed by the principal financial or accounting officer of the
Company.
(c) From the date the Company becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in lieu of the financial information required pursuant to Sections
7.1(a) and (b), copies of its annual reports on Form 10-K and its quarterly
reports on Form 10-Q, respectively.
(d) Each of the financial statements referred to in subparagraphs
(a) and (b) of Section 7.1 and subparagraph (a) of Section 7.2 shall be true and
correct in all material respects as of the dates and for the periods stated
therein, subject in the case of the unaudited financial statements to changes
resulting from normal year-end adjustments (none of which would, alone or in the
aggregate, be materially adverse to the financial condition, operating results,
assets, operations or business prospects of the Company and its subsidiaries
taken as a whole).
7.2 Additional Information. The Company will permit any person who
owns (or has been designated as the representative of holders of) 5% or more of
the Shares or such number of shares of Common Stock issued upon conversion of 5%
or more of the Shares, or any combination thereof, to visit and inspect any of
the properties of the Company, including its books of account, and to discuss
its affairs, finances and accounts with the Company's officers and its
independent public accountants, all at such reasonable times and as often as any
such person may reasonably request. Until the earlier to occur of (i) the date
on which the Company is subject to the reporting requirements of Section 13(a)
of the Exchange Act, or (ii) the date on which quotations for the Common Stock
of the Company are reported by the automated quotations system operated by the
National Association of Securities Dealers, Inc., or by an equivalent quotation
system, the Company will deliver the reports described below in this Section 7.2
to each such person:
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(a) As soon as practicable after the end of each month and in any
event within thirty days thereafter, a consolidated balance sheet of the Company
and its subsidiaries, if any, as at the end of such month, and consolidated
statements of income and of sources and applications of funds of the Company and
its subsidiaries, for each month and for the current fiscal year of the Company
to date, prepared in accordance with generally accepted accounting principles
consistently applied, together with a comparison of such statements to the
Company's operating plan then in effect and approved by its Board of Directors
and a comparison of such statements to the statements for the corresponding
periods of the Company's previous fiscal year, and signed, subject to changes
resulting from year-end audit adjustments, by the principal financial or
accounting officer of the Company.
(b) As soon as available (but in any event within thirty days prior
to the commencement of its fiscal year) a summary of the business plan and
financial plan of the Company for the next fiscal year, as contained in its
operating plan approved by the Company's Board of Directors. Any material
changes in such financial plan shall be submitted as promptly as practicable
after such changes have been approved by the Board of Directors.
(c) With reasonable promptness, such other information and data with
respect to the Company and its subsidiaries as any such person may from time to
time reasonably request.
(d) The foregoing provisions of this Section 7.2 shall not be in
limitation of any rights which you may have with respect to the books and
records of the Company and its subsidiaries, or to inspect their properties or
discuss their affairs, finances and accounts, under the laws of the
jurisdictions in which they are incorporated.
7.3 Right of First Refusal. The Company hereby grants to you the
right of first refusal to purchase, pro
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rata with the other holders of 5% or more of the Company's outstanding shares of
Common Stock, all (or any part) of New Securities (as defined in this Section
7.3) which the Company may, from time to time, propose to sell and issue. This
right of first refusal shall be subject to the following provisions:
(a) "New Securities" shall mean any capital stock (including the
Common Stock or the Preferred) of the Company whether now authorized or not, and
rights, options or warrants to purchase capital stock, and securities of any
type whatsoever that are, or may become, convertible into or exchangeable for
capital stock; provided that the term "New Securities" does not include (i)
securities purchased under this Agreement; (ii) securities offered to the public
pursuant to a registration statement filed pursuant to the Securities Act; (iii)
securities issued pursuant to the acquisition of another corporation by the
Company by merger, purchase of substantially all the assets or other
reorganization whereby the Company owns not less than fifty-one percent of the
voting power of such corporation; (iv) 666,667 shares of Series B Preferred
Stock to be issued on the same day as the Closing to Centennial Technologies,
Inc.; (v) any borrowings, direct or indirect, from financial institutions or
other persons by the Company, whether or not presently authorized, including any
type of loan or payment evidenced by any type of debt instrument, provided such
borrowings do not have any equity features, including warrants, options or other
rights to purchase capital stock, and are not convertible into or exchangeable
for capital stock of the Company; or (vi) securities issued to employees,
consultants, officers or directors of the Company pursuant to any stock option
plan or stock purchase or stock bonus arrangement in effect on the date hereof
or hereafter approved in accordance with Section 7.15.
(b) In the event the Company proposes to undertake an issuance of
New Securities, it shall give you written notice of its intention, describing
the type of New Securities, the price and the general terms upon which the
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Company proposes to issue the same. You shall have thirty days from the date of
receipt of any such notice to agree to purchase your pro rata share of such New
Securities for the price and upon the general terms specified in the notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
(c) In the event you fail to exercise your right of first refusal
within said 30-day period and after the expiration of the 5-day period for the
exercise of the over-allotment provisions of this Section 7.3, the Company shall
have 120 days thereafter to sell or enter into an agreement (pursuant to which
the sale of New Securities covered thereby shall be closed, if at all, within
120 days from the date of said agreement) to sell the New Securities respecting
which the your option was not exercised, at a price and upon general terms no
more favorable to the purchasers thereof than specified in the Company's notice.
In the event the Company has not sold within said 120-day period or entered into
an agreement to sell the New Securities within said 120-day period (or sold and
issued New Securities in accordance with the foregoing within 120 days from the
date of said agreement), the Company shall not thereafter issue or sell any New
Securities, without first offering such securities to you in the manner provided
above.
(d) The right of first refusal granted under this Agreement shall
expire upon the first sale of Common Stock of the Company to the public in an
underwritten public offering at an offering price per share of at least two
times the then effective Conversion Price (as defined in the Restated
Certificate) for the Preferred, which sale is effected pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission (the "Commission") under the Securities Act, with net
proceeds to the Company of not less than $20 million, or upon the acquisition of
the Company by another entity, in which the current shareholders of the Company
own less than 50% of the acquiring entity before the acquisition.
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(e) The right of first refusal set forth in this Section 7.3 is
nonassignable, except that (i) such right is assignable by you to any
wholly-owned subsidiary or parent of, or to any corporation or entity which is,
within the meaning of the Securities Act, controlling, controlled by or under
common control with you, (ii) such right is assignable by you to your partners.
7.4 Prompt Payment of Taxes, etc. The Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto; and provided, further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefor. The Company will promptly pay or cause to be paid when due, or in
conformance with customary trade terms, all other indebtedness incident to
operations of the Company.
7.5 ERISA Compliance. The Company and its subsidiaries will operate
and administer each Employee Benefit Plan in compliance with its terms and the
applicable requirements of ERISA and the Code.
7.6 Maintenance of Properties and Leases. The Company will keep its
properties and those of its subsidiaries in good repair, working order and
condition, reasonable wear and tear, fire and other extraordinary casualty
excepted, and from time to time make all needful and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company and its
subsidiaries will at all times comply with each provision of all leases to which
any of them is a party or under which any of them
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occupies property if the breach of such provision might have a material adverse
effect on the condition, financial or otherwise, or operations of the Company.
7.7 Insurance. The Company will keep its assets and those of its
subsidiaries which are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company's line of business, in
amounts sufficient to prevent the Company or any subsidiary from becoming a
co-insurer and not in any event less than 100% of the insurable value of the
property insured; and the Company will maintain, with financially sound and
reputable insurers, insurance against other hazards and risks and liability to
persons and property to the extent and in the manner customary for companies in
similar businesses similarly situated.
7.8 Key Man Life Insurance. Unless otherwise agreed by your
representative on the Board of Directors, the Company will at all times maintain
with financially sound and reputable insurers term life insurance on the lives
of Mr. Les Sainsbury, in the amount of $2 million, and will pay all premiums in
connection therewith. Such policies shall not be cancelable except upon 30 days
prior written notice to you.
7.9 Accounts and Records. The Company will keep true records and
books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with generally accepted accounting principles applied on a consistent basis.
7.10 Independent Accountants. The Company will retain independent
public accountants of recognized national standing who shall certify the
Company's financial statements at the end of each fiscal year. In the event the
services of the independent public accountants so selected, or any firm of
independent public accountants hereafter
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employed by the Company are terminated, the Company will promptly thereafter
notify you and will request the firm of independent public accountants whose
services are terminated to deliver to you a letter of such firm setting forth
the reasons for the termination of their services. In the event of such
termination, the Company will promptly thereafter engage another such firm of
independent public accountants. In its notice to you, the Company shall state
whether the change of accountants was recommended or approved by the Board of
Directors or any committee thereof.
7.11 Compliance with Requirements of Governmental Authorities. The
Company and all its subsidiaries shall duly observe and conform to all valid
requirements of governmental authorities relating to the conduct of their
businesses or to their properties or assets.
7.12 Maintenance of Corporate Existence, etc. The Company shall
maintain in full force and effect its corporate existence, rights and franchises
and all licenses and other rights to use patents, processes, licenses,
trademarks, trade names or copyrights owned or possessed by it or any subsidiary
and deemed by the Company to be necessary to the conduct of its business.
7.13 Availability of Common Stock for Conversion. The Company will
not issue or agree to issue any shares of Common Stock or options, rights or
warrants to purchase Common Stock or securities convertible into or exchangeable
for Common Stock or take any other action if, after giving effect thereto, the
number of shares of Common Stock remaining unissued and duly reserved for
issuance upon conversion of the Shares shall be insufficient to permit
conversion of all the then outstanding shares of Preferred after giving effect
to any adjustment in the Conversion Price as a result of such action.
7.14 Notice of Record Dates. In the event of any making by the
Company of a record of the holders of any class of securities (other than the
Preferred) for the
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purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, the Company shall mail to you at least ten days
prior to such record date, specified herein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend or
distribution.
7.15 Proprietary Information and Inventions and Non-Competition
Agreements. The Company will require each person now or hereafter employed by it
or any subsidiary (other than clerical staff) who develops or has access to
Intellectual Property and proprietary information to enter into a Proprietary
Information and Inventions Agreement in substantially the form of Exhibit D
hereto. The Company will require all persons now or hereafter employed by the
Company or a subsidiary, and designated as a "key person" by you (or your
transferees) on the Company's Board of Directors to execute an agreement in
substantially the form annexed hereto as Exhibit E as a condition precedent to
the employment of such individuals.
7.16 Employee Stock Purchase Agreement. The Company will not issue
or grant or agree to issue or grant any shares of its capital stock or any
option, right or warrant to purchase shares of its capital stock or securities
convertible into or exchangeable for shares of its capital stock to any employee
or officer of the Company or a subsidiary except pursuant to a plan adopted by
the Board of Directors, your representative on the Board of Directors having
voted in favor thereof (a "Plan"); provided, however, no such issuance or grant
shall be made without the approval of a majority of the members of the Board of
Directors, which majority shall include your representative. Each such purchase
or the exercise of any such option will be subject to proportionate vesting over
at least three years.
7.17 Use of Proceeds. The Company will use the proceeds from the
sale of the Shares for the purchase of Common Stock and other securities of the
Company owned by
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Centennial Technologies, Inc. and for general working capital purposes.
7.18 Replacement Directors. In the event of the death, resignation
or removal of any director designated in accordance with the Stockholders
Agreement by a particular entity or class of stockholders, the Company agrees
that in submitting to the Company's stockholders or Board of Directors the names
of nominees for election as directors or in filling interim vacancies, it will
use its best efforts to cause the nominee of the particular entity or class of
stockholders which had designated the former director to be elected as a
director.
7.19 Stockholders Agreement. The Company shall cause each employee
of the Company holding in excess of 5% of the outstanding Common Stock of the
Company (on a fully diluted basis) to execute and deliver the Stockholders
Agreement executed pursuant to Section 5.6 hereof.
7.20 Debt. The Company shall not incur indebtedness for borrowed
money greater than 7.5% of the Company's total revenue for the four fiscal
quarters preceding the fiscal quarter in which the Company proposes to incur
such indebtedness.
7.21 Director's Expenses. The Company shall pay the out-of-pocket
expenses of the Directors nominated by you incurred in attending meetings of the
Board of Directors or a committee thereof.
7.22 Termination. The provisions of Sections 7.3 through 7.20 shall
terminate immediately prior to the first sale of Common Stock of the Company in
an underwritten registered (as defined in Section 8.2) public offering with an
offering price per share of at least two times the then effective Conversion
Price, with net proceeds to the Company of not less than $20 million.
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SECTION 8
Restrictions on Transferability of
Securities; Compliance with Securities Act
8.1 Restrictions on Transferability. The Shares shall not be
transferable, except upon the conditions specified in this Section 8, which
conditions are intended to insure compliance with the provisions of the
Securities Act or, in the case of Section 8.15 hereof, to assist in an orderly
distribution. You will cause any proposed transferee of Shares held by you to
agree to take and hold those securities subject to the provisions and upon the
conditions specified in this Section 8.
8.2 Certain Definitions. As used in this Section 8, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Holder" shall mean any holder of the outstanding Shares or
Registrable Securities which have not been sold to the public.
"Initiating Holders" shall mean you or your assignees under Section
8.14 hereof who in the aggregate are Holders of more than 50% of the Registrable
Securities which have not been sold to the public.
"Registrable Securities" shall mean (i) Common Stock issued or
issuable upon conversion of the Preferred and (ii) any Common Stock issued in
respect of securities issued pursuant to the conversion of the Shares upon any
stock split, stock dividend, recapitalization or similar event.
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The terms "register", "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by the
Company in compliance with Sections 8.5 and 8.6 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, reasonable
fees and disbursements of one counsel for all the selling Holders and other
security holders, and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
the Company, which shall be paid in any event by the Company).
"Restricted Securities" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 8.3 hereof.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and transfer taxes applicable to the sale of Registrable Securities.
8.3 Restrictive Legend. Each certificate representing (i) the
Preferred, or (ii) the Company's Common Stock issued upon conversion of the
Preferred, or (iii) any other securities issued in respect of the Preferred or
the Common Stock issued upon conversion of the Preferred, upon any stock split,
stock dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted or unless the securities evidenced by such
certificate shall have been registered under the Securities Act or sold pursuant
to Rule 144 or Regulation A thereunder) be stamped or otherwise imprinted with a
legend in the following form (in addition to any legend required under
applicable state securities laws):
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN EXEMPTION
FROM SUCH REGISTRATION UNDER SAID ACT.
Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received either the opinion referred to in Section 8.4(i) or
the "no-action" letter referred to in Section 8.4(ii) to the effect that any
transfer by such holder of the securities evidenced by such certificate will not
violate the Securities Act and applicable state securities laws.
8.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 8.4. Prior to any proposed transfer
of any Restricted Securities (other than under circumstances described in
Sections 8.5, 8.6 and 8.8 hereof), the holder thereof shall give written notice
to the Company of such holder's intention to effect such transfer. Each such
notice shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied (except in transactions in
compliance with Rule 144) by either (i) a written opinion of Debevoise &
Plimpton or legal counsel who shall be reasonably satisfactory to the Company,
addressed to the Company and reasonably satisfactory in form and substance to
the Company's counsel, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration under the Securities
Act, or (ii) a "no action" letter from the Commission to the effect that the
proposed transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be
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taken with respect thereto, whereupon the holder of such Restricted Securities
shall be entitled to transfer such Restricted Securities in accordance with the
terms of the notice delivered by the holder to the Company. Each certificate
evidencing the Restricted Securities transferred as above provided shall bear
the appropriate restrictive legend set forth in Section 8.3 above, except that
such certificate shall not bear such restrictive legend if the opinion of
counsel or "no-action" letter referred to above is to the further effect that
such legend is not required in order to establish compliance with any provisions
of the Securities Act.
8.5 Requested Registration.
(a) Request for Registration. At any time after the Company has
effected a public offering of its securities under the Securities Act, if the
Company shall receive from Initiating Holders a written request that the Company
effect any registration with respect to all or a part of the Registrable
Securities, the Company will:
(i) promptly give written notice of the proposed registration to all
other Holders; and
(ii) as soon as practicable, use its diligent best efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws, appropriate compliance with
applicable regulations issued under the Securities Act and listing on
appropriate exchanges) as may be so requested and as would permit or facilitate
the sale and distribution of all or such portion of such Registrable Securities
as are specified in such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request as are
specified in a written request given within thirty days after receipt of such
written notice from the Company; provided that the Company shall not be
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obligated to effect, or to take any action to effect, any such registration
pursuant to this Section 8.5:
(A) In any jurisdiction in which the Company would be required to
execute a general consent to service of process in effecting such
registration, qualification or compliance, or in which the cost of the
foregoing is unreasonable in light of the number of Registrable Securities
requested to be sold in such jurisdiction, unless the Company is already
subject to service in such jurisdiction and except as may be required by
the Securities Act or applicable rules or regulations thereunder; or
(B) After the Company has effected two such registrations pursuant
to this Section 8.5(a) and such registrations have been declared or
ordered effective and the sales of such Registrable Securities shall have
closed.
Subject to the foregoing clauses (A) and (B), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable, after receipt of the request or requests of
the Initiating Holders.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 8.5(b) below,
include other securities of the Company which are held by officers or directors
of the Company or which are held by persons who, by virtue of agreements with
the Company, are entitled to include their securities in any such registration,
but except as provided in the last sentence of Section 8.5(b) below the Company
shall have no right to include any of its securities in any such registration.
(b) Underwriting. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so
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advise the Company as a part of their request made pursuant to Section 8.5 and
the Company shall include such information in the written notice referred to in
Section 8.5(a)(i) above. The right of any Holder to registration pursuant to
Section 8.5 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities he holds.
If officers or directors of the Company holding other securities of
the Company shall request inclusion in any registration pursuant to Section 8.5,
or if holders of securities of the Company who are entitled, by contract with
the Company, to have securities included in such a registration (the "Other
Shareholders") request such inclusion, the Initiating Holders shall, on behalf
of all Holders, offer to include the securities of such officers, directors and
Other Shareholders in the underwriting and may condition such offer on their
acceptance of the further applicable provisions of this Section 8. The Company
shall (together with all Holders, officers, directors and Other Shareholders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form (including, without limitation,
customary indemnification and contribution provisions on the part of the
Company) with the representative of the underwriter or underwriters selected for
such underwriting by a majority in interest of the Initiating Holders and
reasonably acceptable to the Company; provided that such underwriting agreement
shall not provide for indemnification or contribution obligations on the part of
Holders greater than the obligations of the Holders pursuant to Section 8.10(b).
Notwithstanding any other provision of this Section 8.5, if the representative
advises the Initiating Holders in writing that marketing factors require a
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<PAGE>
limitation on the number of shares to be underwritten, the securities of the
Company held by officers or directors of the Company (other than Registrable
Securities) and the securities held by Other Shareholders (other than
Registrable Securities) shall be excluded from such registration to the extent
so required by such limitation and if a limitation of the number of shares is
still required, the Initiating Holders shall so advise all Holders of
Registrable Securities whose securities would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be included
in the registration and underwriting shall be allocated among all such Holders
in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities and other securities which they held at the time of the
request for registration made by the Initiating Holders pursuant to Section
8.5(a). No Registrable Securities or any other securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. If any Holder of Registrable Securities, officer,
director or Other Shareholder who has requested inclusion in such registration
as provided above disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The securities so withdrawn shall also be withdrawn
from registration. If the underwriter has not limited the number of Registrable
Securities or other securities to be underwritten, the Company may include its
securities for its own account in such registration if the underwriter so agrees
and if the number of Registrable Securities and other securities which would
otherwise have been included in such registration and underwriting will not
thereby be limited.
8.6 Company Registration.
(a) If the Company shall determine to register any of its securities
either for its own account or the account of a security holder or holders
exercising their respective demand registration rights, other than a
37
<PAGE>
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction or a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other
state securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by any Holder within fifteen days after receipt of the
written notice from the Company described in clause (i) above, except as
set forth in Section 8.6(b) below. Such written request may specify all or
a part of a Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 8.6(a) (i). In such event the right of any Holder to
registration pursuant to Section 8.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the Other Shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for underwriting by
the Company, provided that such underwriting agreement shall not provide for
indemnification
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<PAGE>
or contribution obligations on the part of Holders greater than the obligations
of the Holders pursuant to Section 8.10(b). Notwithstanding any other provision
of this Section 8.6, if the underwriter determines that marketing factors
require a limitation on the number of shares to be underwritten, and (a) if such
registration is the first registered offering of the Company's securities to the
public and is for the Company's own account, the underwriter may (subject to the
allocation priority set forth below) exclude from such registration and
underwriting some or all of the Registrable Securities which would otherwise be
underwritten pursuant hereto, and (b) if such registration is other than the
first registered offering of the sale of the Company's securities to the public
for the Company's account, the underwriter may limit the number of Registrable
Securities to be included in the registration and underwriting to not less than
50% of the securities included therein (based on aggregate market values). The
Company shall so advise all holders of securities requesting registration, and
the number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated in the following manner. The
securities of the Company held by officers and directors of the Company (other
than Registrable Securities) shall be excluded from such registration and
underwriting to the extent required by such limitation, and, if a limitation on
the number of shares is still required, the number of shares that may be
included in the registration and underwriting shall be allocated among all such
Holders and Other Shareholders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities and other securities which they
held at the time the Company gives the notice specified in Section 8.6(a)(i),
provided that if such registration is other than the first registered offering
of the sale of the Company's securities to the public for the Company's account,
the number of Registrable Securities permitted to be included therein shall in
any event be at least 50% of the securities included therein (based on aggregate
market values). If any Holder of Registrable Securities or any officer, director
or Other Shareholder
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<PAGE>
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the underwriter. Any Registrable
Securities or other securities excluded or withdrawn from such underwriting
shall be withdrawn from such registration.
8.7 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Section 8 shall be borne by the Company, and all Selling Expenses shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of their shares so registered; provided, however, that the Company shall
not be required to pay any Registration Expenses if, as a result of the
withdrawal of a request for registration by Initiating Holders (other than due
to a material adverse change in the business of the Company or any refusal to
proceed based upon the advice of counsel that the registration statement, or any
prospectus contained therein, contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing), the registration statement does not become effective, in which case
the Holders and Other Shareholders requesting registration shall bear such
Registration Expenses pro rata on the basis of the number of their shares so
included in the registration request, and provided, further, that such
registration shall not be counted as a registration pursuant to Section
8.5(a)(ii)(B).
8.8 Registration on Form S-2 or Form S-3. The Company shall use its
best efforts to qualify for registration on Form S-2 and Form S-3 or any
comparable or successor form or forms; and to that end the Company shall
register (whether or not required by law to do so) the Common Stock under the
Exchange Act in accordance with the provisions of that Act following the
effective date of the first registration of any securities of the Company on
Form S-1 or any comparable or successor form or forms. After the Company has
qualified for the use of either Form S-2 or Form
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S-3 or both, in addition to the rights contained in the foregoing provisions of
this Section 8, the Holders of Registrable Securities shall have the right to
request registrations on Form S-2 or Form S-3 (such requests shall be in writing
and shall state the number of shares of Registrable Securities to be disposed of
and the intended methods of disposition of such shares by such Holder or
Holders) provided that the Company shall not be obligated to effect any such
registration pursuant to this Section 8.8 more than twice in any one year.
8.9 Registration Procedures. In the case of each registration
effected by the Company pursuant to Section 8, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of one hundred
twenty days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (i) such 120-day period shall be extended
for a period of time equal to the period the Holder refrains from selling
any securities included in such registration in accordance with provisions
in Section 8.15 hereof; and (ii) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor
rule under the Securities Act, permits an offering on a continuous or
delayed basis, and provided, further, that applicable rules under the
Securities Act governing the obligation to file a post-effective amendment
permit, in lieu of filing a post-effective amendment which includes any
prospectus required by Section 10(a)(3) of the Securities Act, the
incorporation by reference of information contained in
41
<PAGE>
periodic reports filed pursuant to Section 13 or 15(d) of the Exchange Act
in the registration statement;
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;
(c) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 8.5 hereof, enter into an
underwriting agreement reasonably necessary to effect the offer and sale
of Common Stock, provided such underwriting agreement contains customary
underwriting provisions and provided further that if the underwriter so
requests the underwriting agreement will contain customary contribution
provisions on the part of the Company; and
(d) obtain a comfort letter from the Company's independent public
accountants in customary form and covering such matters of the type
customarily covered by comfort letters and an opinion from the Company's
counsel in customary form and covering such matters of the type
customarily covered in a public issuance of securities, in each case
addressed to the Holders.
8.10 Indemnification.
(a) The Company will, and hereby does, indemnify each Holder, each
of its officers, directors and partners, and each person controlling such
Holder, with respect to which registration, qualification or compliance has been
effected pursuant to this Section 8, and each underwriter, if any, and each
person who controls any underwriter, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration,
42
<PAGE>
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, provided that the Company will not be liable in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by such Holder or underwriter and stated to
be specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable
Securities held by him are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of the Securities
Act and the rules and regulations thereunder, each other such Holder and Other
Shareholder and each of their officers, directors and partners, and each person
controlling such Holder or Other Shareholder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading,
43
<PAGE>
and will reimburse the Company and such Holders, Other Shareholders, directors,
officers, partners, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
or Other Shareholder and stated to be specifically for use therein; provided,
however, that the obligations of such Holders and Other Shareholders hereunder
shall be limited to an amount equal to the proceeds to each such Holder or Other
Shareholder of securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 8.10
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
failure of any Indemnified Party to give notice shall not relieve the
Indemnifying Party of its obligation under this Section 8.10. The Indemnifying
Party will be entitled to participate in, and to the extent that it may elect by
written notice delivered to the Indemnified Party promptly after receiving the
aforesaid notice from such Indemnified Party, at its expense to assume, the
defense of any such claim or any litigation resulting therefrom, with counsel
reasonably satisfactory to such Indemnified Party, provided that the Indemnified
Party may participate in such defense at its expense, notwithstanding the
assumption of such defense by the Indemnifying Party, and provided, further,
that if the defendants in any such action shall include both the Indemnified
Party and the Indemnifying Party and the Indemnified Party shall have reasonably
concluded that there may be legal defenses available to it and/or other
Indemnified Parties which are different from or additional to those available to
the
44
<PAGE>
Indemnifying Party, the Indemnified Party or Parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Party or
Parties and the fees and expenses of such counsel shall be paid by the
Indemnifying Party. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall furnish such information regarding
itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with defense of
such claim and litigation resulting therefrom.
8.11 Information by Holder. Each Holder of Registrable Securities,
and each Other Shareholder holding securities included in any registration,
shall furnish to the Company such information regarding such Holder or Other
Shareholder and the distribution proposed by such Holder or Other Shareholder as
the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Section 8.
8.12 Limitations on Registration of Issues of Securities. From and
after the date of this Agreement, the Company shall not enter into any agreement
with any holder or prospective holder of any securities of the Company giving
such holder or prospective holder the right to require the Company to initiate
any registration of any securities of the Company, provided that this Section
8.12 shall not limit the right of the Company to enter into any agreements with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder the right to require the Company, upon any
registration of any of its securities, to include, among the
45
<PAGE>
securities which the Company is then registering, securities owned by such
holder. Any right given by the Company to any holder or prospective holder of
the Company's securities in connection with the registration of securities shall
be conditioned such that it shall be subordinate to the rights of the Holders
provided in this Agreement.
8.13 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
from and after ninety days following the effective date of the first
registration under the Securities Act filed by the Company for an offering
of its securities to the general public;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) so long as you own any Restricted Securities, furnish to you
forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from
and after ninety days following the effective date of the first
registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as you may
reasonably request in availing yourself of any rule or
46
<PAGE>
regulation of the Commission allowing you to sell any such securities
without registration.
8.14 Transfer or Assignment of Registration Rights. The rights to
cause the Company to register your securities granted to you by the Company
under Sections 8.6 and 8.8 may be transferred or assigned by you to a transferee
or assignee of any of your Restricted Securities, provided that the Company is
given written notice by you at the time of or within a reasonable time after
such transfer or assignment, stating the name and address of such transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and provided, further, that the
transferee or assignee of such rights is not deemed by the board of directors of
the Company, in its reasonable judgment, to be a competitor of the Company; and
provided, further, that the transferee or assignee of such rights assumes your
obligations under this Section 8.
8.15 "Market Stand-off" Agreement. You agree, if requested by the
Company and an underwriter of Common Stock (or other equity securities) of the
Company, not to sell or otherwise transfer or dispose of any Common Stock (or
other equity securities) of the Company held by you during the ninety-day period
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that:
(a) such agreement only applies to the first such registration
statement of the Company including securities to be sold on its behalf to
the public in an underwritten offering; and
(b) all Holders, Other Shareholders and officers and directors and
other shareholders of the Company holding in excess of 1% of the
outstanding Common Stock (on an as converted basis) of the Company enter
into similar agreements.
47
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Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the shares (or securities) subject to the foregoing restriction
until the end of such ninety-day period.
SECTION 9
Miscellaneous
9.1 Governing Law. This Agreement shall be governed in all respects
by the laws of the state of Massachusetts.
9.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive (i) any investigation made by you and (ii)
the Closing.
9.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto; provided, however, the Company may not assign its rights
hereunder.
9.4 Entire Agreement; Amendment. This Agreement (including the
Schedules and Exhibits hereto) and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof. Neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated, except by a
written instrument signed by the Company and the holders of 60% or more of the
Shares sold under this Agreement or such number of shares of Common Stock issued
upon conversion of those 60% of the Shares and not sold to the public, or any
combination thereof, but in no event shall your obligations hereunder be
increased, except upon your written consent.
48
<PAGE>
9.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or delivered either by hand or by messenger, addressed to the
addresses set forth at the beginning of this Agreement, or at such other address
as you shall have furnished to the Company in writing, or if to any other holder
of any Shares or any Common Stock issued upon conversion of Shares, at such
address as such holder shall have furnished the Company in writing, or, until
any such holder so furnishes an address to the Company, then to and at the
address of the last holder thereof who has so furnished an address to the
Company.
9.6 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Shares, upon any breach or default
of the Company under this Agreement, shall impair any such right, power or
remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
9.7 Rights; Separability. In case any provision of the Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
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9.8 Agent's Fees.
(a) The Company hereby agrees to indemnify and to hold you harmless
from and against any liability for commission or compensation in the nature of
an agent's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) arising from any act
by the Company or any of its employees or representatives.
(b) You (i) represent and warrant that you have retained no finder
or broker in connection with the transactions contemplated by this Agreement and
(ii) hereby agree to indemnify and to hold the Company harmless from any
liability for any commission or compensation in the nature of an agent's fee to
any broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which you, or any of your
employees or representatives, are responsible.
9.9 Expenses. The Company shall bear its own expenses and legal fees
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby, and the Company will pay up to $50,000 of the fees, charges
and disbursements of Debevoise & Plimpton, your special counsel with respect to
this Agreement and the transactions contemplated hereby.
9.10 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
9.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument. Confirmation of execution by
electronic transmission of a facsimile signature page shall be binding upon any
party so confirming.
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If you are in agreement with the foregoing, please sign where
indicated below and thereupon this letter shall become a binding agreement
between you and the Company.
Very truly yours,
CENTURY ELECTRONICS MANUFACTURING, INC.
By /s/ L Sainsbury
--------------------------
Name: L SAINSBURY
Title: President
ACCEPTED AND AGREED TO:
HARBOURVEST VENTURE PARTNERS
V-DIRECT FUND, L.P.
By HVP V-Direct Associates, L.L.C.,
its General Partner
By HarbourVest Partners, L.L.C.,
its Managing Member
By
---------------------------
Name:
Title:
<PAGE>
If you are in agreement with the foregoing, please sign where
indicated below and thereupon this letter shall become a binding agreement
between you and the Company.
Very truly yours,
CENTURY ELECTRONICS MANUFACTURING, INC.
By /s/ L Sainsbury
--------------------------
Name: L SAINSBURY
Title: President
ACCEPTED AND AGREED TO:
HARBOURVEST VENTURE PARTNERS
V-DIRECT FUND, L.P.
By HVP V-Direct Associates, L.L.C.,
its General Partner
By HarbourVest Partners, L.L.C.,
its Managing Member
By /s/ Robert Wadsworth
---------------------------
Name: Robert Wadsworth
Title: Managing Director
<PAGE>
Exhibit 10.4
CENTURY ELECTRONICS MANUFACTURING, INC.
Series A Convertible Preferred Stock
--------------------
PREFERRED STOCK PURCHASE AGREEMENT
--------------------
December 1, 1998
<PAGE>
TABLE OF CONTENT
Page
----
SECTION 1
Authorization and Sale of the Shares
1.1 Authorization of the Shares ................................ 1
1.2 Sale of the Shares ......................................... 1
SECTION 2
Closing Date; Delivery
2.1 Closing Date ............................................... 2
2.2 Delivery ................................................... 2
SECTION 3
Representations and Warranties of the Company
3.1 Organization and Standing: Restated Certificate and
By-Laws .................................................... 2
3.2 Corporate Power ............................................ 3
3.3 Subsidiaries ............................................... 3
3.4 Capitalization ............................................. 3
3.5 Authorization .............................................. 4
3.6 Financial Information ...................................... 4
3.7 Outstanding Debt ........................................... 5
3.8 Absence of Liabilities ..................................... 5
3.9 Absence of Certain Changes ................................. 5
3.10 Taxes ...................................................... 6
3.11 Contracts; Insurance ....................................... 6
3.12 Stockholders, Directors and Officers; Indebtedness ......... 8
3.13 Litigation ................................................. 8
3.14 Consents ................................................... 9
3.15 Properties; Liens and Encumbrances ......................... 9
3.16 Leases ..................................................... 9
3.17 Business of the Company .................................... 9
3.18 Intellectual Property, etc. ................................ 10
3.19 Minute Books ............................................... 10
3.20 Offering ................................................... 10
3.21 Compliance with Other Instruments .......................... 11
3.22 Employees .................................................. 11
3.23 Registration Rights ........................................ 12
3.24 Environmental and Safety Laws .............................. 12
3.25 Employee Benefits; ERISA ................................... 12
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3.26 Disclosure ................................................. 13
SECTION 4
Representations and Warranties of Purchaser
4.1 Experience ................................................. 14
4.2 Investment ................................................. 14
4.3 Rule 144 ................................................... 14
4.4 Access to Data ............................................. 14
SECTION 5
Conditions to Closing of Purchaser
5.1 Representations and Warranties Correct ..................... 14
5.2 Performance ................................................ 15
5.3 Opinion of Company's Counsel ............................... 15
5.4 Legal Investment ........................................... 15
5.5 Compliance Certificate ..................................... 15
5.6 Proceedings and Documents .................................. 15
5.7 Proprietary Information and Inventions, and Non-
Competition Agreements ..................................... 15
5.8 Qualifications ............................................. 16
5.9 Certificate of Incorporation ............................... 16
5.10 Key Man Life Insurance ..................................... 16
5.11 Issuance Taxes ............................................. 16
SECTION 6
Conditions to Closing of Company
SECTION 7
Covenants of the Company
7.1 Basic Financial Information ................................ 17
7.2 Additional Information ..................................... 18
7.3 Right of First Refusal ..................................... 19
7.4 Prompt Payment of Taxes, etc. .............................. 21
7.5 ERISA Compliance ........................................... 21
7.6 Maintenance of Properties and Leases ....................... 21
7.7 Insurance .................................................. 22
7.8 Key Man Life Insurance ..................................... 22
7.9 Accounts and Records ....................................... 22
7.10 Independent Accountants .................................... 22
7.11 Compliance with Requirements of Governmental
Authorities ................................................ 23
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7.12 Maintenance of Corporate Existence, etc. ................... 23
7.13 Availability of Common Stock for Conversion ................ 23
7.14 Notice of Record Dates ..................................... 23
7.15 Proprietary Information and Inventions and Non-
Competition Agreements ..................................... 23
7.16 Employee Stock Purchase Agreement .......................... 24
7.17 Use of Proceeds ............................................ 24
7.18 Replacement Directors ...................................... 24
7.19 Stockholders Agreement ..................................... 24
7.20 Debt ....................................................... 24
7.21 Director's Expenses ........................................ 25
7.22 Termination ................................................ 25
SECTION 8
Restrictions on Transferability of
Securities; Compliance with Securities Act
8.1 Restrictions on Transferability ............................ 25
8.2 Certain Definitions ........................................ 25
8.3 Restrictive Legend ......................................... 26
8.4 Notice of Proposed Transfers ............................... 27
8.5 Requested Registration ..................................... 28
8.6 Company Registration ....................................... 31
8.7 Expenses of Registration ................................... 32
8.8 Registration on Form S-2 or Form S-3 ....................... 33
8.9 Registration Procedures .................................... 33
8.10 Indemnification ............................................ 34
8.11 Information by Holder ...................................... 37
8.12 Limitations on Registration of Issues of
Securities ................................................. 37
8.13 Rule 144 Reporting ......................................... 37
8.14 Transfer or Assignment of Registration Rights .............. 38
8.15 "Market Stand-off" Agreement ............................... 38
SECTION 9
Miscellaneous
9.1 Governing Law .............................................. 39
9.2 Survival ................................................... 39
9.3 Successors and Assigns ..................................... 39
9.4 Entire Agreement; Amendment ................................ 39
9.5 Notices, etc. .............................................. 40
9.6 Delays or Omissions ........................................ 40
9.7 Rights; Separability ....................................... 40
9.8 Agent's Fees ............................................... 40
9.9 Expenses ................................................... 41
9.10 Titles and Subtitles ....................................... 41
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9.11 Counterparts ............................................... 41
9.12 Consent of Holder of Series A Preferred .................... 41
9.13 Deletion of Section 7.3 of Series A Preferred Stock
Purchase Agreement, dated February 4, 1998 ................. 41
SCHEDULES AND EXHIBITS
Schedule of Exceptions
Exhibit A -- Restated Certificate of Incorporation
Exhibit B -- Form of Opinion
Exhibit C -- Proprietary Information and Inventions Agreement
Exhibit D -- Agreement Not to Compete
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Century Electronics Manufacturing, Inc.
274 Cedar Hill Road
Marlborough, MA 01752
---------------------
PREFERRED STOCK PURCHASE AGREEMENT
Series A Convertible Preferred Stock
HarbourVest Partners V -
Direct Fund, L.P.
c/o HarbourVest Partners, L.L.C.
One Financial Center
Boston, Massachusetts 02111
The undersigned, Century Electronics Manufacturing, Inc., a Delaware
corporation (the "Company"), hereby agrees with you as follows:
SECTION 1
Authorization and Sale of the Shares
1.1 Authorization of the Shares. The Company has, or before the
Closing (as hereinafter defined) will have, authorized the issue and sale of
931,507 shares (the "Shares") of its Series A Convertible Preferred Stock, par
value $.01 per share (the "Preferred"), having the powers, preferences and
rights set forth in the Company's Restated Certificate of Incorporation (the
"Restated Certificate"), a copy of which is attached hereto as Exhibit A.
1.2 Sale of the Shares. Subject to the terms and conditions hereof
and in reliance upon the representations, warranties and agreements contained
herein, the Company will issue and sell to you and you will purchase from the
Company, at the Closing, 931,507 shares of Preferred for an aggregate purchase
price of $3,400,000.50 (calculated based on a price of $3.65 per share) payable
(x) $1,979,000.50 in cash and (y) in cancellation of (i) the Company's
$400,000.00 promissory note, dated August 11, 1998, with accrued interest
through the date hereof of $12,666.67 and (ii) the Company's $1,000,000.00
promissory note, dated November 4, 1998, with accrued interest through the date
hereof of $8,333.33.
<PAGE>
SECTION 2
Closing Date; Delivery
2.1 Closing Date. The purchase and sale of the Shares hereunder (the
"Closing") shall be held at the offices of Hemenway & Barnes, 60 State Street,
Boston, Massachusetts 02109, at 10:00 a.m., New York City time, on December 1,
1998 or on such other business day thereafter on or prior to December 31, 1998
as may be agreed upon by the Company and you. If the Closing does not occur by
December 31, 1998, this Agreement will be terminated forthwith and the parties
hereto will have no further obligations to each other under this Agreement,
except that the Company shall nevertheless be obligated to make such payments as
provided for in Section 9.9 hereof.
2.2 Delivery. At the Closing, the Company will deliver to you a
certificate or certificates (in definitive form) in such denominations and
registered in your name (or the name of your nominee), representing the number
of the shares of Preferred to be purchased by you from the Company against
payment of the purchase price therefor by check, wire transfer, cancellation of
indebtedness or such other form of payment as shall be mutually agreed upon by
you and the Company.
SECTION 3
Representations and Warranties of the Company
Except to the extent set forth on the Company's Schedule of
Exceptions attached hereto (the "Schedule of Exceptions"), which Schedule of
Exceptions contains, with respect to each matter disclosed therein, a specific
reference to the representation and warranty to which such matter is an
exception, the Company hereby represents and warrants to you as follows:
3.1 Organization and Standing: Restated Certificate and By-Laws. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the failure to so qualify would have a material adverse effect on its
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business or properties. The Company has furnished you with complete and correct
copies of its Restated Certificate and By-Laws and, in each case, all amendments
to the date of this Agreement.
3.2 Corporate Power. The Company has all requisite corporate power
and authority to own the properties owned by it and to carry on its business as
now conducted and to enter into this Agreement and will have at the Closing Date
all requisite corporate power to issue and sell the Shares, to issue the Common
Stock initially issuable upon conversion of the Shares and to carry out and
perform its obligations under the terms of this Agreement.
3.3 Subsidiaries. Other than as specified in the Schedule of
Exceptions attached hereto, the Company has no subsidiaries and does not own of
record or beneficially any capital stock or equity interest or investment in any
corporation, association or business entity.
3.4 Capitalization. The Company's authorized capital stock consists
of (a) 17,593,607 shares of Common Stock, par value $.01 per share (the "Common
Stock"), of which 6,606,877 shares are issued and outstanding, and (b) 3,726,027
shares of Preferred of which 2,739,726 shares are issued and outstanding, and
(c) 666,667 shares of Series B Convertible Preferred Stock, par value $.01 per
share (the "Series B Preferred") of which 666,667 shares are issued and
outstanding. All the aforesaid issued and outstanding shares are duly authorized
and validly issued, fully paid and nonassessable, are owned of record and (to
the best of the Company's knowledge and belief) beneficially by the stockholders
and in the amounts set forth in the Schedule of Exceptions, and have been
offered, issued, sold and delivered by the Company in compliance with applicable
federal and state securities laws. There are no outstanding preemptive,
conversion or other rights, options, warrants or agreements granted or issued by
or binding upon the Company for the purchase or acquisition of any shares of its
capital stock, except with respect to the Preferred in accordance with the
provisions of this Agreement and the Restated Certificate and except as
disclosed in the Schedule of Exceptions. To the best of the Company's knowledge
and belief, no stockholder has granted options or other rights to purchase any
Common Stock from such stockholder other than as set forth in the Schedule of
Exceptions. The Company holds no shares of its capital stock in its treasury.
Neither the Common Stock nor the preferred nor the Series B Preferred has been
registered under Section 12
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of the Securities Exchange Act of 1934, and no such registration is required in
connection with the offer, issue and sale of the Shares to you under the
circumstances contemplated by this Agreement.
3.5 Authorization. All corporate action on the part of the Company,
its directors and stockholders necessary for the due authorization, execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated herein, and for the due authorization, issuance
and delivery of the Shares and of the Common Stock issuable upon conversion of
the Shares has been taken or will be taken prior to the Closing. This Agreement
is a legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws of general application
affecting enforcement of creditors' rights generally. The execution, delivery
and performance by the Company of this Agreement and compliance herewith and the
issuance and sale of the Shares and the issuance of the Common Stock issuable
upon conversion of the Shares will not result in any violation of or be in
conflict with, or result in a breach of, or constitute a default under, any term
or provision of any state or Federal law, ordinance, rule or regulation to which
the Company is subject, or the Company's Restated Certificate or By-Laws, as
amended and in effect on the date hereof, or any mortgage, indenture, agreement,
instrument, judgment, decree, order or other restriction to which the Company is
a party or by which it is bound, or result in the creation of any mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of the
Company pursuant to any such term. No stockholder has any preemptive right or
rights of first refusal by reason of the issuance of the Shares. The Shares,
when issued in compliance with the provisions of this Agreement, will be validly
issued, fully paid and nonassessable, and the Shares will be free of any liens
or encumbrances. The Common Stock issuable upon conversion of the Shares has
been duly authorized and validly reserved, not subject to any preemptive rights
or rights of first refusal and, upon issuance, will be validly issued, fully
paid and nonassessable.
3.6 Financial Information. The Company has furnished you with (i)
its unaudited unconsolidated balance sheet as of September 30, 1998 and
statement of income and changes in financial position for the three-month period
then ended and (ii) its November 13, 1998 draft audited
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balance sheet as of June 30, 1997 and June 30, 1998 and statements of income and
changes in financial position for the twelve months ended June 30, 1997 and June
30, 1998, respectively, (all of which are collectively referred to as the
"Financial Statements"). The Financial Statements present fairly the financial
position and results of operations of the Company at the dates and for the
periods to which they relate, have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the periods
involved and show all material liabilities, absolute or contingent, of the
Company required to be recorded thereon in accordance with generally accepted
accounting principles as at the respective dates thereof.
3.7 Outstanding Debt. The Company has no outstanding indebtedness
for borrowed money except as reflected on the Financial Statements and is not a
guarantor or otherwise contingently liable for any such indebtedness. There
exists no default under the provisions of any instrument evidencing any
indebtedness or otherwise or of any agreement relating thereto.
3.8 Absence of Liabilities. The Company has no material liabilities
(fixed or contingent, including without limitation any tax liabilities due or to
become due) which are not fully reflected or provided for on the Financial
Statements, except as listed in the Schedule of Exceptions.
3.9 Absence of Certain Changes. Since June 30, 1998, except to the
extent described in the Schedule of Exceptions, there has not been any event or
condition of any character which has adversely affected the Company's business
or prospects, including but not limited to:
(a) Any material adverse change in the condition, assets,
liabilities or business of the Company;
(b) Any damage, destruction or loss of any of the properties or
assets of the Company (whether or not covered by insurance) materially
adversely affecting the business or plans of the Company;
(c) Any declaration, setting aside or payment or other distribution
in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by
the Company; or
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(d) Any labor trouble, or any event or condition of any character,
materially adversely affecting the business or plans of the Company.
3.10 Taxes. The Company has duly filed within the time prescribed by
law (including extensions of time approved by the appropriate taxing authority)
all tax returns and reports required to be filed with the United States Internal
Revenue Service and with the states of Massachusetts, and (except to the extent
that the failure to file would not have a material adverse effect on the
condition or operations of the Company) with all other jurisdictions where such
filing is required by law; all such tax returns are true and correct; and the
Company has paid all taxes, interest, penalties, assessments or deficiencies
shown to be due or claimed to be due or in respect of such tax returns and
reports. The Company knows of (i) no other tax returns or reports which are
required to be filed which have not been so filed and (ii) no unpaid assessment
for additional taxes for any fiscal period or any basis therefor. The Company's
federal income tax returns have not been audited by the Internal Revenue
Service.
3.11 Contracts; Insurance. Except as set forth in the Schedule of
Exceptions, the Company has no currently existing contract, obligation,
agreement, plan, arrangement, commitment or the like (written or oral) of any
material nature, including without limitation the following:
(a) Employment, bonus or consulting agreements, pension, profit
sharing, deferred compensation, incentive compensation, perquisite, stock
bonus, retirement, stock option, stock purchase, severance or termination
pay plan, phantom stock or similar plans, including agreements evidencing
rights to purchase securities of the Company and agreements among
shareholders and the Company or any Employee Benefit Plan;
(b) Loan or other agreements, notes, indentures, or instruments
relating to or evidencing indebtedness for borrowed money, or mortgaging,
pledging or granting or creating a lien or security interest or other
encumbrance on any of the Company's property or any agreement or
instrument evidencing any guaranty by the Company of payment or
performance by any other person;
6
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(c) Agreements with dealers, sales representatives, brokers or other
distributors, jobbers, advertisers or sales agencies;
(d) Agreements with any labor union or collective bargaining
organization or other labor agreements;
(e) Any contract or series of contracts with the same person for the
furnishing or purchase of machinery, equipment, goods or services,
including without limitation agreements with processors and
subcontractors;
(f) Any indenture, agreement or other document (including private
placement brochures) relating to the sale or repurchase of shares;
(g) Any joint venture contract or arrangement or other agreement
involving a sharing of profits or expenses to which the Company is a
party;
(h) Agreements limiting the freedom of the Company to compete in any
line of business or in any geographic area or with any person;
(i) Agreements providing for disposition of the business, assets or
shares of the Company, agreements of merger or consolidation to which the
Company is a party or letters of intent with respect to the foregoing;
(j) Licenses, agreements or arrangements providing for the use of or
limiting the use of Intellectual Property;
(k) Letters of intent or agreements with respect to the acquisition
of the business, assets or shares of any other business; and
(l) Insurance policies, health insurance plans, medical plans or any
benefit plans.
The Company has complied with all the material provisions of all
said contracts, obligations, licenses, agreements, plans, arrangements, and
commitments and is not in default thereunder.
You have been supplied with a true and correct copy of each of the
written contracts and a true and correct
7
<PAGE>
description of the oral contracts which are referred to on the Schedule of
Exceptions, together with all material amendments, waivers or other changes to
all such documents. The Schedule of Exceptions contains a complete and correct
summary (in the detail therein stated) of the material terms of all scheduled
documents, amendments, waivers or other changes to all such documents.
The Company maintains insurance which is adequate to protect the
Company and its financial condition against the risks involved in the business
conducted by the Company.
3.12 Stockholders, Directors and Officers; Indebtedness. Set forth
in the Schedule of Exceptions is a correct and complete list or description of
all indebtedness of the Company to its officers, directors or stockholders or
any of their respective spouses or relatives and of all indebtedness of such
persons to the Company and of all contractual arrangements between the Company
and any officer, director or stockholder of the Company or any of their
respective spouses or relatives. Except as set forth in the Schedule of
Exceptions, none of the officers or directors or significant employees or
consultants of the Company, or their respective spouses or relatives, owns
directly or indirectly, individually or collectively, a material interest in any
entity which is a competitor, customer or supplier of (or has any existing
contractual relationship with) the Company.
3.13 Litigation. Except as set forth in the Schedule of Exceptions,
there is no pending or, to the Company's knowledge and belief, threatened
action, suit, proceeding or claim, or any basis therefor, whether or not
purportedly on behalf of the Company, to which the Company is or may be named as
a party or its property is or may be subject and in which an unfavorable
outcome, ruling or finding in any such matter or for all such matters taken as a
whole might have a material adverse effect on the condition, financial or
otherwise, or operations of the Company; and the Company has no knowledge of any
unasserted claim, the assertion of which is likely and which, if asserted, will
seek damages, an injunction or other legal, equitable, monetary or nonmonetary
relief which claim individually or collectively with other such unasserted
claims if granted would have a material adverse effect on the condition,
financial or otherwise, or operations of the Company.
8
<PAGE>
3.14 Consents. No consent, approval, qualification, order or
authorization of, or filing with, any governmental authority is required in
connection with the Company's valid execution, delivery or performance of this
Agreement, or the offer, issue or sale of the Shares by the Company, the
conversion of the Shares, the issuance of Common Shares upon conversion of the
Shares, or the consummation of any other transaction contemplated on the part of
the Company hereby, except the filing of the Restated Certificate with the
Secretary of State of the State of Delaware.
3.15 Properties; Liens and Encumbrances. The Company owns no real
property and has a valid and indefeasible ownership interest in all its other
property and assets, free from all mortgages, pledges, liens, security
interests, conditional sale agreements, encumbrances or charges, except (i) as
listed on the Schedule of Exceptions hereto; and (ii) tax, materialmen's or like
liens for obligations not yet due or payable or being contested in good faith by
appropriate proceedings.
3.16 Leases. Set forth on the Schedule of Exceptions is a correct
and complete list (including the amount of rents called for and a description of
the leased property) of all material leases, whether for real or personal
property, under which the Company is a lessee. The Company enjoys peaceful and
undisturbed possession under all such leases, all of such leases are valid and
subsisting and none of them is in default in any material respect.
3.17 Business of the Company. There is no pending nor, to the
Company's knowledge and belief, any threatened claim or litigation, or any basis
therefor, against or affecting the Company contesting its right to develop,
produce, manufacture, license, lease, sell or use any product, process, method,
substance, part or other material presently developed, produced, manufactured,
licensed, leased, sold or used or planned to be developed, produced,
manufactured, licensed, leased, sold or used by the Company in connection with
the operations of the Company; and the Company has no knowledge that (i) there
exists, or there is pending or planned, any patent, invention, device,
application or principle, or any statute, rule, law, regulation, standard or
code which would materially adversely affect the condition, financial or
otherwise, or the operations of the Company; or (ii) there is any other factor
(other than fire, flood, accident, act of war or civil commotion, or any other
cause or event
9
<PAGE>
beyond the control of the Company) which may materially adversely affect the
condition, financial or otherwise, or the operations of the Company.
3.18 Intellectual Property, etc. (a) Schedule 3.18 in the Schedule
of Exceptions sets forth a complete list of all material intellectual property
and proprietary rights owned or used by the Company, including, without
limitation, all franchises, permits, licenses, software, trademarks, service
marks, domain names, trade rights, trade dress, patents, patent applications and
copyrights (together with all inventions, know-how and other confidential
information, "Intellectual Property"). The Company has all franchises, permits,
licenses and other similar authority necessary for the conduct of its business
as now being conducted by it and as planned to be conducted, the lack of which
could materially and adversely affect the operations or condition, financial or
otherwise, of the Company, and it is not in default in any material respect
under any of such franchises, permits, licenses or other similar authority. The
Company is the exclusive owner of all right, title and interest in and or has
the valid and legal right to use all Intellectual Property necessary to conduct
its business as now being conducted and as planned to be conducted without
conflict with or infringement upon any valid rights of others except for
infringements or conflicts which could not materially and adversely affect the
operations or condition, financial or otherwise, of the Company. The Company has
not received any notice that the conduct of the business infringes upon or
conflicts with the asserted rights of others and has no knowledge that any
person is infringing upon or in conflict with its asserted rights.
(b) To the Company's knowledge and belief, all software used in the
business that contains or calls on a calendar function, provides specific dates
or calculates spans of dates is able to record, store, process and provide true
and accurate dates and calculations for dates and spans of dates including and
following January 1, 2000.
3.19 Minute Books. The minute books of the Company provided to your
special counsel contain a complete summary of all meetings of directors and
stockholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
3.20 Offering. Neither the Company nor anyone acting on its behalf
in connection with the offering or sale
10
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of the Shares or any similar securities of the Company has directly or
indirectly offered the Shares or any part thereof or any similar securities for
sale to, or solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, anyone other than you and not
more than 3 other institutional investors. The offer, issuance and sale of the
Shares as contemplated by this Agreement are exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act,"
which term shall include any successor federal statute), and from any
registration or filing requirements of any applicable state securities laws, and
neither the Company nor anyone acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
3.21 Compliance with Other Instruments. The Company is not in
violation of any term of its Restated Certificate or By-Laws, in each case, as
in effect on the date hereof. The Company is not (and consummation of the
transactions contemplated by this Agreement will not cause the Company to be) in
violation of any term of any mortgage, indenture, contract, agreement,
instrument, judgment, decree, order, statute, rule or regulation to which the
Company is subject and a violation of which would have a material adverse effect
on the condition, financial or otherwise, or operations of the Company.
3.22 Employees. To the best of the Company's knowledge and belief,
no employee of the Company is, or is now expected to be, in violation of any
term of any employment contract, patent disclosure agreement, non-competition
agreement, or any other contract or agreement or any restrictive covenant or any
other common law obligation to a former employer relating to the right of any
such employee to be employed by the Company because of the nature of the
business conducted or to be conducted by the Company or to the use of trade
secrets or proprietary information of others, and the employment of the
Company's employees does not subject the Company or you to any liability. There
is no pending or, to the Company's knowledge and belief, threatened action,
suit, proceeding or claim, or to its knowledge any basis therefor or threat
thereof, with respect to any contract, agreement, covenant or obligation
referred to in the preceding sentence. The Company does not have any collective
bargaining agreement covering any of its employees. The Schedule of Exceptions
sets forth the names and current base salaries and existing bonus commitments of
the employees of the Company. Except as set forth on the
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Schedule of Exceptions, each employee of the Company is an "employee at will"
and may be terminated by the Company without any payment to such employee (other
than accrued wages).
3.23 Registration Rights. Except as provided for in this Agreement
and as set forth in the Schedule of Exceptions, the Company is not under any
obligation to register (as defined in Section 8.2 below) any of its currently
outstanding securities or any of its securities which may hereafter be issued.
3.24 Environmental and Safety Laws. The Company is not in violation
of any applicable statute, law or regulation relating to the environment or
occupational health and safety, and to its knowledge, no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.
3.25 Employee Benefits; ERISA. To the best of the Company's
knowledge (a) With respect to each employee benefit plan (as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) (an "Employee Benefit Plan") maintained by the Company or
an "ERISA Affiliate" (as defined below): (i) such plan has been administered and
operated in compliance with its terms and the applicable requirements of ERISA
and the Internal Revenue Code of 1986, as amended (the "Code"); (ii) no event
has occurred and there exists no circumstance under which the Company could
incur liability under ERISA, the Code, or otherwise (other than for
contributions or benefits paid or payable in the ordinary course of operation of
such plan); (iii) there are no actions, suits or claims pending or threatened
with respect to any Employee Benefit Plan or against the assets or a fiduciary
of any Employee Benefit Plan; (iv) no "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) which is not covered by an
applicable exemption has occurred; (v) no "reportable event" (as defined in
Section 4043 of ERISA) has occurred; (vi) all contributions and premiums due
have been paid on a timely basis; and (vii) all contributions made under any
Employee Benefit Plan intended to be tax deductible meet the requirements for
deductibility under the Code. As used herein, the term "ERISA Affiliate" refers
to any organization that is (x) a member of a "controlled group" of which the
Company is a member or (y) under "common control" with the Company within the
meaning of Section 414(b) and (c) of the Code.
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(b) Each Employee Benefit Plan maintained by the Company or an ERISA
Affiliate that is intended to qualify under Section 401(a) of the Code has
received a favorable letter of determination from the Internal Revenue Service
that it so qualifies and that its related trust is exempt from taxation under
Section 501(a) of the Code. No event has occurred that will or could give rise
to disqualification or loss of tax-exempt status of any such Employee Benefit
Plan or trust under Sections 401(a) or 501(a) of the Code.
(c) No Company or ERISA Affiliate benefit plan is a "defined benefit
plan" within the meaning of Section 3(35) of ERISA, a "multiemployer plan"
within the meaning of Section 3(37) of ERISA, or a "multiple employer plan"
within the meaning of Section 413 of the Code.
(d) Except as set forth in the Schedule of Exceptions, neither the
approval or execution of this Agreement nor the consummation of the transactions
contemplated by this Agreement will (i) entitle any individual to severance pay
or (ii) accelerate the time of payment or vesting of, or increase the amount of,
compensation due to any individual.
3.26 Disclosure. This Agreement and the Schedule of Exceptions do
not contain any untrue statement of a material fact and do not omit to state a
material fact necessary in order to make the statements contained therein or
herein not misleading. There is no fact known to the Company which materially
adversely affects or in the future may (so far as the Company can now foresee)
materially adversely affect the business, operations, affairs, condition,
properties or assets of the Company or any of its subsidiaries which has not
been set forth in this Agreement or in the other documents, certificates and
instruments delivered to you by or on behalf of the Company specifically for use
in connection with the transactions contemplated by this Agreement.
SECTION 4
Representations and Warranties of Purchaser
You hereby represent and warrant to the Company as follows:
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4.1 Experience. You are experienced in evaluating and investing in
newly organized, emerging companies such as the Company.
4.2 Investment. You are acquiring the Shares to be purchased by you
for investment for your own account and not with the view to, or for resale in
connection with, any distribution thereof, provided that the disposition of your
property shall at all times be within your control. You understand that the
Shares and the Common Stock issuable upon conversion of the Shares have not been
registered under the Securities Act by reason of specified exemption from the
registration provisions of the Securities Act which depends upon, among other
things, the bona fide nature of your investment intent as expressed herein.
4.3 Rule 144. You acknowledge that the Shares to be purchased by you
must be held indefinitely unless they are subsequently registered under the Act
or an exemption from such registration is available. You have been advised or
are aware of the provisions of Rule 144 promulgated under the Act, which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions and that such Rule may not become available
for resale of the Shares.
4.4 Access to Data. You have had an opportunity to discuss the
Company's business, management and financial affairs with its management and
have had the opportunity to review the Company's facilities.
SECTION 5
Conditions to Closing of Purchaser
Your obligation to purchase the Shares to be purchased by you at the
Closing is subject to the fulfillment to your satisfaction on or prior to the
date of the Closing of each of the following conditions:
5.1 Representations and Warranties Correct. The representations and
warranties made by the Company herein and pursuant hereto shall have been true
and correct in all material respects when made, and shall be true and correct in
all respects on the date of the Closing with the same force and effect as if
they had been made at and as of the date of the Closing, except for such changes
resulting from
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consummation of the transactions contemplated by this Agreement.
5.2 Performance. All covenants, agreements and conditions contained
in this Agreement to be performed or complied with by the Company on or prior to
the Closing shall have been performed or complied with in all material respects
and at such time the Company shall not be in default in the performance of or
compliance with any of the provisions of this Agreement or of the Restated
Certificate.
5.3 Opinion of Company's Counsel. You shall have received from
Hemenway & Barnes, counsel to the Company, an opinion addressed to you, dated
the date of the Closing, and in substantially the form attached as Exhibit B
hereto.
5.4 Legal Investment. At the time of the Closing, the purchase of
the Shares to be purchased by you hereunder shall be legally permitted by all
laws and regulations to which you and the Company are subject.
5.5 Compliance Certificate. The Company shall have delivered to you
a certificate of the President of the Company, dated the date of the Closing,
certifying to the fulfillment of the conditions specified in Sections 5.1 and
5.2 of this Agreement and other matters you reasonably request.
5.6 Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be satisfactory in substance and
form to you and your counsel. The Company shall have delivered a check to
Debevoise & Plimpton to satisfy its obligations under Section 9.9, if so
requested prior to the Closing.
5.7 Proprietary Information and Inventions, and Non-Competition
Agreements.
(a) Each person employed by the Company who develops or has access
to Intellectual Property and proprietary information of the Company, including,
without limitation, Les Sainsbury, Ian McEwan and Walter J. Conroy, Jr., has
executed and delivered to the Company a Proprietary Information and Inventions
Agreement substantially in the form of Exhibit C hereto.
(b) Les Sainsbury, Ian McEwan and Walter J. Conroy, Jr., and any
other person employed by the Company
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and designated as a "key person" by you, shall have executed an Agreement Not to
Compete in substantially the form of Exhibit D hereto.
5.8 Qualifications. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body that are now required in
connection with the lawful issuance and sale of the Shares pursuant to this
Agreement, the conversion of the Shares into Common Stock and the issuance of
such Common Stock upon such conversion shall have been duly obtained and shall
be in full force and effect on and as of the Closing.
5.9 Certificate of Incorporation. The Company shall have duly filed
with the Secretary of State of the State of Delaware the Restated Certificate
which shall be in full force and effect and shall not have been further amended.
5.10 Key Man Life Insurance. The Company shall have obtained the
life insurance required to be maintained by the Company pursuant to Section 7.8
and shall have furnished evidence satisfactory to you that such insurance is in
full force and effect.
5.11 Issuance Taxes. All taxes imposed by law in connection with the
issuance, sale and delivery of the Shares shall have been fully paid, and all
laws imposing such taxes shall have been fully complied with.
SECTION 6
Conditions to Closing of Company
The Company's obligation to sell the Shares to be purchased at the
Closing is subject to the fulfillment to its satisfaction on or prior to the
Closing Date of each of the conditions set forth in Sections 5.8 and 5.9.
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SECTION 7
Covenants of the Company
The Company hereby covenants and agrees, so long as you own any
Shares or any Common Stock issued upon conversion of Shares, as follows:
7.1 Basic Financial Information. The Company will furnish the
following reports to you so long as you are (or your representative is) a holder
of Preferred or Common Stock:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred and twenty days thereafter, a
consolidated balance sheet of the Company and its subsidiaries, if any, as at
the end of such fiscal year, and consolidated statements of income and sources
and applications of funds of the Company and its subsidiaries, if any, for such
year, prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and certified by
independent public accountants of recognized national standing selected by the
Company.
(b) As soon as practicable after the end of the first, second and
third quarterly accounting periods in each fiscal year of the Company, and in
any event within forty-five days thereafter, a consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of each such quarterly
period, and consolidated statements of income and sources and applications of
funds of the Company and its subsidiaries for such period and for the current
fiscal year to date, prepared in accordance with generally accepted accounting
principles consistently applied and setting forth in comparative form the
figures for the corresponding periods of the previous fiscal year, subject to
changes resulting from year-end audit adjustments, all in reasonable detail and
signed by the principal financial or accounting officer of the Company.
(c) From the date the Company becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in lieu of the financial information required pursuant to Sections
7.1(a) and (b), copies of its annual reports on Form 10-K and its quarterly
reports on Form 10-Q, respectively.
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(d) Each of the financial statements referred to in subparagraphs
(a) and (b) of Section 7.1 and subparagraph (a) of Section 7.2 shall be true and
correct in all material respects as of the dates and for the periods stated
therein, subject in the case of the unaudited financial statements to changes
resulting from normal year-end adjustments (none of which would, alone or in the
aggregate, be materially adverse to the financial condition, operating results,
assets, operations or business prospects of the Company and its subsidiaries
taken as a whole).
7.2 Additional Information. The Company will permit any person who
owns (or has been designated as the representative of holders of) 5% or more of
the Shares or such number of shares of Common Stock issued upon conversion of 5%
or more of the Shares, or any combination thereof, to visit and inspect any of
the properties of the Company, including its books of account, and to discuss
its affairs, finances and accounts with the Company's officers and its
independent public accountants, all at such reasonable times and as often as any
such person may reasonably request. Until the earlier to occur of (i) the date
on which the Company is subject to the reporting requirements of Section 13(a)
of the Exchange Act, or (ii) the date on which quotations for the Common Stock
of the Company are reported by the automated quotations system operated by the
National Association of Securities Dealers, Inc., or by an equivalent quotation
system, the Company will deliver the reports described below in this Section 7.2
to each such person:
(a) As soon as practicable after the end of each month and in any
event within thirty days thereafter, a consolidated balance sheet of the Company
and its subsidiaries, if any, as at the end of such month, and consolidated
statements of income and of sources and applications of funds of the Company and
its subsidiaries, for each month and for the current fiscal year of the Company
to date, prepared in accordance with generally accepted accounting principles
consistently applied, together with a comparison of such statements to the
Company's operating plan then in effect and approved by its Board of Directors
and a comparison of such statements to the statements for the corresponding
periods of the Company's previous fiscal year, and signed, subject to changes
resulting from year-end audit adjustments, by the principal financial or
accounting officer of the Company.
(b) As soon as available (but in any event within thirty days prior
to the commencement of its fiscal year) a
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summary of the business plan and financial plan of the Company for the next
fiscal year, as contained in its operating plan approved by the Company's Board
of Directors. Any material changes in such financial plan shall be submitted as
promptly as practicable after such changes have been approved by the Board of
Directors.
(c) With reasonable promptness, such other information and data with
respect to the Company and its subsidiaries as any such person may from time to
time reasonably request.
(d) The foregoing provisions of this Section 7.2 shall not be in
limitation of any rights which you may have with respect to the books and
records of the Company and its subsidiaries, or to inspect their properties or
discuss their affairs, finances and accounts, under the laws of the
jurisdictions in which they are incorporated.
7.3 Right of First Refusal. The Company hereby grants to you the
right of first refusal to purchase, pro rata with other holders of the Preferred
who may purchase the Preferred from time to time subsequent to the Closing (for
purposes of this Section 7.3, you and such future holders of the Preferred shall
collectively be referred to as, the "Purchasers" and, individually, a
"Purchaser"), all (or any part) of New Securities (as defined in this Section
7.3) which the Company may, from time to time, propose to sell and issue. A
Purchaser's pro rata share, for purposes of this right of first refusal, is the
ratio of the number of shares of Preferred held by such Purchaser to the total
number of shares of Preferred outstanding on the date such New Securities are
issued. Each Purchaser shall have a right of over-allotment such that if any
Purchaser fails to exercise his right hereunder to purchase his pro rata portion
of New Securities, the other Purchasers may purchase the non-purchasing
Purchaser's portion on a pro rata basis within five days from the date such
non-purchasing Purchaser fails to exercise his right hereunder to purchase his
pro rata share of New Securities. This right of first refusal shall be subject
to the following provisions:
(a) "New Securities" shall mean any capital stock (including the
Common Stock, the Series A Preferred, or the Series B Preferred) of the Company
whether now authorized or not, and rights, options or warrants to purchase
capital stock ("Rights"), and securities of any type whatsoever that are, or may
become, convertible into or exchangeable for capital stock ("Convertible
Securities") (other than capital
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stock issuable upon the exercise of Rights or conversion or exchange of
Convertible Securities); provided that the term "New Securities" does not
include (i) securities purchased under this Agreement and securities issued upon
conversion of such securities, (ii) securities issued in accordance with the
Company's $1,000,000.00 promissory note, dated November 4, 1998 and securities
issued upon conversion of such securities, (iii) securities purchased under the
Series A Preferred Stock Purchase Agreement between the Company and you, dated
February 4, 1998, and securities issued upon conversion of such securities; (iv)
securities offered to the public pursuant to a registration statement filed
pursuant to the Securities Act; (v) securities issued pursuant to the
acquisition of another corporation by the Company by merger, purchase of
substantially all the assets or other reorganization whereby the Company owns
not less than fifty-one percent of the voting power of such corporation; (vi)
666,667 shares of Series B Preferred issued to Centennial Technologies, Inc. and
securities issued upon conversion of such Series B Preferred; (vii) any
borrowings, direct or indirect, from financial institutions or other persons by
the Company, whether or not presently authorized, including any type of loan or
payment evidenced by any type of debt instrument, provided such borrowings do
not have any equity features, including warrants, options or other rights to
purchase capital stock, and are not convertible into or exchangeable for capital
stock of the Company; or (viii) securities issued to employees, consultants,
officers or directors of the Company pursuant to any stock option plan or stock
purchase or stock bonus arrangement in effect on the date hereof or hereafter
approved in accordance with Section 7.16.
(b) In the event the Company proposes to undertake an issuance of
New Securities, it shall give you written notice of its intention, describing
the type of New Securities, the price and the general terms upon which the
Company proposes to issue the same. You shall have thirty days from the date of
receipt of any such notice to agree to purchase your pro rata share of such New
Securities for the price and upon the general terms specified in the notice by
giving written notice to the Company and stating therein the quantity of New
Securities to be purchased.
(c) In the event you fail to exercise your right of first refusal
within said 30-day period and after the expiration of the 5-day period for the
exercise of the over-allotment provisions of this Section 7.3, the Company shall
have 120 days thereafter to sell or enter into an
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agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within 120 days from the date of said agreement) to sell the
New Securities respecting which the your option was not exercised, at a price
and upon general terms no more favorable to the purchasers thereof than
specified in the Company's notice. In the event the Company has not sold within
said 120-day period or entered into an agreement to sell the New Securities
within said 120-day period (or sold and issued New Securities in accordance with
the foregoing within 120 days from the date of said agreement), the Company
shall not thereafter issue or sell any New Securities, without first offering
such securities to you in the manner provided above.
(d) The right of first refusal granted under this Agreement shall
expire upon the first sale of Common Stock of the Company to the public in an
underwritten public offering at an offering price per share of at least two
times the then effective Conversion Price (as defined in the Restated
Certificate) for the Preferred, which sale is effected pursuant to a
registration statement filed with, and declared effective by, the Securities and
Exchange Commission (the "Commission") under the Securities Act, with net
proceeds to the Company of not less than $20 million.
(e) The right of first refusal set forth in this Section 7.3 is
nonassignable, except that (i) such right is assignable by you to any
wholly-owned subsidiary or parent of, or to any corporation or entity which is,
within the meaning of the Securities Act, controlling, controlled by or under
common control with you, (ii) such right is assignable by you to your partners.
7.4 Prompt Payment of Taxes, etc. The Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto; and provided, further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefor. The Company will promptly pay or cause to be paid when due, or in
conformance
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with customary trade terms, all other indebtedness incident to operations of the
Company.
7.5 ERISA Compliance. The Company and its subsidiaries will operate
and administer each Employee Benefit Plan in compliance with its terms and the
applicable requirements of ERISA and the Code.
7.6 Maintenance of Properties and Leases. The Company will keep its
properties and those of its subsidiaries in good repair, working order and
condition, reasonable wear and tear, fire and other extraordinary casualty
excepted, and from time to time make all needful and proper repairs, renewals,
replacements, additions and improvements thereto; and the Company and its
subsidiaries will at all times comply with each provision of all leases to which
any of them is a party or under which any of them occupies property if the
breach of such provision might have a material adverse effect on the condition,
financial or otherwise, or operations of the Company.
7.7 Insurance. The Company will keep its assets and those of its
subsidiaries which are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company's line of business, in
amounts sufficient to prevent the Company or any subsidiary from becoming a
co-insurer and not in any event less than 100% of the insurable value of the
property insured; and the Company will maintain, with financially sound and
reputable insurers, insurance against other hazards and risks and liability to
persons and property to the extent and in the manner customary for companies in
similar businesses similarly situated.
7.8 Key Man Life Insurance. Unless otherwise agreed by your
representative on the Board of Directors, the Company will at all times maintain
with financially sound and reputable insurers term life insurance on the life of
Mr. Les Sainsbury, in the amount of $2 million, and will pay all premiums in
connection therewith. Such policies shall not be cancelable except upon 30 days
prior written notice to you.
7.9 Accounts and Records. The Company will keep true records and
books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with
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generally accepted accounting principles applied on a consistent basis.
7.10 Independent Accountants. The Company will retain independent
public accountants of recognized national standing who shall certify the
Company's financial statements at the end of each fiscal year. In the event the
services of the independent public accountants so selected, or any firm of
independent public accountants hereafter employed by the Company are terminated,
the Company will promptly thereafter notify you and will request the firm of
independent public accountants whose services are terminated to deliver to you a
letter of such firm setting forth the reasons for the termination of their
services. In the event of such termination, the Company will promptly thereafter
engage another such firm of independent public accountants. In its notice to
you, the Company shall state whether the change of accountants was recommended
or approved by the Board of Directors or any committee thereof.
7.11 Compliance with Requirements of Governmental Authorities. The
Company and all its subsidiaries shall duly observe and conform to all valid
requirements of governmental authorities relating to the conduct of their
businesses or to their properties or assets.
7.12 Maintenance of Corporate Existence, etc. The Company shall
maintain in full force and effect its corporate existence, rights and franchises
and all licenses and other rights to use patents, processes, licenses,
trademarks, trade names or copyrights owned or possessed by it or any subsidiary
and deemed by the Company to be necessary to the conduct of its business.
7.13 Availability of Common Stock for Conversion. The Company will
not issue or agree to issue any shares of Common Stock or options, rights or
warrants to purchase Common Stock or securities convertible into or exchangeable
for Common Stock or take any other action if, after giving effect thereto, the
number of shares of Common Stock remaining unissued and duly reserved for
issuance upon conversion of the Shares shall be insufficient to permit
conversion of all the then outstanding shares of Preferred after giving effect
to any adjustment in the Conversion Price as a result of such action.
7.14 Notice of Record Dates. In the event of any making by the
Company of a record of the holders of any class of securities (other than the
Preferred) for the
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purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, the Company shall mail to you at least ten days
prior to such record date, specified herein, a notice specifying the date on
which any such record is to be taken for the purpose of such dividend or
distribution.
7.15 Proprietary Information and Inventions and Non-Competition
Agreements. The Company will require each person now or hereafter employed by it
or any subsidiary (other than clerical staff) who develops or has access to
Intellectual Property and proprietary information to enter into a Proprietary
Information and Inventions Agreement in substantially the form of Exhibit C
hereto. The Company will require all persons now or hereafter employed by the
Company or a subsidiary, and designated as a "key person" by you (or your
transferees) on the Company's Board of Directors to execute an agreement in
substantially the form annexed hereto as Exhibit D as a condition precedent to
the employment of such individuals.
7.16 Employee Stock Purchase Agreement. The Company will not issue
or grant or agree to issue or grant any shares of its capital stock or any
option, right or warrant to purchase shares of its capital stock or securities
convertible into or exchangeable for shares of its capital stock to any employee
or officer of the Company or a subsidiary except pursuant to a plan adopted by
the Board of Directors, your representative on the Board of Directors having
voted in favor thereof (a "Plan"); provided, however, no such issuance or grant
shall be made without the approval of a majority of the members of the Board of
Directors, which majority shall include your representative. Each such purchase
or the exercise of any such option will be subject to proportionate vesting over
at least three years.
7.17 Use of Proceeds. The Company will use the proceeds from the
sale of the Shares for general working capital purposes.
7.18 Replacement Directors. In the event of the death, resignation
or removal of any director designated in accordance with the Stockholders
Agreement, dated February 4, 1998, by and among the Company, the undersigned,
HarbourVest Partners V - Direct Fund L.P., and the other parties thereto (the
"Stockholders Agreement"), by a particular entity or class of stockholders, the
Company agrees that in submitting to the Company's stockholders or Board of
Directors the names of nominees for election as
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directors or in filling interim vacancies, it will use its best efforts to cause
the nominee of the particular entity or class of stockholders which had
designated the former director to be elected as a director.
7.19 Stockholders Agreement. The Company shall cause each employee
of the Company holding in excess of 5% of the outstanding Common Stock of the
Company (on a fully diluted basis) to execute and deliver the Stockholders
Agreement.
7.20 Debt. The Company shall not incur indebtedness for borrowed
money greater than 7.5% of the Company's total revenue for the four fiscal
quarters preceding the fiscal quarter in which the Company proposes to incur
such indebtedness.
7.21 Director's Expenses. The Company shall pay the out-of-pocket
expenses of the Directors nominated by you incurred in attending meetings of the
Board of Directors or a committee thereof.
7.22 Termination. The provisions of Sections 7.3 through 7.20 shall
terminate immediately prior to the first sale of Common Stock of the Company in
an underwritten registered (as defined in Section 8.2) public offering with an
offering price per share of at least two times the then effective Conversion
Price, with net proceeds to the Company of not less than $20 million.
SECTION 8
Restrictions on Transferability of
Securities; Compliance with Securities Act
8.1 Restrictions on Transferability. The Shares shall not be
transferable, except upon the conditions specified in this Section 8, which
conditions are intended to insure compliance with the provisions of the
Securities Act or, in the case of Section 8.15 hereof, to assist in an orderly
distribution. You will cause any proposed transferee of Shares held by you to
agree to take and hold those securities subject to the provisions and upon the
conditions specified in this Section 8.
8.2 Certain Definitions. As used in this Section 8, the following
terms shall have the following respective meanings:
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"Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Holder" shall mean any holder of the outstanding Shares or
Registrable Securities which have not been sold to the public.
"Initiating Holders" shall mean you or your assignees under Section
8.14 hereof who in the aggregate are Holders of more than 50% of the Registrable
Securities which have not been sold to the public.
"Registrable Securities" shall mean (i) Common Stock issued or
issuable upon conversion of the Preferred and (ii) any Common Stock issued in
respect of securities issued pursuant to the conversion of the Shares upon any
stock split, stock dividend, recapitalization or similar event.
The terms "register", "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by the
Company in compliance with Sections 8.5 and 8.6 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, reasonable
fees and disbursements of one counsel for all the selling Holders and other
security holders, and the expense of any special audits incident to or required
by any such registration (but excluding the compensation of regular employees of
the Company, which shall be paid in any event by the Company).
"Restricted Securities" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 8.3 hereof.
"Selling Expenses" shall mean all underwriting discounts, selling
commissions and transfer taxes applicable to the sale of Registrable Securities.
8.3 Restrictive Legend. Each certificate representing (i) the
Preferred, or (ii) the Company's Common
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Stock issued upon conversion of the Preferred, or (iii) any other securities
issued in respect of the Preferred or the Common Stock issued upon conversion of
the Preferred, upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall (unless otherwise permitted or unless the
securities evidenced by such certificate shall have been registered under the
Securities Act or sold pursuant to Rule 144 or Regulation A thereunder) be
stamped or otherwise imprinted with a legend in the following form (in addition
to any legend required under applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN EXEMPTION
FROM SUCH REGISTRATION UNDER SAID ACT.
Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received either the opinion referred to in Section 8.4(i) or
the "no-action" letter referred to in Section 8.4(ii) to the effect that any
transfer by such holder of the securities evidenced by such certificate will not
violate the Securities Act and applicable state securities laws.
8.4 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 8.4. Prior to any proposed transfer
of any Restricted Securities (other than under circumstances described in
Sections 8.5, 8.6 and 8.8 hereof), the holder thereof shall give written notice
to the Company of such holder's intention to effect such transfer. Each such
notice shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied (except in transactions in
compliance with Rule 144) by either (i) a written opinion of Debevoise &
Plimpton or legal counsel who shall be reasonably satisfactory to the Company,
addressed to the Company and reasonably satisfactory in form and substance to
the Company's counsel, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration under the Securities
Act, or (ii) a "no action" letter from the
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Commission to the effect that the proposed transfer of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
above provided shall bear the appropriate restrictive legend set forth in
Section 8.3 above, except that such certificate shall not bear such restrictive
legend if the opinion of counsel or "no-action" letter referred to above is to
the further effect that such legend is not required in order to establish
compliance with any provisions of the Securities Act.
8.5 Requested Registration.
(a) Request for Registration. At any time after the Company has
effected a public offering of its securities under the Securities Act, if the
Company shall receive from Initiating Holders a written request that the Company
effect any registration with respect to all or a part of the Registrable
Securities, the Company will:
(i) promptly give written notice of the proposed registration to all
other Holders; and
(ii) as soon as practicable, use its diligent best efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws, appropriate compliance with
applicable regulations issued under the Securities Act and listing on
appropriate exchanges) as may be so requested and as would permit or facilitate
the sale and distribution of all or such portion of such Registrable Securities
as are specified in such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request as are
specified in a written request given within thirty days after receipt of such
written notice from the Company; provided that the Company shall not be
obligated to effect, or to take any action to effect, any such registration
pursuant to this Section 8.5:
(A) In any jurisdiction in which the Company would be required to
execute a general consent to service of process in effecting such
registration,
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qualification or compliance, or in which the cost of the foregoing is
unreasonable in light of the number of Registrable Securities requested to
be sold in such jurisdiction, unless the Company is already subject to
service in such jurisdiction and except as may be required by the
Securities Act or applicable rules or regulations thereunder; or
(B) After the Company has effected two such registrations pursuant
to this Section 8.5(a) and such registrations have been declared or
ordered effective and the sales of such Registrable Securities shall have
closed.
Subject to the foregoing clauses (A) and (B), the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable, after receipt of the request or requests of
the Initiating Holders.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 8.5(b) below,
include other securities of the Company which are held by officers or directors
of the Company or which are held by persons who, by virtue of agreements with
the Company, are entitled to include their securities in any such registration,
but except as provided in the last sentence of Section 8.5(b) below the Company
shall have no right to include any of its securities in any such registration.
(b) Underwriting. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
Section 8.5 and the Company shall include such information in the written notice
referred to in Section 8.5(a) (i) above. The right of any Holder to registration
pursuant to Section 8.5 shall be conditioned upon such Holder's participation in
such underwriting and the inclusion of such Holder's Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities he holds.
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If officers or directors of the Company holding other securities of
the Company shall request inclusion in any registration pursuant to Section 8.5,
or if holders of securities of the Company who are entitled, by contract with
the Company, to have securities included in such a registration (the "Other
Shareholders") request such inclusion, the Initiating Holders shall, on behalf
of all Holders, offer to include the securities of such officers, directors and
Other Shareholders in the underwriting and may condition such offer on their
acceptance of the further applicable provisions of this Section 8. The Company
shall (together with all Holders, officers, directors and Other Shareholders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form (including, without limitation,
customary indemnification and contribution provisions on the part of the
Company) with the representative of the underwriter or underwriters selected for
such underwriting by a majority in interest of the Initiating Holders and
reasonably acceptable to the Company; provided that such underwriting agreement
shall not provide for indemnification or contribution obligations on the part of
Holders greater than the obligations of the Holders pursuant to Section 8.10(b).
Notwithstanding any other provision of this Section 8.5, if the representative
advises the Initiating Holders in writing that marketing factors require a
limitation on the number of shares to be underwritten, the securities of the
Company held by officers or directors of the Company (other than Registrable
Securities) and the securities held by Other Shareholders (other than
Registrable Securities) shall be excluded from such registration to the extent
so required by such limitation and if a limitation of the number of shares is
still required, the Initiating Holders shall so advise all Holders of
Registrable Securities whose securities would otherwise be underwritten pursuant
hereto, and the number of shares of Registrable Securities that may be included
in the registration and underwriting shall be allocated among all such Holders
in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities and other securities which they held at the time of the
request for registration made by the Initiating Holders pursuant to Section
8.5(a). No Registrable Securities or any other securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. If any Holder of Registrable Securities, officer,
director or Other Shareholder who has requested inclusion in such registration
as provided above disapproves of the terms of the underwriting, such person may
elect to
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withdraw therefrom by written notice to the Company, the underwriter and the
Initiating Holders. The securities so withdrawn shall also be withdrawn from
registration. If the underwriter has not limited the number of Registrable
Securities or other securities to be underwritten, the Company may include its
securities for its own account in such registration if the underwriter so agrees
and if the number of Registrable Securities and other securities which would
otherwise have been included in such registration and underwriting will not
thereby be limited.
8.6 Company Registration.
(a) If the Company shall determine to register any of its securities
either for its own account or the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction or a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other
state securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by any Holder within fifteen days after receipt of the
written notice from the Company described in clause (i) above, except as
set forth in Section 8.6(b) below. Such written request may specify all or
a part of a Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 8.6(a) (i). In such event the right of any Holder to
registration pursuant to Section 8.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the
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underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the Other Shareholders distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for underwriting by the Company, provided that such
underwriting agreement shall not provide for indemnification or contribution
obligations on the part of Holders greater than the obligations of the Holders
pursuant to Section 8.10(b). Notwithstanding any other provision of this Section
8.6, if the underwriter determines that marketing factors require a limitation
on the number of shares to be underwritten, and (a) if such registration is the
first registered offering of the Company's securities to the public and is for
the Company's own account, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto, and (b) if such registration is other than the first registered
offering of the sale of the Company's securities to the public for the Company's
account, the underwriter may limit the number of Registrable Securities to be
included in the registration and underwriting to not less than 50% of the
securities included therein (based on aggregate market values). The Company
shall so advise all holders of securities requesting registration, and the
number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated in the following manner. The
securities of the Company held by officers and directors of the Company (other
than Registrable Securities) shall be excluded from such registration and
underwriting to the extent required by such limitation, and, if a limitation on
the number of shares is still required, the number of shares that may be
included in the registration and underwriting shall be allocated among all such
Holders and Other Shareholders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities and other securities which they
held at the time the Company gives the notice specified in Section 8.6(a) (i),
provided that if such registration is other than the first registered offering
of the sale of the Company's securities to the public for the Company's account,
the number of Registrable Securities permitted to be included therein shall in
any event be at least 50% of the securities included therein (based on aggregate
market values). If any Holder of Registrable Securities or any officer, director
or Other Shareholder disapproves of the terms of any such underwriting, he may
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elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
8.7 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to this
Section 8 shall be borne by the Company, and all Selling Expenses shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of their shares so registered; provided, however, that the Company shall
not be required to pay any Registration Expenses if, as a result of the
withdrawal of a request for registration by Initiating Holders (other than due
to a material adverse change in the business of the Company or any refusal to
proceed based upon the advice of counsel that the registration statement, or any
prospectus contained therein, contains an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing), the registration statement does not become effective, in which case
the Holders and Other Shareholders requesting registration shall bear such
Registration Expenses pro rata on the basis of the number of their shares so
included in the registration request, and provided, further, that such
registration shall not be counted as a registration pursuant to Section 8.5(a)
(ii) (B).
8.8 Registration on Form S-2 or Form S-3. The Company shall use its
best efforts to qualify for registration on Form S-2 and Form S-3 or any
comparable or successor form or forms; and to that end the Company shall
register (whether or not required by law to do so) the Common Stock under the
Exchange Act in accordance with the provisions of that Act following the
effective date of the first registration of any securities of the Company on
Form S-1 or any comparable or successor form or forms. After the Company has
qualified for the use of either Form S-2 or Form S-3 or both, in addition to the
rights contained in the foregoing provisions of this Section 8, the Holders of
Registrable Securities shall have the right to request registrations on Form S-2
or Form S-3 (such requests shall be in writing and shall state the number of
shares of Registrable Securities to be disposed of and the intended methods of
disposition of such shares by such Holder or Holders) provided that the Company
shall not be obligated to effect any such registration pursuant to this Section
8.8 more than twice in any one year.
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8.9 Registration Procedures. In the case of each registration
effected by the Company pursuant to Section 8, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of one hundred
twenty days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (i) such 120-day period shall be extended
for a period of time equal to the period the Holder refrains from selling
any securities included in such registration in accordance with provisions
in Section 8.15 hereof; and (ii) in the case of any registration of
Registrable Securities on Form S-3 which are intended to be offered on a
continuous or delayed basis, such 120-day period shall be extended, if
necessary, to keep the registration statement effective until all such
Registrable Securities are sold, provided that Rule 415, or any successor
rule under the Securities Act, permits an offering on a continuous or
delayed basis, and provided, further, that applicable rules under the
Securities Act governing the obligation to file a post-effective amendment
permit, in lieu of filing a post-effective amendment which includes any
prospectus required by Section 10(a) (3) of the Securities Act, the
incorporation by reference of information contained in periodic reports
filed pursuant to Section 13 or 15(d) of the Exchange Act in the
registration statement;
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;
(c) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 8.5 hereof, enter into an
underwriting agreement reasonably necessary to effect the offer and sale
of Common Stock, provided such underwriting agreement contains customary
underwriting provisions and provided further that if the underwriter so
requests the underwriting agreement will contain customary contribution
provisions on the part of the Company; and
(d) obtain a comfort letter from the Company's independent public
accountants in customary form and
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covering such matters of the type customarily covered by comfort letters
and an opinion from the Company's counsel in customary form and covering
such matters of the type customarily covered in a public issuance of
securities, in each case addressed to the Holders.
8.10 Indemnification.
(a) The Company will, and hereby does, indemnify each Holder, each
of its officers, directors and partners, and each person controlling such
Holder, with respect to which registration, qualification or compliance has been
effected pursuant to this Section 8, and each underwriter, if any, and each
person who controls any underwriter, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such Holder, each of its officers, directors and partners, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by such Holder or underwriter and stated to
be specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable
Securities held by him are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of the Securities
Act and the
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rules and regulations thereunder, each other such Holder and Other Shareholder
and each of their officers, directors and partners, and each person controlling
such Holder or Other Shareholder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such Holders, Other Shareholders,
directors, officers, partners, persons, underwriters or control persons for any
legal or any other expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, in each case to
the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by such Holder
or Other Shareholder and stated to be specifically for use therein; provided,
however, that the obligations of such Holders and Other Shareholders hereunder
shall be limited to an amount equal to the proceeds to each such Holder or Other
Shareholder of securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 8.10
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
failure of any Indemnified Party to give notice shall not relieve the
Indemnifying Party of its obligation under this Section 8.10. The Indemnifying
Party will be entitled to participate in, and to the extent that it may elect by
written notice delivered to the Indemnified Party promptly after receiving the
aforesaid notice from such Indemnified Party, at its expense to assume, the
defense of any such claim or any litigation resulting therefrom, with counsel
reasonably satisfactory to such Indemnified Party, provided that the Indemnified
Party may participate in such defense at its expense, notwithstanding the
assumption of such defense by the Indemnifying Party, and provided, further,
that if the defendants in any such action shall include both the Indemnified
Party and the Indemnifying Party and the Indemnified Party shall have reasonably
concluded that there may be legal defenses
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available to it and/or other Indemnified Parties which are different from or
additional to those available to the Indemnifying Party, the Indemnified Party
or Parties shall have the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such action on behalf of
such Indemnified Party or Parties and the fees and expenses of such counsel
shall be paid by the Indemnifying Party. No Indemnifying Party, in the defense
of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Each Indemnified Party shall furnish
such information regarding itself or the claim in question as an Indemnifying
Party may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
8.11 Information by Holder. Each Holder of Registrable Securities,
and each Other Shareholder holding securities included in any registration,
shall furnish to the Company such information regarding such Holder or Other
Shareholder and the distribution proposed by such Holder or Other Shareholder as
the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Section 8.
8.12 Limitations on Registration of Issues of Securities. From and
after the date of this Agreement, the Company shall not enter into any agreement
with any holder or prospective holder of any securities of the Company giving
such holder or prospective holder the right to require the Company to initiate
any registration of any securities of the Company, provided that this Section
8.12 shall not limit the right of the Company to enter into any agreements with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder the right to require the Company, upon any
registration of any of its securities, to include, among the securities which
the Company is then registering, securities owned by such holder. Any right
given by the Company to any holder or prospective holder of the Company's
securities in connection with the registration of securities shall be
conditioned such that it shall be subordinate to the rights of the Holders
provided in this Agreement.
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8.13 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Restricted Securities to the public without registration, the
Company agrees to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times
from and after ninety days following the effective date of the first
registration under the Securities Act filed by the Company for an offering
of its securities to the general public;
(b) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) so long as you own any Restricted Securities, furnish to you
forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from
and after ninety days following the effective date of the first
registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as you may
reasonably request in availing yourself of any rule or regulation of the
Commission allowing you to sell any such securities without registration.
8.14 Transfer or Assignment of Registration Rights. The rights to
cause the Company to register your securities granted to you by the Company
under Sections 8.6 and 8.8 may be transferred or assigned by you to a transferee
or assignee of any of your Restricted Securities, provided that the Company is
given written notice by you at the time of or within a reasonable time after
such transfer or assignment, stating the name and address of such transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and provided, further, that the
transferee or assignee of such rights is not deemed by the board of directors of
the Company, in its reasonable
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judgment, to be a competitor of the Company; and provided, further, that the
transferee or assignee of such rights assumes your obligations under this
Section 8.
8.15 "Market Stand-off" Agreement. You agree, if requested by the
Company and an underwriter of Common Stock (or other equity securities) of the
Company, not to sell or otherwise transfer or dispose of any Common Stock (or
other equity securities) of the Company held by you during the ninety-day period
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that:
(a) such agreement only applies to the first such registration
statement of the Company including securities to be sold on its behalf to
the public in an underwritten offering; and
(b) all Holders, Other Shareholders and officers and directors and
other shareholders of the Company holding in excess of 1% of the
outstanding Common Stock (on an as converted basis) of the Company enter
into similar agreements.
Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the shares (or securities) subject to the foregoing restriction
until the end of such ninety-day period.
SECTION 9
Miscellaneous
9.1 Governing Law. This Agreement shall be governed in all respects
by the laws of the state of Massachusetts.
9.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive (i) any investigation made by you and (ii)
the Closing.
9.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto; provided, however, the Company may not assign its rights
hereunder.
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9.4 Entire Agreement; Amendment. This Agreement (including the
Schedules and Exhibits hereto) and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof. Neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated, except by a
written instrument signed by the Company and the holders of 60% or more of the
Shares sold under this Agreement or such number of shares of Common Stock issued
upon conversion of those 60% of the Shares and not sold to the public, or any
combination thereof, but in no event shall your obligations hereunder be
increased, except upon your written consent.
9.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or delivered either by hand or by messenger, addressed to the
addresses set forth at the beginning of this Agreement, or at such other address
as you shall have furnished to the Company in writing, or if to any other holder
of any Shares or any Common Stock issued upon conversion of Shares, at such
address as such holder shall have furnished the Company in writing, or, until
any such holder so furnishes an address to the Company, then to and at the
address of the last holder thereof who has so furnished an address to the
Company.
9.6 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Shares, upon any breach or default
of the Company under this Agreement, shall impair any such right, power or
remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
9.7 Rights; Separability. In case any provision of the Agreement
shall be invalid, illegal or unenforceable,
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the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
9.8 Agent's Fees.
(a) The Company hereby agrees to indemnify and to hold you harmless
from and against any liability for commission or compensation in the nature of
an agent's fee to any broker or other person or firm (and the costs and expenses
of defending against such liability or asserted liability) arising from any act
by the Company or any of its employees or representatives.
(b) You (i) represent and warrant that you have retained no finder
or broker in connection with the transactions contemplated by this Agreement and
(ii) hereby agree to indemnify and to hold the Company harmless from any
liability for any commission or compensation in the nature of an agent's fee to
any broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which you, or any of your
employees or representatives, are responsible.
9.9 Expenses. The Company shall bear its own expenses and legal fees
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby, and the Company will pay up to $50,000 of the fees, charges
and disbursements of Debevoise & Plimpton, your special counsel with respect to
this Agreement and the transactions contemplated hereby.
9.10 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
9.11 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same instrument. Confirmation of execution by
electronic transmission of a facsimile signature page shall be binding upon any
party so confirming.
9.12 Consent of Holder of Series A Preferred. The undersigned,
HarbourVest Partners V - Direct Fund, L.P., in its capacity as the owner of 100%
of the outstanding shares of Preferred hereby consents pursuant to the Restated
Certificate to the transactions contemplated by this
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Agreement, including but not limited to the authorization by the Company of
986,301 additional shares of Preferred.
9.13 Deletion of Section 7.3 of Series A Preferred Stock Purchase
Agreement, dated February 4, 1998. The parties hereto, being all of the parties
to the Company's Series A preferred Stock Purchase Agreement, dated February 4,
1998 (the "Old Agreement"), hereby delete Section 7.3 of the Old Agreement.
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If you are in agreement with the foregoing, please sign where
indicated below and thereupon this letter shall become a binding agreement
between you and the Company.
Very truly yours,
CENTURY ELECTRONICS MANUFACTURING, INC.
By /s/ L.J. SAINSBURY
-------------------------------
Name: L.J. SAINSBURY
Title: President
ACCEPTED AND AGREED TO:
HARBOURVEST PARTNERS
V-DIRECT FUND, L.P.
By HVP V-Direct Associates, L.L.C.,
its General Partner
By HarbourVest Partners, L.L.C.,
its Managing Member
By /s/ Ofer Nemirovsky
--------------------------------
Name: Ofer Nemirovsky
Title: Managing Director
<PAGE>
Exhibit 10.5
WAIVER OF RIGHTS AND AMENDMENT
UNDER PURCHASE AGREEMENTS
This Waiver of Rights and Amendment under Purchase Agreements ("Waiver of
Rights") is made and entered into as of July 30, 1999, by and among Century
Electronics Manufacturing, Inc., a Delaware corporation (the "Company"), and
HarbourVest Partners V- Direct Fund, L.P. ("HarbourVest").
WHEREAS, the Company and HarbourVest are parties to that certain Series A
Convertible Preferred Stock Purchase Agreement, dated as of December 1, 1998,
and that certain Series A Convertible Preferred Stock Purchase Agreement, dated
as of February 4, 1998 (the "Purchase Agreements"), which agreements provide
certain arrangements with respect to (among other matters) the registration of
shares of common stock, $.01 par value per share, of the Company ("Common
Stock") owned by HarbourVest and its assignees under the Securities Act of 1933,
as amended (the "Securities Act");
WHEREAS, the Company, Amitek Corporation, a Florida corporation
("Amitek"), and certain other persons are party to an Agreement and Plan of
Merger, dated as of July 30, 1999 (the "Merger Agreement"), pursuant to which,
as of the date hereof, Amitek is being merged with and into a wholly-owned
subsidiary of the Company and Myung Ho Park, Yoon Jung Park and Sung Woo Kwon
(collectively, the "Amitek Investors") are being issued as partial consideration
therefor, and may be issued from time to time in the future as additional
consideration therefor, shares of the Common Stock of the Company;
WHEREAS, as of the date hereof, the Company and the Amitek Investors are
entering into a Registration Rights Agreement (the "Registration Rights
Agreement"), pursuant to which certain arrangements are being made with respect
to the registration of shares of Common Stock owned by the Amitek Investors and
their assignees under the Securities Act;
WHEREAS, the obligation of the Amitek Investors to consummate the
transactions contemplated by the Merger Agreement is conditioned upon
HarbourVest waiving certain rights under the Purchase Agreements and the Company
and HarbourVest making certain amendments to the Purchase Agreements in order to
clarify the interrelationship between the respective registration rights
provisions contained in the Registration Rights Agreement and the Purchase
Agreements; and
WHEREAS, this Waiver of Rights meets the requirements for a valid waiver
or amendment of the provisions of the Purchase Agreements, which requirements
are set forth in Section 9.4 thereof.
<PAGE>
NOW, THEREFORE, the parties to this Waiver of Rights agree as follows:
1. Waiver of Rights under Purchase Agreements. HarbourVest hereby waives
all rights under Section 8.12 of each of the Purchase Agreements with respect to
the Registration Rights Agreement as in effect on the date hereof.
2. Amendments to Purchase Agreements.
(a) Section 8.2 of each of the Purchase Agreements, entitled
"Certain Definitions" is amended to include two additional definitions, as
follows:
"Amitek Securities" shall mean shares constituting "Registrable
Securities" under the Registration Rights Agreement, dated as of
July 30, 1999, by and among the Company and Myung Ho Park, Yoon Jung
Park and Sung Woo Kwon (the "Registration Rights Agreement"), which
are proposed to be included in a registration.
"Majority Participating Amitek Holders" shall have the meaning given
to such term in the Registration Rights Agreement.
(b) The second paragraph of Section 8.5(b) of each of the Purchase
Agreements is amended and restated in its entirety as follows (with bold
double underlined and strikethrough fonts used for purposes of indicating
changes only):
"If officers or directors of the Company holding other
securities of the Company shall request inclusion in any
registration pursuant to Section 8.5, or if holders of the
securities of the Company who are entitled, by contract with the
Company, to have securities included in such a registration (the
"Other Shareholders") request such inclusion, the Initiating Holders
shall, on behalf of all Holders, offer to include the securities
(including Amitek Securities) of such officers, directors and Other
Shareholders in the underwriting and may condition such offer on
their acceptance of the further applicable provisions of this
Section 8. The Company shall (together with all Holders, officers,
directors and Other Shareholders proposing to distribute their
securities through such underwriting) enter into an underwriting
agreement in customary from (including, without limitation,
customary indemnification and contribution provisions on the part of
the Company) with the representative of the underwriter or
underwriters selected for such underwriting by a majority in
interest of the Initiating Holders and reasonably acceptable to the
Company; provided that such underwriting agreement shall not provide
for indemnification or contribution obligations on the part of
Holders or the holders of Amitek Securities greater than the
obligations of the Holders pursuant to Section 8.10(b).
Notwithstanding any other provision of this Section 8.5, if the
-2-
<PAGE>
representative advises the Initiating Holders in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the securities of the Company held by officers or
directors of the Company (other than Registrable Securities or
Amitek Securities) and the securities held by Other Shareholders
(other than Registrable Securities or Amitek Securities) shall be
excluded from such registration to the extent so required by such
limitation and if a limitation of the number of shares is still
required, the Initiating Holders shall so advise all holders of
Registrable Securities and Amitek Securities whose securities would
otherwise be underwritten pursuant hereto, and the number of shares
of Registrable Securities and Amitek Securities that may be included
in the registration and underwriting shall be allocated among all
such holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities, Amitek Securities and
other securities which they held at the time of the request for
registration made by the Initiating Holders pursuant to Section
8.5(a). No Registrable Securities, Amitek Securities or any other
securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such
registration. If any holder of Registrable Securities or Amitek
Securities, officer, director or Other Shareholder who has requested
inclusion in such registration as provided above disapproves of the
terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the underwriter and the
Initiating Holders. The securities so withdrawn shall also be
withdrawn from registration. If the underwriter has not limited the
number of Registrable Securities, Amitek Securities or other
securities to be underwritten, the Company may include its
securities for its own account in such registration if the
underwriter so agrees and if the number of Registrable Securities,
Amitek Securities and other securities which would otherwise have
been included in such registration and underwriting will not thereby
be limited."
(c) The portion of Section 8.6(b) of each of the Purchase
Agreements, which begins with the phrase "Notwithstanding any other
provision of this Section 8.6" and ends at the conclusion of Section
8.6(b), is amended and restated in its entirety as follows (with bold
double underlined and strikethrough fonts used for purposes of indicating
changes only):
"Notwithstanding any other provision of this Section 8.6, if the
underwriter determines that marketing factors require a limitation
on the number of shares to be underwritten, and (a) if such
registration is the first registered offering of the Company's
securities to the public and is for the Company's own account, the
underwriter may (subject to the allocation priority set forth below)
exclude from such registration and underwriting some or all of the
Registrable Securities which would otherwise be underwritten
pursuant hereto, and (b) if such
-3-
<PAGE>
registration is other than the first registered offering of the sale
of the Company's securities to the public for the Company's account,
the underwriter may limit the number of Registrable Securities and
Amitek Securities to be included in the registration and
underwriting to not less than 50% of the securities included therein
(based on aggregate market value). The Company shall so advise all
holders of securities requesting registration, and the number of
shares of securities that are entitled to be included in the
registration and underwriting shall be allocated in the following
manner. The securities of the Company held by officers and directors
of the Company (other than Registrable Securities and Amitek
Securities) shall be excluded from such registration and
underwriting to the extent required by such limitation, and, if a
limitation on the number of shares is still required, the number of
shares that may be included in the registration and underwriting
shall be allocated among all such Holders and Other Shareholders in
proportion, as nearly as practicable, to the respective amounts of
Registrable Securities, Amitek Securities and other securities which
they held at the time the Company gives the notice specified in
Section 8.6(a)(i), provided that if such registration is other than
the first registered offering of the sale of the Company's
securities to the public for the Company's account, the number or
Registrable Securities and Amitek Securities permitted to be
included therein shall in any event be at least 50% of the
securities included therein (based on aggregate market values). If
any holder of Registrable Securities or Amitek Securities or any
officer, director or Other Shareholder disapproves of the terms of
any such underwriting, he may elect to withdraw therefrom by written
notice to the Company and the underwriter. Any Registrable
Securities, Amitek Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such
registration.
In the event that (i) the holders of "Registrable Securities"
under the Registration Rights Agreement (as defined therein)
exercise their registration rights under Section 2.1 or 2.2 thereof
and (ii) any holders of Registrable Securities hereunder exercise
their registration rights in respect of such registration pursuant
to Section 8.6 hereof and request inclusion therein, then (X) the
second paragraph of Section 5.1 of the Registration Rights Agreement
shall govern any so-called "cutbacks," notwithstanding anything to
the contrary in this Agreement and (Y) the Majority Participating
Amitek Holders may condition such inclusion upon the holders of
Registrable Securities seeking such inclusion agreeing to be treated
in respect of such registration as an "Amitek Holder," a "holder of
Registrable Securities," and a "seller of Registrable Securities"
under Sections 5.1, 5.3, and 7 of the Registration Rights Agreement,
as in effect on the date hereof, without regard to any inconsistency
between such provisions and this Agreement."
-4-
<PAGE>
3. Authority; Effect. Each party hereto represents and warrants to and
agrees with each other party that the execution and delivery of this Waiver of
Rights and the consummation of the transactions contemplated hereby have been
duly authorized on behalf of such party and do not violate any agreement or
other instrument applicable to such party or by which its assets are bound.
Except to the extent specifically amended hereby, the provisions of the Purchase
Agreements shall remain unmodified and the provisions of the Purchase Agreements
are hereby confirmed as being in full force and effect.
4. Third Party Beneficiaries. The Amitek Investors are intended to be
third-party beneficiaries of this Waiver of Rights.
5. Binding Effect, etc. This Waiver of Rights, together with the Purchase
Agreements and the Registration Rights Agreement, constitutes the entire
agreement of the parties with respect to its subject matter, supersedes all
prior or contemporaneous oral or written agreements or discussions with respect
to such subject matter, and shall be binding upon and inure to the benefit of
the parties hereto and their respective heirs, representatives, successors and
assigns.
6. Descriptive Headings. The descriptive headings of this Waiver of Rights
are for convenience of reference only, are not to be considered a part hereof
and shall not be construed to define or limit any of the terms or provisions
hereof.
7. Counterparts. This Waiver of Rights may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one instrument.
8. Severability. If in any judicial proceedings a court shall refuse to
enforce any provision of this Waiver of Rights, then such unenforceable
provision shall be deemed eliminated from this Waiver of Rights for the purpose
of such proceedings to the extent necessary to permit the remaining provisions
to be enforced. To the full extent, however, that the provisions of any
applicable law may be waived, they are hereby waived to the end that this Waiver
of Rights be deemed to be valid and binding agreement enforceable in accordance
with its terms, and in the event that any provision hereof shall be found to be
invalid or unenforceable, such provision shall be construed by limiting it so as
to be valid and enforceable to the maximum extent consistent with and possible
under applicable law.
9. Governing Law. This Waiver of Rights shall be governed by and construed
in accordance with the domestic substantive laws of The Commonwealth of
Massachusetts without giving effect to any choice or conflict of laws provision
or rule that would cause the application of the domestic substantive laws of any
other jurisdiction.
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<PAGE>
IN WITNESS WHEREOF, each of the undersigned has duly executed this Waiver
of Rights (or caused this Waiver of Rights to be executed on its behalf by its
officer or representative thereunto duly authorized) under seal as of the date
first above written.
CENTURY ELECTRONICS MANUFACTURING,
INC.
By: /s/ Leslie J. Sainsbury
----------------------------
Name: Leslie J. Sainsbury
Title: President
HARBOURVEST VENTURE PARTNERS V -
DIRECT FUND L.P.
By: HVP V - Direct Associates, L.L.C.
Its General Partner
By: HarbourVest Partners, L.L.C.
Its Managing Member
By /s/ Ofer Nemirovsky
--------------------------
Title: Managing Director
<PAGE>
Exhibit 10.6
WAIVER OF RIGHTS AND AMENDMENT
UNDER PURCHASE AGREEMENT
This Waiver of Rights and Amendment under Purchase Agreement ("Waiver of
Rights") is made and entered into as of July 30, 1999, by and among Century
Electronics Manufacturing, Inc., a Delaware corporation (the "Company"), and
Centennial Technologies, Inc. ("Centennial").
WHEREAS, the Company and Centennial are parties to that certain Series B
Convertible Preferred Stock Purchase Agreement dated as of February 4, 1998 (the
"Purchase Agreement"), which agreement provides certain arrangements with
respect to (among other matters) the registration of shares of common stock,
$.01 par value per share, of the Company ("Common Stock") owned by Centennial
and its assignees under the Securities Act of 1933, as amended (the "Securities
Act");
WHEREAS, the Company, Amitek Corporation, a Florida corporation
("Amitek"), and certain other persons are party to an Agreement and Plan of
Merger, dated as of July 30, 1999 (the "Merger Agreement"), pursuant to which,
as of the date hereof, Amitek is being merged with and into a wholly-owned
subsidiary of the Company and Myung Ho Park, Yoon Jung Park and Sung Woo Kwon
(collectively, the "Amitek Investors") are being issued as partial consideration
therefor, and may be issued from time to time in the future as additional
consideration therefor, shares of the Common Stock of the Company;
WHEREAS, as of the date hereof, the Company and Amitek Investors are
entering into a Registration Rights Agreement (the "Registration Rights
Agreement"), pursuant to which certain arrangements are being made with respect
to the registration of shares of Common Stock owned by the Amitek Investors and
their assignees under the Securities Act;
WHEREAS, the obligation of the Amitek Investors to consummate the
transactions contemplated by the Merger Agreement is conditioned upon Centennial
waiving certain rights under the Purchase Agreement and the Company and
Centennial making certain amendments to the Purchase Agreement in order to
clarify the interrelationship between the respective registration rights
provisions contained in the Registration Rights Agreement and the Purchase
Agreement; and
WHEREAS, this Waiver of Rights meets the requirements for a valid waiver
or amendment of the provisions of the Purchase Agreement, which requirements are
set forth in Section 9.4 thereof.
<PAGE>
NOW, THEREFORE, the parties to this Waiver of Rights agree as follows:
1. Waiver of Rights under Purchase Agreement. Centennial hereby waives all
rights under Section 8.12 of the Purchase Agreement with respect to the
Registration Rights Agreement as in effect on the date hereof.
2. Amendments to Purchase Agreement.
(1) Section 8.2 of the Purchase Agreement, entitled "Certain
Definitions" is amended to include two additional definitions, as follows:
"Amitek Securities" shall mean shares constituting "Registrable
Securities" under the Registration Rights Agreement, dated as of
[June ___, 1999], by and among the Company and Myung Ho Park, Yoon
Jung Park and Sung Woo Kwon (the "Registration Rights Agreement"),
which are proposed to be included in a registration.
"Majority Participating Amitek Holders" shall have the meaning given
to such term in the Registration Rights Agreement.
(a) The second paragraph of Section 8.5(b) of the Purchase Agreement
is amended and restated in its entirety as follows (with bold double
underlined and strikethrough fonts used for purposes of indicating changes
only):
"If officers or directors of the Company holding other
securities of the Company shall request inclusion in any
registration pursuant to Section 8.5, or if holders of the
securities of the Company who are entitled, by contract with the
Company, to have securities included in such a registration (the
"Other Shareholders") request such inclusion, the Initiating Holders
shall, on behalf of all Holders, offer to include the securities
(including Amitek Securities) of such officers, directors and Other
Shareholders in the underwriting and may condition such offer on
their acceptance of the further applicable provisions of this
Section 8. The Company shall (together with all Holders, officers,
directors and Other Shareholders proposing to distribute their
securities through such underwriting) enter into an underwriting
agreement in customary from (including, without limitation,
customary indemnification and contribution provisions on the part of
the Company) with the representative of the underwriter or
underwriters selected for such underwriting by a majority in
interest of the Initiating Holders and reasonably acceptable to the
Company; provided that such underwriting agreement shall not provide
for indemnification or contribution obligations on the part of
Holders or the holders of Amitek greater than the obligations of the
Holders pursuant to Section 8.10(b). Notwithstanding any other
provision of this Section 8.5, if the
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<PAGE>
representative advises the Initiating Holders in writing that
marketing factors require a limitation on the number of shares to be
underwritten, the securities of the Company held by officers or
directors of the Company (other than Registrable Securities or
Amitek Securities) and the securities held by Other Shareholders
(other than Registrable Securities or Amitek Securities) shall be
excluded from such registration to the extent required by such
limitation and if a limitation of the number of shares is still
required, the Initiating Holders shall so advise all holders of
Registrable Securities or Amitek Securities whose securities would
otherwise be underwritten pursuant hereto, and the number of shares
of Registrable Securities and Amitek Securities that may be included
in the registration and underwriting shall be allocated among all
such holders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities, Amitek Securities and
other securities which they held at the time of the request for
registration made by the Initiating Holders pursuant to Section
8.5(a). No Registrable Securities, Amitek Securities or any other
securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such
registration. If any holder of Registrable Securities or Amitek
Securities, officer, director or Other Shareholder who has requested
inclusion in such registration as provided above disapproves of the
terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the underwriter and the
Initiating Holders. The securities so withdrawn shall also be
withdrawn from registration. If the underwriter has not limited the
number of Registrable Securities, Amitek Securities or other
securities to be underwritten, the Company may include its
securities for its own account in such registration if the
underwriter so agrees and if the number of Registrable Securities,
Amitek Securities and other securities which would otherwise have
been included in such registration and underwriting will not thereby
be limited."
(b) The portion of Section 8.6(b) of the Purchase Agreement, which
begins with the phrase "Notwithstanding any other provision of this
Section 8.6" and ends at the conclusion of Section 8.6(b), is amended and
restated in its entirety as follows (with bold double underlined and
strikethrough fonts used for purposes of indicating changes only):
"Notwithstanding any other provision of this Section 8.6, if the
underwriter determines that marketing factors require a limitation
on the number of shares to be underwritten, and (a) if such
registration is the first registered offering of the Company's
securities to the public and is for the Company's own account, the
underwriter may (subject to the allocation priority set forth below)
exclude from such registration and underwriting some or all of the
Registrable Securities which would otherwise be underwritten
pursuant hereto, and (b) if such
-3-
<PAGE>
registration is other than the first registered offering of the sale of the
Company's securities to the public for the Company's account, the underwriter
may limit the number of Registrable Securities and Amitek Securities to be
included in the registration and underwriting not less than 50% of the
securities included therein (based on aggregate market value). The Company shall
so advise all holders of securities requesting registration, and the number of
shares of securities that are entitled to be included in the registration and
underwriting shall be allocated in the following manner. The securities of the
Company held by officers and directors of the Company (other than Registrable
Securities and Amitek Securities) shall be excluded from such registration and
underwriting to the extent required by such limitation, and, if a limitation on
the number of shares is still required, the number of shares that may be
included in the registration and underwriting shall be allocated among all such
Holders and Other Shareholders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities, Amitek Securities and other
securities which they held at the time the Company gives the notice specified in
Section 8.6(a)(i), provided that if such registration is other than the first
registered offering of the sale of the Company's securities to the public for
the Company's account, the number or Registrable Securities and Amitek
Securities permitted to be included therein shall in any event be at least 50%
of the securities included therein (based on aggregate market values). If any
holder of Registrable Securities or Amitek Securities or any officer, director
or Other Shareholder disapproves of the terms of any such underwriting, he may
elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities. Amitek Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
In the event that (i) the holders of "Registrable Securities" under the
Registration Rights Agreement (as defined therein) exercise their registration
rights under Section 2.1 or 2.2 thereof and (ii) any holders of Registrable
Securities hereunder exercise their registration rights in respect of such
registration pursuant to Section 8.6 hereof and request inclusion therein, then
(X) the second paragraph of Section 5.1 of the Registration Rights Agreement
shall govern any so-called "cutbacks," notwithstanding anything to the contrary
in this Agreement and (Y) the Majority Participating Amitek Holders may
condition such inclusion upon the holders of Registrable Securities seeking such
inclusion agreeing to be treated in respect of such registration as an "Amitek
Holder," a "holder of Registrable Securities," and a "seller of Registrable
Securities" under Sections 5.1, 5.3, and 7 of the Registration Rights Agreement,
as in effect on the date hereof, without regard to any inconsistency between
such provisions and this Agreement."
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<PAGE>
IN WITNESS WHEREOF, each of the undersigned has duly executed this Waiver
of Rights (or caused this Waiver of Rights to be executed on its behalf by its
officer or representative thereunto duly authorized) under seal as of the date
first above written.
CENTURY ELECTRONICS MANUFACTURING, INC.
By: /s/ Leslie J. Sainsbury
-------------------------
Name: Leslie J. Sainsbury
Title: President
CENTENNIAL TECHNOLOGIES, INC.
By: /s/ Donald R. Peck
-------------------------------------
Name: Donald R. Peck
Title: Secretary, Treasurer and General Counsel
-5-
<PAGE>
Exhibit 10.7
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of the
30th day of June, 1997, among Century Electronics Manufacturing, Inc., a
Delaware corporation (the "Company"), and the parties listed on the signature
page attached hereto (collectively, together with their successors or assigns,
the "Holders").
The Holders are holders of notes (the "Notes") which are convertible into
shares (collectively, the "Underlying Shares") of the Company's common stock,
par value $.O1 per share (the "Common Stock"). For the purposes of this
Agreement, "Registrable Securities" means, collectively, (a) the Underlying
Shares and (b) any shares of Common Stock issued with respect to the Underlying
Shares by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization; but does not include any shares of the Common Stock which may be
sold by any of the Holders who are not affiliates of the Company pursuant to
Rule 144(k) of the Securities Act of 1933, as amended (the "Securities Act") or
any other rule of similar effect. Notwithstanding anything to the contrary
contained in this Agreement, if the Company is party to a merger, consolidation
or other combination which causes the Notes to be automatically converted into
Common Stock in accordance with the terms of the Notes, the registration
obligations of the Company and/or all other parties with respect to Registrable
Securities shall be governed by the specific terms of the Notes and section 7 of
the note purchase letter agreements, dated the date hereof, between the Company
and the Holders, and this Agreement shall be automatically terminated.
The parties hereto agree as follows:
1. Demand Registration.
(a) Demand Registration. At any time after six months from the date
on which the Common Stock is first publicly traded (the "Effective Date"), the
holders of at least 20% of the Registrable Securities may request registration
under the Securities Act of all or part of the Registrable Securities. The
Holders will collectively be entitled to request one (1) registration only, and
the registration requested pursuant to this paragraph 1(a) is referred to herein
as the "Demand Registration." The request for a Demand Registration shall be in
writing and shall specify the number of Registrable Securities requested to be
registered by each Holder. Within ten (10) days after receipt of any such
request, the Company will give written notice of such requested Demand
Registration to all other holders of Registrable Securities and will include in
such registration the Registrable Securities with respect to which the Company
receives written requests for inclusion therein within fifteen (15) days after
the giving (in accordance with paragraph 9(f) hereof) of the Company's notice
(such additional selling Holders, together with the original requesting Holders,
being collectively referred to as the "Requesting Holders"). A registration will
not count as the Demand Registration unless and until it has become effective
(unless such Demand Registration has not become effective due solely to the
fault of one or more of the Requesting Holders). The Company will pay all
Registration Expenses (as defined in Section 4 hereof) other than underwriting
discounts or commissions, if any, and filing fees
<PAGE>
relating to the Registrable Securities to be registered (collectively, the
"Stockholder Costs") in connection with any registration initiated as a Demand
Registration whether or not it has become effective. Upon the effectiveness of
the Demand Registration, the Requesting Holders may thereafter sell the
Registrable Securities covered by the effective Demand Registration from time to
time, in their discretion, provided that they comply with all applicable federal
and state securities laws, including, without limitation, prospectus delivery
requirements; provided, further, that the Company shall not be obligated to keep
such Demand Registration statement effective for a period longer than one year.
The Company may, in its discretion, determine that the Demand Registration shall
be underwritten by one or more underwriters. In such case, the managing
underwriter (the "Underwriter") chosen by the Company shall be reasonably
acceptable to the majority in interest of the Requesting Holders. All of the
Registrable Securities requested to be registered by the Requesting Holders
shall be included in the Demand Registration.
In addition to all of the Registrable Securities requested to be registered by
the Requesting Holders, the Company may include in the Demand Registration
additional securities (the "Additional Securities") to be issued by it or to be
sold by other security holders; provided, that if the Underwriter, if any,
advises the Company in writing that in its opinion the number of the Additional
Securities requested to be included in such registration exceeds the number
which can be sold in an orderly manner in such offering without materially
adversely affecting the market for the Company's stock, the Company will include
in such registration only such number of the Additional Securities which the
Underwriter determines may be included, pro rata among the Company and the
holders of the Additional Securities on the basis of the number of shares that
they have requested to be registered or in accordance with contractual rights,
if any, or other preference rights determined by the Company.
(b) Restrictions on the Demand Registration. The Company will not be
obligated to effect the Demand Registration within six (6) months after the
effective date of a previous Company registration statement regardless of
whether Registrable Securities were included.
2. Piggyback Registrations.
(a) Right to Piggyback. Subject to Section 3 below, whenever the
Company proposes to register any of its securities under the Securities Act
(other than pursuant to an underwritten initial public offering of the Common
Stock (the "Initial Offering") or the Demand Registration) and the registration
form to be used may be used for the registration of Registrable Securities (a
"Piggyback Registration"), the Company will give prompt written notice to the
Holders of its intention to effect such a registration and will use its
reasonable best efforts to include in such registration all Registrable
Securities requested to be included within fifteen (15) days after the giving
(in accordance with paragraph 9(f) hereof) of the
2
<PAGE>
Company's notice, all to the extent and under the conditions that such
registration is permitted under the Securities Act.
In the event that the Piggyback Registration is underwritten and the managing
underwriter (the "Piggyback Underwriter") reasonably believes that the sale of
the number of shares proposed to be sold by the Requesting Holders and other
holders of Common Stock requesting piggyback registration (the "Other Holders")
would have a material adverse effect on the market for the Company's stock, the
Requesting Holders hereby agree that the number of shares of Registrable
Securities which are sold by the Piggyback Underwriter in the underwritten
offering shall be reduced, pro rata with the shares to be sold by the Other
Holders, to such number as the Piggyback Underwriter reasonably recommends may
be sold in the offering without having a material adverse effect on the market
for the Company's stock. Any reduction shall be pro rata on the basis of the
number of shares requested to be registered by the Requesting Holders as well as
the Other Holders. Notwithstanding the foregoing provisions, the Company may
withdraw any registration statement referred to in this Section 2 without
incurring any liability to the Holders.
(b) Piggyback Expenses. The Registration Expenses of the Holders
other than Stockholder Costs will be paid by the Company in all Piggyback
Registrations.
3. Registration Procedures. Whenever the Holders have requested that any
Registrable Securities be registered pursuant to the Demand Registration, the
Company will use its reasonable best efforts to effect the registration and the
sale of such Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto the Company will as expeditiously as
reasonably possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
reasonable best efforts to cause such registration statement to become effective
(provided that before filing a registration statement or prospectus or any
amendments or supplements thereto, the Company will furnish to one counsel
selected by the Requesting Holders copies of all such documents proposed to be
filed, which documents will be subject to the review of such counsel);
(b) furnish to Requesting Holders such number of copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus)
such other documents as they may reasonably request in order to facilitate the
disposition of the Registrable Securities included in such registration
statement;
(c) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
the Holders reasonably request and do any and all other acts and things which
may be reasonably necessary or advisable to enable the Holders to consummate the
disposition in such jurisdictions of the
3
<PAGE>
Registrable Securities included in such registration statement (provided that
the Company will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph, (ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction;
(d) notify the Holders, at any time when a prospectus relating to
Registrable Securities is required to be delivered under the Securities Act, of
the happening of any event as a result of which the prospectus included in such
registration statement may contain an untrue statement of material fact or may
omit any fact necessary to make the statements therein not misleading, and, at
the request of the Requesting Holders, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Registrable Securities, such prospectus will not contain an untrue
statement of a material fact or omit to state any fact necessary to make the
statements therein not misleading;
(e) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the National Association of
Securities Dealers, Inc. ("NASD") automated quotation system if similar
securities issued by the Company are so listed and, if listed on the NASD
automated quotation system, use its reasonable best efforts to secure
designation of all such Registrable Securities covered by such registration
statement as a NASDAQ "national market system security" within the meaning of
Rule 11Aa2-1 of the Securities and Exchange Commission if similar securities
issued by the Company are so designated, and if the Registrable Securities are
traded on NASDAQ, use its reasonable best efforts to arrange for at least two
(2) market makers to register as such with respect to such Registrable
Securities with the NASD;
(f) provide a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration statement;
(g) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the Requesting
Holders or the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities:
(h) make available for inspection upon reasonable notice during the
Company's regular business hours by the Requesting Holders, any underwriter
participating in any disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by the Requesting Holders or any
such underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the Company's officers, directors,
employees and independent accountants to supply all information, reasonably
requested by any such underwriter, attorney, accountant or agent in connection
with such registration statement, provided, that prior thereto each party
4
<PAGE>
receiving such information shall agree in writing to reasonable and customary
non-disclosure and confidentiality provisions;
(i) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of a least twelve (12) months beginning
with the first day of the Company's first full calendar quarter after the
effective date of the registration statement, which earnings statement shall
satisfy the provision of Section 11(a) of the Securities Act and/or Rule 158
thereunder;
(j) permit the Holders to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of the Requesting Holders and their counsel should be included;
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order;
(l) use its reasonable best efforts to cause such Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the Requesting Holders to consummate the disposition of such
Registrable Securities; and
(m) obtain a cold comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the Requesting Holders shall
reasonably request.
If any such registration or comparable statement refers to any Requesting Holder
by name or otherwise as the holder of any securities of the Company and if, in
its sole and exclusive judgment, such Requesting Holder is or might be deemed to
be a controlling person of the Company, the Requesting Holder shall have the
right to require (i) the insertion therein of language, in form and substance
satisfactory to the Requesting Holder and presented to the Company in writing,
to the effect that the holding by the Requesting Holder of such securities is
not to be construed as a recommendation by the Holder of the investment quality
of the Company's securities covered thereby and that such holding does not imply
that the Requesting Holder will assist in meeting any future financial
requirements of the Company, or (ii) in the event that such reference to the
Requesting Holder by name or otherwise is not required by the Securities Act or
any similar federal statute then in force, the deletion of the reference to the
Requesting Holder; provided that with respect to this clause (ii) the Requesting
Holder shall furnish to the Company an opinion of counsel to
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<PAGE>
such effect, which opinion and which counsel shall be reasonably satisfactory to
the Company.
In connection with the Demand Registration or a Piggyback Registration which
includes Registrable Securities, the Company may require the Holders to furnish
to the Company such information regarding the distribution of such securities as
the Company may from time-to-time reasonably request in writing. In connection
with any such registration hereunder, the Holders shall be deemed to agree that
(i) they shall deliver a copy of the then current prospectus (including any
amendment or supplement thereto) as required by Section 5(b) of the Securities
Act, (ii) they shall furnish to the Company in writing such information with
respect to themselves and the proposed distribution by them as reasonably shall
be requested and as is reasonably necessary in order to assure compliance with
applicable federal and state securities laws and (iii), upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 3(d), the Holder shall forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until the Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(d) hereof, and, if so directed by
the Company, the Holder shall deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such holder's possession,
of the prospectus covering such Registrable Securities current at the time of
receipt of such notice.
4. Registration Expenses. All expenses incident to the Company's
performance or compliance with this Agreement, including without limitation all
registration, filing and listing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
and fees and disbursements of counsel for the Company and the Holders and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other persons retained by the Company (all such expenses being
herein called "Registration Expenses") will be borne by the Company, except for
Stockholder Costs.
5. Indemnification.
(a) In the event of a registration of any of the Registrable
Securities under the Securities Act pursuant to Sections 1 or 2 hereof, the
Company agrees to indemnify, to the extent permitted by law, each Holder, its
officers and directors and each Person who controls such Holder (within the
meaning of the Securities Act) against all losses, claims, damages, liabilities
and expenses caused by any untrue or alleged untrue statement of material fact
contained in any registration statement under which any of the Registrable
Securities were registered under the Securities Act pursuant to Sections 1 or 2
hereof, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
insofar as the same are caused by or contained in any
6
<PAGE>
information furnished in writing to the Company by the Holder expressly for use
therein or by the Holder's failure to deliver a copy of the registration
statement or prospectus or any amendments thereof or supplements thereto after
the Company has furnished the Holders with a sufficient number of copies of the
same. In connection with an underwritten offering, the Company will indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Securities Act) to the same extent
as provided above with respect to the indemnification of the Holder.
(b) In connection with any registration statement in which a Holder
is participating, each Holder will furnish to the Company in writing such
information and affidavits as the Company reasonably requests for use in
connection with any such registration statement or prospectus and, to the extent
permitted by law, will indemnify the Company, its directors and officers and
each Person who controls the Company (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities and expenses resulting from any
untrue or alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, but
only to the extent that such untrue statement or omission is contained in any
information or affidavit so furnished in writing by such Holder.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one (1) counsel for all parties indemnified by such
indemnifying party with respect to such claim.
(d) The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and will survive the transfer of securities. The
indemnifying party also agrees to make such provisions as are reasonably
requested by any indemnified party for contribution to such party in the event
the indemnifying party's indemnification is unavailable for any reason.
6. Participation in Underwritten Registrations. No person may participate
in any registration hereunder which is underwritten unless such person (a)
agrees to sell such person's securities on the basis provided in any
underwriting arrangements approved by the
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<PAGE>
person or persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
7. Obligation to Communicate with Holders. Upon the written request of any
Holder or Holders owning notes convertible into 10 percent or more of the
Registrable Securities, the Company shall deliver to such Holder or Holders the
names and addresses of all Holders for the purpose of allowing the requesting
Holder or Holders to communicate regarding a request for the Demand
Registration.
8. Lock-Up Agreements. The Holders agree not to directly or indirectly
effect any public sale or distribution (including without limitation any sales
pursuant to Rule 144 and Rule 144A promulgated pursuant to the Securities Act)
of equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the 180 day period
beginning on the effective date of the Initial Offering, or engage in any
hedging transaction with similar effect, unless the underwriters managing the
Initial Offering otherwise agree.
9. Miscellaneous.
(a) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may be amended or waived only upon the prior
written consent of (i) the Company and the holders of a majority in interest of
the Registrable Securities if all Holders are treated the same by such amendment
or waiver or (ii) the Company and all of the Holders if certain of the Holders
are to be treated differently by such amendment or waiver (provided that it is
understood that any Holder shall have the right to waive his, her or its rights
without the consent of the other Holders).
(b) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not.
(c) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(d) Counterparts. This Agreement may be executed in two or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together shall constitute one and the
same Agreement.
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<PAGE>
(e) Headings; Interpretation. The headings of this Agreement are
inserted for convenience only and do not constitute a Section of this Agreement.
The use of the word "including" in this Agreement shall be by way of example
rather than by limitation.
(f) Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable express courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the Holders and to the Company at the addresses
indicated below:
If to the Company: Century Electronics Manufacturing, Inc.
374 Turnpike Road
Southborough, MA 01772
With a copy to: Hemenway & Barnes
60 State Street
Boston, Massachusetts 02109
Attention: Frederic J. Marx, Esq.
If to the Holders: To the Addresses Shown on the Company's Records.
or to such other address or to the attention of such other person as the
recipient party requested in writing in accordance with this paragraph.
(g) Prior Rights. This Agreement supersedes and replaces all
registration rights of any nature which were previously granted by the Company
to any of the Holders under any document, instrument or agreement, and each
Holder agrees and acknowledges that all such prior rights are void and of no
effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first written above.
Century Electronics Manufacturing, Inc.
By /s/ L J Sainsbury
-------------------------
L J Sainsbury
[HOLDERS' SIGNATURES APPEAR ON FOLLOWING PAGES]
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<PAGE>
HOLDERS SIGNATURES
/s/ Robert Cohen /s/ Gary Kaplowitz
- ------------------------------ ------------------------------
Robert Cohen Gary Kaplowitz
/s/ Lenore Katz /s/ Allen Rothstein
- ------------------------------ ------------------------------
Lenore Katz Allen Rothstein
/s/ Ellen Cohen /s/ Richard Feldman
- ------------------------------ ------------------------------
Ellen Cohen Richard Feldman
/s/ Meryl Cohen /s/ Louis Silverstein
- ------------------------------ ------------------------------
Meryl Cohen, as Custodian under the Louis Silverstein
New York UGMA, for Gabrielle, Jaclyn,
Erica and Nicole Cohen, Tenants in Common
/s/ Stefanie Rubin
------------------------------
Stefanie Rubin
S&R Holdings
/s/ Jeffrey Rubin
------------------------------
By: /s/ S&R Holidngs Jeffrey Rubin
---------------------------
EC Partners Alan Cohen, Robert Cohen
and Jeffrey Rubin,
By: /s/ EC Partners Tenants in Common
---------------------------
/s/ Alan Cohen
------------------------------
/s/ Alexander Brodt Alan Cohen
- -------------------------------
Alexander Brodt
/s/ Robert Cohen
------------------------------
Robert Cohen
Abby Cohen May, Jennifer Cohen
and Richard Cohen, Tenants in Common /s/ Jeffrey Rubin
------------------------------
Jeffrey Rubin
/s/ Abby Cohen May
- ------------------------------
Abby Cohen May
/s/ Jennifer Cohen
- ------------------------------
Jennifer Cohen
/s/ Richard Cohen
- ------------------------------
Richard Cohen
10
<PAGE>
Exhibit 10.8
REGISTRATION RIGHTS AGREEMENT
This Agreement (the "Agreement") is made as of July 30, 1999, by and among
Century Electronics Manufacturing, Inc., a Delaware corporation (the "Company"),
and Myung Ho Park, Yoon Jung Park and Sung Woo Kwon (collectively, the "Amitek
Investors").
WHEREAS, the Company, Amitek Corporation, a Florida corporation
("Amitek"), and certain other persons are party to an Agreement and Plan of
Merger dated as of July 30, 1999 (the "Merger Agreement"), pursuant to which, as
of the date hereof, Amitek is being merged with and into the Company and the
Amitek Investors are being issued as partial consideration therefor, and may be
issued from time to time in the future as additional consideration therefor,
shares of the Common Stock of the Company;
WHEREAS, the Company and HarbourVest Partners V-Direct Fund, L.P.
("HarbourVest") are parties to that certain Series A Convertible Preferred Stock
Purchase Agreement, dated as of December 1, 1998, and that certain Series A
Convertible Preferred Stock Purchase Agreement, dated as of February 4, 1998
(such agreements as amended by the Waiver of Rights and in effect as of the date
hereof, the "Purchase Agreements"), which agreements provide certain
arrangements with respect to the registration of shares of Common Stock of the
Company owned by HarbourVest or its assignees under the Securities Act;
WHEREAS, the Company and HarbourVest are entering into a Waiver of Rights
and Amendment under Purchase Agreements (the "Waiver of Rights") as of the date
hereof, pursuant to which HarbourVest is waiving certain rights under, and
providing for certain amendments to, the Purchase Agreements; and
WHEREAS, the Company and the Amitek Investors wish to provide certain
arrangements with respect to the registration of shares of Common Stock of the
Company owned from time to time by the Amitek Investors under the Securities
Act.
NOW, THEREFORE, in consideration of the mutual promises and obligations
contained herein, the parties agree as follows:
1. Definitions.
1.1 "Amitek Holder" means any person owning Registrable Securities or any
assignee thereof in accordance with Section 9 hereof.
1.2 "Commission" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act or the Exchange Act.
<PAGE>
1.3 "Common Stock" means the Common Stock, $.01 par value per share, of
the Company.
1.4 "Exchange Act" means the Securities Exchange Act of 1934 and the rules
and regulations of the Commission thereunder, and any successor to such statute
or such rules and regulations.
1.5 "Form S-1", "Form S-3", "Form S-4" and "Form S-8" mean respective
forms under the 1933 Act and any successor registration forms.
1.6 "HarbourVest Securities" means any shares constituting "Registrable
Securities" under either of the Purchase Agreements (as defined therein) that
are proposed to be included in a registration hereunder.
1.7 "Initiating Holders" shall have the meaning given to such term in the
Purchase Agreements.
1.8 "Initial Public Offering" means the first registered offering of
securities of the Company under the Securities Act.
1.9 "Majority Participating Amitek Holders" means, with respect to any
registration of Registrable Securities, the holder or holders at the relevant
time of at least a majority of the Registrable Securities to be included in the
registration statement in question.
1.10 "Register", "registered", and "registration" refer to a registration
effected by preparing and filing a registration statement or similar document in
compliance with the Securities Act of 1933, as amended (the "1933 Act"), and the
automatic effectiveness or the declaration or ordering of effectiveness of such
registration statement or document.
1.11 "Registrable Securities" means (i) any Common Stock issued or
issuable to an Amitek Investor under the Merger Agreement, or (ii) any common
stock or other securities issued or issuable with respect to any Registrable
Securities by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. Registrable Securities shall cease to be
Registrable Securities when (i) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement or (ii) such securities shall have been publicly distributed pursuant
to an exemption from the registration requirements of the Securities Act.
1.12 "Registration Expenses" means all expenses incident to performance of
or compliance with Sections 2, 3 and 4 hereof by the Company, including without
limitation all registration and filing fees, all listing fees, all fees and
expenses of complying with securities
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or blue sky laws, all printing and automated document preparation expenses, all
messenger and delivery expenses, the fees and disbursements of counsel for the
Company and of its independent public accountants, including the expenses of any
special audits required by or incident to such performance and compliance, and
the fees and disbursements of one counsel for the Amitek Holders on whose behalf
Registrable Securities are being registered, but excluding underwriting
discounts and commissions and applicable transfer taxes, if any, which shall be
borne by the sellers of the Registrable Securities in all cases.
1.13 "Rule 144" means Rule 144 promulgated under the Securities Act, and
any successor rule or regulation thereto, and in the case of any referenced
section of such rule, any successor section thereto, collectively and as from
time to time amended and in effect.
1.14 "Securities Act" means the Securities Act of 1933 or any successor
federal statute, and the rules and regulations of the Commission thereunder, and
in the case of any referenced section of any such statute, rule or regulation,
any successor section thereto, collectively and as from time to time amended and
in effect.
2. Required Registrations.
2.1 Registration on Request. At any time six months after an Initial
Public Offering, one or more Amitek Holders holding at least 50% of the then
outstanding Registrable Securities may, by written notice to the Company,
request that the Company effect the registration under the Securities Act of not
less than 30% of then outstanding Registrable Securities held by such Amitek
Holders as a group. If the Amitek Holders initiating such registration intend to
distribute the Registrable Securities in an underwritten offering, they shall so
state in their request. Promptly after receipt of such notice, the Company will
give written notice of such requested registration to all other holders of
Registrable Securities. The Company will then use its best efforts expeditiously
to effect the registration under the Securities Act of the Registrable
Securities which the Company has been requested to register by such Amitek
Holders, and all other Registrable Securities which the Company has been
requested to register by other holders of Registrable Securities by notice
delivered to the Company within 30 days after the giving of such notice by the
Company.
2.2 Registration on Form S-3. At any time after the Company becomes
eligible to file a Registration Statement on Form S-3, an Amitek Holder or group
of Amitek Holders may request the Company, in writing, to effect the
registration on Form S-3 of such number of Registrable Shares having a market
value of not less than $100,000 as shall be specified in the request. If the
Amitek Holders initiating such registration intend to distribute the Registrable
Securities in an underwritten offering, they shall so state in their request.
Promptly after receipt of such notice, the Company will give written notice of
such requested registration to all other holders of Registrable Securities. The
Company will then use its best efforts expeditiously to effect the registration
under the Securities Act of the Registrable Securities which the Company has
been requested to register by such Amitek Holders, and all other
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<PAGE>
Registrable Securities which the Company has been requested to register by other
holders of Registrable Securities by notice delivered to the Company within 30
days after the giving of such notice by the Company. The Company may postpone
for a period of up to 60 days the filing of any registration requested pursuant
to this Section 2.2 if the Board of Directors of the Company in good faith
determines that such registration is likely to have an adverse effect on any
plan, proposal or agreement by the Company with respect to any financing,
acquisition, recapitalization, reorganization or other material transaction;
provided, however, that the Company may not exercise such right of postponement
more frequently than one time in any 12 month period.
2.3 Number of Requests; Form. The Company shall not be required to effect
more than one registration pursuant to Section 2.1 or more than one registration
per calendar year pursuant to Section 2.2. The registration requested pursuant
to Section 2.1 shall be effected by the filing of a registration statement on
Form S-1 (or any other form which includes substantially the same information as
would be required to be included in a registration statement on such form as
currently constituted), unless the use of a different form has been agreed to in
writing by the Majority Participating Amitek Holders. No registration of
Registrable Securities under Section 2.1 or Section 2.2 which shall not have
become and remained effective, shall be deemed to be a registration for any
purpose of this Section 2.3.
2.4 Payment of Expenses. The Company hereby agrees to pay, or cause its
Subsidiaries to pay, all Registration Expenses in connection with all
registrations effected pursuant to Sections 2.1 and 2.2. However, the Company
shall not be required to pay for any expenses of such registration proceeding if
the registration request is withdrawn at any time at the request of the Majority
Participating Amitek Holders (in which case all participating Amitek Holders
shall bear such expenses), unless in the case of a registration requested
pursuant to Section 2.1, the Amitek Holders holding a majority of the
Registrable Securities agree to forfeit their right to one demand registration
pursuant to Section 2.1 at the time of any such withdrawal, which forfeiture
shall bind all holders of Registrable Securities. However, if the Amitek Holders
have learned of a material adverse change in the condition, business, or
prospects of the Company from that known to the initiating Amitek Holders at the
time of their request that makes the proposed offering unreasonable in the good
faith judgment of the Majority Participating Amitek Holders, then the Amitek
Holders shall not be required to pay any of such expenses in the case of a
registration requested pursuant to Section 2.1 or 2.2 and the right to one
demand registration pursuant to the prior sentence shall not be forfeited in the
case of a registration requested pursuant to Section 2.1.
3. Piggyback Registration. If the Company at any time proposes to register any
of its equity securities under the Securities Act, for its own account or for
the account of any holder of its securities other than Registrable Securities,
including without limitation HarbourVest or its assignees under Section 8.14 of
the Purchase Agreements, on a form which would permit registration of
Registrable Securities for sale to the public under the Securities Act, or
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<PAGE>
proposes to register any securities in a so-called "unallocated" or "universal"
shelf registration statement, the Company will each such time give prompt notice
to all holders of Registrable Securities of its intention to do so. Such notice
shall describe such securities and specify the form, manner and other relevant
aspects of such proposed registration. Any such holder may by written response
delivered to the Company within 30 days after the giving of any such notice
request that all or a specified part of the Registrable Securities held by such
holder be included in such registration. Such response shall also specify the
intended method of disposition of such Registrable Securities. The Company
thereupon will use its best efforts as a part of its filing of such form to
effect the registration under the Securities Act of all Registrable Securities
which the Company has been so requested to register by the holders of
Registrable Securities, to the extent required to permit the disposition (in
accordance with the intended methods thereof as aforesaid) of the Registrable
Securities so to be registered. The Company shall be under no obligation to
complete any offering of its securities it proposes to make and shall incur no
liability to any holder for its failure to do so. No registration of Registrable
Securities effected under this Section 3 shall relieve the Company of any of its
obligations to effect registrations of Registrable Securities pursuant to
Section 2.1 hereof.
3.1 Excluded Transactions. The Company shall not be obligated to effect
any registration of Registrable Securities under this Section 3 incidental to
the registration of any of its securities in connection with mergers,
acquisitions, exchange offers, dividend reinvestment plans or stock option or
other employee benefit plans.
3.2 Payment of Expenses. The Company hereby agrees to pay, all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this Section 3.
4. Registration Procedures. If and whenever the Company is required to use its
best efforts to effect the registration of any Registrable Securities under the
Securities Act as provided in Sections 2 or 3 hereof, the Company will as
expeditiously as reasonably possible:
4.1 Registration Statement. Prepare and (in the case of a registration
pursuant to Section 2 hereof, promptly and in any event within 60 days after the
end of the period within which requests for registration may be delivered to the
Company) file with the Commission a registration statement with respect to such
Registrable Securities and use its best efforts to cause such registration
statement to become effective. Such registration statement shall be for an
offering to be made on a continuous or delayed basis (a so-called "shelf
registration statement") if the Company is eligible for the use thereof and the
Majority Participating Amitek Holders have requested a shelf registration
statement.
4.2 Amendments and Supplements to Registration Statement. Prepare and file
with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective and to comply with the provisions of
the Securities Act with respect to the
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<PAGE>
disposition of all Registrable Securities and other securities, if any, covered
by such registration statement until the later of (i) such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
registration statement (but in no event for a period of more than 120 days after
such registration statement becomes effective) or (ii) the expiration of the
time when a prospectus relating to such registration is required to be delivered
under the Securities Act.
4.3 Cooperation. Use its best efforts to cooperate with the seller in the
disposition of the Common Stock covered by such registration statement,
including without limitation in the case of an underwritten offering pursuant to
Section 2.1 causing key executives of the Company and its subsidiaries to
participate under the direction of the managing underwriter in a "road show"
scheduled by such managing underwriter in such locations and of such duration as
in the judgment of such managing underwriter are appropriate for such
underwritten offering.
4.4 Furnishing of Copies of Registration Statements and Other Documents.
Furnish to each seller of such Registrable Securities such number of conformed
copies of such registration statement and of each such amendment and supplement
thereto (in each case including all exhibits, except that the Company shall not
be obligated to furnish any such seller with more than two copies of such
exhibits other than incorporated documents), such number of copies of the
prospectus included in such registration statement (including each preliminary
prospectus and any summary prospectus), each in conformity with the requirements
of the Securities Act, such documents incorporated by reference in such
registration statement or prospectus and such other documents as such seller may
reasonably request in order to facilitate the disposition of its Registrable
Securities covered by such registration statement.
4.5 State Securities Laws. Use its best efforts to register or qualify
such Registrable Securities under such securities or blue sky laws of such
jurisdictions as the sellers shall reasonably request, and do any and all other
acts and things which may be necessary or advisable to enable each seller to
consummate the disposition in such jurisdictions of its Registrable Securities
covered by such registration statement; provided, however, that the Company
shall not be obligated to file any general consent to service of process or to
qualify as a foreign corporation or subject the Company to taxation in any
jurisdiction in which it is not so qualified.
4.6 Opinion of Counsel; Comfort Letter. Use its best efforts to obtain all
legal opinions, auditors' consents and comfort letters and experts cooperation
as may be required, including furnishing to each seller of such Registrable
Securities a signed counterpart, addressed or confirmed to such seller, of (i)
an opinion of counsel for the Company and (ii) a "cold comfort" letter signed by
the independent public accountants who have certified the Company's financial
statements included in such registration statement, covering substantially the
same matters as are customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to underwriters in underwritten public offerings
of securities.
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<PAGE>
4.7 Notice of Prospectus Defects. Immediately notify each seller of
Registrable Securities covered by such registration statement, at any time when
a prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing, and at the request of any such seller
prepare and furnish to such seller a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
4.8 General Compliance with Federal Securities Laws; Section 11(a) Earning
Statement. Otherwise use its best efforts to comply with the Securities Act, the
Exchange Act and any other applicable rules and regulations of the Commission,
and make available to its securities holders, as soon as reasonably practicable,
an earning statement covering the period of at least 12 months after the
effective date of such registration statement, which earning statement shall
satisfy Section 11(a) of the Securities Act and any applicable regulations
thereunder, including Rule 158.
4.9 Exchange Listing. Use its best efforts to list such Registrable
Securities on each securities exchange on which any equity security of the
Company is then listed, if such securities are not already so listed.
4.10 Transfer Agent. Provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement.
4.11 Participation by Selling Security Holders. In connection with the
preparation and filing of each registration statement registering Registrable
Securities under the Securities Act, and before filing any such registration
statement or any other document in connection therewith, give the participating
Amitek Holders and their underwriters, if any, and their respective counsel and
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the
Commission, each amendment thereof or supplement thereto and any related
underwriting agreement or other document to be filed, and give each of the
aforementioned persons such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such Amitek Holders, underwriters, counsel
or accountants, to conduct a reasonable investigation within the meaning of the
Securities Act.
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The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing and which shall be required by the
Securities Act (or similar state laws) or by the Commission in connection
therewith.
5. Additional Procedures in Connection with Underwritten Offerings; Amitek
Holder Lockups; Cutbacks.
5.1 Registrations Upon Request Pursuant to Section 2. In the case of a
registration pursuant to Section 2 hereof, whenever the Majority Participating
Amitek Holders shall request that such registration shall be effected pursuant
to an underwritten offering, such registration shall be so effected, and only
securities which are to be distributed by the underwriters designated by such
Majority Participating Amitek Holders may be included in such registration. If
requested by such underwriters, the Company and each participating seller will
enter into an underwriting agreement with such underwriters for such offering
containing such representations and warranties by the Company and such other
terms and provisions as are customarily contained in underwriting agreements
with respect to secondary distributions, including, without limitation,
indemnity and contribution. In a registration pursuant to Section 2.1, each
Amitek Holder agrees that without the consent of the managing underwriter, for a
period from 15 days prior to the effective date of the registration statement
until 90 days after such effective date, such Amitek Holder will not directly or
indirectly sell, offer to sell, grant any option for the sale of, or otherwise
dispose of any common equity or securities convertible into common equity except
(i) for Registered Securities sold in such registered offering and (ii)
transfers to affiliates and partners of such Amitek Holder, each of whom shall
have furnished to the Company and the managing underwriter their written consent
to be bound by this Agreement including this Section 5.1.
If the managing underwriter advises the Amitek Holders requesting
registration that the number of shares to be included in a registration pursuant
to Section 2.1 or 2.2, should be limited due to market conditions or otherwise,
(i) all shares other than Registrable Securities or HarbourVest Securities shall
be excluded prior to the exclusion of any Registrable Securities and HarbourVest
Securities and (ii) thereafter, if additional shares must be excluded from such
registration, all holders of Registrable Securities and HarbourVest Securities
shall share pro rata in the number of shares of Registrable Securities and
HarbourVest Securities that may be registered in such registration, such sharing
to be based on the respective numbers of shares owned by such holders on the
date the request for such registration by the Amitek Holders was made under
Section 2.1 or 2.2.
5.2 Piggyback Registrations Pursuant to Section 3; Cutbacks. In connection
with the exercise of any registration rights granted to holders of Registrable
Securities pursuant to Section 3 hereof, if the registration is to be effected
by means of an underwritten offering of Common Stock on a firm commitment basis,
the Company may condition participation in such
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registration by such holders upon inclusion of the Registrable Securities being
so registered in such underwriting. In addition, such holders may request that
such Registrable Securities be included in any underwritten offering of Common
Stock (whether or not on a firm commitment basis).
If the managing underwriter for the offering shall advise the Company in
writing that the total amount of securities, including Registrable Securities,
requested by shareholders to be included in such offering exceeds the amount of
securities to be sold other than by the Company that can be successfully
offered, then the Company shall be required to include in the offering only that
number of such securities, including Registrable Securities, which the managing
underwriter believes will not jeopardize the success of the offering. In such
case, the securities so included shall be reduced as follows: (i) all shares
other than Registrable Securities, HarbourVest Securities or securities being
issued by the Company shall be excluded prior to the exclusion of any
Registrable Securities, HarbourVest Securities and securities being issued by
the Company, and (ii) thereafter, if additional shares must be excluded from
such registration, all holders of Registrable Securities and HarbourVest
Securities shall share pro rata in the number of shares of Registrable
Securities and HarbourVest Securities that may be registered in such
registration, such sharing to be based on the respective numbers of shares owned
by such holders on the date the Company gave the Amitek Holders notice of such
registration pursuant to Section 3.
In the event that (i) the holders of "Registrable Securities" under either
of the Purchase Agreements (as defined therein) exercise their registration
rights under Section 8.5 thereof and (ii) any holders of Registrable Securities
hereunder exercise their registration rights in respect of such registration
pursuant to Section 3 hereof and request inclusion therein, then (X)
notwithstanding anything to the contrary in this Agreement, the second paragraph
of Section 8.5(b) of the relevant Purchase Agreement (as amended by the Waiver
of Rights) shall govern any so-called "cutbacks" and (Y) the Initiating Holders
may (as contemplated by the first sentence of the second paragraph of Section
8.5(b) of the Purchase Agreements) condition such inclusion upon the agreement
by the holders of Registrable Securities hereunder seeking such inclusion to be
bound by and comply with the applicable provisions of Section 8 of the relevant
Purchase Agreement (as amended by the Waiver of Rights), notwithstanding any
inconsistency between such provisions and this Agreement.
5.3 Sellers Party to Underwriting Agreement. The holders of Registrable
Securities to be distributed in any underwritten offering shall be parties to
the underwriting agreement entered into by the Company in connection therewith,
and the representations and warranties by, and the other agreements on the part
of, the Company to and for the benefit of the underwriters shall also be made to
and for the benefit of such holders of Registrable Securities.
6. Amitek Holder Lockup Agreements in Connection with Initial Public Offering.
Each Amitek Holder agrees that without the consent of the managing underwriter
(treating all holders on a consistent basis) it will not, for a period of 180
days following the effective date
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of the registration statement for an Initial Public Offering directly or
indirectly sell, offer to sell, grant any option for the sale of, or otherwise
dispose of any common equity or securities convertible into common equity,
except (i) for the Registrable Securities sold pursuant to such registration
statement, and (ii) transfers to affiliates and partners of such Amitek Holder
(each of whom shall have furnished to the Company and the managing underwriter
their written consent to be bound by this Agreement, including this Section 6),
provided that the officers, directors and all holders of more than 1% of the
shares of Common Stock (calculated for the purpose as if all securities
convertible into or exercisable for Common Stock, directly or indirectly, are so
converted or exercised) of the Company enter such lockup agreements for the same
period and on the same terms.
7. Indemnification and Contribution.
7.1 Indemnities of the Company and the Issuer. In the event of any
registration of any Registrable Securities under the Securities Act pursuant to
Section 2 or 3 hereof, the Company will, and hereby does, indemnify and hold
harmless each Amitek Investor and each seller of Registrable Securities, their
respective partners, directors and officers, and each other person, if any, who
controls any such Amitek Investor or seller within the meaning of Section 15 of
the Securities Act (each such person being referred to in this Section 7.1 as a
"Covered Person"), against any losses, claims, damages or liabilities, joint or
several, to which such Covered Person may be or become subject under the
Securities Act, the Exchange Act, any other securities or other law of any
jurisdiction, common law or otherwise, insofar as such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) arise out of or
are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained or incorporated by reference in any registration
statement under the Securities Act, any preliminary prospectus or final
prospectus included therein, or any related summary prospectus, or any amendment
or supplement thereto, or any document incorporated by reference therein, or
(ii) any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse such Covered Person for any legal or any other expenses
incurred by it in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding; provided, however, that the
Company shall not be liable to any Covered Person in any such case for any such
loss, claim, damage, liability, action or proceeding (i) to the extent that it
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement or incorporated document, in reliance upon and in conformity with
written information furnished to the Company or on behalf of such Covered Person
expressly for inclusion therein or (ii) in the case of a sale directly by a
Amitek Holder of Registrable Securities (including a sale of such Registrable
Securities through any underwriter retained by such Amitek Holder engaging in a
distribution solely on behalf of such Amitek Holder), such untrue statement or
alleged untrue statement or omission or alleged omission was contained in a
preliminary prospectus and corrected in a final or amended prospectus, and such
Amitek Holder failed to deliver a copy of
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the final or amended prospectus at or prior to the confirmation of the sale of
the Registrable Securities to the person asserting any such loss, claim, damage
or liability in any case in which such delivery is required by the Securities
Act. The indemnities of the Company contained in this Section 7.1 shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Covered Person and shall survive any transfer of Registrable Securities.
7.2 Indemnities to the Company. In the event of any registration of
Registrable Securities pursuant to Section 2 or 3, each seller of Registrable
Securities will, and hereby does, indemnify and hold harmless the Company, each
director of the Company, each officer of the Company who shall sign such
registration statement and each other person (other than such seller), if any,
who controls the Company within the meaning of Section 15 of the Securities Act
(each such person being referred to in this Section 7.2 as a "Covered Person"),
against any losses, claims, damages or liabilities, joint or several, to which
such Covered Person may be or become subject under the Securities Act, the
Exchange Act, any other securities or other law of any jurisdiction, common law
or otherwise, insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained or
incorporated by reference in any registration statement under the Securities
Act, any preliminary prospectus or final prospectus included therein, or any
related summary prospectus, or any amendment or supplement thereto, or any
document incorporated by reference therein, or (ii) any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse such
Covered Person for any legal or any other expenses incurred by it in connection
with investigating or defending any such loss, claim, damage, liability, action
or proceeding; provided, however, that such seller of Registrable Securities
shall be liable hereunder in any such case only if and to the extent that such
statement or omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such seller expressly
for inclusion therein; and provided, further, that such seller of Registrable
Securities shall have no liability hereunder if such untrue statement or alleged
untrue statement or omission or alleged omission was contained in a preliminary
prospectus and corrected in a final or amended prospectus, and the Company
failed to deliver a copy of the final or amended prospectus at or prior to the
confirmation of the sale of the securities to the person asserting any such
loss, claim, damage or liability in any case in which such delivery is required
by the Securities Act. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or any such
director, officer or controlling person and shall survive any transfer of
Registrable Securities.
7.3 Indemnification Procedures. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim of the type referred to in the foregoing provisions of this Section 7,
such indemnified party will, if a claim in respect thereof is to be made against
any indemnifying party, give written notice to each such indemnifying party of
the commencement of such action; provided, however, that the failure of any
indemnified party to give notice to such indemnifying party as provided herein
shall not
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relieve such indemnifying party of its obligations under the foregoing
provisions of this Section 7, except and solely to the extent that such
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, each indemnifying
party will be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying party similarly notified, to the extent that
it may wish, with counsel reasonably satisfactory to such indemnified party (who
shall not, except with the consent of the indemnified party, be counsel to such
an indemnifying party), and after notice from an indemnifying party to such
indemnified party of its election so to assume the defense thereof, such
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof; provided, however, that (i) if the indemnified party reasonably
determines that there may be a conflict between the positions of such
indemnifying party and the indemnified party in conducting the defense of such
action or that there may be defenses available to such indemnified party
different from or in addition to those available to such indemnifying party,
then counsel for the indemnified party shall conduct the defense to the extent
reasonably determined by such counsel to be necessary to protect the interests
of the indemnified party and such indemnifying party shall employ separate
counsel for its own defense, (ii) in any event, the indemnified party shall be
entitled to have counsel chosen by such indemnified party participate in, but
not conduct, the defense and (iii) the indemnifying party shall bear the legal
expenses incurred in connection with the conduct of, and the participation in,
the defense as referred to in clauses (i) and (ii) above. If, within a
reasonable time after receipt of the notice, such indemnifying party shall not
have elected to assume the defense of the action, such indemnifying party shall
be responsible for any legal or other expenses incurred by such indemnified
party in connection with the defense of the action, suit, investigation, inquiry
or proceeding. No indemnifying party will consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect to such claim or litigation.
7.4 Contribution. If the indemnification provided for in Sections 7.1 or
7.2 hereof is unavailable to a party that would have been an indemnified party
under any such Section in respect of any losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) referred to therein, then each
party that would have been an indemnifying party thereunder shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative fault of such indemnifying party on the
one hand and such indemnified party on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof). The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such indemnifying
party or such indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
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statement or omission. The parties agree that it would not be just and equitable
if contribution pursuant to this Section 7.4 were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the preceding sentence. The amount
paid or payable by a contributing party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 7.4 shall include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. No party guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any party who was not guilty of such
fraudulent misrepresentation. Notwithstanding the foregoing, no seller of
Registrable Securities shall be required to assume any liability that such
seller would not have been liable to assume had the indemnification provisions
contained in this Section 7 been enforceable.
7.5 Limitation on Liability of Sellers of Registrable Securities. The
obligation to provide indemnification pursuant to this Section 7 shall be
several, and not joint and several, among sellers of Registrable Securities and
the liability of each such seller under this Section 7 shall be limited to the
proportion of any loss, claim, damage, liability or expense which is equal to
the proportion that the public offering price of the shares sold by such seller
under such registration statement bears to the total public offering price of
all securities sold thereunder, but the liability of each such seller in respect
of any indemnification or contribution obligation of such seller arising under
this Section 7 shall not in any event exceed an amount equal to the net proceeds
to such seller (after deduction of all underwriters' discounts and commissions
and all other expenses paid by such seller in connection with the registration
in question) from the disposition of the Registrable Securities disposed of by
such seller pursuant to such registration. In no event shall any seller of
Registrable Securities, in connection with any public offering of the shares of
the Company, be required to provide an indemnification or contribution
obligation greater than the indemnification and contribution obligations of such
seller set forth in this Section 7.2.
8. Reports Under Securities Exchange Act of 1934. With a view to making
available to the Amitek Holders the benefits of Rule 144 promulgated under the
1933 Act ("Rule 144") and any other rule or regulation of the SEC that may at
any time permit a Amitek Holder to sell securities of the Company to the public
without registration, and with a view to making it possible for Amitek Holders
to register the Registrable Securities pursuant to a registration on Form S-3,
the Company agrees to:
(a) use its best efforts to make and keep public information
available, as those terms are understood and defined in Rule 144, at all
times commencing 91 days after the effective date of the registration
statement for its Initial Public Offering;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as will permit Amitek
Holders to use Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable
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(but not later than 120 days) after the end of the fiscal year in which
the registration statement for the Initial Public Offering is declared
effective;
(c) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the 1933 Act and
the 1934 Act; and
(d) furnish to any Amitek Holder forthwith upon request (1) a
written statement by the Company as to its compliance with the reporting
requirements of Rule 144 (at any time more than 90 days after the
effective date of the registration statement for the Initial Public
Offering), the 1933 Act and the 1934 Act (at any time after it has become
subject to such reporting requirements), or as to its qualification as a
registrant whose securities may be resold pursuant to Form S-3 (at any
time after it so qualifies), (2) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so
filed by the Company, and (3) such other information as may be reasonably
requested in availing any Amitek Holder of any rule or regulation of the
SEC which permits the selling of any such securities without registration
or pursuant to such form.
9. Assignment of Registration Rights. The rights to cause the Company to
register Registrable Securities pursuant to Sections 2 and 3 may be assigned by
any Amitek Holder to a permitted transferee, and by such transferee to a
subsequent permitted transferee, but only if such rights are transferred (a) to
any member of the family of such Amitek Holder, or any trust for the benefit of
such holder or family member or (b) in connection with the sale or other
transfer of not less than 50% of the Registrable Securities then held by such
Amitek Holder so long as such sale or other transfer involves at least 500,000
shares (as adjusted to reflect any stock dividends, stock splits,
recapitalizations or similar events) of Common Stock (or an equivalent amount of
other Registrable Securities). Any transferee to whom rights under this
Agreement are transferred shall (i) as a condition to such transfer, deliver to
the Company a written instrument by which such transferee agrees to be bound by
the obligations imposed upon Amitek Holders under this Agreement to the same
extent as if such transferee were a Amitek Holder under this Agreement and (ii)
be deemed to be a Amitek Holder hereunder.
10. Future Changes in Registration Requirements. In the event that the
registration requirements under the Securities Act are amended or eliminated to
accommodate a "Company registration" or similar approach, this Agreement shall
be deemed amended to the extent necessary to reflect such changes and the intent
of the parties hereto with respect to the benefits and obligations of the
parties, and in such connection, the Company shall use reasonable efforts to
provide Amitek Holders of Registrable Securities equivalent benefits to those
provided under this Agreement.
11. No Amendment Purchase Agreements and Waiver of Rights. The Company shall not
enter into any amendment to, or waive any of its rights under, either of the
Purchase Agreements or the Waiver of Rights without the prior written consent of
the holders of at least
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50% of the then outstanding Registrable Securities, which consent shall not be
unreasonably withheld.
12. Notices. All notices, requests, consents and demands shall be in writing and
shall be personally delivered, mailed, postage prepaid, telecopied or
telegraphed or delivered by any nationally recognized overnight delivery service
to the Company at:
Century Electronics Manufacturing, Inc.
274 Cedar Hill Road
Marlborough, MA 01752
Attn: President
with a copy to:
Hemenway & Barnes
60 State Street
Boston, MA 02109-1899
Attn: John J. Madden, Esq.
to each Amitek Investor, as follows:
Myung Ho Park
Yoon Jung Park
5887 NW 79th Way
Parkland, FL 33067
Sung Woo Kwon
President
Dae Hye Corp. Ltd.
Backsin Bldg., 2nd Floor
151-2 Samsung-Dong,
Kangnam-ku, Seoul Korea
in each Amitek Investor's case, with a copy to:
Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attn: Steven A. Wilcox, Esq.
or such other address as may be furnished in writing to the other parties
hereto. All such notices, requests, demands and other communication shall, when
mailed (registered or certified
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mail, return receipt requested, postage prepaid), personally delivered, or
telegraphed, be effective four days after deposit in the mails, when personally
delivered, or when delivered to the telegraph company, respectively, addressed
as aforesaid, unless otherwise provided herein and, when telecopied or delivered
by any nationally recognized overnight delivery service, shall be effective upon
actual receipt.
13. Entire Agreement. This Agreement, the Purchase Agreements and the Waiver of
Rights, taken together, constitute the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede any and all prior
understandings and agreements, whether written or oral, with respect to such
subject matter. To the extent that any provision of this Agreement is
inconsistent with any provision of the Purchase Agreements or the Waiver of
Rights, this Agreement shall govern.
14. Amendments, Waivers and Consents. Any provision in this Agreement may be
made, and the observance thereof may be waived, if the Company (a) shall obtain
consent thereto in writing from persons holding a majority of the Registrable
Securities then outstanding and (b) shall deliver copies of such consent to any
Amitek Holders who did not execute the same; provided, however, that, without a
Amitek Holder's consent, any such amendment or waiver shall not treat such
Amitek Holder differently from any other Amitek Holder.
15. Binding Effect; Assignment. This Agreement shall be binding upon and inure
to the benefit of the personal representatives, successors and assigns of the
respective parties hereto. Notwithstanding the foregoing sentence, the Company
shall not have the right to assign its obligations hereunder or any interest
herein without obtaining the prior written consent of the Amitek Holders holding
a majority of the Registrable Securities then outstanding, provided in
accordance with Section 14.
16. General. The headings contained in this Agreement are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement. This Agreement shall be governed by and construed in accordance with
the laws of The Commonwealth of Massachusetts.
17. Severability. If any provision of this Agreement shall be found by any court
of competent jurisdiction to be invalid or unenforceable, the parties hereby
waive such provision to the extent that it is found to be invalid or
unenforceable. Such provision shall, to the maximum extent allowable by law, be
modified by such court so that it becomes enforceable, and, as modified, shall
be enforced as any other provision hereof, all the other provisions hereof
continuing in full force and effect.
18. Counterparts. This Agreement may be executed in counterparts, all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Company and the Amitek Investors have executed
this Agreement as of the date and year first above written.
[Corporate Seal] CENTURY ELECTRONICS
MANUFACTURING, INC.
By /s/ Leslie Sainsbury
-------------------------------------
Title: President
/s/ Myung Ho Park
----------------------------------------
Myung Ho Park, as an individual
/s/ Yoon Jung Park
----------------------------------------
Yoon Jung Park, as an individual
/s/ Myung Ho Park
----------------------------------------
Myung Ho Park, as Attorney-in-Fact for
Sung Woo Kwon
<PAGE>
Exhibit 10.9
KEY EMPLOYEE AGREEMENT
To: Leslie J. Sainsbury As of Nov. 5th, 1996
3 Carnoustie
Usworth
Washington
Tyne & Wear NE27 1ND
UNITED KINGDOM
The undersigned, Century Industries, Inc., a company incorporated in the
State of Delaware, United States of America (the "Company") hereby agrees with
you as follows:
1. Position and Responsibilities.
1.1 You shall serve as President and Chief Executive Officer of the
Company, and shall perform the duties customarily associated with such position,
including, but not limited to, those set forth in section 1.2 herein, from time
to time at the offices of the Company presently located at 37 Manning Road,
Billerica, Massachusetts 01821, or at such place or places as are appropriate
and necessary in connection with such employment.
1.2 The President and Chief Executive Officer shall be the chief executive
officer of the Company and, subject to the direction of the Board of Directors
of the Company, shall have general charge of the business, affairs and property
of the Company and general supervision over its other officers and agents. In
general, he shall perform all duties incident to the office of President and
Chief Executive Officer and shall see that all lawful and reasonable orders of
the Company's Board of Directors are carried into effect. The Company's Board of
Directors may from time to time confer like powers upon any other person or
persons.
1.3 You will, to the best of your ability, devote your full time and best
efforts to the performance of your duties hereunder and the business and affairs
of the Company. You agree to perform such other duties as may be reasonably
assigned to you by the Company's Board of Directors from time to time.
1.4 You will duly, punctually and faithfully perform and observe any and
all lawful rules and regulations which the Company may now or shall hereafter
establish governing the conduct of its business.
2. Term of Employment.
2.1 The appointment shall commence on Nov. 5th 1996 (the date on which the
Company completes its acquisition of all of the outstanding capital stock of
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TRIAX Technology Group, Ltd. ("TRIAX")) (the "Commencement Date") and shall
continue (subject to earlier termination in accordance with Sections 2.2 or 2.4)
for a fixed period ending three (3) years from the Commencement Date (the "Fixed
Term").
2.2 The Company shall have the right, upon written notice to you, to
terminate your employment at any time for cause.
2.3 For purposes of Section 2.2, the term "cause" shall mean the
following: (i) your involvement in any felony crime, severe arrestable criminal
offense (excluding road traffic offenses for which a fine or non-custodial
penalty is imposed), or any crime in connection with your employment (including
theft of Company assets); or (ii) gross insubordination or your failure to take
actions permitted by law and necessary to implement strategies or policies of
the Company and which are consistent with your positions and duties, following
written warning of such failure; or (iii) drunkenness or use of any drug or
narcotic which adversely affects your performance; or (iv) any knowing or
intentional misrepresentation of sales or operating status, or other significant
information important to the operating condition of the Company; or (v) acting
in serious or persistent breach or contravention of the non-competition,
non-disclosure or non-solicitation covenants hereof.
2.4 The Company shall have the right to terminate your employment at any
time without cause upon written notice, provided that the Company shall be
obligated to provide you as severance pay an amount equal to (a) your Base
Salary (as set forth in Exhibit A) for a period equal to the lesser of (i) six
(6) months or (ii) the amount of time remaining in the Fixed Term at the time of
your termination, but in any event not less than three (3) months (the
"Severance Period"), less (b) applicable taxes and other required withholdings,
and less (c) any amounts you may owe the Company ("Severance Pay"). The Company
shall also continue in full force and effect for the Severance Period, all
health and insurance benefits that you enjoyed at the time of termination, and
all other benefits which applicable law requires to be continued.
2.5 You shall have the right to terminate this Agreement for any reason
upon not less than six (6) months prior written notice to the Company.
2.6 After receipt of notice from the Company of termination of your
employment hereunder pursuant to Section 2.2 or 2.4, you shall continue to be
available to the Company, at its sole discretion, for up to twenty (20) hours
per week for a period of up to four (4) weeks to assist in any necessary
transition (the "Transition Period"). If you are terminated for cause pursuant
to Section 2.2 and the Company exercises its rights under this Section, your
compensation for work performed during the Transition Period shall be calculated
pro rata based on your then current Base Salary (as set forth in Exhibit A). If
you are terminated without cause pursuant to Section 2.4 hereof, you shall
receive no further compensation for work performed during the Transition Period
beyond the Severance Pay described in Section 2.4.
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<PAGE>
3. Compensation. You shall receive the compensation and benefits set forth on
Exhibit A hereto ("Compensation") for all services to be rendered by you
hereunder and your transfer of property rights pursuant to provisions relating
to proprietary information and inventions contained in the Stock Purchase and
Sale Agreement between the Company, you, TRIAX, and other shareholders of TRIAX.
4. Other Activities During Employment.
4.1 Except for any outside employments and directorships currently held by
you as listed on Exhibit B hereto, if any, and except with the prior written
consent of the Company's Board of Directors (which approval shall not be
unreasonably withheld), you will not during the term of this Agreement undertake
or engage in any other employment, occupation or business enterprise other than
one in which your are an inactive investor.
4.2 You hereby agree that, except as disclosed on Exhibit B hereto, during
your employment hereunder, you will not, directly or indirectly, engage (a)
individually, (b) as an officer, (c) as a director, (d) as an employee, (e) as a
consultant, (f) as an advisor, (g) as an agent (whether a salesperson or
otherwise), (h) as a broker, or (i) as a partner, coventurer, stockholder or
other proprietor owning directly or indirectly more than five percent (5%)
interest in any firm, corporation, partnership, trust, association, or other
organization which is engaged in any line of business engaged in or under
demonstrable development of the Company or any of its subsidiaries (such firm,
corporation, partnership, trust, association, or other organization being
hereinafter referred to as a "Prohibited Enterprise"). You hereby represent that
you are not presently engaged in any of the foregoing capacities (a) through (i)
in any Prohibited Enterprise.
5. Confidentiality, Proprietary Information and Inventions.
5.1 Confidentiality. Except to the extent otherwise required by law, you
agree to keep confidential, except as the Company may otherwise consent in
writing, and, except for the Company's benefit, not to disclose or make any use
of at any time either during or subsequent to your employment, information,
including, without limitation, any inventions, trade secrets, confidential
information, knowledge, data or other information of the Company or any of its
affiliates relating to products, processes, know-how, designs, formulas, test
data, customer lists, business plans, marketing plans and strategies, pricing
strategies, or other subject matter pertaining to any business of the Company or
its affiliates (hereinafter known as "Confidential Information") which you may
produce, obtain or otherwise acquire during the Fixed Term hereof or in the
course of your employment, except as herein provided. You further agree, except
to the extent otherwise required by law, not to deliver, reproduce, or in any
way allow any such trade secrets, Confidential Information, knowledge, data or
other information, or any documentation relating thereto, to be delivered to or
used by any third parties without specific direction or consent of the Company's
Board of Directors. You
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<PAGE>
acknowledge and agree that your obligations under this section shall survive the
termination of your employment with the Company.
5.2 Trade Secrets of Others. You represent and warrant that your
performance of the terms of this Agreement and your position as an employee of
the Company do not and will not breach any agreement to keep confidential any
proprietary information, knowledge or data acquired by you in confidence or in
trust prior to your employment with the Company, and you will not disclose to
the Company, or induce the Company to use, any confidential or proprietary
information or material belonging to any previous employer or other. You agree
not to enter into any agreement either written or oral in conflict herewith.
5.3 Return of Confidential Information. In the event your employment with
the Company terminates for any reason whatsoever, you shall promptly surrender
and deliver to the Company all Confidential Information, records, materials,
equipment, drawings, documents and data which you may obtain or produce during
the course of your employment, and you will not take with you any description
containing or pertaining to any Confidential Information, knowledge or data of
the Company or any of its affiliates which you may produce or obtain during the
course of your employment.
5.4 Proprietary Information. You agree that documents, files and tapes
containing software programs, or marketing, financial, production, employee
relations, legal or other information that could, if circulated, hurt the
Company's competitive position or its relationship with the public, customers,
vendors or others will be kept confidential. You agree that the Company's
information will be given special handling, including storage in a locked desk,
file or other similar container when not in use. You agree that such information
will not be divulged to anyone outside the Company.
5.5 Assignment of Inventions. As used in this Agreement, "Invention" shall
include, but not be limited to, improvements, designs, discoveries,
developments, and works of authorship or artistry (including software,
integrated circuit, printed circuit board or computer design and documentation).
You hereby assign and transfer to the Company your entire right, title and
interest in and to all Inventions, whether or not protectable by patent,
trademark, copyright or mask work right and whether or not used by the Company,
which are reduced to practice, made or conceived by you (solely or jointly with
others) during the period of your employment with the Company, which relate in
any manner to the business, products, technologies, processes, services or
research and development of the Company or any of its affiliates. You agree that
Inventions shall be and remain the sole and exclusive property of the Company or
its nominee, whether or not used by the Company or protected by patent,
copyright, trademark, mask work right or trade secrecy. You agree to disclose
each Invention promptly in writing to the Board of Directors of the Company. You
agree to assist the Company, upon request and at its expense, during and after
your employment, in every reasonable way, to obtain for the Company's own
benefit, patents, trademarks,
-4-
<PAGE>
copyrights, mask work rights or other proprietary rights for Inventions in any
and all countries. You agree to execute such papers and perform such lawful acts
as the Company deems to be necessary to allow it to exercise all right, title
and interest in such patents, trademarks, copyrights and mask work rights,
including executing, acknowledging, and/or delivering to the Company, upon its
request and at its expense, applications for and assignments of Inventions, and
patents, trademarks, copyrights and mask work rights to be issued therefor, in
any and all countries, and to vest title thereto in the Company or its nominee,
You agree that the obligations contained in this section 5.5 shall survive the
termination of your employment with the Company.
5.6 Former Employers. You hereby represent and warrant that your
employment by the Company will not conflict with and will not be constrained by
any prior or current employment, consulting agreement or relationship, whether
oral or written. You represent and warrant that, except for information relating
to the business of your former employers, you do not possess confidential
information arising out of any such employment, consulting agreement or
relationship which, in your best judgment, would be utilized in connection with
your employment by the Company (for these purposes, not including your former
employment with TRIAX). In the alternative, if you should find that confidential
information belonging to any other person or entity (other than TRIAX) might be
usable in connection with the Company's business other than information relating
to the business of your former employers, you agree not to disclose
intentionally to the Company or use on behalf of the Company any confidential
information belonging to any of your former employers, but during your
employment by the Company you will use in your performance of your duties all
information which is generally known and used by persons with training and
experience comparable to your own, all information which is common knowledge in
the industry or otherwise legally in the public domain.
6. Post Employment Activities.
6.1 You shall not for a period of two (2) years after termination of your
employment hereunder (howsoever occasioned), without the prior written consent
of the Company, directly or indirectly do any business with or have any dealings
with any person, firm or company who was a client, customer, supplier, agent or
distributor of the Company or any of its subsidiaries during the period of one
(1) year prior to the end of your employment hereunder and with whom you have
contact during the period of one (1) year prior to the end of your employment.
In addition, you shall not for a period of two (2) years after termination of
your employment (howsoever occasioned) render services similar or reasonably
related to those which you shall have rendered hereunder during the one (1) year
period prior to the end of your employment, to any person or entity whether now
existing or hereafter established which directly competes with (or proposes or
plans to directly compete with) the Company or any of its subsidiaries ("Direct
Competitor") in any line of business engaged in or under development by the
Company or any of its subsidiaries. Nor shall you entice, induce or encourage
any of the other employees of the Company or any of its subsidiaries to
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<PAGE>
engage in any activity which, were it done by you, would violate any provision
of the Assignment of Inventions and Confidentiality Agreement which you have
executed or this Section 6. As used in this Section 6.1, The phrase "any line of
business engaged in or under development by the Company or any of its
subsidiaries" shall be applied as at the date of termination of your employment.
6.2 For a period of one (1) year after the termination of your employment
with the Company, the provisions of Section 4.2 shall be applicable to you and
you shall comply therewith. As applied to such one (1) year post-employment
period, the phrase "any other line of business engaged in or under development
by the Company or any of its subsidiaries," as used in Section 4.2, shall be
applied as at the date of termination of your employment with the Company.
6.3 No provision of this Agreement shall be construed to preclude you from
performing the same service which the Company hereby retains you to perform for
any person or entity which is not a Direct Competitor of the Company or any of
its subsidiaries upon the expiration or termination of your employment so long
as you do not thereby violate any term of the Assignment of Inventions and
Confidentiality Agreement.
6.4 You agree that for a period of one (1) year following the termination,
for any reason, of your employment with the Company, you shall not entice or
encourage any then-current employee of the Company or any of its subsidiaries to
leave his or her employment, nor shall you assist, directly or indirectly, any
company, entity, recruitment firm, employment agency, or other organization in
the hiring or recruitment of any then-current employee of the Company or any of
its subsidiaries for another position in the field of business in which the
Company or any of its subsidiaries is engaged without the prior knowledge and
written consent of the Company's officers and Board of Directors. You agree
that, in the event of a breach by you of this Section 6.4, you shall pay all
damages to the Company or any of its subsidiaries resulting therefrom,
including, but not limited to, the full amount of the fee paid to the executive
recruitment firm, if any, employed by the Company or any of its subsidiaries in
connection with the recruitment and hiring of the employee(s) lost as a result
of your breach of this Section 6.4.
7. Assignment of Inventions and Confidentiality Agreement. You agree to execute,
deliver and be bound by the provisions of the Assignment of Inventions and
Confidentiality Agreement attached hereto as Exhibit C.
8. Remedies. Your obligations under the provisions of Sections 4, 5, 6, 7 and 9
of this Agreement (as modified by Section 10, if applicable) shall survive the
expiration or termination of your employment (whether through your resignation
or otherwise) with the Company. You acknowledge that a remedy at law for any
breach or threatened breach by you of the provisions of Sections 4, 5, 6.1
through 6.3, and the provisions of the Assignment of Inventions and
Confidentiality Agreement would be inadequate and
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<PAGE>
you therefore agree that the Company shall be entitled to injunctive relief in
case of any such breach or threatened breach.
9. Assignment. This Agreement and the rights and obligations of the parties
hereto shall bind and inure to the benefit of any successor or successors of the
Company by reorganization, merger or consolidation and any assignee of all or
substantially all of its business and properties, but, except as to any such
successor or assignee of the Company, neither this Agreement nor any rights or
benefits hereunder may be assigned by the Company or by you, except by operation
of law.
10. Interpretation. It is the intent of the parties that in case any one or more
of the provisions contained in this Agreement shall, for any reason, be held to
be invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect the other provisions of this Agreement, and
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein. MOREOVER, it is the intent of the
parties that in case any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as to duration,
geographical scope, activity or subject, such provision shall be construed by
limiting or reducing it as determined by a court of competent jurisdiction, so
as to be enforceable to the extent compatible with applicable law.
11. Notices. Any notice that the Company or you is required to or may desire to
give the other under this Agreement shall be deemed to have been duly given if
dispatched by the party hereto by registered post addressed to the other party
as in the case of the Company's registered office for the time being and in the
case of your last known address and such notice shall be deemed to have been
given on the day on which in the ordinary course of post it would have been
delivered. The date of personal delivery of any notice under this Section 10
shall be deemed to be the date of delivery thereof.
12. Waivers. If either party should waive any breach of any provision of this
Agreement, such party shall not thereby be deemed to have waived any preceding
or succeeding breach of the same or any other provision of this Agreement.
13. Complete Agreement; Amendments. The foregoing, including Exhibits A, B and C
hereto, is the entire agreement of the parties with respect to the subject
matter hereof, superseding any previous oral or written communications,
representations, understandings, or agreements with the Company or any officer
or representative thereof. Any amendment to this Agreement or waiver by the
Company of any right hereunder shall be effective only if evidenced by a written
instrument executed by the parties hereto, upon authorization of the Company's
Board of Directors.
14. Headings. The headings of the Sections hereof are inserted for convenience
only and shall not be deemed to constitute a part hereof nor to affect the
meaning of this Agreement.
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<PAGE>
15. Counterparts. This Agreement may be signed in two counterparts, each of
which shall be deemed an original and both of which shall together constitute
one agreement.
16. Governing Law. This Agreement shall be governed by and construed under the
laws of the Commonwealth of Massachusetts. The parties consent to the
jurisdiction of the courts of the Commonwealth of Massachusetts, and any federal
court located therein, and to the appropriateness of the venue of such courts,
in connection with any dispute which may arise pursuant to this Agreement.
If you are in agreement with the foregoing, please sign your name below,
whereupon this Agreement shall become binding in accordance with its terms.
Please then return this Agreement to the Company. (You may retain for your
records the accompanying counterpart of this Agreement enclosed herewith.)
Very truly yours,
CENTURY INDUSTRIES, INC.
By: /s/ Leslie J. Sainsbury
---------------------------
Accepted and Agreed:
/s/ Leslie J. Sainsbury
- ----------------------------
Leslie J. Sainsbury
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<PAGE>
Exhibit A
EMPLOYMENT TERM, COMPENSATION, STOCK OPTIONS AND BENEFITS
OF LESLIE J. SAINSBURY
1. Term. The term of the Agreement to which this Exhibit A is annexed and
incorporated shall be until November 5, 1999.
2. Compensation. Your Base salary shall be $200,000 per annum which shall accrue
day to day and be payable by equal monthly instalments in arrears in accordance
with the payroll policies of the Company then in effect.
3. Company Stock. Upon acceptance of this Agreement, you shall be granted an
incentive stock option to purchase 25,000 shares of common stock of the Company
at the fair market value determined by the Board of Directors of the Company.
The options shall vest three (3) years after your Commencement Date (the
"Vesting Date"), and may be exercised after the Vesting Date for a period of
three (3) years (the "Exercise Period"). Notwithstanding the foregoing, upon a
declaration of effectiveness by the Securities and Exchange Commission of a
registration statement filed in connection with an Initial Public Offering of
the shares of the Company, all options granted herein shall become fully vested
and the Exercise Period shall begin.
4. Centennial Stock. Upon the anniversary of each year of the Fixed Term of this
Agreement, you shall be granted an incentive stock option to purchase 10,000
shares of the common stock of the Company's parent, Centennial Technologies,
Inc. ("Centennial") under Centennial's 1994 Stock Option Plan. These incentive
stock options shall be granted at a price equal to the fair market value per
share on the date of the grant. The options granted hereunder shall vest in
thirst over a three (3) year period.
5. Vacation. You shall be entitled to all public holidays in accordance with
Company policy, and four (4) weeks paid vacation per annum. You will not be
permitted to carry over unused holiday entitlements into a following year except
with the prior written consent of the Company. Any holiday entitlement
unutilized when permission has not been given for it to be carried forward will
be forfeited.
6. Relocation. To assist you in your relocation to Massachusetts, the Company
will reimburse you for the reasonable cost of moving you, your family and your
household and personal belongings from your current residence to Massachusetts.
Relocation expense reimbursements shall comply with deductible moving expense as
defined by the Internal Revenue Code. Reimbursements will only be made directly
to you. The Company will not directly contract with or make payment to any third
parties.
<PAGE>
Relocation expenses may consist of the moving of household goods, which includes
the cost of packing, crating and transporting your household and personal
effects and those of the members of your household from your former home to your
new home, plus traveling and lodging expenses incurred during the period of
travel from the former residence to the new place of residence. Examples of
non-reimbursable moving expenses are meals while moving from your old residence
to your new residence; travel expenses, meals and lodging for pre-move
house-hunting trips; or staying in temporary quarters in the general location of
your new principal place of work.
7. Insurance and Benefits. You shall be eligible for participation in any
health, other group insurance plan, or pension insurance and benefits scheme
that may be established by the Company or which the Company is required to
maintain by law. You shall also be eligible to receive any other benefits that
are provided to any of the executive officers of the Company.
<PAGE>
Exhibit 10.10
Century
[LOGO]
Electronics Manufacturing, Inc.
KEY EMPLOYEE AGREEMENT
To: Mark Lombardo As of: July 1999
9376 Cascade Ct.
Boynton Beach, Florida 33437
The undersigned, Century Electronics Manufacturing, Inc., a company incorporated
in the State of Delaware, United States of America (the "Company") hereby agrees
with you as follows:
1. Position and Responsibilities.
1.1 You shall serve as Vice-President of the Company, and shall perform
the duties customarily associated with such position, including, but not limited
to, those set forth in section 1.2 herein, from time to time at the offices of
the Company presently located at 1701 Clint Moore Road, Boca Raton, Florida
33437 or at such place or places as are appropriated and necessary in connection
with such employment. However no relocation is required.
1.2 You shall be a Vice-President of the Company and, subject to the
direction of the Board of Directors of the Company, shall have general charge of
the business, affairs and property of the Florida Operations and general
supervision over Florida Personnel. In general, he shall perform all duties
incident to the office of Vice-President and shall see that all lawful and
reasonable orders of the Company's Board of Directors are carried into effect.
The Company's Board of Directors may from time to time confer like powers upon
any other person or persons.
1.3 You will, to the best of your ability, devote your full time and best
efforts to the performance of your duties hereunder and the business and affairs
of the Company. You agree to perform such duties as may be reasonably assigned
to you by the Company's Board of Directors from time to time.
1.4 You will duly, punctually and faithfully perform and observe any and
all lawful rules and regulations which the Company may now of shall hereafter
establish governing the conduct of its business.
2. Term of Employment
2.1 The appointment shall commence on July 1999(the date on which the
Company completes its acquisition of all of the outstanding stock of Amitek
Corporation ("Amitek") the ("Commencement Date") and shall continue (subject to
earlier
<PAGE>
termination in accordance with Sections 2.2 or 2.4) for a fixed period ending
three (3) years from the Commencement Date (the "Fixed Term").
2.2 The Company shall have the right, upon written notice to you, to
terminate your employment at any time for cause.
2.3 For purposes of Section 2.2, the term "cause" shall mean the
following: (i) your involvement in any felony crime, severe arrestable criminal
offense (excluding road traffic offenses for which a fine or non-custodial
penalty is imposed), or any crime in connection with your employment (including
theft of Company assets); or (ii) gross insubordination or your failure to take
actions permitted by law and necessary to implement strategies or policies of
the Company and which are consistent with your positions and duties, following
written warning of such failure; or (iii) drunkenness or use of any drug or
narcotic which adversely affects your performance; or (iv) any knowing or
intentional misrepresentation of sales or operating status, or other significant
information important to the operating condition of the Company; or (v) acting
in serious or persistent breach or contravention of the non-competition,
non-disclosure or non-solicitation covenants hereof.
2.4 The Company shall have the right to terminate your employment at any
time without cause upon written notice, provided that the Company shall be
obligated to provide you as severance pay an amount equal to (a) your Base
Salary (as set forth in Exhibit A) for a period equal to the greater of(i) six
(6) months or (ii) the amount of time remaining in the Fixed Term at the time of
your termination, but in any event not less than three (3) months (the
"Severance Pay"), less (b) applicable taxes and other required witholdings, and
less (c) any amounts you may owe the Company ("Severance Pay"). The Company
shall also continue in full force and effect for the Severance Period, all
health and insurance benefits that you enjoyed at the time of termination, and
all other benefits which applicable law requires to be continued.
2.5 You shall have the right to terminate this Agreement for any reason
upon not less than six (6) months prior written notice to the Company.
2.6 After receipt of notice from the Company of termination of your
employment hereunder pursuant to Section 2.2 or 2.4, you shall continue to be
available to the Company, at its sole discretion, for up to twenty (20) hours
per week for a period of up to four (4) weeks to assist in any necessary
transition (the "Transition Period"). If you are terminated for cause pursuant
to Section 2.2 and the Company exercises its rights under this Section, your
compensation for work performed during this Transition Period shall be
calculated pro rata based on your then current Base Salary (as set forth in
Exhibit A). If you are terminated without cause pursuant to Section 2.4 hereof,
you shall receive no further compensation for work performed during the
Transition Period beyond the Severance Pay described in Section 2.4.
3. Compensation. You shall receive the compensation and benefits set forth on
Exhibit A hereto ("Compensation") for all services to be rendered by you
hereunder and your
<PAGE>
transfer of property rights pursuant to provisions relating to proprietary
information and inventions contained in the Stock Purchase and Sale Agreement
between the Company, you, "Amitek", and other shareholders of
4. Other Activities During Employment
4.1 Except for any outside employments and directorships currently held by
you as listed on Exhibit B hereto, if any, and except with the prior written
consent of the Company's Board of Directors (which approval shall not be
unreasonably withheld), you will not during the term of this Agreement undertake
or engage in any other employment, occupation or business enterprise other than
one in which you are an inactive investor.
4.2 You hereby agree that, except as disclosed on Exhibit B hereto, during
your employment hereunder, you will not, directly or indirectly, engage (a)
individually, (b) as an officer, (c) as a director (d) as an employee (e) as a
consultant (f) as an advisor (g) as an agent (whether a salesperson or
otherwise), (h) as a broker (i) as a partner, coventurer, stockholder or other
proprietor owning directly or indirectly more than five percent (5%) interest in
any firm, corporation, partnership, trust, association, or organization which is
engaged in any line of business engaged in or under demonstrable development of
the Company or any of its subsidiaries (such firm, corporation, partnership,
trust, association, or other organization being hereinafter referred to as a
"Prohibited Enterprise"). You hereby represent that you are not presently
engaged in any of the foregoing capacities (a) through (i) in any Prohibited
Enterprise.
5. Confidentiality, Proprietary Information and Inventions.
5.1 Confidentiality. Except to the extent otherwise required by law, you
agree to keep confidential, except as the Company may otherwise consent in
writing, and, except for the Company's benefit, not to disclose or make any use
of at any time either during or subsequent to your employment, information,
including without limitation, any inventions, trade secrets, confidential
information, knowledge, date or other information of the Company or any of its
affiliates relating to products, processes, know-how, designs, formulas, test
data, customer lists, business plans, marketing plans and strategies, pricing
strategies, or other subject matter pertaining to any business of the Company or
its affiliates (hereinafter known as "Confidential Information") which you may
produce, obtain or otherwise acquire during the Fixed Term hereof or in the
course of employment, except as herein provided. You further agree, except to
the extent otherwise required by law, not to deliver, reproduce, or in any way
allow any such trade secrets, Confidential Information, knowledge, data or other
information, or any documentation relating thereto, to be delivered to or used
by any third parties without specific direction or consent of the Company's
Board of Directors. You acknowledge and agree that your obligations under this
section shall survive the termination of your employment with the Company.
<PAGE>
5.2 Trade Secrets of Others. You represent and warrant that your
performance of the terms of this Agreement and your position as an employee of
the Company do not and will not breach any agreement to keep confidential any
proprietary information, knowledge or data acquired by you in confidence or in
trust prior to your employment with the Company, and you will not disclose to
the Company, or induce the Company to use, any confidential or proprietary
information or material belonging to any previous employer or other. You agree
not to enter into any agreement either written or oral in conflict herewith.
5.3 Return of Confidential Information. In the event your employment with
the Company terminates for any reason whatsoever, you shall promptly surrender
and deliver to the Company all Confidential Information, records, materials,
equipment, drawings, documents and date which you may obtain or produce during
the course of your employment, and you will not take with you any description
containing or pertaining to any Confidential Information, knowledge or data of
the Company or any of its affiliates which you may produce or obtain during the
course of your employment.
5.4 Proprietary Information. You agree that documents, files and tapes
containing software programs, or marketing, financial, production, employee
relations, legal or other information that could, if circulated, hurt the
Company's competitive position or its relationship with the public, customers,
vendors or others will be kept confidential. You agree that the Company's
information will be given special handling, including storage in a locked desk,
file or similar container when not in use. You agree that such information will
not be divulged to anyone outside the Company.
5.5 Assignment of Inventions. As used in this Agreement, "Invention" shall
include, but not be limited to, improvements, designs, discoveries,
developments, and works of authorship or artistry (including software,
integrated circuit, printed circuit board or computer design and documentation).
You hereby assign and transfer to the Company your entire right, title and
interest in all Inventions, whether or not protectable by patent, trademark,
copyright or mask work right and whether or not used by the Company, which are
reduced to practice, made or conceived by you (solely or jointly with others)
during the period of your employment with the Company, which relate in any
manner to the business, products, technologies, processes, services or research
and development of the Company or any of its affiliates. You agree that
Inventions shall be and remain the sole and exclusive property of the Company or
its nominee, whether or not used by the Company or protected by patent,
copyright, trademark, mask work right or trade secrecy. You agree to disclose
each Invention promptly in writing to the Board of Directors of the Company. You
agree to assist the Company, upon request and at its expense, during and after
your employment, in every reasonable way, to obtain for the company's own
benefit, patents, trademarks, copyrights, mask work rights or other rights or
other proprietary rights for Inventions in any and all countries. You agree to
execute such papers and perform such lawful acts as the Company deems to be
necessary to allow it to exercise all right, title and interest in such patents,
trademarks, copyrights and mask work rights, including executing, acknowledging,
and/or delivering to the Company, upon request and at its expense, applications
for and assignments of Inventions, and patents,
<PAGE>
trademarks, copyrights, and mask rights to be issued therefor, in any and all
countries, and to vest title thereto in the Company or its nominee. You agree
that the obligations contained in this section 5.5 shall survive the termination
of your employment with the Company.
5.6 Former Employers. You hereby represent and warrant that your
employment by the Company will not conflict with and will not be constrained by
any prior or current employment, consulting agreement or relationship, whether
oral or written. You represent and warrant that, except for information relating
to he business of your former employers, you do not possess confidential
information arising out of any such employment, consulting agreement or
relationship which, in your best judgement, would be utilized in connection with
your employment by the Company (for these purposes, not including your former
employment with AMITEK. In the alternative, if you should find that confidential
information belonging to any other person or entity (other than AMITEK might be
usable in connection with the Company's business other than information to the
Company or use on behalf of the Company any confidential information belonging
to any of your former employers, but during your employment by the Company you
will use in your performance of your duties all information witch is generally
known and used by persons with training and experience comparable to your own,
all information which is common knowledge in the industry or otherwise legally
in the public domain.
6. Post Employment Activities.
6.1 You shall not for a period of two (2) years after termination of your
employment hereunder (howsoever occasioned), without the prior written consent
of the Company, directly or indirectly do any business with or have any dealings
with any person, firm or company who was a client, customer, supplier, agent or
distributor of the Company or any of its subsidiaries during the period of one
(1) year prior to the end of your employment hereunder and with whom you have
contact during the period of one (1) year prior to the end of your employment.
In addition, you shall not for a period of two (2) years after termination of
your employment of your employment (howsoever occasioned) render services or
reasonably related to those which you shall have rendered hereunder during the
one (1) year period prior to the end of your employment, to any person or entity
whether now existing or hereafter established which directly competes with (or
proposes or plans to directly compete with) the Company or any of its
subsidiaries ("Direct Competitor") in any line of business engaged in or under
development by the Company or any of its subsidiaries. Nor shall you entice,
induce or encourage any of the other employees of the Company or any of its
subsidiaries to engage in any activity which, were it done by you, would violate
any provision of the Assignment of Inventions and Confidentiality Agreement
which you have executed or this Section 6. As used by the Company or any of its
subsidiaries" shall be applied as at the date of termination of your employment.
<PAGE>
6.2 For a period of one (1) year after the termination of your employment
with the Company, the provisions of Section 4.2 shall be applicable to you and
you shall comply therewith. As applied to such one (1) year post-employment
period, the phrase "any other line of business engaged in or under development
by the Company or any of its subsidiaries," as used in Section 4.2, shall be
applies as at the date of termination of your employment with the Company.
6.3 No provision of this Agreement shall be construed to preclude you from
performing the same service which the Company hereby retains you to perform for
any person or entity which is not a Direct Competitor of the Company or any of
its subsidiaries upon the expiration or termination of your employment so long
as you do not thereby violate any term of the Assignment of Inventions and
Confidentiality Agreement.
6.4 You agree that for a period of one (1) year following the termination,
for any reason, of your employment with the Company, you shall not entice or
encourage any then-current employee of the Company or any of its subsidiaries to
leave his or her employment, nor shall you assist, directly or indirectly, any
company, entity, recruitment firm, employment agency, or other organization in
the hiring or recruitment of any then-current employee of the Company or any of
its subsidiaries for another position in the field of business in which the
Company or any of its subsidiaries is engaged without the prior knowledge and
written consent of the Company's officers and Board of Directors. You agree
that, in the event of a breach by you of this Section 6.4, you shall pay all
damages to the Company or any of its subsidiaries resulting therefrom,
including, but not limited to, the full amount of the fee paid to the executive
recruitment firm. If any, employed by the Company or any of its subsidiaries in
connection with the recruitment and hiring of the employee(s) lost as a result
of your breach of this Section 6.4.
7. Assignment of Inventions and Confidentiality Agreement. You agree to
execute, deliver and be bound by the provisions of the Assignment of
Inventions and Confidentiality Agreement attached hereto as Exhibit C.
8. Remedies. Your obligations under the provisions of Sections 4,5,6,7 and 9
of this Agreement (as modified by Section 10, if applicable) shall survive
the expiration or termination of your employment (whether through you
resignation or otherwise) with the Company. You acknowledge that a remedy
at law for any breach or threatened breach by you of the provisions of
Sections 4,5,6.1 through 6.3, and the provisions of the Assignment of
Inventions and Confidentiality Agreement would be inadequate and you
therefore agree that the Company shall be entitled to injunctive relief in
case of any such breach or threatened breach.
9. Assignment. This Agreement and the rights and obligations of the parties
hereto shall bind and inure to the benefit of any successor or successors
of the Company by reorganization, merger or consolidation and any assignee
of all or substantially all of its business and properties, but except as
to any such successor or assignee of the
<PAGE>
Company, neither this Agreement nor any rights or benefits hereunder may
be assigned by the Company or by you, except by operation of law.
10. Interpretation. It is the intent of the parties that in case any one or
more of the provisions contained in this Agreement shall, for any reason,
be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceable shall not affect the other
provisions of this Agreement, and this Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein. MOREOVER, it is the intent of the parties that in case any one or
more of the provisions contained in this Agreement shall for any reason be
held to be excessively broad as to duration, geographical scope, activity
or subject, such provision shall be construed by limiting or reducing it
as determined by a court of competent jurisdiction, so as to be
enforceable to the extent compatible with applicable law.
11. Notices. Any notice that the Company or you is required to or may desire
to give the other under this Agreement shall be deemed to have been duly
given if dispatched by the party hereto by registered post addressed to
the other party as in the case of the Company's registered office for the
time being and in the case of your last known address and such notice
shall be deemed to have been given on the day on which in the ordinary
course of post it would have been delivered. The date of personal delivery
of any notice under this Section 10 shall be deemed to be the date of
delivery thereof.
12. Waivers. If either party should waive any breach of any provision of this
Agreement, such party shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of this
Agreement.
13. Complete Agreement; Amendments. The forgoing, including Exhibits A, B and
C hereto, is the entire agreement of the parties with respect to the
subject matter hereof, superseding any previous oral or written
communications, representations, understandings, or agreements with the
Company or any officer or representative thereof. Any amendment to this
Agreement or waiver by the Company of any right hereunder shall be
effective only if evidenced by a written instrument executed by the
parties hereto, upon authorization of the Company's Board of Directors.
14. Headings. The headings of the Sections hereof are inserted for convenience
only and shall not be deemed to constitute a part hereof nor to affect the
meaning of this agreement.
15. Counterparts. This Agreement may be signed in two counterparts, each of
which shall be deemed an original and both of which shall together
constitute one agreement.
<PAGE>
16. Governing Law. This Agreement shall be governed by and construed under the
laws of the Commonwealth of Massachusetts. The parties consent to the
jurisdiction of the courts of the Commonwealth of Massachusetts, and any
federal court located therein, and to the appropriateness of the venue of
such courts, in connection with any dispute which may arise pursuant to
this Agreement.
If you are in agreement with the foregoing, please sign your
name below, whereupon this Agreement shall become binding in
accordance with its terms. Please then return this Agreement to the
Company. (You may retain for your records the accompanying
counterpart of this Agreement enclosed herewith.)
Very truly yours,
CENTURY ELECTRONIC
MANUFACTURING INC.
By: /s/Les Sainsbury
------------------------
Les Sainsbury
President & CEO
Century Electronics Mfg. Inc.
Accepted and Agreed:
/s/ Mark Lombardo 6/30/99
- --------------------------
Mark Lombardo
<PAGE>
Century
[LOGO]
Electronics Manufacturing, Inc.
Exhibit A
EMPLOYMENT TERM, COMPENSATION, STOCK OPTIONS AND BENEFITS
MARK LOMBARDO
1. Term. The term of the Agreement to which this Exhibit A is annexed and
incorporated shall be until 3 years from date of Amitek Merger. (See Special
Notes)
2. Compensation. Your Base salary shall be $150,000 per annum which shall accrue
day to day and be payable by equal monthly installments in arrears in accordance
with the payroll policies of the Company then in effect.
3. Company Stock. Upon acceptance of this Agreement, you shall be granted an
incentive stock option to purchase 30,000 shares of common stock of the Company
at the fair market value determined by the Board of Directors of the Company.
The options shall vest in accordance with the attached Stock Option letter
labeled schedule A-1. Notwithstanding the foregoing, upon a declaration of
effectiveness by the Securities and Exchange Commission of a registration
statement filed in connection with an Initial Public Offering of the shares of
the Company, all options granted herein shall become fully vested and the
Exercise Period shall begin.
4. Bonus Plan. Your Bonus Plan will consist of two elements. a) Cash
b) StockOptions.
a) The Company operates a Senior Management Bonus Scheme that incentives
and rewards Management for achieving annually set targets for revenue and
profit, it is envisaged that you should earn $50,000 per annum under the
Scheme.
b) You will be offered 30,000 Options annually, which will be split into 2
elements.
i) 60% (18,000 Options) will be awarded upon achieving 85% of the
Companies annual Bonus Scheme Target(100%).
ii) 40% (12,000 Options) will be awarded for fulfilling / achieving
a set of mutually agreed goals and objectives.
5. Car Allowance. The Company will reimburse you $650.00 per month for a motor
vehicle necessary to carry out your duties on behalf of the Company.
6. Vacation. You shall be entitled to all public holidays in accordance with the
Company policy, and three (3) weeks paid vacation per annum. You will not be
permitted to carry over unused holiday entitlements into a following year except
with the prior written consent of the Company. Any holiday entitlement
unutilized when permission has not been given for it to be carried forward will
be forfeited.
<PAGE>
7. Insurance and Benefits. You shall be eligible for participation in any
health, other group insurance plan, or pension insurance and benefits scheme
that may be established by the Company or which the Company is required to
maintain by law. You shall also be eligible to receive any other benefits that
are provided to any of the executive officers of the Company.
Special Notes
Your current Base Salary and Commission / Bonus Scheme will be honored by
Century and will remain in force until December 31, 1999. Thereafter Century's
offer of Base Salary and Bonus Plan will be effective from January 1, 2000.
<PAGE>
When you wish to exercise this stock option, please refer to the provisions of
this letter and then correspond, in writing, with the Secretary of the Company.
Further, please indicate your acknowledgement and acceptance of this option by
signing the enclosed copy of this letter and returning it to the undersigned.
Very Truly Yours, Acknowledgement & Consent
/s/ Les Sainsbury
Les Sainsbury
President & CEO
Century Electronics Mfg. Inc.
<PAGE>
Schedule A-1
Mark Lombardo
9376 Cascade Court
Boynton Beach, Florida 33437
Subject: Stock Options
Dear Mark,
Further to our recent meeting and discussions, I hope the following clarifies
your stock options plan.
Century Electronics Manufacturing, Inc. (The Company) has granted you an
incentive stock option to purchase thirty thousand (30,000) shares of the common
stock, $.01 per value per share of The Company, at a price of $6.34 per share,
for a total exercise price of ($190,200). Regardless of your decision whether or
not to buy, you are requested to keep the number shares that you are eligible to
purchase strictly confidential.
The following term and conditions are applicable with respect to this option,
and your signature shall constitute your acknowledgement and acceptance of same:
A) This option shall not be transferable under any circumstances accept by
operation of law.
B) The price at which this option may be exercised shall be $6.34 per share,
for a total of $190,200.
C) This option in the first part is exercisable commencing July 1, 2000. It
may be exercised at any time thereafter prior to June 30, 2003 subject to
the following terms and vesting provisions.
1) Should your employment with the company, (or a parent or subsidiary
of The Company) terminate for any reason, all unexercised options
that have not vested as set forth in Paragraph F shall terminate
immediately.
<PAGE>
2) In the event of termination of your employment other than by death
or disability, you may exercise the outstanding options exercisable
by you at the date of your termination by you until three (3) months
from the date of your termination.
3) In the event of your termination as a result of death or disability
that lasts for more than ninety (90) days, all outstanding options
exercisable by you at the day of such termination, may be exercised
until the date of expiration of this option or one (1) year from the
date of your employment terminates.
D) The option may be exercised in whole or in part from time to time,
provided, however, that an option may be exercised as to less than 100
shares at any one time unless it is being exercised in full and the
balance of the shares subject to option is less than 100.
E) The shares of common stock underlying this option and the exercise price
therefore shall be appropriately adjusted from time to time for stock
splits, reverse splits, stock dividends, and reclassification of shares.
F) In the event of a sale or acquisition of substantially all stock assets of
The Company, The Company shall give thirty (30) days notice of such an
event to you and you may exercise up to 100% of the vested portion of this
option. If you do not exercise the option within thirty (30) days of such
notice, all unexercised portions of this option shall terminate and be of
no further force of effect.
G) Notwithstanding anything contained herein to the contrary, the maximum
number of options that may be exercised as follows:
Vesting Period Number of Options
-------------- -----------------
July 1, 1999 to June 30, 2000 0
July 1, 2000 to June 30, 2001 10,000
July 1, 2001 to June 30, 2002 10,000
July 1, 2002 to June 30, 2003 10,000
The terms of any sale of the above described provisions shall be void if the
incursion of such provisions causes this option not to qualify as an incentive
stock option under section 422 of the code.
This opportunity to purchase stock in the Company is being offered because of
the Company's desire to reward key employees.
Exercising options may not be a prudent business decision for some employees.
Therefore we urge you to review this opportunity carefully, consult a tax
advisor, and make a decision to exercise options only if your personal financial
situation makes this a wise choice.
<PAGE>
When you wish to exercise this stock option, please refer to the provisions of
this letter and then correspond, in writing, with the Secretary of the Company.
Further, please indicate your acknowledgement and acceptance of this option by
signing the enclosed copy of this letter and returning it to the undersigned.
Very Truly Yours, Acknowledgement & Consent
/s/ Les Sainsbury /s/ Mark A. Lombardo
6/30/99
Les Sainsbury
President & CEO
Century Electronics Mfg. Inc.
<PAGE>
Exhibit 10.11
NO SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS WARRANT OR THE
SHARES PURCHASABLE HEREUNDER SHALL BE MADE EXCEPT PURSUANT TO REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
TO
PURCHASE COMMON STOCK
OF
CENTURY ELECTRONICS MANUFACTURING, INC.
THIS CERTIFIES that, for value received, CTN THAILAND HOLDINGS LIMITED, an
entity with its principal address at Citco Building, P.O. Box 662, Roadtown,
Tortola, British Virgin Islands ("CTN") is entitled, subject to the terms and
conditions set forth in this Warrant, to purchase from CENTURY ELECTRONICS
MANUFACTURING, INC., a Delaware corporation with its principal office at 374
Turnpike Road, Southborough, Massachusetts 01772 (the "Company"), One Hundred
Thousand (100,000) fully paid and nonassessable shares of the Common Stock, $.01
par value, of the Company (the "Common Stock"), at any time commencing on
September 30, 1997 and continuing until 5:00 p.m. Boston, Massachusetts time on
September 30, 2000 (the "Expiration Date"), at a price of Five and 00/100
Dollars ($5.00) per share (the "Initial Purchase Price"), subject to adjustment
as provided in Section 5 below. This Warrant is issued to CTN in connection with
the purchase by the Company of 2,450,000 CEMTL Shares pursuant to the terms of
that certain Stock Purchase Agreement dated as of September , 1997, between CTN
and the Company.
1. Exercise. This Warrant may be exercised by the holder hereof, in whole
or in part (but not as to a fractional share) and from time to time, in
increments of not less than 500 shares, by the presentation and surrender of
this Warrant with a duly executed Election to Purchase (in substantially the
form attached to this Warrant as Exhibit A) at the principal office of the
Company as set forth above (or at such other address as the Company may
designate by notice in writing to the holder hereof at the address of such
holder appearing on the books of the Company), upon payment to the Company of
the purchase price by certified or bank cashier's check. The shares of Common
Stock so purchased shall be deemed to be issued to the holder hereof as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been surrendered, the Election to Purchase has been duly
executed and delivered to the Company, and payment made for such shares.
Certificates for the shares of Common Stock so purchased shall be delivered or
mailed to the holder promptly after this Warrant shall have been exercised, and,
unless this Warrant has expired or has been exercised in full, a new Warrant
identical in form but representing the number of shares of Common Stock with
respect to which this Warrant shall not then have been exercised shall also be
issued to the holder hereof.
2. No Rights as Stockholder. Nothing contained herein shall be construed
to confer upon the holder of this Warrant, as such, any of the rights of a
stockholder of the Company.
<PAGE>
3. No Fractional Shares. The Company shall not issue certificates
representing fractions of shares of Common Stock upon any exercise of this
Warrant, but shall make a cash payment for any fractional share based on the
Market Value (as defined below) of the Common Stock on the date of exercise. For
the purposes of this Warrant, "Market Value" shall be the closing sale price on
the principal exchange on which the Common Stock is traded; or if not traded on
any exchange, then the representative closing bid price in the over-the-counter
market; or if not traded in the over-the-counter market, the market value as
determined by the Board of Directors of the Company. All calculations under this
Section 3 and under Sections 5 and 6 shall be made to the nearest cent or share,
as the case may be.
4. Replacement Warrants. This Warrant is exchangeable, upon its surrender
by the holder at the office of the Company referred to in Section 1 above, for
new warrants (containing the same terms as this Warrant) each representing the
right to purchase such number of shares of Common Stock as shall be designated
by such holder at the time of such surrender (but not exceeding in the aggregate
the remaining number of shares of Common stock which may be purchased
hereunder). Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant and upon delivery of a bond or
indemnity reasonably satisfactory to the Company (or, in the case of mutilation,
upon surrender of this Warrant), the Company will issue to the holder a
replacement warrant (containing the same terms as this Warrant). As used herein,
"Warrant" shall include all new warrants issued in exchange for or replacement
of this Warrant.
5. Stock Dividends and Splits. If the Company shall pay a dividend in
shares of its Common Stock, subdivide (split) its outstanding shares of Common
Stock, combine (reverse split) its outstanding shares of Common Stock, issue by
reclassification of its shares of Common Stock any shares or other securities of
the Company, or distribute to holders of its Common Stock any securities of the
Company or of another entity, the number of shares of Common Stock or other
securities the holder hereof is entitled to purchase pursuant to this Warrant
immediately prior thereto shall be adjusted so that the holder shall be entitled
to receive upon exercise the number of shares of Common Stock or other
securities of the Company which the holder would have owned or would have been
entitled to receive after the happening of any of the events described above had
this Warrant been exercised immediately prior to the happening of such event,
and the exercise price per share shall be correspondingly adjusted; provided,
however, that no adjustment in the number of shares and/or the exercise price
shall be required unless such adjustment would require an increase or decrease
of at least one percent (1%) in such number and/or price, and provided further,
however, that any adjustments which by reason of this Section 5 are not required
to be made shall be carried forward and taken into account in any subsequent
adjustments. An adjustment made pursuant to this Section 5 shall become
effective immediately after the record date in the case of a stock dividend or
other distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or reclassification.
6. Consolidation or Merger. If the Company is consolidated or merged with
or into another corporation or if all or substantially all of its assets are
conveyed to another corporation, this Warrant shall thereafter be exercisable
for the purchase of the kind and number of shares
- 2 -
<PAGE>
of stock or other securities or property, if any, receivable upon such
consolidation, merger or conveyance by a holder of the number of shares of
Common Stock of the Company which could have been purchased upon the exercise of
this Warrant immediately prior to such consolidation, merger or conveyance; and,
in any such case, appropriate adjustment (as determined by the Board of
Directors) shall be made in the application of the provisions herein set forth
with respect to the rights and interest thereafter of the holder of this Warrant
to the end that the provisions set forth herein (including provisions with
respect to changes in and other adjustments of the number of shares of Common
Stock that the holder of this Warrant is entitled to purchase) shall thereafter
be applicable, as nearly as reasonably may be, in relation to any shares of
stock or other property thereafter deliverable upon the exercise of this
Warrant. In lieu thereof, the Company may terminate this Warrant upon thirty
(30) days prior written notice to the holder hereof if the Company has entered
into or its Board of Directors has approved a plan or agreement for the sale,
merger or consolidation of the Company to, with or into another entity which is
not owned or controlled by the Company. During said thirty-day period the
Company shall cooperate with and complete any exercise of the Warrant by the
holder hereof.
7. Transfer. This Warrant may not be transferred to any person or entity
other than a successor to the right, title or interest of CTN or a purchaser of
all or substantially all of the assets of CTN, if applicable, without the prior
written consent of the Company, and in compliance with the provisions of Section
8 below.
8. Requirements for Transfer.
(a) This Warrant and the Common Stock so purchased shall not be sold
or transferred unless either (i) they first shall have been registered under the
Securities Act of 1933, as amended (the "Act"), or (ii) the Company first shall
have been furnished with an opinion of legal counsel, reasonably satisfactory to
the Company, to the effect that such sale or transfer is exempt from the
registration requirements of the Act.
(b) Notwithstanding the foregoing, no registration or opinion of
counsel shall be required after such time that the Common Stock so purchased
becomes eligible for resale pursuant to Rule 144 under the Act.
(c) Each certificate representing Common Stock purchased on exercise
of this Warrant shall bear a legend substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered
under such Act or an opinion of counsel satisfactory to the
Company is obtained to the effect that such registration is
not required."
- 3 -
<PAGE>
The foregoing legend shall be removed from the certificates at the request
of the holder thereof, at such time as they become eligible for resale
pursuant to Rule 144(k) under the Act.
9. Representations. The Company represents, warrants and agrees that: the
Company has the corporate power and authority to grant this Warrant; this
Warrant is enforceable and during its life will be enforceable against the
Company in accordance with its terms; the execution and delivery of this Warrant
by the Company has been duly and validly authorized and all requisite corporate
action has been taken to make it valid and binding against the Company in
accordance with its terms; and the Company has and on the date and/or dates of
any exercise or conversion will have the full right and power to transfer the
entire right, title and interest in and to the shares of Common Stock subject to
this Warrant to the Purchaser, free and clear of all liens, encumbrances,
charges and restrictions of any kind, other than those set forth in applicable
securities laws.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer as of this 30th day of September, 1997.
CENTURY ELECTRONICS MANUFACTURING, INC.
By: /s/ L. J. Sainsbury
-------------------
Name: L. J. SAINSBURY
Title: PRESIDENT & COO
- 4 -
<PAGE>
EXHIBIT A
FORM OF ELECTION TO PURCHASE
TO: CENTURY ELECTRONICS MANUFACTURING, INC.
The undersigned holder of this Warrant (1) hereby irrevocably elects to
exercise the right to purchase hereunder _______ full shares of the Common Stock
of Century Electronics Manufacturing, Inc., (2) makes payment in full of the
purchase price of such shares, (3) requests that certificates for such shares be
issued in the name of CTN and (4) if said number of shares shall not be all the
shares the holder is entitled to purchase under this Warrant, requests that a
new warrant for the unexercised portion of this Warrant be issued.
Dated: , 19__
CENTENNIAL TECHNOLOGIES, INC.
By____________________________
Name
Title
- 5 -
<PAGE>
[Execution Copy]
Exhibit 10.12
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT
IN EFFECT WITH RESPECT TO SUCH SECURITIES, OR DELIVERY OF AN OPINION OF COUNSEL
IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES THAT SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE WITH THE
SECURITIES ACT.
Century Electronics Manufacturing, Inc.
Series A Preferred
Stock Purchase Warrant
Expiring December 31,2003
Century Electronics Manufacturing, Inc. (the "Company"), a Delaware
corporation, for value received, hereby certifies that HarbourVest Partners
V-Direct Fund L.P., or registered assigns, is entitled to purchase from the
Company 27,397 duly authorized, validly issued, fully paid and nonassessable
shares of Series A Preferred Stock, par value $.0l per share, of the Company
(the "Warrant Shares") at an exercise price per share of $3.65 (as adjusted as
provided herein, the "Exercise Price"), at any time or from time to time prior
to 5 P.M., New York City time, on December 31, 2003, all subject to the terms,
conditions and adjustments set forth below in this Warrant.
Section 1. Exercise of Warrants. (a) Upon the terms and subject to
the conditions set forth in this Warrant, each holder of Warrants shall have the
right, which may be exercised until 5:00 p.m., New York City time, on December
31, 2003 (the "Expiration Time"), to receive from the Company the number of
fully paid and nonassessable Warrant Shares which the holder may at the time be
entitled to receive upon exercise of this Warrant and payment of the Exercise
Price then in effect for such Warrant Shares. Each Warrant not exercised prior
to the Expiration Time shall be deemed automatically exercised in accordance
with the last sentence of the following paragraph (even if the form of election
to purchase attached hereto is not delivered) immediately prior to such
Expiration Time.
(b) Warrants may be exercised upon surrender to the Company of this
Warrant with the form of election to purchase attached hereto duly filed in and
signed and upon payment to the Company of the Exercise Price for each of the
Warrant Shares in respect of which such Warrants are then exercised. Payment of
the aggregate Exercise Price shall be made by certified or official bank check
to the order of the Company. In lieu of exer-
<PAGE>
cising any Warrant by paying in full the Exercise Price plus transfer taxes (if
applicable pursuant to Section 2), if any, the holder may, from time to time,
convert such Warrant, in whole or in part, into such number of Warrant Shares
determined by dividing (a) the aggregate Current Market Value of the number of
Warrant Shares represented by such Warrant, minus the sum of the aggregate
Exercise Price for such Warrant Shares plus transfer taxes, if any, by (b) the
Current Market Value of one Warrant Share (such conversion, a "Cashless
Exercise").
Current Market Value at any date means:
(i) if the Company's Common Stock is not registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
determined in good faith by the Company's Board of Directors, upon review
of the relevant facts,
(ii) if the Company's Common Stock is registered under the Exchange
Act the product of (A) the number of shares of the Company's Common Stock
issuable upon conversion of one Warrant Share times (B) the average of the
daily closing sale prices (or if sale prices are not available, bid
prices) for each business day during the period commencing 10 business
days before the date one day prior to the exercise date and ending on the
date one day prior to date of exercise,
provided, however, that if any Warrant is to be exercised (and the Warrant
Shares issuable upon such exercise to be converted) at the initial public
offering of the Company's Common Stock, the Current Market Value of the Warrant
Shares issuable upon exercise of such Warrant shall be equal to (x) the initial
public offering price of one share of the Company's Common Stock times (y) the
number of shares of the Company's Common Stock issuable upon the conversion of
one Warrant Share.
(c) Subject to the provisions of Section 2 hereof, upon such
surrender of Warrants and (other than in a Cashless Exercise) payment of the
Exercise Price, the Company shall issue and cause to be delivered with all
reasonable dispatch to or upon the written order of the Warrant holder and in
such name or names as the Warrant holder may designate, a certificate or
certificates for the number of full Warrant Shares issuable upon the exercise of
such Warrants together with cash as provided in Section 1(e); provided, however,
that if any consolidation, merger, transfer or lease of assets is proposed to be
effected by the Company as described in Section 5 hereof, or a tender offer or
an exchange offer for Warrant Shares shall be made, upon such surrender of
Warrants and payment of the Exercise Price as aforesaid, the Company shall, as
soon as possible, but in any event not later than three business days
thereafter, issue and cause to be delivered the full number of Warrant Shares
issuable upon the exercise of such Warrants in the manner described in this
sentence and/or any other consideration to be issued to such Warrant holder
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<PAGE>
pursuant to Section 5 hereof together with cash as provided in Section 1(e).
Such certificate or certificates shall be deemed to have been issued and any
person so designated to be named therein shall be deemed to have become a holder
of record of such Warrant Shares as of the date of the surrender of such
Warrants and (other than in a Cashless Exercise) payment of the Exercise Price.
(d) The Warrants shall be exercisable, at the election of the
holders thereof, either in full or from time to time in part, and, in the event
that a certificate evidencing Warrants is exercised in respect of fewer than all
of the Warrant Shares issuable upon such exercise at any time prior to the date
of expiration of the Warrants, a new certificate evidencing the remaining
Warrant or Warrants will be issued and delivered pursuant to the provisions of
this Section 1.
(e) The Company shall not be required to issue fractional Warrant
Shares upon the exercise of Warrants. In lieu of any fractional Warrant Share,
the Company shall make a cash payment equal to the Exercise Price multiplied by
such fraction.
Section 2. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issue of any Warrant or any certificates for Warrant Shares in a name
other than that of the registered holder of a Warrant surrendered upon the
exercise of such Warrant, and the Company shall not be required to issue or
deliver such Warrant or certificates for Warrant Shares unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
Section 3. Mutilated or Missing Warrant. Upon receipt by the Company
of evidence and indemnity satisfactory to it of the loss, theft, destruction or
mutilation of, and upon surrender and cancellation of this Warrant if mutilated,
the Company will make and deliver in lieu of this Warrant a new Warrant of the
same series and of like tenor of this Warrant.
Section 4. Reservation of Warrant Shares and Conversion Shares. (a)
The Company will at all times reserve and keep available, free from preemptive
rights, out of the aggregate of its authorized but unissued Series A Preferred
Stock or its authorized and issued Series A Preferred Stock held in its
treasury, for the purpose of enabling it to satisfy any obligation to issue
Warrant Shares upon exercise of Warrants, the maximum number of shares of Series
A Preferred Stock which may then be deliverable upon the exercise of all
outstanding Warrants. The Company covenants that all Warrant Shares
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<PAGE>
which may be issued upon exercise of Warrants will, upon payment of the Exercise
Price therefor and the issuance thereof, be fully paid, nonassessable, free of
preemptive rights, free from all taxes (subject to Section 2 hereof) and free
from all liens, charges and security interests, created by or through the
Company, with respect to the issue thereof.
(b) The Company will at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock or its authorized and issued Common Stock held in its treasury, for
the purpose of enabling it to satisfy any obligation to issue Common Stock upon
conversion of Series A Preferred Stock issued or issuable upon exercise of
Warrants, the maximum number of shares of Common Stock (the "Conversion Shares")
which may then be deliverable upon the conversion of all Series A Preferred
Stock issuable upon exercise of all outstanding Warrants. The Company covenants
that all Conversion Shares which may be issued thereof, by fully paid,
nonassessable, free of preemptive rights, free form all taxes and free from all
liens, charges and security interests, created by or through the Company, with
respect to the issue thereof.
Section 5. Reorganization of the Company. If the Company
consolidates or mergers with or into, or transfers or leases all or
substantially all its assets to, any person, upon consummation of such
transaction the Warrants shall automatically become exercisable for the kind and
amount of securities, cash or other assets which the holder of a Warrant would
have owned immediately after the consolidation, merger, transfer or lease if the
holder had exercised the Warrant (and, if the holder so elects, if the holder
had exercised the Warrant and convened the Warrant Shares issuable upon exercise
of such Warrant) immediately before the effective date of the transaction.
Concurrently with the consummation of such transaction, the corporation formed
by or surviving any such consolidation or merger if other than the Company, or
the person to which such sale or conveyance shall have been made, shall enter a
Warrant Agreement (in form and substance satisfactory to the holders of this
Warrant) so providing and further providing for adjustments which shall be as
nearly equivalent as may be practical to the adjustments provided for in this
Section 5.
Section 6. Changes Affecting the Series A Preferred Stock. If the
Company at any time while this Warrant, or any portion thereof, remains
outstanding and unexpired shall pay any dividend or make any other distribution
on the Series A Preferred Stock payable in shares of Series A Preferred Stock or
shall split, subdivide or combine the Series A Preferred Stock into a different
number of securities of the same class, the Exercise Price for such securities
shall be proportionately decreased in the case of a stock dividend, split or
subdivision or proportionately increased in the case of a combination and the
number of the securities as to which purchase rights under this Warrant exist
shall be increased or de-
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creased proportionately in accordance with such stock dividend, split,
subdivision or combination.
Section 7. Governing Law. THIS WARRANT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF DELAWARE AND FOR ALL PURPOSES SHALL
BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF DELAWARE.
IN WITNESS WHEREOF, Century Electronics Manufacturing, Inc. has
caused this Warrant to be duly executed, as of November 4, 1998.
CENTURY ELECTRONICS MANUFACTURING,
INC.
By: /s/ L. Sainsbury
----------------------------------
Name: L. SAINSBURY
Title: PRESIDENT & CEO
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Form of Election to Purchase
(To be Executed Upon Exercise of Warrant)
The undersigned hereby irrevocably elects to exercise Warrants
containing the right to receive ______ shares of Series A Preferred Stock and
herewith (check item) tenders payment for such shares to the order of Century
Electronics Manufacturing, Inc. in the amount of ______ per share of Series A
Preferred Stock in accordance with the terms hereof, as follows:
______ $______ by certified or official bank check to the order of
Century Electronics Manufacturing, Inc.; or
______ $______ by surrender of Warrant Shares having a Current
Market Value (as defined in the Warrant Agreement) of $______.
The undersigned requests that a certificate for such shares be
registered in the name of _______________, whose address is ___________________,
and that such shares be delivered to __________________, whose address is
___________________.
If said numbers of shares is less than all of the shares of Series A
Preferred Stock purchasable under the Warrant, the undersigned requests that a
new Warrant representing the remaining balance of such Warrants be registered in
the name of _______________, whose address is ___________________, and that such
shares be delivered to _______________, whose address is ___________________.
Date: _________________________ Your Signature: __________________________
<PAGE>
Exhibit 10.13
NO SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION OF THIS WARRANT OR THE
SHAPES PURCHASABLE HEREUNDER SHALL BE MADE EXCEPT PURSUANT TO REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS OR PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO THE
ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT
TO
PURCHASE COMMON STOCK
OF
CENTURY ELECTRONICS MANUFACTURING, INC.
This CERTIFIES that, for value received, GUARANTY BUSINESS CREDIT
CORPORATION d/b/a FIDELITY FUNDING, or its successors and assigns ("Holder") is
entitled, subject to the terms and conditions set forth in this Warrant, to
purchase from CENTURY ELECTRONICS MANUFACTURING, INC., a Delaware corporation
with its principal office at 274 Cedar Hill Road, Marlborough, Massachusetts
01752 (the "Company"), Sixty Thousand (60,000) fully paid and nonassessable
shares (the "Warrant Stock") of the Common Stock, $.01 par value, of the Company
(the "Common Stock"), at any time commencing on July 15, 1999 and continuing
until 5:00 p.m. Boston, Massachusetts time on July 15, 2004 (the "Expiration
Date"), at a price of Six and 00/100 Dollars ($6.00) per share (such price, as
adjusted in accordance with Section 12, the "Purchase Price"), subject to
further adjustment as provided in Section 5 below. This Warrant is issued to
Holder in connection with the increase of a credit facility from Holder to the
Company on the terms and conditions set forth in that certain First Amendment to
Loan and Security Agreement, dated as of July 15, 1999, by and among the
Company, two of its wholly-owned subsidiaries, and Holder.
1. Exercise.
(a) Method of Exercise. This Warrant may be exercised by Holder
hereof, in whole or in part (but not as to a fractional share) and from time to
time, in increments of not less than 500 shares, by the presentation and
surrender of this Warrant with a duly executed Election to Purchase or Convert
(in substantially the form attached to this Warrant as Exhibit A) at the
principal office of the Company as set forth above (or at such other address as
the Company may designate by notice in writing to Holder hereof at the address
of Holder appearing on the books of the Company), upon payment to the Company of
the purchase price by certified or bank cashier's check (unless Holder is
exercising the conversion right set forth in Section 1(b)). The shares of Common
Stock so purchased shall be deemed to be issued to Holder hereof as the record
owner of such shares as of the close of business on the date on which this
Warrant shall have been surrendered, the Election to Purchase or Convert has
been duly executed and delivered to the Company, and payment made for such
shares. Certificates for the shares of Common Stock so purchased shall be
delivered or mailed to Holder promptly after this Warrant shall have been
exercised, and, unless this Warrant has expired or has been exercised in full, a
new Warrant identical in form but representing the number of shares of Common
Stock with respect to which this Warrant shall not then have been exercised
shall also be issued to Holder hereof.
<PAGE>
(b) Conversion Right. In lieu of exercising this Warrant as
specified in Section 1(a), Holder may from time to time convert this Warrant, in
whole or in part, into a number of shares of Common Stock determined by dividing
(a) the aggregate fair market value of the shares of Common Stock issuable upon
exercise of this Warrant minus the aggregate Purchase Price of such shares by
(b) the fair market value of one share. The fair market value of the Common
Stock shall be determined pursuant to Section 1(c).
(c) Fair Market Value. If the Common Stock is traded in a public
market, its fair market value shall be its closing price reported for the
business day immediately before Holder delivers its Election to Purchase or
Convert to the Company. If the Common Stock is not traded in a public market,
the Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Holder.
2. No Rights as Stockholder. Nothing contained herein shall be construed
to confer upon Holder of this Warrant, as such, any of the rights of a
stockholder of the Company.
3. No Fractional Shares. The Company shall not issue certificates
representing fractions of shares of Common Stock upon any exercise of this
Warrant, but shall make a cash payment for any fractional share based on the
fair market value of the Common Stock on the date of exercise, determined in
accordance with Section 1(c) above.
4. Replacement Warrants. This Warrant is exchangeable, upon its surrender
by Holder at the office of the Company referred to in Section 1 above, for new
warrants (containing the same terms as this Warrant) each representing the right
to purchase such number of shares of Common Stock as shall be designated by
Holder at the time of such surrender (but not exceeding in the aggregate the
remaining number of shares of Common stock which may be purchased hereunder).
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and upon delivery of a bond or
indemnity reasonably satisfactory to the Company (or, in the case of mutilation,
upon surrender of this Warrant), the Company will issue to Holder a replacement
warrant (containing the same terms as this Warrant). As used herein, "Warrant"
shall include all new warrants issued in exchange for or replacement of this
Warrant.
5. Stock Dividends and Splits. If the Company shall pay a dividend in
shares of its Common Stock, subdivide (split) its outstanding shares of Common
Stock, combine (reverse split) its outstanding shares of Common Stock, issue by
reclassification of its shares of Common Stock any shares or other securities of
the Company, or distribute to holders of its Common Stock any
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<PAGE>
securities of the Company or of another entity, the number of shares of Common
Stock or other securities Holder hereof is entitled to purchase pursuant to this
Warrant immediately prior thereto shall be adjusted so that Holder shall be
entitled to receive upon exercise the number of shares of Common Stock or other
securities of the Company which Holder would have owned or would have been
entitled to receive after the happening of any of the events described above had
this Warrant been exercised immediately prior to the happening of such event,
and the exercise price per share shall be correspondingly adjusted; provided,
however, that no adjustment in the number of shares and/or the exercise price
shall be required unless such adjustment would require an increase or decrease
of at least one percent (1%) in such number and/or price, and provided further,
however, that any adjustments which by reason of this Section 5 are not required
to be made shall be carried forward and taken into account in any subsequent
adjustments. An adjustment made pursuant to this Section 5 shall become
effective immediately after the record date in the case of a stock dividend or
other distribution and shall become effective immediately after the effective
date in the case of a subdivision, combination or reclassification.
6. Consolidation or Merger. If the Company is consolidated or merged with
or into another corporation or if all or substantially all of its assets are
conveyed to another corporation,. this Warrant shall thereafter be exercisable
for the purchase of the kind and number of shares of stock or other securities
or property, if any, receivable upon such consolidation, merger or conveyance by
a holder of the number of shares of Common Stock of the Company which could have
been purchased upon the exercise of this Warrant immediately prior to such
consolidation, merger or conveyance; and, in any such case, appropriate
adjustment (as determined by the Board of Directors in good faith) shall be made
in the application of the provisions herein set forth with respect to the rights
and interest thereafter of Holder of this Warrant to the end that the provisions
set forth herein (including provisions with respect to changes in and other
adjustments of the number of shares of Common Stock that Holder of this Warrant
is entitled to purchase) shall thereafter be applicable, as nearly as reasonably
may be, in relation to any shares of stock or other property thereafter
deliverable upon the exercise of this Warrant.
7. Transfer. This Warrant may not be transferred to any person or entity
other than a successor to the right, title or interest of Holder or a purchaser
of all or substantially all of the assets of Holder, if applicable, without the
prior written consent of the Company, which shall not be unreasonably withheld,
and in compliance with the provisions of Section 8 below. Commencing on the
earlier of the 90th day after the date hereof or the completion by the Company
of a registered, initial public offering of its Common Stock, such consent shall
no longer be necessary.
8. Requirements for Transfer.
(a) This Warrant and the Common Stock so purchased shall not be sold
or transferred unless either (i) they first shall have been registered under the
Securities Act of 1933, as amended (the "Act"), or (ii) tic Company first shall
have been furnished with an opinion of
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<PAGE>
legal counsel, reasonably satisfactory to the Company, to the effect that such
sale or transfer is exempt from the registration requirements of the Act.
(b) Notwithstanding the foregoing, no registration or opinion of
counsel shall be required after such time that the Common Stock so purchased
becomes eligible for resale pursuant to Rule 144 under the Act
(c) Each certificate representing Common Stock purchased on exercise
of this Warrant shall bear a legend substantially in the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
may not be offered, sold or otherwise transferred, pledged or
hypothecated unless and until such securities are registered
under such Act or an opinion of counsel satisfactory to the
Company is obtained to the effect that such registration is
not required."
The foregoing legend shall be removed from the certificates at the request
of Holder thereof, at such time as they become eligible for resale
pursuant to Rule 144 under the Act.
9. Representations. The Company represents, warrants and agrees that: the
Company has the corporate power and authority to grant this Warrant; this
Warrant is enforceable and during its life will be enforceable against the
Company in accordance with its terms; the execution and delivery of this Warrant
by the Company has been duly and validly authorized and all requisite corporate
action has been taken to make it valid and binding against the Company in
accordance with its terms; and the Company has and on the date and/or dates of
any exercise or conversion will have the full right and power to transfer the
entire right, title and interest in and to the shares of Common Stock subject to
this Warrant to the Purchaser, free and clear of all liens, encumbrances,
charges and restrictions of any kind, other than those set forth in applicable
securities laws.
10. Put Right. The Company hereby irrevocably grants to Holder the right
and option (the "Put") to sell to the Company this Warrant, in whole but not in
part, on and after the first anniversary of the date hereof, and prior to the
Expiration Date, at a purchase price (the "Purchase Price") of $360,000. The
Purchase Price shall be due and payable within five business days after the
Company's receipt of written notice from Holder of its exercise of the Put. Upon
payment in full of such Purchase Price, Holder shall surrender the Warrant to
the Company for cancellation. Should payment of the Purchase Price upon exercise
of the Put result in the computation or earning of interest to Holder in excess
of the maximum amount allowed by law,
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<PAGE>
the Purchase Price shall be reduced to the extent necessary to reduce the
computation or earning of interest to the maximum amount allowed by law.
11. Registration.
(a) Piggyback Registrations. Notwithstanding the provisions set
forth above, on and after the 90th day after the completion by the Company of a
registered, initial public offering of its Common Stock, the Company shall
notify Holder in writing at least 30 days prior to filing any registration
statement under the Act for purposes of a public offering of securities of the
Company (including, but not limited to, registration statements relating to
secondary offerings of securities of the Company, but excluding registration
statements relating to employee benefit plans) and will afford Holder an
opportunity to include in such registration statement the Warrant Stock or any
portion thereof. If the registration statement is for an underwritten offering,
the Company shall so advise Holder and the right of Holder to be included in a
registration shall be subject to reduction in the discretion of the underwriter
and shall also be subordinate to the preexisting registration rights of (i) the
Amitek investors as set forth in that certain Registration Rights Agreement
dated as of June 30, 1999 by and among the Company and Myung Ho Park, Yoon Jung
Park and Sung Woo Kwon (collectively the "Amitek investors"); (ii) HarbourVest
as set forth in two certain Series A Convertible Preferred Stock Purchase
Agreements, dated as of February 4, 1998 and December 1, 1998, respectively,
between the Company and HarbourVest Partners V-Direct Fund, L.P.
("HarbourVest"); and (iii) Centennial as set forth in that certain Series B
Convertible Preferred Stock Purchase Agreement, dated as of February 4, 1998,
between the Company and Centennial Technologies, Inc. ("Centennial").
(b) Payment of Expenses. All expenses incurred in connection with
registration (excluding underwriters' discounts and commissions and the fees and
expenses of counsel for Holder), including, without limitation, all
registration, blue sky and qualification fees, printers' and accounting fees,
and fees and disbursements of counsel for the Company shall be borne by the
Company.
(c) Obligations of the Company. Whenever required to effect the
registration of the Warrant Stock, the Company shall, as expeditiously as
reasonably possible:
(i) Prepare and file a registration statement with respect
thereto and use its best efforts to cause such registration
statement to become effective, and keep such registration statement
effective for up to 120 days.
(ii) Prepare and file such amendments and supplements to such
registration statement and the prospectus used in connection with
such registration statement as may be necessary to comply with the
provisions of the Act.
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<PAGE>
(iii) Furnish to Holder such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as may be
reasonably requested.
(iv) Use its best efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be
reasonably requested by Holder, provided that the Company shall not
be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of
process in any such states or jurisdictions.
(v) In the event of any underwritten public offering, enter
into and peform its obligations under an underwriting agreement in
usual and customary form, with the managing underwriter(s) of such
offering. Holder shall also enter into and perform its obligations
under such an agreement.
(vi) Notify Holder at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening
of any event as a result of which the prospectus included in such
registration statement or any document incorporated therein by
reference, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
(vii) Furnish, at the request of Holder if and when requesting
registration on the date that such Warrant Stock is delivered to the
underwriters for sale, if such securities are being sold through
underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with
respect to such securities becomes effective, (i) an opinion, dated
as of such date, of the counsel representing the Company for the
purposes of such registration in form and substance as is
customarily given to underwriters in an underwritten public offering
and reasonably satisfactory to Holder, addressed to the
underwriters, if any, and to Holder and (ii) a "cold comfort" letter
dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily
given by independent certified public accountants to underwriters in
an underwritten public offering and reasonably satisfactory to
Holder, addressed to the underwriters, if any, and to Holder.
(viii) Afford to Holder all rights (including the right to
conduct "due diligence" with respect to the Company) customarily
afforded to selling stockholders in an underwritten public offering.
(d) Indemnification. The Company will indemnify and hold harmless
Holder, the partners, officers and directors of Holder, any underwriter (as
defined in the Act) for Holder
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<PAGE>
and each person, if any, who controls Holder or any such underwriter within the
meaning of the Act or the Securities Exchange Act of 1934, as amended (the "1934
Act"), against any losses, claims, damages, or liabilities (joint and several)
to which they may become subject under the Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "violation"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto, or any documents
incorporated therein by reference, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, and the Company, at its option,
shall either assume the defense thereof or will reimburse Holder, partner,
officer, or director, underwriter or controlling person for any legal or other
expenses reasonably incurred by them, as incurred, in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if Holder fails to promptly notify the Company of such claim
or such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any
such, case for any such toss, claim, damage, liability or action (i) to the
extent that it arises out of or is based upon a violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by Holder, or such partner, officer,
director, underwriter or controlling person of Holder, or, (ii) in the case of a
sale directly by Holder or such partner, officer, director, underwriter or
controlling person of Holder, such untrue statement or alleged untrue statement
or omission or alleged omission was contained in a preliminary prospectus and
corrected in a final or amended prospectus, and such seller failed to deliver a
copy of the final or amended prospectus at or prior to the confirmation of the
sale to the person asserting any such loss, claim, damage, liability or action
in any case in which such delivery is required by applicable securities laws.
The obligations of the Company under this paragraph shall survive the completion
of any offering of Warrant Stock.
(e) Survival. The Company's obligations under this Section 11 shall
survive until the fifth anniversary of the date hereof.
12. Adjustment of Purchase Price. If and whenever the Company subsequent
to the date hereof shall issue or sell any shares of Common Stock (or
convertible securities, options, warrants or other stock purchase rights which
provide for an exercise or conversion price to receive Common Stock) for a
consideration or having an exercise or conversion price less than the then
applicable Purchase Price, then the Purchase Price upon each such reissuance,
conversion, exercise or sale shall forthwith be reduced to such lower price.
There is excluded from this Section 12 all Common Stock issued or sold, or to be
issued or sold, as consideration for the acquisition by merger of Amitek
Corporation, including non-statutory stock options issued in connection with
that acquisition. As promptly as practicable (but in any event not later than
five days) after the occurrence of any event requiring any adjustment under this
Section 12 (or
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<PAGE>
under Section 5 above) to the Purchase Price, the Company shall, at its expense,
deliver to the Holder of this Warrant an officers certificate setting forth in
reasonable detail the events requiring the adjustment and the method by which
such adjustment was calculated and specifying the adjusted Purchase Price and
the number of shares of Common Stock purchasable upon exercise of this Warrant
after giving effect to such adjustment
13. No Impairment or Amendment. The Company shall not by any action
including, without limitation, amending its charter, any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate to protect the
rights of the holder hereof against impairment. Without limiting the generality
of the foregoing, the Company (a) will not permit the par value of any shares of
Warrant Stock issuable upon exercise of this Warrant to be greater than the
amount payable therefor upon such exercise, (b) will take all such action as may
be necessary or appropriate in order that the Company may validly issue fully
paid and nonassessable shares of Warrant Stock, (c) will obtain and maintain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction as may be necessary to enable the Company to perform its
obligations under this Warrant, and (d) will not issue any capital stock or
enter into any agreement the terms of which would have the effect, directly or
indirectly, of preventing the Company from honoring its obligations hereunder.
[balance of this page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer as of this 30th day of July, 1999.
ATTEST: CENTURY ELECTRONICS MANUFACTURING, INC.
/s/ James M. Roller By: /s/ Leslie J. Sainsbury
- -------------------------- ----------------------------------
James M. Roller Leslie J. Sainsbury
Secretary President and CEO
<PAGE>
EXHIBIT A
ELECTION TO PURCHASE OR CONVERT
Century Electronics Manufacturing, Inc.:
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase Warrant Stock and (check one):
[ ] herewith tenders payment for ___________ shares of Warrant Stock
to the order of Century Electronics Manufacturing, Inc. in the
amount of $ ________ in accordance with the terms of this Warrant or
[ ] herewith tenders this Warrant for ___________ shares of Warrant
Stock pursuant to the conversion right provisions of Section 1(b) of
this Warrant.
Please issue a certificate or certificates for such Warrant Stock in the
name of, and pay any cash for any fractional share to:
Name____________________________________________
________________________________________________
________________________________________________
________________________________________________
Signature_______________________________________
Note: The above signature should correspond
exactly with the name on the first page of
this Warrant or with the name of any
assignee pursuant to Section 7 of this
Warrant
If said number of shares shall not be all the shares purchasable under the
within Warrant, a new Warrant is to be issued in the name of said undersigned
for the balance remaining of the shares purchasable thereunder.
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<PAGE>
Exhibit 10.14
AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT is made and entered into as of
the 30th day of July, 1999, by and between AMITEK CORPORATION, a Delaware
corporation (hereinafter referred to as "Borrower"), and NATIONAL BANK OF
CANADA, a Canadian Chartered Bank (hereinafter referred to as "Lender").
WITNESSETH:
WHEREAS, Lender has previously extended financing to M&K TECHNOLOGY, INC.,
a Florida corporation ("M&K") and AMITEK CORPORATION, a Florida corporation
("Amitek Florida" or "Amitek", Amitek Florida and M&K hereinafter collectively
referred to as "Original Borrower"), as most recently evidenced by that certain
Consolidation Master Revolving Promissory Note in the principal amount of
Fourteen Million and 00/100 Dollars ($14,000,000.00) executed by Original
Borrower in favor of Lender dated as of February 8, 1999, and that certain CAPEX
Line/Term Promissory Note in the original principal amount of One Million Six
Hundred Seventy-Five Thousand and 00/100 Dollars ($1,675,000.00) executed by
Original Borrower in favor of Lender dated as of June 4, 1998 (collectively, the
"Original Notes"); and
WHEREAS, in connection with the indebtedness evidenced by the Original
Notes, the Original Borrower and Lender entered into that certain Loan Agreement
dated as of June 4, 1998, as amended by First Amendment to Loan Agreement dated
as of September 23, 1998, as further amended by Second Amendment to Loan
Agreement dated as of February 8, 1999 (collectively, the "Original Loan
Agreement"); and
WHEREAS, Amitek Florida has merged into the Guarantor (as defined herein),
with the Guarantor being the surviving corporation, and Guarantor immediately
after closing of the above described merger has conveyed all of the assets of
Amitek Florida to the Borrower and Borrower has assumed all liabilities of
Amitek (it being acknowledged that the Borrower is a wholly owned subsidiary
corporation of Guarantor), such that the Borrower is now the owner of all of the
assets and liabilities of Amitek Florida (collectively, the "Merger
Transactions"); and
WHEREAS, Borrower is a Delaware corporation and desires to obtain
extensions of credit of up to Fourteen Million Five Hundred Seventy-Six Thousand
Three Hundred Six and 54/100 Dollars ($14,576,306.54) from the Lender,
consisting of (i) a revolving line of credit in the principal amount of Fourteen
Million and 00/100 Dollars ($14,000,000.00), which consists of the assumption of
the existing Fourteen Million and 00/100 Dollar ($14,000,000.00) revolving line
of credit from Lender to Original Borrower (the "Loan"), which shall be used to
assist Borrower in connection with the merger of Amitek into Borrower with
Borrower being the surviving corporation and to support general working capital
requirements of the Borrower, and (ii) the assumption of an existing CAPEX
line/term loan in the current principal amount of Five Hundred Seventy-Six
Thousand Three Hundred Six and 54/100 Dollars ($576,306.54) (the "Term Loan")
and Lender is agreeable to allowing the assumption of the Loans (as defined
herein) up to such amounts subject to the terms and provisions set forth herein;
and
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WHEREAS, Borrower wishes to assume all of the duties and obligations of
Amitek under the Original Loan Agreement; and
WHEREAS, the parties hereto wish to amend and restate the Original Loan
Agreement in its entirety in accordance with the terms and provisions of and as
provided herein.
NOW, THEREFORE, for and in consideration of the sum of Ten and 00/100
($10.00) Dollars and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the loans
or extensions of credit heretofore, now or hereafter made or to be made to or
for the benefit of the Borrower by the Lender, the parties do hereby agree as
follows:
Article 1
RECITALS AND DEFINITIONS
1.1 Recitals. The foregoing recitals are acknowledged by the parties to be
true and correct, and are incorporated herein by reference.
1.2 Definitions. As used in this Agreement, the terms listed below shall
have the following meanings:
(a) "Advance": A disbursement by the Lender of a portion of the Loan
proceeds to partially assist Borrower in connection with the merger of Amitek
into Borrower with Borrower being the surviving corporation and to support
general working capital requirements of the Borrower.
(b) "Agreement" or "Loan Agreement": This Amended and Restated Loan
Agreement.
(c) "Borrower": AMITEK CORPORATION, a Delaware corporation.
(d) "Borrower Security Agreement": An Amended and Restated Security
Agreement from Borrower to Lender securing the Notes and all other obligations
and indebtedness of Borrower to Lender, which is a valid first lien on all of
Borrower's accounts, inventory, chattel paper, general intangibles, fixtures,
furniture, instruments, equipment and personal property now owned or hereafter
acquired by Borrower and all proceeds of the foregoing.
(e) "Borrower's Counsel Opinion Letter": A letter from Borrower's Counsel
in form and substance satisfactory to Lender and Lender's Counsel, opining as to
certain matters concerning the Loans.
(f) "Business Days": Days upon which the Lender is open for normal
business.
(g) "Cash Collateral Account". That certain cash collateral account
pledged by Borrower in favor of Lender, into which all collections shall be
remitted from a lockbox account into which
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Borrower's account debtors remit all payments, which collections shall be
applied against the Loan and Term Loans facility balances two (2) bank days
after receipt of available funds in the Cash Collateral Account. The Borrower
shall not have access to the lockbox or the Cash Collateral Account.
(h) "Closing": The time of the execution and delivery of this Agreement by
Borrower and Lender.
(i) "Code": The Internal Revenue Code of 1986, as amended from time to
time, and applicable Department of Treasury regulations thereunder.
(j) Intentionally deleted.
(k) "Credit Facility Letter": Not applicable.
(l) "Dollars" or "$": United States Dollars.
(m) Intentionally deleted.
(n) "Eligible Receivables": Accounts receivable of Borrower which are
Receivables arising out of sales of tangible personal property made by Borrower
in the ordinary course of its business, which are no more than ninety (90) days
old from their invoice date, according to the original terms of sale, and, the
payment of which is not in dispute and in which the Lender has a first priority
security interest, provided however, that if fifty percent (50%) or more of the
Receivables from any account debtor are more than ninety (90) days old from
invoice date, all of said account debtor's Receivables shall be deemed
ineligible. The Lender may treat any Receivable as ineligible (i) if any
warranty contained in this or any related agreement is breached with respect
thereto; (ii) if the customer or account debtor has disputed liability or made
any claim with respect to the Receivable or the merchandise covered thereby or
with respect to any other Receivable due from said customer to the Borrower;
(iii) if the customer or account debtor has filed a petition for bankruptcy or
any other application for relief under the Bankruptcy Act, assigned for the
benefit of creditors, or if any petition or any other application for relief
under the Bankruptcy Act has been filed against the said customer or account
debtor, or if the customer or account debtor has failed, suspended business,
become insolvent, or had or suffered a receiver or trustee to be appointed for
any of its assets or affairs; (iv) if the customer or account debtor is located
outside the United States; (v) if the Receivable is a government receivable in
which the Lender will not be able to perfect its lien under the Federal
Assignment of Claims Act for any reason whatsoever; (vi) if the Receivable is
offset, in whole or in part, by a credit due and owing from the Borrower to that
account debtor; (vii) if the Receivable is due and owing from an account debtor
who is also a creditor of Borrower; (viii) if any portion of the Receivable
represents finance and service charges due and owing to Borrower from said
account debtor; (ix) if any portion of the Receivable represents a deposit
already collected by the Borrower, the amount of the Receivable which is
eligible for financing hereunder shall be reduced by an amount equal to the
amount of the deposit which has been collected by the Borrower from the
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account debtor; (x) if the Receivable is due and owing from an affiliate
corporation or related entity of Borrower or represents an intercompany account;
(xi) if the Receivable represents a consignment sale or warranty work; (xii) if
the Receivable represents a C.O.D. sale; (xiii) if the Receivable represents
sums due and owing from an employee of the Borrower; (xiv) if the Receivable
represents retainage due and owing to Borrower, (xv) if the Receivable
represents the billing for inventory which has not been delivered to said
account debtor; (xvi) if the Receivable represents a Bill and Hold Invoice for
items which have been billed and are not yet due and payable; (xvii) if the
Receivable represents sums due and owing for work and/or service currently being
rendered by Borrower but not yet completed by Borrower; (xviii) if the
Receivable arises from a progress billing for work not yet completed and
delivered to the customer; or (xix) if the Lender believes, in its credit
judgment in Lender's sole discretion, that collection of such Receivable is
insecure or that it may not be paid by reason of financial inability to pay or
otherwise or that such Receivable is not suitable for use as collateral
hereunder.
(o) "ERISA": The Employee Retirement Income Security Act of 1974, as
amended from time to time.
(p) "Event of Default": The occurrence of any one or more of the Events of
Default described in Article 9 hereof.
(q) "Financing Statements": Financing Statements and/or Financing
Statement Amendments from Borrower to Lender to perfect Lender's security
interest in the property described in the Security Agreements.
(r) "Generally Accepted Accounting Principles" or "GAAP": Those principles
of accounting set forth in opinions of the Financial Accounting Standards Board
of the American Institute of Public Accountants or which have other substantial
authoritative support and are applicable in the circumstances as of the date of
any report required herein or as of the date of an application of such
principles as required herein.
(s) "Governmental Authority": Any federal, state, provincial, county,
municipal or other governmental department, commission, board, bureau, court,
agency, or any instrumentality of any other governmental entity.
(t) "Governmental Requirements": Any law, statute, code, ordinance, order,
rule, regulation, judgment, decree, writ, injunction, franchise, permit,
certificate, license, authorization, or other direction or requirement of any
Governmental Authority now existing or hereafter enacted, adopted, promulgated,
entered or issued applicable to the Loans or to the Borrower.
(u) "Guaranty": An Absolute Unconditional and Continuing Guaranty executed
by the Guarantor guaranteeing repayment of the Notes and the Indebtedness, and
performance of all of the Borrower's obligations under the Loan Documents.
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(v) "Guarantor": CENTURY ELECTRONICS MANUFACTURING, INC., a Delaware
corporation, which shall guarantee the performance of all obligations and
repayment of all sums due under or in connection with the Loans, and all other
obligations of Borrower to Lender, and which shall execute the Guaranty and
certain loan documentation associated therewith.
(w) "Indebtedness": Collectively, all of the Borrower's presently existing
or hereafter created or assumed obligations to the Lender, including, without
limitation, obligations for borrowed money, notes payable and drafts accepted
representing extensions of credit (whether or not representing obligations for
borrowed money), obligations representing the Loans and any modifications or
renewals thereof, obligations representing indebtedness to the Lender whether or
not assumed, secured or unsecured, however and wherever incurred, acquired or
evidenced, whether primary or secondary, direct or indirect, absolute or
contingent, joint or several or due or to become due, including without
limitation, all such obligations, liabilities and all indebtedness and
obligations now or hereafter owed by Borrower to Lender, its affiliates,
successors and/or assigns.
(x) "Initial Advance": The first Advance of the Loan proceeds.
(y) "Landlord Acknowledgment Agreement": If and as applicable, an
agreement executed by each landlord and each entity that holds inventory of
Borrower at a certain business location acknowledging and waiving any and all
landlord's or other liens in connection with the inventory stored at said
location.
(z) "Landlord's Waiver of Lien Agreement": Waiver Agreements from all
Landlords where Borrower leases business properties waiving the Landlord's lien
at that location.
(aa) "Leases": Leases for all locations where Borrower leases property in
connection with its business operations.
(bb) "Loan Account". Borrower's account on the books of the Lender in
which Advances will be recorded, as well as payments made on the Loans and other
appropriate debits and credits as provided in this Agreement.
(cc) "Loan Documents": This Agreement, the Notes, the Security Agreements,
the Guaranty and all other associated loan documents executed in connection with
the making of the Loans (and any modification, renewal or extension thereof).
(dd) "Loan": A revolving line of credit in the maximum principal amount of
Fourteen Million and 00/100 Dollars ($14,000,000.00) from Lender to Borrower.
(ee) "Loans": The Loan and the Term Loan.
(ff) "Machinery and Equipment". All machinery, equipment, furniture,
fixtures, computer hardware and software, hand and power tools, trucks,
trailers, forklifts, automobiles, heavy
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equipment, and other motor vehicles, trucks, trailers, machinery and equipment
of all classes, together with all parts thereof and all accessions thereto,
wherever located, now owned or hereafter acquired by the Borrower.
(gg) "Maturity Date": As to the Loan, June 4, 2001, and as to the Term
Loan, June 4, 2001; upon which date the entire principal balance and accrued
interest and all other applicable charges under the respective Loans shall
become due and payable in full.
(hh) "Merger and Conveyance Documents": That certain Agreement and Plan of
Merger among Guarantor and Amitek Florida, Myung Ho Park and Yoon Jung Park
dated July 30, 1999, as amended, together with all closing and merger
documentation associated therewith, including, without limitation, all transfer
documents, opinion letters, resolutions, closing statements, promissory notes,
security documents, employment agreements, certificates and the Certificate of
Merger as filed with the Secretary of State of the State of Delaware and the
Articles of Merger as filed in the office of the Secretary of State of the State
of Florida; together with that certain Assignment and Assumption Agreement
entered into by and between Guarantor and Borrower whereby and whereunder all
assets of Amitek Florida obtained by Guarantor pursuant to the above described
merger, together with all obligations of Amitek Florida are conveyed to and
assumed by Borrower, as applicable.
(ii) "Note": An Assumption and Modification Master Revolving Promissory
Note in the principal amount of Fourteen Million and 00/100 Dollars
($14,000,000.00) from Borrower to Lender of even date herewith, and any
modifications, amendments or renewals thereof, evidencing the Loan.
(jj) "Notes": The Note and the Term Note, together with all amendments,
extensions and renewals thereof. The Notes shall be and are cross-collateralized
and cross-defaulted such that a default under either of the Notes shall be and
constitute a default under both of the Notes.
(kk) "Person": As the case may be, any corporation, natural person, firm,
joint venture, partnership, trust, unincorporated organization and government,
or any department or agency of any government.
(ll) "Plan": Any pension plan which is governed by the terms and
provisions of Title IV of ERISA and in respect of which the Borrower or a
commonly controlled entity of the Borrower is an "Employer" (as defined in
Section 407(d)(7) of ERISA).
(mm) "Prime Rate". The interest rate announced from time to time charged
by National Bank of Canada as its United States Prime Lending Rate, which rate
is purely discretionary and is not necessarily the best or lowest rate charged
borrowing customers of the Lender.
(nn) "Receivables". All accounts, accounts receivable, general
intangibles, contract rights and other obligations of any kind, whether now
owned or hereafter acquired by Borrower and all proceeds of the foregoing and
all rights now or hereafter existing in and to all security agreements,
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leases and other contracts security or otherwise relating to any such accounts,
contract rights, chattel paper instruments, general intangibles and obligations
and all proceeds, profits, deposits, products and accessions of and to all of
the foregoing.
(oo) "Reportable Event": Any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder.
(pp) "Security Agreements": Collectively, the Borrower's Security
Agreement and the Security Cash Collateral Account and Lockbox Agreement, which
provide a valid first lien on the property identified in the Security
Agreements.
(qq) "Security Cash Collateral Account and Lockbox Agreement". An Amended
and Restated Security, Cash Collateral Account and Lockbox Agreement whereby and
whereunder payment of all of Borrower's Receivables shall be directed to a
lockbox maintained with CITIBANK, F.S.B. to flow through the Cash Collateral
Account, and, be applied against the Loan and Term Loans facilities balances.
(rr) "Solvent": That, at the time of determination, (i) the fair market
value of the Borrower's assets (both at fair valuation and at present fair
saleable value on an orderly basis) is in excess of the total amount of its
liabilities, including contingent obligations; (ii) it is then able and expects
to be able to pay its debts as they mature; and (iii) it has capital sufficient
to carry on its business as conducted and as proposed to be conducted.
(ss) "Term Loan": A CAPEX line/term loan in the principal amount of Five
Hundred Seventy-Six Thousand Three Hundred Six and 54/100 Dollars ($576,306.54),
original amount One Million Six Hundred Seventy-Five Thousand and 00/100 Dollars
($1,675,000.00) from Lender to Borrower.
(tt) "Term Note": An Assumption and Modification CAPEX Line/Term
Promissory Note in the principal amount of Five Hundred Seventy-Six Thousand
Three Hundred Six and 54/100 Dollars ($576,306.54), original amount One Million
Six Hundred Seventy-Five Thousand and 00/100 Dollars ($1,675,000.00) from Lender
to Borrower of even date herewith, and any modifications, amendments or renewals
thereof, evidencing the Term Loan.
1.3 Other Definitional Provisions. (a) The terms "material" and
"materially" shall have the meanings ascribed to such terms under Generally
Accepted Accounting Principles as such would be applied to the business of the
Borrower, except as the context shall clearly otherwise set forth; (b) all of
the terms defined in this Agreement shall have such defined meanings when used
in other documents issued under, or delivered pursuant to, this Agreement,
unless the context shall otherwise require; (c) all terms defined in this
Agreement in the singular shall have comparable meanings when used in the
plural, and vice versa; (d) accounting terms to the extent not otherwise defined
shall have the respective meanings given them under, and shall be construed in
accordance with Generally Accepted Accounting Principles; (e) the words
"hereby", "hereto", "hereof', "herein", "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and
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not to any particular provision of this Agreement; (f) the masculine and neuter
genders are used herein and whenever used shall include the masculine, feminine
and neuter as well; and (g) whenever in this Agreement any of the parties hereto
is referred to, such reference shall be deemed to include their heirs, personal
representatives, successors and assigns of such parties unless the context shall
expressly provide otherwise.
Article 2
THE LOANS
2.1 Loan. Provided there does not exist an Event of Default, and no event
with which notice or lapse of time or both would become such an Event of
Default, and subject to the terms and provisions of this Agreement, Lender will,
under the Note, lend or advance for the account of Borrower from time to time,
and, Borrower may borrow, repay and re-borrow (provided that unless Borrower
intends to pay and satisfy the Loan in full, Borrower shall not reduce the
outstanding principal balance under the Loan to a sum of less than One Thousand
Dollars ($1,000.00)) such amounts as may be required to partially assist
Borrower in connection with the Merger Transactions and to support general
working capital requirements of the Borrower, not exceeding in the aggregate an
amount equal to (A) (i) eighty-five (85%) percent of Eligible Receivables, less
such reserves as Lender, in its sole discretion elects to establish, provided
further that a Receivable may be devalued in such amount as shall be determined
by Lender in its sole discretion due to "Dilution" which is defined as and is
the result of non-cash credits posted against the Receivable which results in
payment or other satisfaction of all or any portion of the Receivable for
reasons other than full payment of the Receivable in cash, together with an
amount equal to (ii) thirty percent (30%) of the Borrower's raw materials and
finished goods inventory, which raw materials and finished goods inventory is
not supported by a firm buyback agreement in form and content acceptable to
Lender, in Lender's sole and absolute discretion, together with an amount equal
to (iii) sixty-five (65%) percent of Borrower's raw materials inventory,
work-in-process inventory, and finished goods inventory, when such inventory is
supported by a firm buyback agreement in form and content acceptable to Lender,
in Lender's sole and absolute discretion, all of which raw materials inventory,
work-in-process inventory and finished goods inventory set forth in (ii) and
(iii) above must be satisfactory to Lender in its sole and absolute discretion
(the "Eligible Inventory"); provided, that by way of example and not by way of
limitation, that inventory such as (a) inventory held at subcontractor's
locations, (b) slow moving inventory, (c) inventory classified as reserves on
the Borrower's balance sheets, (d) obsolete inventory, and (e) in-transit
inventory shall not be considered Eligible Inventory, provided further, that the
amount of advances for Eligible Inventory shall not exceed the sum of Seven
Million and 00/100 Dollars ($7,000,000.00) in the aggregate at any time; or, (B)
the aggregate sum of Fourteen Million and 00/100 Dollars ($14,000,000.00),
whichever is less. In connection with Advances based upon the Borrower
inventory, it is acknowledged that Lender shall determine, in its sole
discretion, which inventory shall constitute Eligible Inventory which is
eligible for financing hereunder. The aggregate amounts outstanding under the
Loan shall not at any time exceed the amount provided above, and in the event
the amount outstanding at any time exceeds the permitted amount, said excess
amount shall bear interest at the rate set forth in the Note and shall be due
and payable in full on DEMAND.
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2.2 Term Loan. The proceeds of the Term Loan were used by the Original
Borrower to partially finance capital expenditures of the Original Borrower. No
further advances may be made under the Term Loan.
2.3 Loan Closing Amendment Fee. Audit Fees and Unused Line Fees. In
connection with the Loans, the following fees and rates shall apply:
(a) LOAN CLOSING AMENDMENT FEE: A Loan Closing Amendment Fee in the amount
of One Hundred Thousand and 00/100 Dollars ($100,000.00) shall be due and
payable in connection with the Closing of the Loans, payable as follows:
(i) Twenty-Five Thousand and 00/100 Dollars ($25,000.00) shall be
payable at the time of Closing
(ii) Twenty-Five Thousand and 00/100 Dollars ($25,000.00) shall be
payable on November 1, 1999
(iii) Twenty-Five Thousand and 00/100 Dollars ($25,000.00) shall be
payable on February 1,2000
(iv) Twenty-Five Thousand and 00/100 Dollars ($25,000.00) shall be
payable on May 1, 2000.
Notwithstanding anything to the contrary set forth above, in the
event and at such time as the Loans are paid in full or upon the occurrence of
an Event of Default, whichever shall first occur, the remaining unpaid balance
of the Loan Closing Amendment Fee shall immediately become due and payable in
full.
(b) AUDIT FEES: There shall be quarterly audits (the frequency of which
may be adjusted at any time by Lender, in Lender's sole discretion) of the
Borrower performed in each fiscal year of Borrower during the term of the Loans.
There shall be a quarterly audit fee due and owing from the Borrower to Lender
in connection with said audits based upon a charge of Four Hundred and 00/100
Dollars ($400.00) per day plus expenses, subject to adjustment at any time.
(c) UNUSED LINE FEE: An unused line fee shall be charged in connection
with the Loan, such that the unused portion of the Loan shall be subject to an
annual fee of one-quarter of one percent (.25%) per annum to be calculated and
payable upon a quarterly basis based upon the average outstanding principal
balance under the Loan for the preceding ninety (90) days payable in arrears on
the first day of the first month following the previous quarterly period.
2.4 Loan Account. All Advances hereunder and under the Note shall be
recorded by Lender in the Loan Account.
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2.5 Loan Documents. Borrower's obligation to repay the Loans is evidenced
by the Notes delivered simultaneously herewith, which set forth the method for
payment, rates of interest, and such further terms as are therein set forth. The
repayment of the Notes and the Indebtedness is to be secured by the following
documentation, which documents Borrower shall deliver, or cause to be delivered,
to Lender simultaneously with the delivery of the Notes and which documents must
be received prior to any funding hereunder:
(a) The Security Agreements, in form and substance satisfactory to Lender
and Lender's counsel.
(b) Financing statements filed in such public offices as Lender and
Lender's counsel may deem necessary to perfect a security interest in any of the
personal property referred to in the Security Agreements.
(c) The Guaranty, in form and substance satisfactory to Lender and
Lender's Counsel, executed by the Guarantor.
(d) The Merger and Conveyance Documents, in form and substance
satisfactory to Lender and Lender's Counsel, shall have been executed and
delivered with the Certificate of Merger having been duly filed in the office of
the Secretary of State of the State of Delaware, the Articles of Merger having
been duly filed in the office of the Secretary of State of the State of Florida,
and all required consents to the merger shall have been obtained and all
required consents to the Merger Transactions shall have been obtained.
(e) Subordination Agreements, executed by Borrower and all appropriate
shareholders, officers, and directors of Borrower, as required by Lender.
(f) Borrower's Counsel Opinion Letter, in form and substance satisfactory
to Lender and Lender's Counsel, from Borrower's Counsel opining as to certain
matters concerning the Loans and the Merger Transactions.
(g) Such policies of liability insurance, worker's compensation insurance,
business interruption insurance and hazard insurance (with fire, extended
coverage, vandalism and mischief protection) as the Lender may reasonably
request, subject to standard loss-payee's and additional insured's endorsements,
as applicable, in the Lender's favor, and providing at least thirty (30) days
prior written notice of any cancellation, modification or non-renewal of the
insurance coverage.
(h) Incumbency Certificate and Resolutions of the sole shareholder and the
directors of the Borrower authorizing the Loans, and the execution of all Loan
Documents related thereto.
(i) Incumbency Certificate and Resolutions of the directors of the
Guarantor authorizing the Guaranty, and the execution of all Loan Documents
related to the Guaranty and the Loan.
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(j) Certificate of Good Standing evidencing that Borrower is in good
standing under the laws of the State of Delaware, the laws of the State of
Florida and in each other state in which Borrower is required to be qualified to
conduct business.
(k) Certified copies of the Articles of Incorporation and By-Laws of
Borrower.
(l) Evidence of compliance by the Borrower with the Florida Fictitious
Name Statute, if and as applicable.
(m) Certificate of Good Standing evidencing that Guarantor is in good
standing under the laws of the State of Delaware, the laws of the Commonwealth
of Massachusetts and in each other state in which Guarantor is required to be
qualified to conduct business.
(n) Certified copies of the Articles of Incorporation and By-Laws of
Guarantor.
(o) Certified copies of the Leases in connection with all leased premises
of the Borrower.
(p) Landlord's Waiver of Lien Agreement(s) and Landlord's Acknowledgment
Agreement(s) executed by all landlords and all other necessary parties at
business locations of Borrower or storage locations of Borrower's inventory,
waiving the landlord's lien.
(q) Financial statements of the Borrower and the Guarantor, in form and
substance acceptable to Lender.
(r) Such other documentation as may be required by Lender or Lender's
Counsel.
Article 3
MANNER OF MAKING LOAN ADVANCES
3.1 Advances. Each Advance to the Borrower under the Loan shall be made by
the Lender upon written request of the Borrower stating the date on which the
Advance is to be made (the "Borrowing Date"), and the principal amount of the
Advance requested, said Advance Request to be delivered by no later than 12:30
p.m. on the day of the requested Advance, together with a Remittance Report, on
National Bank of Canada form, in the form attached hereto and made a part hereof
as Exhibit "A" (the "Remittance Report"). The above set forth written forms may
be sent via facsimile, to be immediately followed by delivery of the original
forms to Lender. Any notice delivered under this subsection shall be irrevocable
and bind the Borrower to consummate the Advance on the Borrowing Date.
3.2 Borrowing Base Certificate. Advances will be made based on the most
recent Borrowing Base Certificate submitted by Borrower to Lender. The form of
the Borrowing Base Certificate is appended hereto and made a part hereof as
Exhibit "B" (the "Borrowing Base
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Certificate"). The Borrowing Base Certificate shall be provided by Borrower to
Lender, no less than one (1) time in each week in each month in each fiscal year
of the Borrower, or as otherwise required by Lender.
3.3 Supporting Documentation. At the time of the Advance, the Borrower
must deliver to Lender, such listings of Eligible Receivables and Eligible
Inventory and such other reports and documentation as shall be required by
Lender to support the Advance.
Article 4
INTEREST AND PAYMENTS
All interest under the Loans shall be computed on the basis of a year
containing three hundred sixty (360) days for the actual number of days elapsed.
Payments of interest (and principal under the Term Notes) shall be due and
payable to the Lender in accordance with the terms and provisions of the Notes,
and interest shall accrue at the rate of interest provided in the Notes for each
Advance thereunder. Each payment of principal, interest and/or fees, and any
other amounts required to be paid to the Lender with respect to the Loans, shall
be effectuated by means of an Advance under the Note; provided, however, that if
there is not adequate availability under the Loan to effectuate any such
Advance, Borrower shall be responsible for payment of the same. Payments of
principal, interest, fees or other amounts made by the Borrower shall be made to
the Lender at the Lender's offices located at 125 W. 55th Street, 23rd Floor,
New York, New York 10019, for the account of Lender, in Dollars and in
immediately available funds before 12:00 p.m. (New York time) on the date such
payment is due. The Lender shall deem any payment made by or on behalf of the
Borrower that is not made in immediately available funds and prior to 12:00 p.m.
(New York time) to be a nonconforming payment, which shall not be deemed to be
received by the Lender until the later of (a) the time such funds become
available funds or (b) the next Business Day. Any non-conforming payment may
constitute or become an Event of Default hereunder. Interest shall continue to
accrue on any principal as to which a non-conforming payment is made until the
later of (a) the date such funds become available funds or (b) the next Business
Day. All payments to be made by the Borrower on account of principal, interest
and/or fees, shall be made without diminution, setoff, recoupment or
counterclaim.
Article 5
CONDITIONS PRECEDENT TO FIRST ADVANCE AND ADDITIONAL ADVANCES
5.1 Conditions Precedent. The obligations of Lender to make the Initial
Advance and all additional Advances under the Loans are subject to the following
conditions precedent:
(a) Representations and Warranties. The representations, covenants and
warranties made by Borrower in this Agreement shall be true and correct on and
as of the date of such Advance.
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(b) No Default. There shall be no default, and no event which with notice
or lapse of time or both would become such an Event of Default, under this
Agreement, the Notes, the Security Agreements, or any other Loan Documents.
(c) Intentionally deleted.
(d) No Material Adverse Change. There shall have been no material adverse
change in the business or financial condition of the Borrower or the Guarantor
or in the value of the Collateral since March 31, 1999.
(e) Intentionally deleted.
(f) Intentionally deleted.
(g) Delivery of Loan Documents. All of the Loan Documents shall have been
duly executed and delivered to Lender, and the Merger and Conveyance Documents,
the Financing Statements and the Security Agreements (if applicable) shall have
been recorded in the appropriate public offices.
(h) Lien and Judgment Searches: Lien and judgment searches of the
Guarantor shall have been conducted with the Delaware Secretary of State, the
Massachusetts Secretary of State, Middlesex County, Massachusetts, the Florida
Secretary of State, Broward County, Florida, Palm Beach County, Florida, and any
other state or jurisdiction as shall be required by Lender. Additionally, lien
and judgment searches of Amitek Florida shall have been conducted with the
Florida Secretary of State, Broward County, Florida, and Palm Beach County,
Florida, and any other state or jurisdiction as shall be required by Lender. The
results of the above set forth lien and judgment searches must be satisfactory
to Lender, in Lender's sole and absolute discretion. Post closing searches will
be required in all jurisdictions.
(i) Delivery of Other Documents. Borrower shall have delivered, or caused
to be delivered to Lender, the other documents required under Article 2 hereof,
and shall have also delivered or caused to be delivered to Lender, the
following:
(i) Report on Receivables evidencing that there are adequate
Eligible Receivables to support the Initial Advance and each subsequent
Advance.
(ii) Report on all of Borrower inventory evidencing that there is
adequate Eligible Inventory to support the Initial Advance and each
subsequent Advance.
(iii) Such policies of liability insurance, flood insurance,
worker's compensation insurance, business interruption insurance and
hazard insurance (with fire, extended coverage,
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vandalism and mischief protection) as Lender may reasonably request
subject to standard loss-payee's and additional insured's endorsements, as
applicable, in the Lender's favor.
(iv) Such other certification or documentation to be executed by
Borrower as may be reasonably required by Lender or Lender's counsel
pertaining to the closing of the Initial Advance and all subsequent
Advances of the proceeds hereunder, it being understood that all such
items shall be promptly delivered prior to Lender's obligation to making
further Advances hereunder.
Article 6
USE OF LOAN PROCEEDS; MARGIN STOCK
The proceeds of the Loan shall be used to partially finance the Merger
Transactions and to support general working capital requirements of the
Borrower. The proceeds of the Term Loan have previously been used by Amitek to
finance capital expenditures of Amitek. Borrower does not own any margin
securities and no portion of any Advance or any of the Loans will be used for
the purpose of reducing or retiring any indebtedness which was originally
incurred by Borrower to purchase any margin securities, and neither the making
of any and all Loans and Advances, nor the use of the proceeds thereof will
violate or be inconsistent with the provisions of Regulations G, T, U or X of
the Board of Governors of the Federal Reserve System of the United States.
Article 7
REPRESENTATIONS AND WARRANTIES
7.1 Representations and Warranties. Borrower represents and warrants to
Lender that, so long as credit remains available to the Borrower or there is any
outstanding balance due under any of the Notes as secured by the Loan Documents:
(a) Borrower and the Guarantor, as applicable, have the power to engage in
all the transactions contemplated by this Agreement and have full power,
authority and legal right to execute and deliver, and to comply with their
respective obligations under the Loan Documents, which documents constitute the
valid and legally binding obligations of Borrower and Guarantor, as applicable,
enforceable against Borrower and Guarantor in accordance with their respective
terms.
(b) To the best of its knowledge and belief, there is no suit, action, or
proceeding pending or threatened against or affecting Borrower, before or by any
court, administrative agency or other Governmental Authority which brings into
question the validity of the transactions contemplated hereby or would interfere
with the ability of Borrower to comply with the terms hereof.
(c) Borrower is in good standing under the laws of the State of Delaware
and under the laws of the State of Florida and Borrower is in good standing and
fully qualified and authorized to do business in all states where it conducts
business. Borrower, prior to Closing, will deliver to Lender: (i) resolutions
certified as true by the secretary of Borrower authorizing Borrower's
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participation in connection with the transactions contemplated herein and
execution of the Notes, and related Loan Documents; (ii) incumbency certificates
of Borrower; (iii) certified copies of the Articles of Incorporation and By-laws
of Borrower; and (iv) Corporate Certificates of Good Standing for Borrower.
(d) Except as otherwise disclosed on Exhibit "C" appended hereto and made
a part hereof, during the one (1) year period preceding the date of closing, the
Borrower has not been known as or used any corporate of fictitious names other
than the corporate name of the Borrower on the Closing date. All trade names or
styles under which the Borrower sells inventory or equipment or creates
Receivables or to which instruments in payment of Receivables are made payable,
are set forth on Exhibit "C".
(e) The Borrower and the Guarantor own or possess all intellectual
property required to conduct its businesses as now and presently planned to be
conducted without, to their knowledge, conflict with the rights of others.
(f) Borrower and Guarantor are Solvent after giving effect to the
transactions contemplated by the Loan Documents.
(g) Neither the execution nor delivery of any of the Loan Documents, nor
any other document relating hereto, will conflict with or result in a breach of
any of the provisions of the Charter, Articles of Incorporation, By-Laws or
Partnership Agreement, where applicable, of the Borrower or the Guarantor or of
any applicable law, judgment, order, writ, injunction, decree, rule or
regulation of any court, administrative agency or other Governmental Authority,
or of any agreement or other instrument to which Borrower or the Guarantor is a
party or by which either of them is bound or constitute a default under any
thereof, or result in the creation or imposition of any lien, charge or
encumbrance upon any property of Borrower, other than those created under this
transaction in favor of Lender.
(h) No consent, approval or other authorization of or by any Governmental
Authority is required in connection with the execution or delivery by Borrower
or the Guarantor of the Loan Documents, or compliance with the provisions hereof
or thereof.
(i) There are no actions, suits or proceedings pending or, to the
knowledge of the Borrower or the Guarantor, overtly threatened against or
affecting the Borrower or the Guarantor, at law or in equity, or before or by
any Federal, State, Provincial, municipal or other Governmental Authority, which
involve any of the transactions herein contemplated or the possibility of any
judgment or liability which would result in any material adverse change in the
business, operations, properties or assets or in the financial condition of the
Borrower or of the Guarantor. Neither the Borrower nor the Guarantor are in
default with respect to (a) any judgment, order, writ, injunction or decree or
(b) any rule or regulation of any court or Federal, State, Provincial, municipal
or other Governmental Authority, which would have a material adverse effect on
its business, properties or condition (financial or otherwise).
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(j) Subject to any limitation stated thereon or by Borrower or the
Guarantor in writing, all balance sheets, earnings statements and other
financial data which have been or shall hereafter be furnished to the Lender to
induce it to enter into this Agreement or otherwise in connection herewith, do
or will fairly represent the financial condition of the Borrower and the
Guarantor as of the dates and the results of their operations for the period for
which the same are furnished to the Lender and have been or will be prepared in
accordance with Lender's requirements, and that all other information, reports
and other papers and data furnished to the Lender are or will be, at the time
the same are so furnished, accurate and correct in all material respects and
complete insofar as completeness may be necessary to give the Lender a true and
accurate knowledge of the subject matter. There are no material liabilities of
any kind of the Borrower or the Guarantor as of the date of the most recent
financial statements which are not reflected therein. There have been no
materially adverse changes in the financial condition or operation of the
Borrower or the Guarantor since the date of such financial statements. At
Lender's request, Borrower and the Guarantor shall provide financial statements
prepared in accordance with Lender's requirements, certified by Borrower and the
Guarantor or their respective accountants, as applicable, that said financial
statements are true and accurate, on an annual basis within one hundred twenty
(120) days of the end of the Borrower's and the Guarantor's fiscal year, as
applicable, and on an interim basis as may be required by Lender.
(k) Borrower will pay all obligations, including tax claims, when due,
except such as the Borrower contests in an appropriate proceeding, in which
event Borrower shall furnish to Lender, if requested, a bond or other security
satisfactory to Lender in an amount sufficient to protect Lender and its
interest herein.
(l) There is no default on the part of Borrower or the Guarantor under
this Agreement, the Notes, any of the Security Agreements, the Guaranty, or any
of the other Loan Documents.
(m) The Borrower hereby agrees to indemnify the Lender and to hold the
Lender harmless of and from any and all claims for broker's or finder's fees or
commissions in connection with the Loans, and agrees to pay all expenses
(including but not limited to attorney's fees and expenses) incurred by the
Lender in connection with the defense of any action or proceeding brought to
collect any such fees and commissions, or otherwise relating to any such
broker's claims resulting from or arising out of any claim that the Borrower
consulted, dealt or negotiated with the person or entity making such brokerage
claim.
(n) Each Plan, pension, profit sharing or other employee benefit plan,
maintained by Borrower and the Guarantor is in material compliance with ERISA,
the Code, and all applicable rules and regulations adopted by regulatory
authorities pursuant thereto. The Borrower and the Guarantor have filed all
material reports required to be filed by ERISA, the Code, and such rules and
regulations. In addition, any qualified Plans subject to the minimum funding
standards, do not, as of the date hereof, have a funding deficiency, as defined
by ERISA. No Reportable Event material in relation to the business operations,
property, financial or other conditions of the Borrower or the Guarantor has
occurred with respect to any Plan. No tax penalty nor other liability in the
aggregate material in
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relation to business operations, property, or financial conditions of the
Borrower or the Guarantor has been assessed against the Borrower or the
Guarantor with respect to a Plan.
(o) Borrower has filed or caused to be filed all tax returns, which to the
knowledge of the Borrower, are required to be filed, and has fully paid all
taxes shown to be due and payable on said returns or any assessments made
against it or its property, and all other taxes, fees, or other charges imposed
on it or any of its property by any Governmental Authority. No tax liens have
been filed and, to the knowledge of Borrower, no claims are being made or may
hereafter be asserted with respect to any such taxes, fees or other charges
except for (i) those, the amount or validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with Generally Accepted Accounting Principles have been
provided on the books of Borrower; and (ii) such failures to file or pay such
tax liens or claims as could not, in the aggregate, reasonably be expected to
have a material adverse effect on the business operations, property or financial
or other condition of the Borrower, and can not reasonably be expected to have
an adverse effect on the ability of the Borrower to perform any of its
obligations in any material respect under this Agreement, the other Loan
Documents, or under any other contractual obligation.
(p) All copies of all documents, reports, and statements heretofore
furnished by or on behalf of Borrower and the Guarantor, or in connection with
this Agreement, to the Lender are, and those delivered subsequent to the date
hereof will be, true and correct copies of the originals of such documents,
reports and statements. All matters stated or certified in any written
statement, certificate, report or other writing heretofore furnished pursuant to
this Agreement by or on behalf of the Borrower and the Guarantor to the Lender
are, and all matters stated or certified subsequent to the date hereof will be,
true and correct as of the date stated or certified. All such documents,
reports, statements, writings and certifications shall be in form and detail
satisfactory to the Lender.
(q) The Borrower and the Guarantor own or lease all of their properties
and assets reflected on the balance sheets referred to in Section 7.1(j) hereof.
(r) All of the properties and assets of the Borrower set forth in Section
7.1(q) are free and clear of all mortgages, pledges, liens, charges and other
encumbrances of any nature whatsoever.
(s) The Borrower and the Guarantor are not in default in the performance,
observance of fulfillment of any of the obligations, covenants or conditions
contained in any lease for real or personal property, which would have a
material adverse affect on their businesses and all such leases are valid and
existing and in full force and effect.
(t) The Borrower is not an "investment company" within the meaning of the
Investment Company Act of 1940 and any amendments thereto.
(u) None of the employees of the Borrower or the Guarantor or any of their
subsidiaries are subject to any collective bargaining agreement and there are no
strikes, work stoppages, election or decertification petitions or proceedings,
unfair labor charges, equal opportunity proceedings, or
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other material labor/employee related controversies or proceedings pending, or,
to the best knowledge of the Borrower, threatening the Borrower or the Guarantor
or any of their subsidiaries, or between the Borrower or the Guarantor (or any
of their subsidiaries) and any of their employees, other than employee
grievances arising in the ordinary course of business which could not reasonably
be expected, individually or in the aggregate, to have a materially adverse
effect on the Borrower or the Guarantor.
Article 8
COVENANTS OF BORROWER
8.1 Borrower shall do, or cause to be done, all of the things necessary to
preserve, renew and keep in full force and effect, its corporate existence and
its rights, licenses, franchises and permits and shall comply with all laws
applicable to it, operate its business in a proper and efficient manner, and
substantially as presently operated or proposed to be operated, and at all times
shall maintain, preserve and protect all franchises and trade names and preserve
all property used or useful in the conduct of its business, and keep the same in
good repair, working order and condition, and from time to time make or cause to
be made any needed and proper repairs, renewals, replacements, betterments and
improvements thereto so that the business carried on in connection therewith may
be properly and advantageously conducted at all times.
8.2 Borrower shall at all times maintain true and correct books and
records and shall keep its books and records in accordance with Generally
Accepted Accounting Principles, and shall furnish, and shall have the Guarantor
furnish, the Lender with such financial statements as may be required by Lender
on a yearly and interim basis as set forth in this paragraph and other parts of
this Agreement.
8.3 Borrower shall properly pay and discharge (a) all taxes, assessments
and governmental charges upon or against Borrower or its assets prior to the
date on which penalties are attached thereto, unless, and to the extent, such
taxes are being diligently contested in good faith by appropriate proceedings
and appropriate reserves therefor have been established; and (b) all lawful
claims for labor, materials, supplies, services or anything else which might or
could, if unpaid, become a lien or charge upon the properties or assets of the
Borrower, unless and to the extent only that the same are transferred to bond,
being diligently contested in good faith, and by appropriate proceedings and
appropriate reserves therefor have been established.
8.4 The Borrower shall maintain the Cash Collateral Account, into which
all proceeds of Receivables (as collected from the Lockbox and otherwise) will
be deposited on a daily basis.
8.5 The Borrower shall, at its expense, comply with all of the insurance
requirements set forth in this Agreement and the Security Agreements throughout
the term of the Loans.
8.6 The Borrower shall indemnify and save harmless Lender from any and all
loss or damage of whatsoever kind and from any suits, claims, or demands,
including, without limitation,
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Lender's reasonable legal fees and expenses, at all trial and appellate levels,
on account of any matter or thing arising out of this Agreement or in connection
herewith, or on account of any act or omission to act by Borrower in connection
with this Agreement and the Loans. The Borrower agrees to pay any and all taxes
(other than taxes on or measured by net income of Lender) incurred or payable in
connection with the execution and delivery of this Agreement and all Loans, as
well as all costs and expenses (including attorneys' fees) incurred by Lender in
enforcing this Agreement. Such obligation shall survive repayment of the Loans.
8.7 Lender shall have the right, from time to time hereafter and until the
maturity of the Loans, to secure printed publicity, in the form of tombstone ads
or other similar ads, through newspapers and other media concerning the Loans.
8.8 The Borrower shall: (a) make full and timely payments of the principal
and interest due and owing under each of the Notes and the Indebtedness of the
Borrower to the Lender, whether now existing or hereafter arising; (b) duly
comply with all of the terms and covenants contained in each of the Loan
Documents; and (c) at all times maintain the liens and security interests
provided for under or pursuant to this Agreement and all other applicable Loan
Documents as valid and perfected liens and security interests on the property
intended to be covered thereby.
8.9 The Borrower shall promptly notify the Lender upon the commencement of
any action, suit or claim or counter-claim or proceeding against or
investigation of the Borrower (except when such alleged liability is fully
covered by insurance).
8.10 Borrower shall pay all indebtedness and obligations promptly and in
accordance with its respective terms and pay and discharge promptly all taxes,
assessments, and governmental charges or levies imposed upon it or in respect of
its property, before the same shall become in default, as well as all lawful
claims for labor, materials, and supplies or otherwise which, if unpaid, might
become a lien or charge upon such property or any part thereof, and timely
comply with all applicable laws and governmental rules and regulations.
8.11 The Borrower shall promptly notify the Lender in writing of: (a) any
material assessments by any taxing authorities for unpaid taxes as soon as
Borrower has knowledge thereof; and (b) any alleged default by the Borrower in
the performance of or any modification of any of the terms and conditions
contained in any agreement, mortgage or indenture or instrument to which the
Borrower is a party, or which is binding upon the Borrower, and upon any default
by the Borrower in the payment of any of its indebtedness.
8.12 The Borrower shall provide to Lender annual audited financial
statements of Borrower, in form and substance acceptable to Lender, prepared in
accordance with GAAP, by a national "Big Six" accounting firm acceptable to
Lender, in form and substance acceptable to Lender, within one hundred twenty
(120) days following the end of each fiscal year of Borrower.
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8.13 The Borrower shall provide to Lender monthly internally prepared
financial statements of Borrower, in form and substance acceptable to Lender,
certified by Borrower's chief financial officer as being true and correct in all
respects, and otherwise in form and substance acceptable to Lender, within
thirty (30) days following the end of each monthly period in each fiscal year of
Borrower. In addition to the monthly financial statements, Borrower shall also
provide to Lender a Covenant Compliance Certificate in the form attached hereto
as Exhibit "D", which certificate shall be provided on a monthly basis within
thirty (30) days following the end of each monthly period in each fiscal year of
Borrower.
8.14 The Borrower shall provide to Lender annual audited financial
statements of Guarantor, in form and substance acceptable to Lender, prepared in
accordance with GAAP, by a national "Big Six" accounting firm acceptable to
Lender, in form and substance acceptable to Lender, within one hundred twenty
(120) days following the end of each fiscal year of Guarantor.
8.15 Borrower shall allow Lender to conduct an audit, examination and
inspection of the properties and places of business of Borrower, including the
Borrower's books and records (and to make extracts therefrom), and, including an
audit confirmation of the accounts receivable balances and ownership interest in
the inventory, assets and business property of Borrower. Such audits,
examinations and inspections shall be at the sole expense of Borrower. The cost
of such audits shall be Four Hundred and 00/100 Dollars ($400.00) per day, plus
expenses. Said audits, examinations and inspections shall be conducted on a
quarterly basis.
8.16 Borrower shall allow Lender to conduct appraisals of Borrower's
inventory, said appraisals to be conducted by Koll Dove Tech, Inc., or such
other firm as shall be acceptable to Lender, said appraisals to be conducted at
such times as shall be required by Lender in its sole and absolute discretion,
at the sole cost and expense of Borrower; provided however, that so long as the
Loans are in good standing and there has been no prior and no then existing
Event of Default, the frequency of said appraisals shall not exceed two (2)
times per calendar year on a semi-annual basis.
8.17 Borrower shall provide Lender, within one hundred twenty (120) days
after the end of each fiscal year of Borrower, projections reflecting the
Borrower's performance for the next two (2) fiscal years including a balance
sheet and profit and loss statement, with said projections to be broken down on
a monthly basis for the next fiscal year and on an annual basis for the second
year.
8.18 Borrower shall provide to Lender within one hundred twenty (120) days
after the end of each fiscal year of Guarantor, projections reflecting the
Guarantor's performance for the next two (2) fiscal years including a balance
sheet and profit and loss statement, said projections to be broken down on a
monthly basis for the next fiscal year and on an annual basis for the second
year.
8.19 Borrower shall provide to Lender monthly an aged analysis of all
outstanding Receivables of Borrower, in form and substance acceptable to Lender,
within fifteen (15) days following the end of each monthly period in each fiscal
year of Borrower.
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8.20 Borrower shall provide to Lender monthly an aged analysis of all
outstanding accounts payables of Borrower, in form and substance acceptable to
Lender, within fifteen (15) days following the end of each monthly period in
each fiscal year of Borrower.
8.21 Borrower shall provide to Lender monthly an analysis of all inventory
of Borrower, in form and substance acceptable to Lender, within fifteen (15)
days following the end of each monthly period in each fiscal year of Borrower.
8.22 Borrower shall provide to Lender a copy of Borrower's backlog report
in form and content satisfactory to Lender in Lender's sole and absolute
discretion, within fifteen (15) days of the end of each quarterly period in each
fiscal year of Borrower.
8.23 Borrower shall provide to Lender on a semi-annual basis, a complete
and updated listing of all of its customers and account debtors, which listing
shall include all of the customers' and account debtors' addresses and phone
numbers.
8.24 Borrower shall not sell or convey any of its stock or assets, except
in the normal and ordinary course of business, including any merger,
consolidation, or reorganization, and there shall be no change in the ownership
or management of the Borrower unless consented to in writing by Lender.
8.25 Borrower shall not incur any capital expenditures in excess of One
Million Five Hundred Thousand and 00/100 Dollars ($1,500,000.00) in the
aggregate from the time of Closing through and including June 30, 2000, or in
excess of Three Million and 00/100 Dollars ($3,000,000.00) in the aggregate in
any fiscal year thereafter.
8.26 Borrower shall maintain a Minimum Tangible Net Worth (which is
defined as book net worth plus subordinated debt (which may not exceed the sum
of One Million Nine Hundred Fifty-Six Thousand and 00/100 Dollars
($1,956,000.00) for purposes of this calculation) minus good will (intangibles))
of not less than Two Million and 00/100 Dollars ($2,000,000.00) from the date of
Closing through and including September 29, 1999; not less than Two Million Five
Hundred Thousand and 00/100 Dollars ($2,500,000.00) from September 30, 1999
through and including December 30, 1999; not less than Three Million Five
Hundred Thousand and 00/100 Dollars ($3,500,000.00) from December 31, 1999
through and including June 29, 2000; and not less than Five Million and 00/100
Dollars ($5,000,000.00) from June 30, 2000 and at all times thereafter.
8.27 Borrower shall maintain a Current Ratio (which is defined as current
assets divided by current liabilities, it being acknowledged that for purposes
of this calculation the Loan is considered a current liability) of not less than
1.00 to 1 from the date of Closing through and including June 29,2000; and not
less than 1.05 to 1 from June 30,2000 and at all times thereafter.
8.28 Borrower shall maintain a Debt Ratio (which is defined as
consolidated total liabilities divided by tangible net worth) of not greater
than 14.00 to 1 from the time of Closing through and
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including September 29, 1999; not greater than 10.50 to 1 from September 30,
1999 through and including December 30, 1999; not greater than 8.00 to 1 from
December 31, 1999 through and including June 29,2000; and not greater than 5.50
to 1 from June 30,2000 and at all times thereafter.
8.29 Borrower shall maintain an Interest Coverage Ratio (which is defined
as earnings before interest and taxes minus extraordinary gain divided by
interest expense) of not less than 1.00 to 1 from the time of Closing through
and including December 30,1999, not less than 2.00 to 1 from December 31, 1999
through and including June 29,2000; and not less than 2.50 to 1 from June 30,
2000 and at all times thereafter. The Interest Coverage Ratio will be tested on
a rolling twelve (12) month basis.
NOTE: Compliance with the above set forth covenants shall be tested on a
monthly basis excepting for Capital Expenditures and Tangible Net
Worth, which shall be tested on an annual basis.
8.30 The Borrower will not assume, guarantee, endorse or otherwise become
directly or contingently liable in connection with any obligation of any other
person, firm or corporation without Lender's prior written consent, which
consent shall be in Lender's sole discretion.
8.31 The Borrower will not authorize, issue, grant or sell any shares of
its capital stock without prior written approval of Lender.
8.32 Borrower shall not incur any additional indebtedness (secured or
unsecured) or lease commitments during the term of the Loans in excess of Two
Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate in each fiscal
year, without the prior written approval of Lender, which approval shall be in
Lender's sole discretion.
8.33 Borrower shall not make any loans to officers, directors and/or
employees of Borrower in excess of One Hundred Thousand and 00/100 Dollars
($100,000.00) in the aggregate in each fiscal year during the term of the Loans,
without the prior written approval of Lender, which approval shall be in
Lender's sole discretion. Borrower shall not convey or transfer any cash, assets
or property to any affiliate, subsidiary or related entity of the Borrower at
any time during the term of the Loans.
8.34 Borrower shall not declare or pay any dividends during the term of
the Loans.
NOTE: In connection with the above, all accounting terms used shall be
construed in accordance with GAAP.
8.35 There shall be no subordinate financing of any of the property
encumbered by the Security Agreements, or otherwise included in any collateral
pledged as security for the Loans ("Collateral"), and, no changes in the
borrowing entity without Lender's prior written approval.
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8.36 The Borrower shall give the Lender prompt written notice of any
action, suit or proceeding at law or in equity or by or before any governmental
instrumentality or other agency, the outcome of which might adversely affect the
operations or financial condition of the Borrower or the Guarantor or adversely
affect the ability of the Borrower or the Guarantor to perform their respective
obligations under the Loan Documents.
8.37 The Borrower shall give Lender prompt written notice of any Event of
Default hereunder, or any event of default with respect to its or the
Guarantor's obligations under any of the other Loan Documents to which it or the
Guarantor is a party, indicating the nature and status thereof and the action
which the party giving such notice proposes to take with respect thereto.
8.38 Borrower shall not directly or indirectly engage in any business
activity which would represent a material change from the kind of business
activity currently engaged in by it, which in the aggregate would have a
substantial and material effect on the Borrower's businesses, without the prior
written consent of Lender, which consent shall be in Lender's sole discretion.
8.39 Borrower shall provide to the Lender all information reasonably
necessary for the Lender to verify the credit standing of Borrower and Guarantor
during the term of the Loans.
8.40 The Borrower shall establish no additional employee benefit plans of
any nature without the prior written consent of the Lender, which consent shall
not be unreasonably withheld. Each pension, profit sharing, or other employee
benefit plan, at anytime, maintained by the Borrower, shall be in material
compliance with ERISA, the Code and all applicable rules and regulations adopted
by regulatory authorities, pursuant thereto. The Borrower will cause to be filed
all material reports required to be filed by ERISA, the Code and such rules and
regulations.
8.41 The Borrower within ten (10) days after written request from the
Lender, will furnish a written statement in form satisfactory to the Lender,
duly acknowledged: (i) setting forth the unpaid principal balance of, and the
interest and other sums due on, the Indebtedness evidenced by the Notes and/or
secured by any of the other Loan Documents; (ii) stating whether or not any
offsets or defenses exist against the payments due under the Notes or any of the
other Loan Documents; (iii) stating the current maturity date of the Notes; and
(iv) setting forth such other information as the Lender may request from time to
time.
8.42 The Borrower will not assume, guaranty, endorse or otherwise become
directly or contingently liable in connection with any obligation of any other
person, firm or corporation without Lender's prior written consent, which
consent shall be in Lender's sole discretion.
8.43 The Borrower shall notify the Lender immediately of any change in the
name of the Borrower, the principal place of business of the Borrower, the
office where the books and records of the Borrower are kept or any change in the
registered agent of the Borrower for the purpose of service of process.
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8.44 The Borrower shall use the funds borrowed by the Borrower under this
Agreement solely for the purposes set forth in this Agreement. Additionally,
Borrower shall not transfer any funds borrowed by the Borrower under this
Agreement or any other funds of Borrower to the Guarantor, or to any other
affiliated or subsidiary corporation of the Borrower, during the term of this
Agreement.
Article 9
EVENTS OF DEFAULT
9.1 Events of Default. Each of the following is an Event of Default
hereunder:
(a) If Borrower fails to pay any installment of interest or principal
under either of the Notes when the same shall become due, subject to any
applicable grace period(s) set forth in either Note, if and as applicable;
(b) The dissolution, termination of existence, merger, consolidation or
reorganization of Borrower;
(c) Intentionally deleted.
(d) If there occurs any default or Event of Default under any other term
of this Agreement, either of the Notes, any of the Security Agreements, the
Guaranty or any of the other Loan Documents relating hereto or thereto, subject
to any applicable notice and/or cure periods set forth therein, if any;
(e) If any representation or warranty of Borrower hereunder shall prove to
be incorrect in any material respect;
(f) The commencement of levy, execution or attachment proceedings against
Borrower, or any principal thereof, or Guarantor, or the application for or
appointment of a liquidator, receiver, custodian, sequester, conservator,
trustee, or other similar judicial officer (and such appointment continues for a
period of forty-five (45) days), or the insolvency, in the bankruptcy or equity
sense, of Borrower, any principal thereof, or Guarantor;
(g) The assignment for the benefit of creditors, or the admission in
writing of any inability to pay any debts generally as they become due, or
ordering the winding up or liquidation of its affairs, by Borrower, any
principal thereof, or Guarantor, or the commencement of a case by or against
Borrower, any principal thereof, or Guarantor, under any insolvency, bankruptcy,
creditor adjustment, debtor rehabilitation or similar law, state or federal;
(h) The determination by Borrower, any principal thereof, or Guarantor to
request relief under any insolvency, bankruptcy, creditor adjustment, debtor
rehabilitation or similar proceeding, provincial, state or federal, including
without limitation the consent by any of them to the appointment
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of or taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator or similar official for it or for any of its respective property or
assets;
(i) There shall have occurred any material adverse change in the financial
condition of Borrower or the Guarantor;
(j) The issuing of any attachment or garnishment, or the filing of any
lien against the Collateral, or the pledge, assignment, transfer or granting of
a security interest by the Borrower of any equity in any of the Collateral
without the written consent of the Lender;
(k) The taking of possession of any substantial part of the property of
the Borrower or the Guarantor at the instance of any Governmental Authority;
(l) Falsity in any material respect of, or any material omission in, any
representation or statement made to Lender by or on behalf of the Borrower or
Guarantor in connection with the Loans;
(m) If the Borrower shall have failed to comply with any other agreement,
covenant, condition, provision or term contained in this Agreement, subject to
notice and a fifteen (15) day right to cure;
(n) There shall be entered against Borrower or Guarantor one or more
judgments or decrees;
(o) There shall occur an Event of Default by the Borrower in the
performance of its obligations under the Indebtedness, or under any other loan
agreement with the Lender and/or any other lender;
(p) There shall occur any default in the payment or performance of any
obligation of the Guarantor arising under its Guaranty, or pursuant to any of
the Loan Documents, subject to any applicable notice and cure period provided in
said documents, if any; or
(q) If at any time Lender deems itself insecure for any reason whatsoever
(notwithstanding any grace period in any Loan Documents), or if any change or
event shall occur which in Lender's judgment impairs any security for the Loans,
increases Lender's risk in connection with the Loans, or indicates that Borrower
or the Guarantor may be unable to perform their respective obligations under any
of the Loan Documents.
Article 10
SET-OFFS
In addition to any other rights the Lender may have at law or in equity,
if Borrower becomes insolvent howsoever evidenced, or any Event of Default
occurs and is continuing, any indebtedness
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from the Lender to Borrower, and any other property of Borrower held by the
Lender, may be set-off and applied towards the payment of the Indebtedness of
the Borrower under this Agreement (including, but not limited to all
Indebtedness evidenced by the Notes) to the Lender, including, without
limitation, any note payable to the Lender, whether or not such Indebtedness of
the Borrower to the Lender on such note or any part thereof shall then be due.
Article 11
LENDER'S REMEDIES IN EVENT OF DEFAULT
11.1 Upon the occurrence of any Event of Default, subject only to any
notice requirement and grace period expressly provided in the Notes, the
Security Agreements, or any other Loan Documents, if any, the Lender shall be
entitled to all of its rights and remedies hereunder, at law or in equity and
under the Notes, the Security Agreements, and any of the other Loan Documents,
including, without limitation, the right to declare the outstanding principal
balance of the Notes, the accrued interest thereon, and all other obligations of
the Borrower to the Lender under this Agreement, the other Loan Documents or
otherwise to be immediately due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived,
anything in this Agreement, the Notes or any of the other Loan Documents to the
contrary notwithstanding, and the Lender's obligation to make any additional
Advances hereunder shall be permanently terminated.
11.2 Lender may proceed directly against the Guarantor, with or without
exercising its rights against the Borrower, and obtain judgments against the
Guarantor.
11.3 All of the remedies herein given to Lender or otherwise available to
it shall be cumulative and may be exercised concurrently. Failure to exercise
any of the remedies herein provided shall not constitute a waiver thereof by
Lender, nor shall use of any such remedies prevent the subsequent or concurrent
resort to any other remedy or remedies which shall be vested in Lender by this
Agreement or at law or in equity. To be effective, any waiver by Lender must be
in writing and such waiver shall be limited in its effect to the condition or
default specified therein; but no such waiver shall extend to any subsequent
condition or default or impair any right consequent thereon.
Article 12
TAX INDEMNIFICATION
Borrower hereby agrees to and does hereby indemnify and hold harmless
Lender of and from any and all liability in connection with payment of any and
all intangible, documentary stamp, transfer, recording and other taxes due and
owing to the State of Florida, and all other applicable jurisdictions in
connection with the execution, delivery and/or enforcement of this Agreement,
the Notes, the Security Agreements, and all associated Loan Documents, together
with all penalties and interest associated therewith, if any. Accordingly,
Borrower does hereby authorize Lender to reimburse itself for any such taxes
that Lender pays upon behalf of Borrower from the proceeds under the Note, in
the event Lender, at any time, in its sole discretion, deems it necessary to pay
such taxes, together
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with any penalties and interest associated therewith. This indemnification shall
survive repayment of the Loans.
Article 13
CROSS-DEFAULT AND CROSS-COLLATERALIZATION
It is agreed, acknowledged and understood that the Loans, as evidenced by
the Notes and the Loan Documents, are cross-defaulted such that an event of
default by Borrower under either of the Notes or any of the Loan Documents shall
be and constitute a default under all of the Notes, this Agreement and all of
the Loan Documents entitling Lender to exercise all remedies provided herein and
in the Loan Documents in connection with the Notes, the Indebtedness and all
obligations associated therewith.
It is additionally agreed, acknowledged and understood that the Loans, as
evidenced by the Notes and the Loan Documents, are cross-collateralized such
that no collateral which secures the Loans shall be released without the
Lender's prior written consent, which consent shall be in Lender's sole and
absolute discretion, until such time as all of the Notes are paid and satisfied
in full.
Article 14
MISCELLANEOUS
14.1 Verification of Facts. Any condition of this Agreement which requires
the submission of evidence of the existence or non-existence of a specified fact
or facts implies as a condition the existence or non-existence, as the case may
be, of such fact or facts, and Lender shall, at all times, be free independently
to establish to its satisfaction and in its absolute discretion such existence
or non-existence.
14.2 No Levy or Attachment. No part of the Loans will be, at any time,
subject or liable to attachment or levy at the suit of any creditor of Borrower
or of any other interested party, or at the suit of any contractor,
subcontractor, sub-subcontractors or materialman, or any of their creditors.
14.3 Severability. If performance of any provision hereof or any
transaction related hereto is limited by law, then the obligation to be
performed shall be reduced accordingly, and if any clause or provision herein
contained operates or would operate to invalidate this Agreement in part, then
the invalid part of said clause or provisions only shall be held for naught as
though not contained herein, and the remainder of this Agreement shall remain
operative and in full force and effect.
14.4 Waiver. If Lender shall waive any provisions of the Loan Documents,
or shall fail to enforce any of the conditions or provisions of this Agreement,
such waiver shall not be deemed to be a continuing waiver, and shall never be
construed as such, and Lender shall thereafter have the right to insist upon the
enforcement of such conditions or provisions. Furthermore, no provision of this
Agreement shall be amended, waived, modified, discharged or terminated except by
instrument in writing, signed by the parties hereto.
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14.5 Entire Agreement. This Agreement and the documents expressly referred
to herein embody the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings relating to the subject matter. This Agreement may
be changed, waived, discharged, or terminated only by an instrument in writing
duly executed by the party against which enforcement of such change, waiver,
discharge, or termination is sought.
14.6 No Violation. Anything in this Agreement to the contrary
notwithstanding, the Lender shall not be obligated to extend credit to the
Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
14.7 Notices. All notices given hereunder shall be in writing and
addressed as follows:
(a) Lender: NATIONAL BANK OF CANADA
5100 Town Center Circle, Suite 430
Boca Raton, Florida 33486
Attention: Jean E. Page, Vice President
with copy to: Gary S. Singer, Esquire
MOMBACH, BOYLE & HARDIN, P.A.
500 East Broward Boulevard, Suite 1950
Fort Lauderdale, Florida 33394
(b) Borrower: AMITEK CORPORATION
1701 Clint Moore Road
Boca Raton, Florida 33487
with copy to: John J. Madden, Esquire
HEMENWAY & BARNES
60 State Street, Eighth Floor
Boston, Massachusetts 02109
(c) Guarantor: CENTURY ELECTRONICS MANUFACTURING, INC.
274 Ceder Hill Road
Marlborough, Massachusetts 01752
Attn: Les Sainsbury, CEO and President
14.8 Reproduction of Documents. This Agreement, the Loan Documents and all
other documents relating hereto or thereto may be reproduced by the Lender, and,
the Lender may destroy any original documents so reproduced. The Borrower agrees
and stipulates that any such reproduction shall be admissible in evidence as the
original itself in any jurisdiction or administrative proceeding (whether or not
the original is in existence and whether or not such reproduction was
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made by the Lender in the regular course of business) and that any enlargement,
facsimile, or further reproduction of said document shall likewise be admissible
in evidence.
14.9 No Partnership or Control. In no event shall the Lender's rights
hereunder or under any of the Loan Documents grant the Lender the right to or be
deemed to indicate that the Lender is in control of the business, management or
properties of the Borrower, or has power over the daily management functions and
operating decisions made by the Borrower. The Lender is the Lender only and
shall not be considered a shareholder, joint venturer or partner of the
Borrower.
14.10 Headings. The headings preceding the text of the sections of this
Agreement are used solely for convenience of reference and shall not affect the
meaning, construction, or effect of this Agreement.
14.11 Assignment or Participation by Lender. Lender shall have the right
at any time to convey or assign the Loans or any portion thereof, and,
additionally, shall have the right to sell a participation in the Loans to
another lending institution at any time that the Loans are outstanding, in any
amount as solely determined by Lender, and Lender is hereby authorized to
release all financial information of the Borrower to said assignee or
participating lender(s).
14.12 No Assignment by Borrower. Borrower shall not assign this Agreement
without the prior written consent of Lender, and any assignment in violation
hereof shall be of no force and effect and shall constitute an Event of Default
herein. Subject to the previous sentence, this Agreement shall extend to and
bind the parties hereto, and their respective successors and assigns.
14.13 Survival of Representations and Warranties. Except as otherwise
noted herein, all covenants, agreements, representations and warranties made
herein and in the Loan Documents shall survive the respective dates of
effectiveness thereof and shall continue in full force and effect so long as the
Loan Documents, or any of them, remain in effect or any of the obligations
evidenced thereby are outstanding and unpaid.
14.14 Conflicts. In the event of any conflict, inconsistency or ambiguity
between the provisions of this Agreement and the provisions of the Notes, the
Security Agreements, the Guaranty or any other Loan Documents, the provisions of
this Agreement shall control and prevail.
14.15 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument. Any term used herein shall
be equally applicable to both the singular and plural forms.
14.16 Expenses. Borrower will pay all reasonable out-of-pocket expenses
incurred by Lender in connection with the preparation of the Loan Documents
(whether or not the transactions contemplated hereby shall be consummated), the
making of the Loans, the enforcement and protection in any legal or equitable
proceeding of the rights of the Lender in connection with the Loan Documents,
and in connection with any action or claim under the Loan Documents including
the
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Notes, or in any way related thereto, including, without limitation, the
reasonable fees and disbursements of counsel of the Lender.
14.17 No Usury. It is the intention of the parties hereto to comply with
the usury laws of applicable governmental authorities; accordingly, it is agreed
that, notwithstanding any provision to the contrary in the Notes, this Loan
Agreement or any of the other documents securing payment thereof or otherwise
relating hereto, no such provision shall require the payment or permit the
collection of interest in excess of the maximum permitted by law. In determining
the maximum rate allowed, Lender may take advantage of any state or federal law,
rule or regulation in effect from time to time which may govern the maximum rate
of interest which may be charged. If any excess of interest in such respect is
provided for, or shall be adjudicated to be so provided for, in the Notes, this
Loan Agreement or in any of the other documents securing payment thereof or
otherwise relating hereto, then in such event: (a) the provisions of this
paragraph shall govern and control; (b) neither Borrower nor its heirs, personal
representatives, successors or assigns or any other party liable for the payment
thereof, shall be obligated to pay the amount of such interest to the extent
that it is in excess of the maximum amount permitted by law; (c) any such excess
which may have been collected shall be either applied as a credit against the
then unpaid principal amount of the Notes or refunded to Borrower; and (d) the
effective rate of interest shall be automatically reduced to the maximum lawful
contract rate allowed under the applicable usury laws.
14.18 Waiver. The Borrower hereby waives any right to require a proceeding
first against any other party providing collateral, or to exhaust any security
for the performance of the Indebtedness. The Borrower further covenants that no
security now or subsequently held by the Lender for the payment of the
Indebtedness evidenced by the Notes made by Borrower under this Agreement, or
for the payment of any other Indebtedness of Borrower to the Lender under this
Agreement or the other Loan Documents, whether in the nature of a security
interest, pledge, lien, assignment, setoff, suretyship, guaranty, indemnity,
insurance or otherwise, and no act, omission or other conduct of the Lender in
respect of such security (excluding fraud, gross negligence or willful
misconduct), shall affect in any manner whatsoever the unconditional obligation
of the Borrower under this Agreement and the Notes, and the Lender may release,
exchange, enforce, apply the proceeds of and otherwise deal with any such
security without affecting in any manner the unconditional obligation of the
Borrower under this Agreement and the Notes.
Without limiting the generality of the foregoing, such obligations, and
the rights of the Lender to enforce the same, by proceedings, whether by action
at law, suit in equity or otherwise, shall not be in any way affected by (i) any
insolvency, bankruptcy, liquidation, reorganization, readjustment, composition,
dissolution, winding up or other proceeding involving or affecting the Borrower
or others, or (ii) any change in the ownership of any of the capital stock of
the Borrower or any other party providing collateral for any of the
Indebtedness, or any of their respective affiliates.
The Borrower hereby waives to the fullest extent possible under applicable
law:
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(a) any defense based upon the doctrine of marshalling of assets or
upon an election of remedies by the Lender, including, without limitation, an
election to proceed by nonjudicial rather than judicial foreclosure;
(b) any defense based upon any statute or rule of law which provides
that the obligation of a surety must be neither larger in amount nor in other
respects more burdensome than that of the principal; and
(c) any other event or action (excluding the Borrower's compliance
with the provisions hereof) that would result in the discharge by operation of
law or otherwise of the Borrower from the performance or observance of any
obligation, covenant or agreement contained in this Agreement, the Notes or any
other Loan Documents.
14.19 Indemnification. The Borrower shall indemnify and hold harmless the
Lender, and its directors, officers, employees and agents against all losses,
claims, damages, penalties, judgments, liabilities and expenses (including,
without limitation, all expenses of litigation or preparation therefor whether
or not the Lender is a party thereto) which it may pay or incur arising out of
or relating to, directly or indirectly, this Agreement, the Notes, the other
Loan Documents, the transactions contemplated hereby or the direct or indirect
application or proposed application of the proceeds of any Loans hereunder.
14.20 Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal statutes and laws of the State of New York (other
than with respect to conflicts of laws), but giving effect to federal laws
applicable to national banks to the extent applicable, except as required by
mandatory provisions of laws and except to the extent that the validity or
perfection of the security interest created hereby, or remedies hereunder, in
respect of the Property or any other particular Collateral are governed by the
laws of a jurisdiction other than the State of New York.
14.21 Year 2000 Compatibility. Borrower shall take all actions necessary
to assure that Borrower's computer based systems are able to operate and
effectively process data including dates on and after January 1, 2000. At the
request of Lender, Borrower shall provide Lender assurance acceptable to Lender
of Borrower's Year 2000 compatibility. Borrower hereby covenants and agrees that
all of Borrower's information systems, including without limitation, all
computer hardware and software, networks, databases, and all other electronic
data storage, retrieval and computation hardware, software and devices of any
kind (collectively, the "Information Systems), have been and/or will be updated
and modified to accommodate and conform to the Year 2000 date change, and are
and/or will be in full compliance with any and all federal, state and local
laws, regulations and ordinances relating to the same, whether now in effect, or
hereafter enacted (collectively, the "Information System Laws").
Borrower hereby agrees, unconditionally, absolutely, and irrevocably to
indemnify, defend, and hold harmless Lender, its affiliates, successors,
assigns, and its officers, directors, employees, and agents against and in
respect of any loss, liability, cost, injury, expense, or damage of any and
every kind whatsoever (including without limitation, court costs and attorneys'
fees and expenses) which
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at any time or from time to time maybe suffered or incurred, directly or
indirectly, in connection with, with respect to, or as a direct or indirect
result of the failure of Borrower to update or modify its Information Systems to
accommodate and conform to the Year 2000 date change and/or fully comply with
all Information System Laws including, without limitation, any losses,
liabilities, damages, injuries, costs, expenses, or claims asserted or arising
under the Information System Laws, whether now known or unknown.
14.22 THE BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF ALL STATE AND FEDERAL COURTS SITTING IN NEW YORK
COUNTY, NEW YORK, AND AGREES THAT ALL SUMMONS AND OTHER COURT PROCESS ISSUED BY
SAID COURTS MAY BE SERVED UPON THE BORROWER, WITHIN OR OUTSIDE OF SAID COURTS'
TERRITORIAL JURISDICTION, BY MAILING THE SAME, BY REGISTERED OR CERTIFIED MAIL,
OR BY PERSONAL SERVICE, TO THE BORROWER AT ITS ADDRESS SPECIFIED HEREIN.
IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT NO SUIT OR ACTION SHALL BE
COMMENCED BY BORROWER, OR BY ANY SUCCESSOR, PERSONAL REPRESENTATIVE OR ASSIGN OF
BORROWER, WITH RESPECT TO THE LOANS, THIS LOAN AGREEMENT OR ANY OTHER LOAN
DOCUMENTS, OTHER THAN IN A STATE COURT OF COMPETENT JURISDICTION IN AND FOR NEW
YORK COUNTY, NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT
IN THE UNITED STATES IN WHICH THE PRINCIPAL PLACE OF BUSINESS OF THE LENDER IN
THE STATE OF NEW YORK IS SITUATED, AND NOT ELSEWHERE. NOTHING CONTAINED IN THIS
PARAGRAPH SHALL PROHIBIT THE LENDER FROM INSTITUTING SUIT IN ANY COURT OF
COMPETENT JURISDICTION FOR THE ENFORCEMENT OF ITS RIGHTS HEREUNDER, IN THE
NOTES, IN THE SECURITY AGREEMENTS, OR IN ANY OTHER LOAN DOCUMENT.
14.23 Waiver and Release. AS A MATERIAL INDUCEMENT FOR THE LENDER TO
EFFECTUATE THE LOANS AND THE LENDER TO EXECUTE THIS AGREEMENT, THE BORROWER DOES
HEREBY RELEASE, WAIVE, DISCHARGE, COVENANT NOT TO SUE, ACQUIT, SATISFY AND
FOREVER DISCHARGE THE LENDER, ITS OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS AND
AGENTS AND ITS AFFILIATES AND ASSIGNS FROM ANY AND ALL LIABILITY, CLAIMS,
COUNTERCLAIMS, DEFENSES, ACTIONS, CAUSES OF ACTION, SUITS, CONTROVERSIES,
AGREEMENTS, PROMISES AND DEMANDS WHATSOEVER IN LAW OR IN EQUITY WHICH THE
BORROWER EVER HAD, NOW HAS, OR WHICH ANY PERSONAL REPRESENTATIVE, SUCCESSOR,
HEIR OR ASSIGN OF THE BORROWER HEREAFTER CAN, SHALL OR MAY HAVE AGAINST THE
LENDER, ITS OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS AND AGENTS, AND ITS
AFFILIATES AND ASSIGNS, FOR, UPON OR BY REASON OF ANY MATTER, CAUSE OR THING
WHATSOEVER, THROUGH THE DATE HEREOF. THE BORROWER FURTHER EXPRESSLY COVENANTS
WITH AND WARRANTS UNTO THE LENDER AND ITS AFFILIATES AND ASSIGNS, THAT THERE
EXIST NO CLAIMS,
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COUNTERCLAIMS, DEFENSES, OBJECTIONS, OFFSETS OR CLAIMS OF OFFSET AGAINST THE
LENDER OR THE OBLIGATION OF THE BORROWER TO PAY THE LENDER ALL AMOUNTS OWING
UNDER THE NOTES, THIS LOAN AGREEMENT, AND ALL ASSOCIATED LOAN DOCUMENTS AS AND
WHEN THE SAME BECOME DUE AND PAYABLE.
14.24 Amended and Restated Agreement. THIS AGREEMENT AMENDS AND RESTATES
THE ORIGINAL LOAN AGREEMENT SUCH THAT THE SECURITY INTERESTS, RIGHTS, DUTIES AND
OBLIGATIONS OF THE BORROWER AND THE LENDER CREATED BY THE ORIGINAL LOAN
AGREEMENT ARE NOT EXTINGUISHED, BUT ARE REAFFIRMED AND REMAIN IN FULL FORCE AND
EFFECT AS MODIFIED BY AND AS PROVIDED IN THIS AMENDED AND RESTATED LOAN
AGREEMENT.
INTENTIONALLY LEFT BLANK
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WAIVER OF JURY TRIAL. LENDER AND BORROWER HEREBY MUTUALLY, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY
IN RESPECT TO ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH THIS AGREEMENT AND ANY AGREEMENT CONTEMPLATED OR TO BE EXECUTED
IN CONJUNCTION HEREWITH, UNDER ANY OF THE LOAN DOCUMENTS, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF
EITHER PARTY. THE BORROWER ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A
MATERIAL INDUCEMENT TO THE LENDER IN ACCEPTING THIS AGREEMENT, AND, THAT THE
LENDER WOULD NOT HAVE ACCEPTED THIS AGREEMENT WITHOUT THIS JURY TRIAL WAIVER,
AND, THAT THE UNDERSIGNED HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS HAD AN
OPPORTUNITY TO CONSULT WITH AN ATTORNEY REGARDING THIS JURY TRIAL WAIVER, AND,
UNDERSTANDS THE LEGAL EFFECT OF THIS JURY TRIAL WAIVER.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
Signed, sealed and delivered in BORROWER:
the presence of:
AMITEK CORPORATION, a Delaware
corporation
/s/ Teresa A. Belmonte By: /s/ James M. Roller
- ---------------------------------- -----------------------------
Title: Secretary & Treasurer
- ---------------------------------- --------------------------
(Corporate Seal)
LENDER:
NATIONAL BANK OF CANADA,
a Canadian Chartered Bank
/s/ Teresa A. Belmonte By: /s/ Jean Page
- ---------------------------------- -----------------------------
Title: V.P.
- ---------------------------------- --------------------------
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COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF SUFFOLK )
The foregoing instrument was acknowledged before me this 30th day of July,
1999, by James M. Roller as Secretary & Treasurer and on behalf of AMITEK
CORPORATION, a Delaware corporation, who |_| is personally known to me or |_|
produced his/her driver's license as identification.
/s/ Beth A. Good
------------------------------
NOTARY PUBLIC
Commonwealth of Massachusetts
Print/Type/Stamp Name:
Commission Expiration Date:
Notary Seal:
[NOTARY'S STAMP]
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF SUFFOLK )
The foregoing instrument was acknowledged before me this 30th day of July,
1999, by Jean Page, as Vice President of and on behalf of NATIONAL BANK OF
CANADA, a Canadian Chartered Bank, who |_| is personally known to me or |_|
produced his/her driver's license as identification.
/s/ Beth A. Good
------------------------------
NOTARY PUBLIC
Commonwealth of Massachusetts
Print/Type/Stamp Name:
Commission Expiration Date:
Notary Seal:
[NOTARY'S STAMP]
-35-
<PAGE>
EXHIBITS
Description Exhibit
- ----------- -------
Remittance Report ................................. A
Borrowing Base Certificate ........................ B
Fictitious Names .................................. C
Financial Covenant Compliance Certificate ......... D
<PAGE>
REMITTANCE REPORT
To Commercial Finance Department Company___________________
Prepared By_______________
[LOGO] NATIONAL BANK OF CANADA EOT_______________________
BANK USE ONLY
This Form To Be Used To Report Detail of Lockbox, Depository Transfer Check,
Wire Transfer or Correspondent Bank Transfer. This Form Must Be Completed For
Each Day's Remittance.
DETAIL MUST BE ATTACHED OR SHOWN ON REVERSE.
- --------------------------------------------------------------------------------
FOR BANK USE ONLY
FORMAT |0|8|R| |C|M|L|
OBLIGOR NO. |_|_|_|_|-|_|_|_|_|
COLLATERAL NO. |0|3|_|_|_|_|
- --------------------------------------------------------------------------------
PLEASE TYPE OR PRINT CLEARLY
DATE OF REMITTANCE ................ |_|_|-|_|_|-|_|_|
REMITTANCE REPORT NUMBER .......... |_|_|-|_|_|_|_|_|
(MO.)
1. GROSS REDUCTION TO ACCOUNTS RECEIVABLE ........... |_|,|_|_|_|,|_|_|_|.|_|_|
(To Be Reported on Line 3A
on Borrowing Base)
2. LESS DISCOUNTS ................. |_|,|_|_|_|,|_|_|_|.|_|_|
3. LESS OTHER (EXPLAIN ON BACK) ... |_|,|_|_|_|,|_|_|_|.|_|_|
4. TOTAL NONCASH REDUCTIONS TO ACCOUNTS
RECEIVABLE (2+3) ................................. |_|,|_|_|_|,|_|_|_|.|_|_|
-------------------------
5. ACCOUNTS RECEIVABLE CASH (1-4) ................... |_|,|_|_|_|,|_|_|_|.|_|_|
6. PLUS: CASH NOT RELATED TO
ACCOUNTS RECEIVABLE (EXPLAIN ON BACK) ............ |_|,|_|_|_|,|_|_|_|.|_|_|
-------------------------
7. TOTAL CASH REMITTED (5+6) ........................ |_|,|_|_|_|,|_|_|_|.|_|_|
(To Be Reported on Line 17 =========================
On Borrowing Base)
THE UNDERSIGNED HEREBY CERTIFIES THAT ALL CASH RECEIPTS, DISCOUNTS, AND OTHER
REDUCTIONS TO ACCOUNTS RECEIVABLE PREVIOUSLY UNREPORTED TO NATIONAL BANK OF
CANADA ARE SHOWN ABOVE AND THAT THE BORROWER IS NOT IN DEFAULT UNDER THE
SECURITY AGREEMENT, OR ANY SUBSEQUENT AGREEMENTS, BETWEEN THE BANK AND BORROWER.
AUTHORIZED SIGNATURE _______________________
EXHIBIT "A"
<PAGE>
REMITTANCE DETAIL REPORT Remittance No. ______
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Customer Reference Gross Reduction A/R
Name Number To A/R Discount Other Cash
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
Totals
- ---------------------------------------------------------------------------------------------
Enter Line 1 Enter Line 2 Enter Line 3 Enter Line 5
on Remittance on Remittance on Remittance on Remittance
------------------------------------------------------------------
Cash Not Related To Accounts Receivable
To Be Applied To Loan Only
- ----------------------------------------------------------------------------
$
- ----------------------------------------------------------------------------
EXPLANATION
- ----------------------------------------------------------------------------
EXPLANATION
- ---------------------------------------------------------------------------------------------
EXPLANATION Sub Total: Cash Not Related to A/R Enter Line 6
on Remittance
-----------------
Total Cash Remitted Enter Line 7
on Remittance $
-----------------
</TABLE>
<PAGE>
[LOGO] NATIONAL CANADA FINANCE CORP.
BORROWING BASE CERTIFICATE
EOT# ____________________
Format |_|_|R|-|C|M|L|
Obigor # |_|_|_|_|-|_|_|_|_|
Collat # |0|3|_|_|_|_|
As of Date |_|_|-|_|_|-|_|_|
Bank Use Only
CUSTOMER NAME: _____________________________ -------------------------------
<TABLE>
<S> <C> <C>
CERTIFICATE NUMBER: _____________
1. ACCOUNTS RECEIVABLE CONTROL (Line 6 of previous Certificate dated ___________) $____________
2. Additions to Accounts Receivable Control since last Certificate
(A) New Sales Dated: ________ - _________ $____________
(B) Other Additions (Explain on back) ____________
(C) TOTAL ADDITIONS +____________
3. Reductions to Accounts Receivable Control since last Certificate
(A) Gross Reductions (Line 1 of Remit # ________ - _________ $____________
(B) Credit Memos issued since last Certificate ____________
(C) Other Reductions since last Certificate (Explain on back) ____________
(D) TOTAL REDUCTIONS -____________
4. Accounts Receivable Control (Line 1 plus 2C minus 3D) $
============
5. Adjustment to Accounts Receivable Control (See instructions
and explain on back) +/-____________
6. ADJUSTED ACCOUNTS RECEIVABLE CONTROL $
============
7. Total Ineligible Accounts (Line 5 of previous Recapitulation
dated __________) -____________
8. Eligible Accounts Receivable (Line 6 minus 7) $
============
9. Accounts Receivable Availability (______% of line 8) $____________
10. Inventory Availability (Line 13 of previous Recapitulation; Inventory
dated ___________) +____________
11. Other Availability: ________________________________________________________ +____________
12. Other Availability: ________________________________________________________ +____________
13. Holdbacks for Letters of Credit and Acceptances or Other as detailed in
schedule on back -____________
14. Total Gross Availability
(The lesser of the totals of lines 9, 10, 11, 12 and 13
or Creditline of $________________) $
============
15. Beginning Loan Balance (Line 19 of previous Certificate dated __________) $____________
16. Plus Borrowing requested +____________
17. Less Cash remitted against Loan since last Certificate
(Reported on line 7 of Remit)
(Note: Remittance numbers should correspond to those noted above on line 3A)
Remit # _______ Amt $ ____________ Remit # _______ Amt $ ____________
Remit # _______ Amt $ ____________ Remit # _______ Amt $ ____________
Remit # _______ Amt $ ____________ Remit # _______ Amt $ ____________
TOTAL CASH REMITTED -____________
18. Adjustments to Loan Balance (Explain clearly on back) +/-___________
19. New Loan Balance (Line 15 plus 16 less 17 plus/minus 18) $
============
20. Net Availability (Line 14 minus line 19) $
============
</TABLE>
Certification:
(A) Borrower hereby certifies that they are not in default under the
Security Agreement or any of the Borrower's liabilities.
(B) No Remittances have been received from or returns and allowances granted
to any debtors whose accounts have been assigned to the National Canada
Finance Corp. other than previously reported.
(C) We hereby assign to National Canada Finance Corp. all accounts which came
into existance since our last Certificate, and all rights, title and
interest of the undersigned in and to the goods represented thereby, and
all monies due or to become due thereby.
_____________________________
(Date)
_____________________________
(Authorized Signature)
EXHIBIT "B"
<PAGE>
Explanation of Line 2B "Other Additions":
___________________________________________________________________ $__________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
Total "Other Additions" as shown on Line 2B on Front $
==========
Explanation of Line 3C "Other Reductions"
___________________________________________________________________ $__________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
Total "Other Reductions" as shown on Line 3C on Front $
==========
Explanation of Line 5 "Adjustment to Accounts Receivable Control"
___________________________________________________________________ $__________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
$
==========
Explanation of Line 18 Loan "Adjustments"
___________________________________________________________________ $__________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
___________________________________________________________________ ___________
$
==========
- --------------------------------------------------------------------------------
COMMERCIAL LETTERS X RECIPROCAL OF = HOLDBACK
OF CREDIT INVENTORY AMOUNT
ADVANCE RATE
1. $________________ X ____________% = $ ______________
2. $________________ X ____________% = $ ______________
3. $________________ X ____________% = $ ______________
4. $________________ X ____________% = $ ______________
5. STANDBY LETTERS OF CREDIT================ $ ______________
6. BANKER'S ACCEPTANCES===================== $ ______________
7. BILL OF LADING GUARANTEES================ $ ______________
8. OTHER - Explain _________________________
_________________________________________
__________________________________________ $ _____________
9. Total Holdback carried forward to line 13
on Front $
=============
The above balances are as of ___/___/___
<PAGE>
Exhibit "C"
Fictitious Names
None.
<PAGE>
Exhibit 10.15
ABSOLUTE UNCONDITIONAL AND CONTINUING GUARANTY
THIS ABSOLUTE UNCONDITIONAL AND CONTINUING GUARANTY, dated as of the 30th
day of July, 1999 (the "Guaranty"), is executed by CENTURY ELECTRONICS
MANUFACTURING, NC., a Delaware corporation (the "Guarantor"), in favor of
NATIONAL BANK OF CANADA, a Canadian Chartered Bank ("Creditor").
WHEREAS, AMITEK CORPORATION, a Delaware corporation ("Borrower") is or may
become indebted to Creditor; and
WHEREAS, Guarantor is the sole shareholder of Borrower; and
WHEREAS, without this Guaranty, Creditor would be unwilling to extend
credit to Borrower; and
WHEREAS, because of the direct benefit to Guarantor from any and all
loan(s) to be made by Creditor in favor of Borrower, and as an inducement to
Creditor to make said loan(s) to Borrower, Guarantor agrees to guarantee to
Creditor the obligations of Borrower as set forth herein.
NOW, THEREFORE, for Ten Dollars ($10.00) and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged,
Guarantor hereby guarantees to Creditor the prompt and full payment of the
Guaranteed Indebtedness (hereinafter defined), as and when the same shall be due
and payable, whether by lapse of time, by acceleration of maturity or otherwise,
and at all times thereafter, and performance of all obligations of Borrower in
connection with the Guaranteed Indebtedness, including without limitation
performance of all of Borrower's obligations under the Loan Documents (as
hereinafter defined), this Guaranty being upon the following terms and
conditions:
1. The term "Guaranteed Indebtedness", as used herein, includes: all
indebtedness of every kind and character, without limit as to amount, whether
now existing or hereafter arising, of Borrower to Creditor, regardless of
whether evidenced by notes, drafts, acceptances, discounts, overdrafts, or
otherwise, and whether such indebtedness be fixed, contingent, joint, several,
or joint and several, including, but not limited to, (a) the indebtedness
arising under that certain Assumption and Modification Master Revolving
Promissory Note in the principal amount of Fourteen Million and 00/100 Dollars
($14,000,000.00) and that certain Assumption and Modification CAPEX Line/Term
Promissory Note in the principal amount of Five Hundred Seventy-Six Thousand
Three Hundred Six and 54/ 100 Dollars ($576,306.54), all of the above set forth
Notes executed or to be executed by Borrower in favor of Creditor; (b) interest
on any of the indebtedness described in the preceding; (c) any and all costs,
attorneys' fees, and expenses incurred by Creditor by reason of Borrower's
default in payment of any of the foregoing indebtedness; (d) any renewal,
extension or rearrangement of the indebtedness, costs, or expenses described
above, or any part thereof; (e) any amount paid by Borrower to Creditor which is
later set aside in a bankruptcy proceeding; and (f) the indebtedness
PLEASE INITIAL JR
----
<PAGE>
and obligations arising under the Loan Agreement (as such term is hereinafter
defined) and other Loan Documents, plus all costs and legal fees associated
therewith incurred by Creditor in connection with enforcement of and collection
of the same; provided, however, that the Guarantor shall be liable under this
Guaranty only for the maximum amount of such liability that can be hereby
incurred without rendering this Guaranty voidable under applicable law relating
to fraudulent conveyance or fraudulent transfer and not for any greater amount.
2. This instrument shall be an absolute and continuing guaranty of payment
and performance and not one merely of collection and shall cover all of the
Guaranteed Indebtedness, and it shall apply to and secure any ultimate balance
due or remaining unpaid to Creditor, notwithstanding any interruptions in the
business relations of the Borrower with Creditor.
3. If Guarantor becomes liable for any indebtedness owing by Borrower to
Creditor, by endorsement or otherwise, other than under this Guaranty, such
liability shall not be in any manner impaired or affected hereby, and the rights
of Creditor hereunder shall be cumulative of any and all other rights that
Creditor may ever have against Guarantor. The exercise by Creditor of any right
or remedy hereunder or under any other instrument, or at law or in equity, shall
not preclude the concurrent or subsequent exercise of any other right or remedy.
If, for any reason whatsoever, Borrower is now, or hereafter becomes, indebted
to Guarantor, such indebtedness and all interest thereon shall, at all times, be
subordinate in all respects to the Guaranteed Indebtedness, and Guarantor shall
not be entitled to enforce or receive payment thereof until the Guaranteed
Indebtedness has been fully paid. Notwithstanding anything to the contrary
contained in this Guaranty, or as a result of any payments made by any party
hereunder, Guarantor shall not have any right of subrogation, reimbursement,
exoneration, indemnification, participation and/or contribution against Borrower
or any other guarantor of the Guaranteed Indebtedness, any and all such right(s)
of subrogation, reimbursement, exoneration, indemnification, participation
and/or contribution being hereby expressly waived and released. Accordingly,
Guarantor shall not have any right of subrogation, reimbursement, exoneration,
indemnification, participation and/or contribution under the documents executed
in favor of Creditor securing payment of the Guaranteed Indebtedness or to
participate in any way therein, or in any right, title or interest in and to any
mortgaged property or any collateral for the Guaranteed Indebtedness, all such
rights of subrogation, reimbursement, exoneration, indemnification,
participation and/or contribution being hereby expressly waived and released.
4. In the event of default by Borrower in payment of the Guaranteed
Indebtedness, or any part thereof, when such indebtedness becomes due, either by
its terms or as the result of the exercise of any power to accelerate, Guarantor
shall, on demand and without further notice of nonpayment or of dishonor,
without any notice having been given to Guarantor previous to such demand of the
acceptance by Creditor of this Guaranty, and, without any notice having been
given to Guarantor previous to such demand of the creating or incurring of such
indebtedness, pay the amount due thereon to Creditor, and it shall not be
necessary for Creditor, in order to enforce such payment by Guarantor, first to
institute suit or exhaust its remedies against Borrower or others liable on such
indebtedness, or to enforce its rights against any security which shall ever
have been given
2 PLEASE INITIAL JR
----
<PAGE>
to secure such indebtedness. Suit may be brought or demand may be made against
all parties who have signed this Guaranty, or against any one or more of them,
separately or together, without impairing the rights of Creditor against any
other party hereto.
5. Guarantor hereby agrees that Guarantor's obligations under the terms of
this Guaranty shall not be released, diminished, impaired, reduced or affected
by the occurrence of any one or more of the following events: (a) the taking or
accepting of any other security or guaranty for any or all of the Guaranteed
Indebtedness; (b) any release, surrender, exchange, subordination, or loss of
any security at any time existing in connection with any or all of the
Guaranteed Indebtedness; (c) any partial release of the liability of Guarantor
hereunder or, if there is more than one person or entity signing this Guaranty,
the complete or partial release of any one or more of them hereunder; (d) the
death, insolvency, bankruptcy, disability, dissolution, termination,
receivership, reorganization or lack of corporate, partnership or other power of
Borrower, any of the undersigned, or any party at any time liable for the
payment of any or all of the Guaranteed Indebtedness, whether now existing or
hereafter occurring; (e) renewal, extension, modification or rearrangement of
the payment of any or all of the Guaranteed Indebtedness, either with or without
notice to or consent of Guarantor, or any adjustment, indulgence, forbearance,
or compromise that may be granted or given by Creditor to Borrower or Guarantor;
(f) any neglect, delay, omission, failure, or refusal of Creditor to take or
prosecute any action for the collection of any of the Guaranteed Indebtedness or
to foreclose or take or prosecute any action to foreclose upon any security
therefor or to take or prosecute any action in connection with any instrument or
agreement evidencing or securing all or any part of the Guaranteed Indebtedness;
(g) any failure of Creditor to notify Guarantor of any renewal, extension,
rearrangement, modification or assignment of the Guaranteed Indebtedness or any
part thereof, or of any instrument evidencing or securing the Guaranteed
Indebtedness or any part thereof, or of the release of or change in any security
or of any other action taken or refrained from being taken by Creditor against
Borrower or of any new agreement between Creditor and Borrower, it being
understood that Creditor shall not be required to give Guarantor any notice of
any kind under any circumstances with respect to or in connection with the
Guaranteed Indebtedness; (h) the unenforceability of all or any part of the
Guaranteed Indebtedness against Borrower, whether because the Guaranteed
Indebtedness exceeds the amount permitted by law, the act of creating the
Guaranteed Indebtedness, or any part thereof, is ultra vires, the officers or
persons creating same acted in excess of their authority, or otherwise, it being
agreed that Guarantor shall remain liable hereon regardless of whether Borrower
or any other person be found not liable on the Guaranteed Indebtedness, or any
part thereof, for any reason; or (i) any payment by Borrower to Creditor is held
to constitute a preference under the bankruptcy laws or if for any other reason
Creditor is required to refund such payment or pay the amount thereof to someone
else. It is the intent of Guarantor and Creditor that the obligations and
liabilities of Guarantor hereunder are absolute and unconditional under any and
all circumstances and that until the Guaranteed Indebtedness is fully and
finally paid, such obligations and liabilities shall not be discharged or
released, in whole or in part, by any act or occurrence which might, but for the
provisions of this Guaranty, be deemed a legal or equitable discharge or release
of a guarantor.
3 PLEASE INITIAL JR
----
<PAGE>
6. Creditor is hereby given a lien for the amount of the liability and
indebtedness, whether or not due and payable, created by this Guaranty upon all
property and security now or hereafter in the possession or custody of Creditor
by or for the account of Guarantor or in which any or all of the undersigned may
have any interest (all remittances and property to be deemed in the possession
or custody of Creditor as soon as put in transit to it by mail or carrier) and
also upon the balance of any deposit accounts of any or all of the undersigned
held with Creditor existing from time to time, and Creditor is hereby authorized
and empowered at its option to appropriate any and all thereof and apply any and
all thereof and the proceeds thereof to the payment and extinguishment of the
liability and indebtedness hereby created at any time after such liability and
indebtedness becomes payable. Creditor is further authorized and empowered at
its option at any time after the liability and indebtedness hereby created
becomes payable, to sell, assign and deliver any security or property at any
time in the possession or custody of Creditor for any or all of the undersigned
or in which Guarantor may have any interest at public or private sale, for cash,
credit or for future delivery, all at the option of Creditor, without further
advertisement or notice of sale and without notice to Guarantor of intention to
sell, which rights of Guarantor are hereby expressly waived. Upon any sales at
public auction, Creditor may bid for and purchase the whole or any part of the
security or property sold free of any right of redemption which any and all of
the undersigned hereby waive and release.
7. In case of any sale by Creditor of any such security or property on
credit or for future delivery, such may be retained by Creditor until the
selling price is paid by the purchaser and Creditor shall incur no liability in
case of failure of the purchaser to pay therefor. In case of any such failure
any such security or property may be resold.
8. This Guaranty is for the benefit of Creditor and Creditor's successors
and assigns, and in the event of an assignment of the Guaranteed Indebtedness,
or any part thereof, the rights and benefits hereunder, to the extent applicable
to the indebtedness so assigned, may be transferred with such indebtedness. This
Guaranty is binding not only on Guarantors, but on Guarantors' successors and
assigns, and, if this Guaranty is signed by more than one person or entity, then
all of the obligations of Guarantors arising herein shall be jointly and
severally binding on each of the undersigned, and their respective heirs,
personal representatives and/or successors and assigns. This Guaranty shall be
governed by and construed in accordance with the internal statutes and laws of
the State of New York, without regard to principles of conflicts of law. If any
provision of this Guaranty or the application thereof to any person or
circumstance shall, for any reason and to any extent, be invalid or
unenforceable, neither the remainder of this Guaranty nor the application of
such provision to any other person or circumstances shall be affected thereby,
but rather the same shall be enforced to the greatest extent permitted by law.
Guarantors hereby agree with Creditor that all rights, remedies and recourses
afforded to Creditor by reason of this Guaranty or otherwise are separate and
cumulative and may be pursued separately, successively or concurrently, as
occasion therefor shall arise, and are nonexclusive and shall in no way limit or
prejudice any other legal or equitable right, remedy or recourse which Creditor
may have. Guarantor shall pay the reasonable attorneys' fees and all other costs
and expenses which may be incurred by Creditor in the enforcement of this
Guaranty.
4 PLEASE INITIAL JR
----
<PAGE>
9. It is not the intention of Creditor or Guarantor to obligate Guarantor
to pay interest in excess of that legally permitted to be paid by Guarantor
under applicable law. Should it be determined that any portion of the Guaranteed
Indebtedness constitutes interest in excess of the maximum amount of interest
which Guarantor (in such capacity) may lawfully be required to pay under
applicable law, the obligation of Guarantor to pay such interest shall
automatically be limited to the payment thereof at the maximum rate so permitted
under applicable law.
10. Guarantor does hereby and shall indemnify and hold Creditor harmless
of and from any and all loss or damage of whatsoever kind and from any suits,
claims or demands, including without limitation, Creditor's legal fees and
expenses through all trial and appellate levels, on account of any matters or
anything arising out of this Guaranty or in connection herewith on account of
any such acts or omissions to act by Creditor in connection with this Guaranty,
which obligations shall survive termination of this Guaranty, other than any of
the foregoing arising solely out of the gross negligence or willful misconduct
of Creditor.
11. Guarantor shall furnish to Creditor, annual audited financial
statements of Guarantor, in form and substance acceptable to Creditor, prepared
in accordance with Generally Accepted Accounting Principles consistently
applied, by a national "Big Six" accounting firm acceptable to Creditor, in form
and substance acceptable to Creditor, within one hundred twenty (120) days
following the end of each fiscal year of Guarantor, together with such other
financial information of Guarantor as shall reasonably be required by Creditor.
12. Upon the filing of a petition in bankruptcy, with respect to Borrower,
any assignment for the benefit of creditors of Borrower, or, any other
circumstances necessitating Creditor to file its claim against Borrower,
Guarantor agrees that notwithstanding any stay, injunction or other prohibition
preventing the maturity, acceleration or collection of all or any portion of the
Guaranteed Indebtedness, the Guaranteed Indebtedness (whether or not then due
and payable by Borrower) shall forthwith become due and payable by Guarantor for
purposes of this Guaranty on demand. The obligation of Guarantor to pay the
Guaranteed Indebtedness of Guarantor hereunder shall not be affected or impaired
by Creditor's omission or failure to prove its claim against Borrower.
Accordingly, the rights of Creditor under this Guaranty shall not be affected or
impaired by its election to prove its claim(s) or its election not to pursue
such claim(s), as it sees fit, without in any way releasing, reducing or
otherwise affecting the liability of Guarantor to Creditor.
13. Notwithstanding that this Guaranty may have been canceled or
terminated, in the event that all or any part of the Guaranteed Indebtedness is
paid by or on behalf of Borrower and because of any bankruptcy or other laws
relating to creditor rights, Creditor repays any amounts to Borrower or to any
trustee, receiver or otherwise, then the amount so repaid shall again become
part of the Guaranteed Indebtedness, the repayment of which is guaranteed
hereby, and the undersigned Guarantor shall immediately repay all such amounts
to Creditor. If the original of this Guaranty was marked "Canceled" by Creditor
and returned to the undersigned Guarantor, for the purposes of this Section 13,
a photocopy or other reproduction of this Guaranty shall constitute the original
of this Guaranty.
5 PLEASE INITIAL JR
----
<PAGE>
14. Unless otherwise provided, all notices required to be given hereunder
shall be in writing and shall be deemed served on the earlier of(i) receipt or
(ii) three (3) days after deposit in certified United States mail, postage
prepaid, and addressed to the parties at the following addresses, or such other
addresses as may from time to time be designated by written notice given as
herein required:
to Guarantor:
CENTURY ELECTRONICS MANUFACTURING, INC.
274 Ceder Hill Road
Marlborough, Massachusetts 01752
Attn: Les Sainsbury, CEO and President
to Creditor:
NATIONAL BANK OF CANADA
5100 Town Center Circle
Suite 430
Boca Raton, Florida 33486
Attention: Jean E. Page, Vice President
Personal delivery to a party or to any officer, partner, agent or employee of
such party, or if a proper person, to a member of his family, at its address
herein shall constitute receipt. Rejection or other refusal to accept or
inability to deliver because of changed address of which no notice has been
received shall also constitute receipt. Notwithstanding the foregoing, no notice
of change of address shall be effective until the date of receipt thereof. This
section shall not be construed in any way to affect or impair any waiver of
notice or demand herein provided or to require giving of notice or demand to or
upon Guarantor in any situation or for any reason.
15. EACH GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ALL STATE AND FEDERAL COURTS SITTING IN NEW YORK
COUNTY, NEW YORK AND AGREES THAT ALL SUMMONS AND OTHER COURT PROCESS ISSUED BY
SAID COURTS MAY BE SERVED UPON GUARANTOR, WITHIN OR OUTSIDE SAID COURTS'
TERRITORIAL JURISDICTION, BY MAILING THE SAME, BY REGISTERED OR CERTIFIED MAIL,
OR BY PERSONAL SERVICE, TO GUARANTOR AT ITS ADDRESS SPECIFIED HEREIN; PROVIDED
THAT NOTHING CONTAINED HEREIN SHALL LIMIT CREDITOR'S RIGHT TO SUE GUARANTOR IN
ANY OTHER COURT HAVING JURISDICTION OVER GUARANTOR IN ANY MANNER PERMITTED BY
APPLICABLE LAW. GUARANTOR HEREBY IRREVOCABLY APPOINTS Mark Lombard, WHOSE
ADDRESS IS 1701 Clint Moore Road, Boca Raton, FL 33487, AGENT FOR THE SERVICE OF
PROCESS FOR THE PURPOSES OF ANY PURPORTED CONTROVERSY OR CAUSE OF ACTION ARISING
OUT OF THIS GUARANTY OR ANY RELATED INSTRUMENT.
6 PLEASE INITIAL JR
----
<PAGE>
16. The Guaranteed Indebtedness includes, without limitation, all sums now
or hereafter due and owing pursuant to the terms of those certain promissory
notes, executed or to be executed by Borrower payable to the order of Creditor
evidencing a Revolving Line of Credit loan in the principal amount of Fourteen
Million and 00/100 Dollars ($14,000,000.00) and a CAPEX Line/Term loan in the
current principal amount of Five Hundred Seventy-Six Thousand Three Hundred Six
and 54/100 Dollars ($576,306.54), and an Amended and Restated Loan Agreement
(the "Loan Agreement") evidencing said indebtedness, executed or to be executed
by Borrower in favor of Creditor, and all other loan documents evidencing and/or
securing the Guaranteed Indebtedness and previously, now or hereafter executed
by Borrower in connection therewith, and any of the other Loan Documents
referred to in the Loan Agreement (collectively "Loan Documents"), the terms and
provisions of which are agreed to, accepted and acknowledged by Guarantor.
Capitalized terms used and not defined herein have the meanings given them in
the Loan Agreement or the other Loan Documents.
17. Guarantor additionally unconditionally guarantees to Creditor the
timely performance of all other obligations of Borrower under the Loan Agreement
and all of the Loan Documents.
18. The liability of the Guarantor hereunder shall be joint and several
with the Borrower and all other guarantors of the Guaranteed Indebtedness.
19. Guarantor represents and warrants to Creditor that, at the time of the
execution and delivery of this Guaranty, nothing exists to impair the
effectiveness of the liability of Guarantor to Creditor hereunder, or the
immediate taking effect of this Guaranty as the sole agreement between Guarantor
and Creditor with respect to guaranteeing the Guaranteed Indebtedness. Guarantor
further represents and warrants that, if a corporation, it is now and will
continue to be duly organized, validly existing and in good standing under the
laws of the state or country of its incorporation; has the corporate power and
authority to own its properties and to carry on its business as now being
conducted and to enter into and perform its obligations under this Guaranty; all
of its issued and outstanding stock has been duly and validly issued and is
fully paid and nonassessable; there are no outstanding rights or options to
acquire any additional stock, excepting as set forth on Schedule "1" appended
hereto and made a part hereof, and its stock has not been pledged or encumbered
in any manner; is qualified to do business and is in good standing in the State
of Delaware, the Commonwealth of Massachusetts and all other states in which it
is required to conduct business; and it has not amended or modified its articles
or certificate of incorporation or its bylaws except as previously disclosed to
Creditor in writing prior to the execution hereof and that no amendment, change
or modification thereto shall be binding upon Creditor or affect this Guaranty
unless said amendment, change or modification has been agreed to in writing by
Creditor. Guarantor represents and warrants that, if a partnership, it is now
and will continue to be duly formed, validly existing and in good standing under
the laws of the state or country of its creation; is qualified to do business in
the State of Florida; has the partnership power and authority to own its
properties and to carry on its business as now being conducted and to enter into
and perform its obligations under this Guaranty; and it has not amended, changed
or modified its certificate of partnership or partnership agreement except as
previously disclosed to Creditor in writing prior to the execution hereof and
that no
7 PLEASE INITIAL JR
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<PAGE>
amendment, change or modification thereto shall be binding upon Creditor or
affect this Guaranty unless said amendment, change or modification has been
agreed to in writing by Creditor. Guarantor further represents and warrants to
Creditor that this Guaranty when executed and delivered by Guarantor will
constitute the legal, valid and binding obligations of Guarantor enforceable in
accordance with the terms hereof; that the execution, delivery and performance
by Guarantor of this Guaranty will not violate any indenture, agreement or other
instrument (or, if Guarantor is a corporation or partnership, its articles of
incorporation or bylaws or its partnership agreement) to which Guarantor is a
party or by which it or any of its property is bound, or be in conflict with,
result in a breach of or constitute (with due notice or the lapse of time, or
both) a default under any such indenture, agreement or other instrument, or
result in the creation or imposition of any lien, charge or encumbrance of any
nature whatsoever upon any of its property or assets, except as contemplated by
the provisions of this Guaranty; that, if Guarantor is a corporation or
partnership, the execution, delivery and performance by Guarantor of this
Guaranty is within its corporate or partnership powers and purposes and has been
duly authorized by all requisite corporate or partnership action of Guarantor,
that there are no judgments outstanding against Guarantor and there is no
action, suit, proceeding, or investigation now pending (or to the best of
Guarantor's knowledge, after diligent inquiry, threatened) against, involving or
affecting Guarantor or any of its properties or any part thereof, at law, in
equity or before any governmental authority that if adversely determined as to
Guarantor, would result in a material adverse change in the business or
financial condition of Guarantor, or Guarantor's operation and ownership of any
of its properties, nor is there any basis for such action, suit, proceeding, or
investigation; and that Guarantor is not insolvent and will not be rendered
insolvent by the execution, delivery, payment and performance of this Guaranty.
INTENTIONALLY LEFT BLANK
8 PLEASE INITIAL JR
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<PAGE>
Waiver of Trial by Jury. GUARANTOR BY IT'S EXECUTION HEREOF, AND CREDITOR
BY ACCEPTANCE OF THIS GUARANTY, HEREBY MUTUALLY, SEVERALLY, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL
BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH THIS GUARANTY AND ANY AGREEMENT CONTEMPLATED
OR TO BE EXECUTED N CONJUNCTION HEREWITH, UNDER ANY OF THE LOAN
DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF DEALING STATEMENTS
(WHETHER VERBAL OR WRITTEN), OR ACTIONS OF EITHER PARTY.
EXECUTED at Boston, Massachusetts, as of the 30th day of July, 1999.
Witnesses: CENTURY ELECTRONICS MANUFACTURING,
INC., a Delaware corporation
/s/ Teresa A. Belmont
- ----------------------
(As witness only) By: /s/ James Roller
---------------------------------
Title: Secretary & Treasurer
------------------------------
(Corporate Seal)
COMMONWEALTH OF MASSACHUSETTS
COUNTY OF Suffolk
The foregoing instrument was executed and acknowledged before me this 30th
day of July, 1999, by James Roller, as Secretary & Treasurer of and on behalf of
CENTURY ELECTRONICS MANUFACTURING, INC., a Delaware corporation, who |_| is
personally known to me or |_| produced his/her driver's license as
indentification.
/s/ Beth A. Good
----------------------------
NOTARY PUBLIC
Commonwealth of Massachusetts
Print Name: BETH A GOOD, Notary Public
My Commission Expires: My Commission Expires April 22, 2005
Commission Number:
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<PAGE>
LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement (this "Agreement"), dated as of December
22, 1998, is entered into by and among Century Electronics Manufacturing (NE),
Inc., a Massachusetts corporation ("CEM"), Y.M.C. Manufacturing Company, a
California corporation ("YMC"), and Quality Manufacturing Services, Inc., a
California corporation ("QMS") (CEM, YMC and QMS are sometimes referred to
individually as a "Company" and collectively as the "Companies"), and Fidelity
Funding, Inc., a Texas corporation ("Fidelity"). In consideration of the mutual
covenants and agreements contained herein, the Companies and Fidelity hereby
agree as follows:
Section 1. Definitions and Rules of Construction.
1.1 When used herein, the following terms shall have the following
meanings:
"Account" means the right of a Company to payment for goods sold or leased
or for services rendered by such Company which is not evidenced by an instrument
or chattel paper, whether or not earned by performance.
"Account Debtor" means the Person obligated to make payment on an Account.
"Advance" has the meaning given to it in Section 2.1.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly controls, or is controlled by or under common control
with, such Person.
"Borrowing Base" means, with respect to any Company, an amount, determined
by Fidelity from time to time, equal to the sum of (a) 80% of the aggregate
outstanding face amount of the Eligible Accounts of such Company and (b) the
lesser of (i) 50% of the value of the Eligible Inventory of such Company, valued
at the lower of cost or market, or (ii) $3,000,000 less 50% of the value of the
Eligible Inventory of each other Company then included in each such other
Company's Borrowing Base valued at the lower of cost or market. Fidelity may
change the percentage of Eligible Accounts and/or Eligible Inventory
constituting the Borrowing Base of any Company from time to time based upon
dilution, net collectibility and other factors deemed appropriate by Fidelity.
"Borrowing Base Certificate" means a certificate in the form attached
hereto as Exhibit A, duly executed by the president or the chief financial
officer of the applicable Company.
"Cash Collateral" has the meaning given to it in Section 7.
"CEM Term Advance" has the meaning given to it in Section 2.6.
"Century" means Century Electronics Manufacturing. Inc., a Delaware
corporation.
"Century Documents" means the Century Guaranty (Fidelity), the Century
Guaranty (USA Funding) and all other documents or agreements executed by Century
in connection herewith or therewith.
"Century Guaranty (Fidelity)" means the General Continuing Guaranty, dated
as of the date hereof, made by Century for the benefit of Fidelity with respect
to the Companies, as amended, supplemented or otherwise modified from time to
time.
"Century Guaranty (USA Funding)" means the General Continuing Guaranty,
dated as of the date hereof, made by Century for the benefit of USA Funding with
respect to the Companies, as amended, supplemented or otherwise modified from
time to time.
"Collateral" has the meaning given to it in Section 6.
<PAGE>
"Concentration Limit" means, as of any date and with respect to any
Account Debtor, an amount equal to 25% of the face amount of Eligible Accounts
under this Agreement and the Related Loan Agreement of all Companies outstanding
on such date or such higher amount as Fidelity shall approve in writing from
time to time; provided, however, that the "Concentration Limit" with respect to
3-Com, Lucent, Polaroid, Northern Telecom and any Affiliate of any the foregoing
Persons shall be 100% of the face amount of Eligible Accounts under this
Agreement and the Related Loan Agreement of all Companies outstanding on such
date.
"Contract Rate" means, prior to the occurrence of an Event of Default or
an event or circumstance that would, with the giving of notice, the passage of
time or both, constitute an Event of Default, a rate of interest equal to the
lesser of (a) the Prime Rate in effect from time to time plus 1.00% per annum
and (b) the maximum rate permitted by applicable law and means, after the
occurrence of an Event of Default or an event or circumstance that would, with
the giving of notice, the passage of time or both, constitute an Event of
Default, a rate of interest equal to the lesser of (x) the Prime Rate in effect
from time to time plus 6.00% per annum and (y) the maximum rate permitted by
applicable law. The Contract Rate shall be automatically increased or decreased,
as the case may be, without notice to the Companies from time to time as of the
effective date of each change in the Prime Rate.
"Current Assets" means, as of any date, only those assets of CEM that may,
in the ordinary course of business, be converted into cash within a period of
one year from such date, but excluding (a) amounts due from employees, officers,
shareholders or directors of CEM, (b) prepaid expenses for services or for
supplies that are not purchased for resale, and (c) amounts due from Affiliates
of CEM.
"Current Liabilities" means, as of any date and with respect to CEM, the
Advances outstanding to such CEM on such date and all other Obligations of CEM
that are due within one year from such date.
"Debt" means, with respect to any Person, all indebtedness, obligations
and liabilities of such Person, including without limitation (a) all liabilities
which would be reflected on a balance sheet of such Person prepared in
accordance with GAAP, (b) all obligations of such Person in respect of any
guaranty of any Debt of another Person, and (c) all obligations, indebtedness
and liabilities secured by any lien on or security interest in any property or
assets of such Person.
"Debt Service Coverage Ratio" means, as of any date, the ratio of EBITDA
for the twelve-month period ending on such date to the sum of (a) the Interest
Expense incurred by CEM during the twelve-month period ending on such date and
(b) all scheduled principal payments on all Debt for money borrowed or assets
financed under capitalized leases by CEM (including the Obligations) for the
twelve-month period beginning on such date (including all scheduled principal
payments on Debt expected to be incurred during such period).
"Eligible Accounts" means, at the time of determination thereof, all
Accounts other than (i) any Account which is payable more than 30 days from
invoice date, (ii) any Account which has been outstanding for more than 90 days
from invoice date, (iii) any Account as to which Fidelity does not have a valid
and perfected, first priority security interest, (iv) to the extent that the
aggregate outstanding Accounts owed by any single Account Debtor exceeds the
Concentration Limit, any Account owed by such Account Debtor, (v) any Account
that is owed by an Account Debtor that is an Affiliate of any Company or an
officer or employee of any Company, (vi) any Account that arises out of a sale
made or services performed outside of the United States or that is owed by an
Account Debtor located outside the United States, (vii) any Account that is owed
by a creditor or supplier of any Company or with respect to which any defense,
counterclaim or right of set off has been asserted, (viii) any Account owed by
an Account Debtor if more than 50% (in dollar amount) of such Account Debtor's
Accounts, have been outstanding more than 90 days from invoice date, (ix) any
Account that is owed by the United States or any department, agency or
instrumentality thereof, unless the right to payment under such Account is
assigned to Fidelity as Collateral in full compliance with the Assignment of
Claims Act of 1940, as amended (31 U.S.C. 3727), (x) any Account owed to a
Company by Northern Telecom or any Affiliate thereof, including, without
limitation, Lancity or Bay Networks; and (xi) any Account that has not been
approved by Fidelity for inclusion in the applicable Borrowing Base.
"Eligible Inventory" means, at the time of determination, all raw
materials that are part of a Company's Inventory that (i) are owned by such
Company, are located in the United States of America and, if located on leased
or mortgaged premises, are subject to the terms of a lien waiver letter executed
by the landlord or mortgagee of such premises if deemed necessary by Fidelity in
its sole discretion, (ii) are ready for sale, and are not, in the opinion of
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<PAGE>
Fidelity, damaged, obsolete or otherwise not readily salable at full value,
(iii) have been held in Inventory for not more than 60 days, (iv) are not on
lease or consignment or furnished under any contract of service from or to any
Person, (v) are subject to an enforceable, first priority, perfected security
interest in favor of Fidelity, (vi) are not the subject of an invoice giving
rise to an Eligible Account, and (vii) have been approved by Fidelity for
inclusion in the Borrowing Base.
"Eligible Machinery and Equipment" means, with respect to any Company and
at the time of determination, all machinery and equipment that (i) are owned by
such Company, are located in the United States of America and, if located on
leased or mortgaged premises, are subject to the terms of a lien waiver letter
executed by the landlord or mortgagee of such premises if deemed necessary by
Fidelity in its sole discretion, (ii) are not on lease or consignment to any
Person, (iii) are subject to an enforceable, first priority, perfected security
interest in favor of Fidelity, (iv) are not, in the opinion of Fidelity, damaged
or obsolete, (v) are not fixtures, and (vi) have been approved by Fidelity as
Eligible Machinery and Equipment.
"Environmental Laws" means any and all federal, state, local and foreign
statutes, laws, regulations, rules, orders, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants or industrial, toxic or hazardous
substances into the environment, or otherwise relating to the manufacture,
processing, treatment, transport or handling of pollutants or industrial, toxic
or hazardous substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations promulgated
with respect thereto.
"ERISA Plan" means any pension benefit plan subject to Title IV of ERISA
maintained by any Company or any Affiliate thereof with respect to which any
Company has a fixed or contingent liability.
"Event of Default" has the meaning given it in Section 9.
"Facility Limit" means $12,000,000.
"GAAP" means generally accepted accounting principles and practices as
promulgated by the American institute of Certified Public Accountants, applied
on basis consistent with past practices.
"Indemnified Claims" means any and all claims, demands, actions, causes of
action, judgments, liabilities, damages and consequential damages, penalties,
fines, costs, fees, expenses and disbursements (including, without limitation,
fees and expenses of attorneys and other professional consultants and experts in
connection with any investigation or defense) of every kind, known or unknown,
existing or hereafter arising, foreseeable or unforeseeable, which may be
imposed upon, threatened or asserted against or incurred or paid by any
Indemnified Person at any time and from time to time, because of, resulting
from, in connection with or arising out of any transaction, act, omission, event
or circumstance in any way connected with the Collateral or the Transaction
Documents (including but not limited to enforcement of Fidelity's rights
thereunder or the defense of Fidelity's actions thereunder), excluding with
respect to any Indemnified Persons, any of the foregoing resulting from such
Indemnified Person's gross negligence or willful misconduct.
"Indemnified Persons" means Fidelity and its officers, directors,
shareholders, employees, attorneys, representatives and Affiliates.
"Intangible Assets" means, with respect to any Company, such of such
Company's assets as are treated as intangible pursuant to GAAP, including,
without limitation: (a) obligations owing by officers, directors, shareholders,
employees, subsidiaries, Affiliates or any Person in which any such officer,
director, shareholder, employee, subsidiary, or Affiliate owns any interest
other than another Company (it being understood that obligations owing by
another Company to such Company shall not be treated as Intangible Assets) and
(b) any asset which is intangible or lacks intrinsic or marketable value or
collectibility, including, without limitation, goodwill, noncompetition
agreements, patents, copyrights, trademarks, franchises, organization or
research and development costs.
3
<PAGE>
"Inventory" means all goods, now owned or hereafter acquired by a Company,
wherever located, that are held for sale or lease or are to be furnished under
any contract of service (including, but not limited to raw materials, work in
process, finished goods and materials used or consumed in the manufacture or
production thereof, goods in which such Company has an interest in mass or a
joint or other interest or rights of any kind, and goods which have been
returned to or repossessed or stopped in transit by such Company).
"Net Profit" means, with respect to CEM and for any period, CEM's net
income before taxes for such period determined in accordance with GAAP, and
means with respect to QMS and YMC, the combined net income of QMS and YMC before
taxes for such period determined in accordance with GAAP as if QMS and YMC were
consolidated entities under GAAP.
"Net Profit Requirement" means (a) with respect to YMC and QMS combined,
$100,000 per fiscal year beginning with the fiscal beginning on July 1, 1999,
and (b) with respect to CEM, $600,000 per fiscal year.
"Obligations" means all indebtedness, obligations and liabilities of the
Companies to Fidelity arising under the Transaction Documents, and all other
indebtedness, obligations and liabilities of the Companies to Fidelity, whether
presently existing or hereafter arising, direct or indirect, primary or
secondary, joint or several, fixed or contingent, and whether originally payable
to Fidelity or to a third party and subsequently acquired by Fidelity.
"Person" means any individual, corporation, joint venture, partnership,
trust, unincorporated organization or governmental entity or agency.
"Prime Rate" means the rate per annum published from time to time by The
Wall Street Journal as the base rate for corporate loans at large commercial
banks (or, if more than one such rate is published, the higher or highest of the
rates so published). If such rate is no longer published by The Wall Street
Journal, then Fidelity shall, in its sole discretion substitute the base or
prime rate for corporate loans at a large commercial bank for the base rate
published in The Wall Street Journal. Such rate may not necessarily be the
lowest or best rate actually charged to any customer of such commercial bank.
"Proportionate Share" means, with respect to any Company and as of any
date, the ratio obtained by dividing (a) the outstanding principal balance of
the Advances, if any, and the Term Advance to such Company as of such date, by
(b) the sum of the outstanding principal balance of all Advances and Term
Advances as of such date.
"QMS Term Advance" has the meaning given to it in Section 2.6.
"Related Loan Agreement" means the Loan and Security Agreement, dated as
of the date hereof, among the Companies and USA Funding, as amended, modified or
supplemented from time to time.
"Remittance Address" means such addresses as Fidelity shall direct the
Companies from time to time in writing in accordance with the terms hereof.
"Shareholders Equity" means, respect to any Company and as of any date,
the shareholders' equity of such Company as of such date determined in
accordance with GAAP plus the principal balance of any Debt of such Company
subordinated to the Obligations pursuant to a written subordination agreement
satisfactory to Fidelity between Fidelity and the Person to whom such Debt is
owed.
"Solvent" means, with respect to any Company, that the debts of such
Company do not exceed the assets of such Company at a fair valuation and that
such Company generally is paying its debts as they become due.
"Tangible Net Worth" means, with respect to CEM and as of any date, the
amount obtained by subtracting CEM's Intangible Assets as of such date from
CEM's Shareholders' Equity as of such date, and means, respect to QMS and YMC
combined (determined as if they were consolidated entities under GAAP), the
amount obtained by subtracting the Intangible Assets of QMS and YMC as of such
date from the Shareholders' Equity of QMS and YMC as of such date.
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"Tangible Net Worth Requirement" means (a) with respect to YMC and QMS
combined, negative $300,000 until June 30,1999 and for each calendar month
thereafter means the Tangible Net Worth Requirement of YMC and QMS combined as
of the last day of the preceding calendar month plus $8,333, and (b) with
respect to CEM, means $3,750,000 until December 31, 1998 and for each calendar
month thereafter means the Tangible Net Worth Requirement of CEM as of the last
day of the preceding calendar month plus $50,000.
"Term" has the meaning given to it in Section 11.4.
"Term Advances" means the CEM Term Advance, the YMC Term Advance and the
QMS Term Advance.
"Termination Event" means (a) the occurrence with respect to any ERISA
Plan of (i) a reportable event described in Sections 4043(b)(5) of ERISA or (ii)
any other reportable event described in Section 4043(b) of ERISA other than a
reportable event not subject to the provision for 30-day notice to the Pension
Benefit Guaranty Corporation pursuant to a waiver by such corporation under
Section 4043(a) of ERISA or (b) the withdrawal of any Company or any Affiliate
of any Company from any ERISA Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) any
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any ERISA
Plan.
"Term Limit" means $2,000,000.
"Transaction Documents" means this Agreement and all other documents and
instruments executed and delivered in connection herewith or therewith.
"UCC" means the Uniform Commercial Code as in effect in the applicable
jurisdiction.
"USA Funding" means USA Funding, Inc., a Delaware corporation.
"Working Capital" means, as of any date and with respect to CEM, the
excess of the Current Assets of CEM over the Current Liabilities of CEM as of
such date.
"Working Capital Requirement" means negative $1,500,000 until January 31,
1999 and for each calendar month thereafter means the Working Capital
Requirement as of the last day of the preceding calendar month plus $50,000.
"YMC Term Advance" has the meaning given to it in Section 2.6.
1.2 Terms defined in the UCC and used but not defined herein shall have
the meanings ascribed to them in the UCC.
1.3 References herein to a particular agreement, instrument or document
also shall be deemed to refer to and include all renewals, extensions and
modifications of such agreement, instrument or document. All addenda, exhibits
and schedules attached to this Agreement are a part hereof for all purposes.
Words in the singular form shall be construed to include the plural and vice
versa, unless the context otherwise requires.
1.4 All interest accruing hereunder shall be calculated on the basis of
actual days elapsed (including the first but excluding the last day) plus three
business days and a year of 360 days. Unless otherwise expressly provided herein
or unless Fidelity otherwise consents, all financial statements and reports
furnished to Fidelity hereunder shall be prepared, and all financial
computations and determinations pursuant hereto shall be made, in accordance
with GAAP. All payments received by Fidelity after its internally established
time for closing business on any business day shall be applied as of the next
succeeding business day. Any payment which is due on a day which is not a
business day shall instead be deemed to be due on the next succeeding business
day, and interest thereon shall accrue and be payable at the then applicable
rate during the time of such extension. Fidelity's records in respect of loans
advanced, accrued interest, payments received and applied and other matters in
respect of calculation of the amount of the Obligations shall be deemed
conclusive absent demonstration of error. All statements of account rendered by
Fidelity to any Companies relating to principal, accrued interest or costs owing
by any Company under this Agreement shall be
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presumed to be correct and accurate unless, within 30 days after receipt
thereof, the Companies shall notify Fidelity in writing of any claimed error
therein.
Section 2. Advances.
2.1 Subject to the terms of this Agreement, including, without limitation,
Section 3, Fidelity shall make advances to each Company (each an "Advance" and
collectively the "Advances") from time to time during the Term; provided,
however, that the aggregate principal amount of Advances outstanding at any time
to any Company shall not exceed such Company's Borrowing Base determined by
Fidelity from time to time; and provided, further, however, that the aggregate
principal amount of Advances outstanding at any time to all Companies shall not
exceed the Facility Limit less the amount of "Advances" then outstanding under
the Related Loan Agreement. Each Advance must be in a minimum amount of $5,000
or, if less, the unadvanced portion of the applicable Borrowing Base. The
Companies hereby agree to repay to Fidelity all Advances made to the Companies
hereunder, together with interest thereon, in the manner provided herein. The
principal owing hereunder in respect of the Advances at any given time shall
equal the aggregate amount of Advances made hereunder minus all principal
payments thereon received by Fidelity hereunder. Subject to the terms and
conditions hereof, the Companies may borrow, repay and reborrow under this
Agreement. The term "Advances" specifically excludes "Term Advances."
2.2 Each request by a Company to Fidelity for an Advance hereunder must be
in writing or promptly confirmed in writing. Each such written request or
confirmation shall be accompanied by a "Borrowing Base Certificate" in the form
attached hereto as Exhibit "A," together with such supporting information as
Fidelity shall request, signed by an authorized representative of such Company.
2.3 Promptly after receiving each Borrowing Base Certificate, Fidelity
shall, based upon such Borrowing Base Certificate and such other information
available to Fidelity, redetermine the applicable Borrowing Base, which
redetermination shall take effect immediately and remain in effect until the
next such redetermination. If all conditions precedent to any Advance requested
have been met, Fidelity will on the date requested make such Advance available
to the applicable Company by wire transfer to the account designated in writing
by such Company. In the event Fidelity does not receive an appropriately
completed Borrowing Base Certificate, Fidelity shall have no obligation to
redetermine any Borrowing Base or make any additional Advances hereunder.
2.4 If the aggregate unpaid principal balance of the Advances to any
Company exceeds such Company's Borrowing Base at any time, the Companies shall,
upon receipt of notice thereof from Fidelity, immediately repay the principal of
the Advances in an amount at least equal to such excess. Any principal repaid
pursuant to this Section 2.4 shall be in addition to, and not in lieu of, all
payments otherwise required to be paid under the Transaction Documents.
2.5 The aggregate unpaid principal balance of the Advances plus all
accrued but unpaid interest thereon shall be payable by the Companies to
Fidelity on demand, or if no demand is made, on the last day of the Term.
2.6 Subject to the terms and conditions hereof, including, without
limitation, Section 3, Fidelity agrees to make (a) a single advance (the "CEM
Term Advance") to CEM in an amount up to 80% of the forced liquidation value of
the Eligible Machinery and Equipment of CEM simultaneously with the first
Advance hereunder, (b) a single advance to YMC (the "YMC Term Advance") in an
amount up to 80% of the forced liquidation value of the Eligible Machinery and
Equipment of YMC on or prior to March 31, 1999, and (c) a single advance to QMS
(the "QMS Term Advance") in an amount up to 80% of the forced liquidation value
of the Eligible Machinery and Equipment of QMS on or prior to March 31, 1999;
provided, however, that the initial amount of all Term Advances shall not exceed
the Term Limit in the aggregate. The Companies hereby agree to repay to Fidelity
all Term Advances hereunder, together with interest thereon, in the manner
provided herein. The principal owing hereunder in respect of the Term Advances
at any given time shall equal the aggregate amount of Term Advances made
hereunder minus all principal payments thereon received by Fidelity hereunder.
Amounts repaid in respect of any Term Advance may not be reborrowed hereunder.
2.7 Each request for a Term Advance must be in writing. Provided that all
conditions precedent thereto have been satisfied, Fidelity will, on the date
requested, make each Term Advance available to the applicable Company in
immediately available funds by wire transfer to the account designated in
writing by such Company.
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2.8 The aggregate principal balance of the Term Advances plus all accrued
but unpaid interest thereon shall be due and payable by the Companies to
Fidelity on demand, or if no demand is made, as follows:
(a) The principal balance of the CEM Term Advance shall be repaid in
monthly installments equal to the initial principal balance of the CEM Term
Advance divided by 48, due and payable on the last day of each calendar month,
commencing on the last day of the calendar month following the calendar month in
which the CEM Term Advance is made and ending on November 30,2001, and a final
payment of the remaining outstanding principal balance of the CEM Term Advance,
due and payable on the third anniversary of the date hereof; provided, however,
that the remaining unpaid principal balance of the CEM Term Advance and all
accrued and unpaid interest thereon shall be due and payable on the earlier of
(i) the payment of the remaining unpaid principal balance of the Advances and
(ii) the last day of the Term.
(b) The principal balance of the YMC Term Advance shall be repaid in
equal monthly installments equal to the initial principal balance of the YMC
Term Advance divided by 48, due and payable on the last day of each calendar
month, commencing on the last day of the calendar month following the calendar
month in which the YMC Term Advance is made and ending on November 30,2001, and
a final payment of the remaining outstanding principal balance of the YMC Term
Advance, due and payable on the third anniversary of the date hereof; provided,
however, that the remaining unpaid principal balance of the YMC Term Advance and
all accrued and unpaid interest thereon shall be due and payable on the earlier
of (i) the payment of the remaining unpaid principal balance of the Advances and
(ii) the last day of the Term.
(c) The principal balance of the QMS Term Advance shall be repaid in
equal monthly installments equal to the initial principal balance of the QMS
Term Advance divided by 48, due and payable on the last day of each calendar
month, commencing on the last day of the calendar month following the calendar
month in which the QMS Term Advance is made and ending on November 30, 2001, and
a final payment of the remaining outstanding principal balance of the QMS Term
Advance, due and payable on the third anniversary of the date hereof; provided,
however, that the remaining unpaid principal balance of the QMS Term Advance and
all accrued and unpaid interest thereon shall be due and payable on the earlier
of (i) the payment of the remaining unpaid principal balance of the Advances and
(ii) the last day of the Term.
(d) The Term Advances may not be prepaid in part prior to maturity,
and may be prepaid in full only in accordance with the provisions of Section 2.9
or Section 11.4.
2.9 The Eligible Machinery and Equipment of each Company shall, at all
times, have an appraised forced liquidation value of not less than 125% of the
outstanding principal balance of the Term Advance to such Company. Fidelity may,
from time to time, have the Eligible Machinery and Equipment appraised by an
appraiser selected by Fidelity, and the Companies shall pay the costs of any
such appraisal. If any such appraisal indicates that the forced liquidation
value of the Eligible Machinery and Equipment of any Company is less than 125%
of the outstanding principal balance of the Term Advance to such Company, the
Companies shall, at Fidelity's option, either (a) grant a security interest to
Fidelity in additional collateral satisfactory to Fidelity having a force
liquidation value, which together with the forced liquidation value of the
Eligible Machinery and Equipment of such Company, equals or exceeds 125% of the
outstanding principal balance of the Term Advance to such Company or (b)
immediately pay down the outstanding principal balance of the Term Advance to
such Company, plus all accrued interest on the amount prepaid, to an amount
equal to 125% of the forced liquidation value of the Eligible Machinery and
Equipment of such Company. Any prepayment hereunder shall be applied to
installments due under Section 2.8 in the reverse order of due dates.
2.10 The aggregate unpaid principal balance of all Advances and the Term
Advances shall bear interest at the Contract Rite in effect from time to time.
Except as provided in Section 2.5 or Section 2.8, all accrued but unpaid
interest thereon shall be due and payable by the Companies to Fidelity on the
last day of each calendar month.
2.11 The Companies shall pay to Fidelity an annual facility fee in the
amount of 0.667% of the sum of (a) the Facility Limit and (b) the Term Limit,
payable on the date hereof and on each anniversary of the date hereof during the
Term. The Companies hereby authorize Fidelity, at its sole discretion, to deduct
any facility fee from any Advance or Term Advance hereunder.
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2.12 In the event that the income earned by Fidelity during any calendar
month pursuant to Section 2.10 (excluding any income earned on any Term Advance)
and by USA Funding pursuant to Section 2.6 of the Related Loan Agreement is less
than $45,000, the Companies shall pay to Fidelity a minimum usage fee equal to
the difference between the amount so earned by Fidelity and $45,000, regardless
of Fidelity's prior compensation. The minimum usage fee for each calendar month
shall be due and payable on the first day of the next calendar month, and shall
be prorated for any partial calendar month during the Term.
2.13 In addition to, and not in lieu of, any termination fee required by
Section 11.4, the Companies shall pay to Fidelity a liquidation fee (in this
section called the "Liquidation Fee") in the amount of 5.00% of the face amount
of each Eligible Account included in any Company's Borrowing Base that is
outstanding at any time during the Liquidation Period (as defined below). The
Liquidation Fee shall be payable on the earlier to occur of (i) the date on
which Fidelity collects the applicable Eligible Account and (ii) the ninetieth
day after the invoice date of the applicable Eligible Account. For purposes of
this section, the term "Liquidation Period" means a period beginning on the
earliest of (i) the date of commencement against or by any Company of any
voluntary or involuntary case under the federal Bankruptcy Code, (ii) the date
of any general assignment by any Company for the benefit of its creditors; (iii)
the date of any appointment or taking possession by a receiver, liquidator,
assignee, custodian or similar official of all or a substantial part of any
Company's assets, or (iv) the date of the cessation of business of any Company
(other than in connection with the sale of substantially all of the assets of
such Company, provided that Fidelity consented in writing to such sale prior
thereto), and ending on the date on which Fidelity has actually received all
fees, costs, expenses and other amounts owing to it hereunder.
2.14 Contemporaneously with the execution and delivery hereof, the
Companies shall pay to Fidelity a fee of $20,000 plus out-of-pocket expenses to
cover the charges of Fidelity's in-house counsel for the negotiation,
preparation, execution and delivery of the Transaction Documents and the Century
Documents. In addition, the Companies shall pay or reimburse Fidelity upon
demand for (a) all other costs and expenses incurred by Fidelity in connection
with its due diligence review of the Companies and the closing of the
transactions contemplated hereby, and (b) all reasonable attorney's fees, court
costs and other expenses incurred by Fidelity (whether or not litigation is
commenced or judgment issued, and if litigation is commenced whether at trial or
any appellate level) in connection with the enforcement by Fidelity of this
Agreement or any other Transaction Document, the protection or enforcement of
Fidelity's interest in the Collateral, the collection by Fidelity of the
Collateral, or the representation of Fidelity in connection with any bankruptcy
case or insolvency proceeding involving any Company, the Collateral, or any
Account Debtor, including, without limitation, any representation involving
relief from a stay motion, a cash collateral dispute, an assumption or rejection
motion or a dispute concerning any proposed disclosure statement and plan
proposed in any such proceeding. Fidelity acknowledges that it has received a
"good faith" deposit of $40,000 from the Companies. Such deposit shall be
applied to the obligations of the Companies hereunder.
2.15 Fidelity shall be entitled to collect upon demand its normal and
customary charges for the following routine services provided or obtained in the
course of performing its functions with respect to the Collateral: appraisals,
lock box charges, credit reports, wire transfers, overnight mail delivery and
UCC, judgment, litigation and tax lien searches and filings.
2.16 All interest, fees and other amounts due to Fidelity pursuant to this
Section 2 shall be payable on demand, and may, in Fidelity's sole discretion, be
deducted from any Advance or paid from the Cash Collateral.
2.17 In connection with the first Advance hereunder and provided that all
conditions contained in Section 3 have been satisfied, Fidelity shall pay (or
reimburse CEM for the payment of) $80,000 of the early termination fee payable
by CEM to Congress Financial Corporation - New England in connection with the
prepayment of CEM's credit facility with Congress Financial Corporation - New
England.
Section 3. Conditions Precedent to Advances.
3.1 Fidelity shall not be obligated to make any Advance or Term Advance
hereunder (including the first) until it shall have received the following
documents, duly executed in form and substance satisfactory to Fidelity and its
counsel:
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(a) lockbox agreements relating to the lockboxes at any Remittance
Address and the related deposit accounts, duly executed by the
financial institutions establishing and maintaining such lockboxes
and deposit accounts;
(b) certificates executed by the President and the Secretary of each
Company and Century certifying (i) the names and signatures of the
officers of such Company or Century, as the case maybe, authorized
to execute Transaction Documents or Century Documents, as the case
may be, (ii) the resolutions duly adopted by the Board of Directors
of such Company or Century, as the case may be, authorizing the
execution of the Transaction Documents or Century Documents, as the
case may be, to it which it is a party, and (iii) correctness and
completeness of the copy of the bylaws of such Company or Century,
as the case may be, attached thereto;
(c) a certificate executed by the President and the Chief Financial
Officer/Treasurer of each Company certifying the satisfaction of the
conditions set forth in Section 3.2;
(d) certificates regarding the due formation, valid existence and good
standing of each Company and Century in the state of its
organization issued by the appropriate governmental authorities in
such jurisdiction;
(e) landlord agreements subordinating the security interests of the
landlords for CEM's premises in Marlborough, Massachusetts, and
YMC's and QMS's premises in Santa Clara, California, in the
Collateral to the security interest therein of Fidelity granted
herein;
(f) a favorable opinion of counsel for the Companies and Century
covering such matters as Fidelity may request in its sole
discretion;
(g) endorsements naming Fidelity as an additional insured or loss payee,
as appropriate, on all liability insurance and all property
insurance policies of the Companies;
(h) the Century Documents, duly executed by all parties thereto;
(i) audited consolidated financial statements of Century for the two
most recent fiscal years ending prior to the date hereof;
(j) appraisals performed by appraisers satisfactory to Fidelity of the
forced liquidation value of the Eligible Machinery and Equipment of
each of CEM, YMC and QMS;
(k) release agreements executed by Congress Financial Corporation - New
England, The Sumitomo Bank of California and CitiBank Federal
Savings Bank, releasing any lien or security interest that any of
them may have in the Collateral;
(l) an intercreditor agreement with USA Funding pursuant to which it
subordinates its security interest in all Collateral other than
Accounts owed by Northern Telecom or any Affiliate thereof;
including, without limitation, Bay Networks and Lancity, to the
security interest therein of Fidelity granted herein; and
(m) the Related Loan Agreement, duly executed by the Companies.
3.2 Fidelity shall not be obligated to make any Advance or Term Advance
hereunder (including the first), unless: (i) all representations and warranties
made by each Company in the Transaction Document and by Century in the Century
Documents are true on and as of the date of such Advance or Term Advance as if
such representations and warranties had been made as of the date of such Advance
or Term Advance, (ii) each Company and Century have performed and complied with
all agreements and conditions required in the Transaction Documents and the
Century Documents to be performed or complied with by them on or prior to the
date of such Advance or Term Advance, (iii) no Event of Default or any event or
circumstance that, with the passage of time, the giving of notice or both, would
become an Event of Default shall have occurred, (iv) such Advance or Term
Advance shall not be prohibited by any law or any regulation or any order of any
court or governmental agency or authority, (v) none of any
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Company or Century shall have repudiated or made any anticipatory breach of any
of its obligations under any Transaction Document or Century Document, as the
case may be, and (vi) Fidelity shall not have disapproved such Advance or Term
Advance in whole or in part.
Section 4. The Companies' Representations and Warranties. Each Company
jointly and severally represents and warrants to Fidelity on the date hereof,
and shall be deemed to represent and warrant to Fidelity on each date on which
an Advance or Term Advance is made to any Company hereunder, that:
4.1 Each Company is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, with all
requisite power and authority to execute, deliver and perform its obligations
under this Agreement and the other Transaction Documents to which it is a party
and to conduct its business as presently conducted. Each Company is duly
qualified and authorized to do business as a foreign corporation and is in good
standing in all states in which such qualification and good standing are
necessary or desirable for the conduct by such Company of its business or the
performance by such Company of its obligations hereunder. The execution,
delivery and performance by each Company of this Agreement and the other
Transaction Documents to which it is a party do not and will not constitute (a)
a violation of any applicable law or such Company's articles or certificate of
incorporation and bylaws, or (b) a material breach of any other document,
agreement or instrument to which such Company is a party or by which such
Company is bound. This Agreement and the other Transaction Documents to which
any Company is a party have been duly authorized, executed and delivered by such
Company, and are legal, valid and binding obligations of such Company
enforceable against such Company in accordance with their terms. No consent of,
approval by, registration or filing with or authorization from any governmental
authority or agency is required in connection with the execution, delivery or
performance by any Company of this Agreement or the other Transaction Documents
to which it is a party.
4.2 Except as described on Schedule 4.2 attached hereto and except for
liens and security interests granted to USA Funding pursuant to the Related Loan
Agreement, none of the Collateral is subject to any lien, encumbrance, security
interest or other claim of any kind or nature, no Company has transferred, sold,
pledged or given a security interest in any of its Accounts, Inventory,
machinery or equipment to anyone other than Fidelity, and there are no financing
statements on file in any public office governing any property of any Company of
any kind, real or personal, in which such Company is named in or has signed as
the debtor.
4.3 Each Company is the sole owner and holder of, and has good and
marketable title to, all Collateral purported to be owned by it. This Agreement
creates a valid security interest in the Collateral in favor of Fidelity. Such
security interest is a perfected, first-priority security interest in the
Collateral other than Accounts owed by Northern Telecom or any Affiliate thereof
and any Collateral covered by the financing statements described in Schedule 4.2
superior to the rights of any other Persons therein, and a perfected,
second-priority security interest in the Collateral consisting of Accounts owed
by Northern Telecom and any Collateral covered by the financing statements
described in Schedule 4.2 superior to the rights of any other Persons therein
other than USA Funding and the Persons whose benefit the financing statements
described in Schedule 4.2 have been filed, as the case may be.
4.4 The amount of each Eligible Account of each Company is due and owing
to such Company and represents an accurate statement of a bona fide sale,
delivery and acceptance of Inventory or performance of service by such Company
to or for an Account Debtor. The terms for payment of the Eligible Accounts are
30 days from date of invoice and the payment of the Eligible Accounts is not
contingent upon the fulfillment by any Company of any further performance of any
nature whatsoever. There are no set-offs, allowances, discounts, deductions,
counterclaims against the Eligible Accounts or any claims by Account Debtors, of
any kind whatsoever, valid or invalid, that have been or may be asserted as a
basis for refusing to pay an Eligible Account, in whole or in part, either at
the time it is accepted by Fidelity for inclusion in any Borrowing Base or prior
to the date it is to be paid. To the best of each Company's knowledge, each
Account Debtor's business is solvent. The Companies have served or caused to be
served any and all preliminary notices required by law to perfect or enforce any
mechanic's lien or stop notice or bonded stop notice for the Eligible Accounts
and the information contained in those notices is true and correct to the best
of each Company's knowledge.
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4.5 The addresses set forth in the perfection certificates delivered by
the Companies to Fidelity in connection herewith are, and for at least the last
six months have been, the mailing addresses, the chief executive offices, the
principal places of business, the offices where all of the books and records
concerning the Eligible Accounts are maintained and the location of all
Collateral of each Company. No Company transacts business, or has transacted
business during the past five years, under any trade, fictitious or assumed name
other than those set forth under such Company's signature hereon. During the
past five years, no Company has not been a party to a merger or consolidation
and has not acquired all or substantially all of the assets of any Person except
as described on Schedule 4.5 attached hereto.
4.6 The Companies have filed all tax reports and returns required to be
filed by them and have paid all federal, state and local taxes and governmental
charges imposed upon the Companies; provided, however, that YMC has a payment
plan with the Internal Revenue Service for the payment of approximately $33,000
in past due federal withholding taxes.
4.7 Each Company is in compliance with ERISA, and is not required to
contribute to any "multiemployer plan" as defined in Section 4001 of ERISA. Each
Company has conducted its business in compliance with all applicable laws,
including but not limited to, applicable Environmental Laws, and maintains and
is in compliance with all licenses and permits required under any such laws to
conduct its business and perform its obligations hereunder. No Company has any
known material contingent liability under any Environmental Law.
4.8 The application made by the Companies and Century to Fidelity in
connection with this Agreement and the statements made therein and in any
materials furnished in connection therewith are true and correct as of the date
hereof. All financial statements furnished by the Companies and Century to
Fidelity in connection with such application or hereunder have been prepared in
accordance with GAAP and fairly present the financial condition and results of
operations of the Companies and Century, as the case may be, as of the dates and
for the periods indicated therein.
4.9 There is no fact which any Company has not disclosed to Fidelity in
writing which could materially adversely affect the properties, business or
financial condition of any Company or Century or any of the Collateral, or which
it is necessary to disclose in order to keep the foregoing representations and
warranties from being misleading.
Section 5. Covenants of the Companies. From the date hereof and until the
payment and performance in full of all of the Obligations, each Company jointly
and severally covenants with Fidelity that:
5.1 Each Company shall preserve and maintain its corporate existence, good
standing and authority to transact business in all jurisdictions where necessary
for the proper conduct of its business, and shall maintain all of its
properties, rights, privileges and franchises necessary or desirable in the
normal conduct of its business.
5.2 Each Company shall permit Fidelity and its representatives, including
any appraisers, auditors and accountants selected by Fidelity, to inspect any of
the Collateral at any time during normal business hours. In addition, Fidelity
shall have the right, from time to time, to perform a field examination of each
Company's books and records during normal business hours. The Companies shall
pay all costs associated with any such audits at the rate of $700 per day per
auditor plus reasonable out-of-pocket expenses; provided, however, that the
Companies' obligation to pay for any such field audits shall be limited to four
field audits per annum per Company so long as no Event of Default or event or
circumstance that would, with the giving of notice, the passage of time or both,
constitute an Event of Default, has occurred; otherwise, no limit shall apply.
5.3 Each Company shall maintain its books and records in accordance with
GAAP. Each Company shall furnish Fidelity, upon request, such information and
statements as Fidelity shall request from time to time regarding such Company's
business affairs, financial condition and results of its operations. Without
limiting the generality of the foregoing, each Company shall provide Fidelity,
on or prior to the last day of each month, unaudited financial statements with
respect to the prior month and, within 90 days after the end of each of such
Company's fiscal years, audited annual financial statements and such
certificates relating to the foregoing as Fidelity may request including,
without limitation, a monthly certificate from the president and chief financial
officer of such Company certifying the accuracy of such financial statements and
all Borrowing Base Certificates delivered to Fidelity during such month, stating
whether any Events of Default have occurred and stating in detail the nature of
any such Events of Default. Any
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such monthly officers' certificate shall be in the form attached hereto as
Exhibit B. Each Company shall provide Fidelity a Borrowing Base Certificate,
appropriately completed and with all attachments, at any time that Fidelity
shall request and on or before the last day of any calendar week in which such
Company does not request an Advance. In addition, each Company shall furnish to
Fidelity upon request a current listing of all open and unpaid accounts payable
and accounts receivable, names, addresses and contact persons for Account
Debtors, and such other items of information that Fidelity may deem necessary or
appropriate from time to time. The Companies immediately shall notify Fidelity
in writing upon becoming aware of the existence of any condition or circumstance
that constitutes an Event of Default or that would, with the giving of notice,
the passage of time or both, constitute an Event of Default. Any such written
notice shall be signed by the president and chief financial officer of each
Company and shall specify the nature of such condition or circumstance, the
period of the existence thereof and the action that the Companies propose to
take with respect thereto.
5.4 Each Company promptly shall notify Fidelity of any attachment or any
other legal process levied against such Company and any action, suit, proceeding
or other similar claim initiated against such Company.
5.5 The Companies shall keep and maintain adequate insurance by insurers
acceptable to Fidelity with respect to their business and all Collateral. Such
insurance shall cover loss, damages and liability of amounts not less than
reasonably requested by Fidelity and shall include, at a minimum, business
interruption insurance, insurance for workers compensation, general premises
liability, fire, casualty, theft and all risk. The Companies shall cause
Fidelity to be an additional insured and loss payee under all policies of
insurance covering any of the Collateral, to the extent of Fidelity's interest.
The Companies shall deliver copies of each insurance policy to Fidelity upon
request.
5.6 The Companies shall file all tax reports and returns required to be
filed by it in the manner and at the times required by applicable law, and shall
pay all federal, state and local taxes and charges imposed upon the Companies
when due.
5.7 Each Company shall maintain a Tangible Net Worth of at least the
applicable Tangible Net Worth Requirement. CEM shall maintain Working Capital of
at least the Working Capital Requirement at all times, and CEM shall maintain a
Debt Service Coverage Ratio of at least 1.20 to 1.00 at all times.
5.8 Each Company shall comply with ERISA and shall not become required to
contribute to any "multiemployee plan" as defined in Section 4001 of ERISA. Each
Company shall conduct its business in compliance with all applicable laws, and
shall maintain and comply with all licenses and permits required under any such
laws to conduct its business and perform its obligations hereunder. Without
limiting the generality of the foregoing, each Company shall comply with all
Environmental Laws now or hereafter applicable to such Company and shall obtain,
at or prior to the time required by applicable Environmental Laws, all
environmental, health and safety permits, licenses and other authorizations
necessary for its operations. Each Company promptly shall furnish to Fidelity
all written notices of violation, complaints, penalty assessments, suits or
other proceedings received by such Company with respect to any alleged violation
of or non-compliance with any Environmental Laws.
5.9 The Net Profit of each Company for each fiscal year of such Company
shall equal or exceed the applicable Net Profit Requirement. No Company's Net
Profit shall be negative for any three or more consecutive calendar months, with
the first such month commencing in the case of CEM, with January 1999, and in
the case of the other Companies, with July 1999.
5.10 No Company shall grant, create or allow to exist any security
interest, lien or other encumbrance on any of the Collateral other than (a) the
lien and security interest granted to Fidelity herein and to USA Funding in the
Related Loan Agreement, (b) the security interests, liens or other encumbrances
described on Schedule 4.2 attached hereto and any liens and security interests
granted to holders of Debt refinancing any Debt secured by such security
interests, liens or other encumbrances to the extent permitted by Section
5.12(c), (c) purchase money liens or security interests granted at a time when
no Event of Default or event or circumstance that would, with the giving of
notice, the passage of time or both, constitute an Event of Default, has
occurred, and (d) liens and security interests securing Debt permitted under
Section 5.12(d), and no Company shall execute any financing statement in favor
of any Person other than Fidelity, USA Funding, the Persons described on
Schedule 4.2 attached hereto and any Person to whom a purchase money lien or
security interest or other lien or security interest permitted above has been
granted. No Company shall change its mailing address, chief executive office,
principal place of business or place where such
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records are maintained, open any new place of business, close any existing place
of business or change the location of any of the Collateral or transact business
under any trade, fictitious or assumed name other than those set forth under
such Company's signature hereon without providing at least 30 days' prior
written notice thereof to Fidelity.
5.11 No Company shall accept any returns or grant any allowance or credit
(other than those returns, allowances and credits accepted or granted in the
ordinary course of such Company's business) to any Account Debtor without notice
to and the prior written approval of Fidelity. The Companies shall provide to
Fidelity for each Account Debtor on Eligible Accounts a weekly report, in form
and substance satisfactory to Fidelity, itemizing all such returns and
allowances made during the previous week with respect to such Eligible Accounts.
5.12 No Company shall incur, directly, or indirectly, any Debt for
borrowed money or otherwise under any promissory note, bond, indenture or
similar instrument, or in connection with the obligations of any Person (whether
by guaranty, suretyship, purchase or repurchase agreement or agreement to make
investments or otherwise), other than (a) Debt incurred in favor of Fidelity or
USA Funding, (b) Debt secured by purchase money liens or security interests
permitted by Section 5.10, (c) Debt incurred to refinance any other Debt then
existing and permitted hereunder to the extent that such Debt does not exceed
the amount of Debt refinanced and such Debt is secured only by the properties
and assets that secured the Debt refinanced, (d) Debt subordinated to the
Obligations pursuant to a written subordination agreement satisfactory to
Fidelity between Fidelity and the Person to whom such Debt is owed, or (e) Debt
incurred in the normal and ordinary course of such Company's business.
5.13 The Companies shall not use any of the funds paid to the Companies
hereunder directly or indirectly for personal, family, household or agricultural
purposes.
5.14 No Company shall directly or indirectly become liable in connection
with the Debt of any Person, whether by guarantee, surety, endorsement (other
than endorsement of negotiable instruments for collection in the ordinary course
of business), agreement to purchase or repurchase, agreement to make
investments, agreement to provide funds or maintain working capital, or any
agreement to assure a creditor against loss, other than in favor of Fidelity or
USA Funding.
5.15 Except for the merger of QMS with and into YMC permitted by Section
5.20, no Company shall discontinue, or make any material change in, its business
as currently established, or enter any new or different line of business not
directly related to such Company's existing line of business.
5.16 Except for the merger of QMS with and into YMC permitted by Section
5.20, no Company shall declare, pay or issue any dividends or other
distributions in respect of its capital stock or distribute, reserve, secure, or
otherwise make or commit distributions on account of its capital stock, or make
any payment on account of the purchase, redemption or other acquisition or
retirement of any shares of its capital stock.
5.17 No Company shall make any loans or advances to or for the benefit of
any officer, director, shareholder or Affiliate of such Company; provided,
however, that each Company may make advances for routine expense allowances to
its officers and directors in the ordinary course of business; and provided,
further, however, that any Company may pay or reimburse Century for costs or
expenses incurred by Century directly on behalf of Century and overhead costs or
expenses incurred by Century and allocable to such Company in accordance with
Century's past practices; and, provided, further, however, that so long as
immediately prior thereto and after giving effect thereto, (a) no Event of
Default or any event or circumstance that, with the giving of notice, the
passage of time or both, would constitute an Event of Default, has occurred, and
(b) such Company is solvent, any Company may make loans or advances to another
Company for any purpose and to Century solely for the purpose of repurchasing
shares of Century's capital stock, provided that the amount of loans and
advances outstanding at any one time from CEM to the other Companies and Century
shall not in the aggregate exceed the difference obtained by subtracting
$1,250,000 from CEM's Tangible Net Worth. No Company shall make any payment on
any obligation owing to any officer, director, shareholder or Affiliate of such
Company; provided, however, that any Company may pay any obligations owed to
another Company as long as both prior, and after giving effect, to such payment,
(a) no Event of Default or event or circumstance that would, with the giving of
notice, the passage of time or both, constitute an Event of Default, has
occurred and (b) such Company is solvent; and, provided, further, however, that
any Company may pay or reimburse Century for costs or expenses incurred by
Century directly on
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behalf of such Company and overhead costs or expenses incurred by Century and
reasonably allocated to such Company in accordance with Century's past
practices.
5.18 No Company shall purchase or otherwise acquire assets from any Person
outside the ordinary course of business of such Company.
5.19 No Company shall not invest in or otherwise purchase or acquire the
securities of any Person.
5.20 No Company shall or dispose of any of its assets other than the sale
of Inventory in the ordinary course of business, and no Company shall dissolve
or liquidate or become a party to any merger or consolidation with any Person;
provided, however, that QMS may merge with and into YMC as long as (a) the
Companies provide prior written notice of the merger to Fidelity, (b) YMC
acknowledges and confirms its obligations hereunder, including those of QMS, in
writing to Fidelity in connection with the consummation of such merger, and (c)
both prior, and after giving effect, to such merger, no Event of Default or
event or circumstance that would, with the giving of notice, the passage of time
or both, constitute an Event of Default, has occurred.
5.21 Each Company shall keep and maintain its furniture, fixtures
machinery and equipment in good operating condition and repair (normal wear and
tear excepted), and shall make all necessary repairs thereto so that the value
and operating efficiency thereof shall at all times be maintained and preserved.
Each Company shall notify Fidelity immediately in writing of any material loss
or damage to any item of its furniture, fixtures, machinery and equipment.
5.22 If any Company now owns or hereafter acquires any vehicles, aircraft,
watercraft or other machinery and equipment for which a certificate of title has
been issued or applied for, such Company immediately shall deliver to Fidelity,
properly endorsed, each certificate of title or application for title or other
evidence of ownership for each such item of machinery and equipment. The
Companies shall take all actions necessary to have Fidelity's security interest
properly recorded on each such certificate of title and shall take all other
actions necessary to perfect Fidelity's security interest in all such assets now
or hereafter acquired by such Company.
Section 6. Collateral. In order to secure the payment and performance of
all Obligations, each Company hereby grants to Fidelity a security interest in
and lien upon all of such Company's right, title and interest in and to (a) all
Accounts, contract rights and general intangibles, receivables and claims
whether now or hereafter arising, all guaranties and security therefor and all
of such Company's right title and interest in the goods purchased and
represented thereby, if any, including all of such Company's rights in and to
returned goods and rights of stoppage in transit, replevin and reclamation as
unpaid vendor; (b) all Inventory and all accessions thereto and products thereof
and documents therefor, (c) all furniture, fixtures, equipment and machinery,
including, without limitation, the furniture, fixtures, equipment and machinery
described on Schedule 6 attached hereto, wherever located and whether now or
hereafter existing, and all parts thereof, accessions thereto, and replacements
therefor and all documents and general intangibles covering or relating thereto;
(d) all books and records pertaining to the foregoing, including but not limited
to computer programs, data, certificates, records, circulation lists, subscriber
lists, advertiser lists, supplier lists, customer lists, customer and supplier
contracts, sales orders, and purchasing records; and (e) all proceeds of the
foregoing (collectively, the "Collateral"). The Companies agree to comply with
all appropriate laws in order and to take all actions necessary or desirable in
Fidelity's judgment to perfect Fidelity's security interest in and to the
Collateral, to execute any financing statement or additional documents as
Fidelity may request and to deliver to Fidelity a list of all locations of its
Inventory, equipment and machinery and landlord and or mortgagee lien waivers
with respect to each site where Inventory, equipment or machinery is located and
which is either leased by the Companies or has been mortgaged by the Companies,
upon request by Fidelity.
Section 7. Collection. Each invoice representing an Account shall state on
its face that amounts payable thereunder are payable only at the Remittance
Address. Fidelity shall have the right at any time, either before or after the
occurrence of an Event of Default and without notice to any Company, to notify
any or all Account Debtors on the Collateral of the assignment of the Collateral
to Fidelity and to direct such Account Debtors to make payment of all amounts
due or to become due to any Company directly to Fidelity, and to the extent
permitted by law, to enforce collection of any Collateral and to adjust, settle
or compromise the amount or payment thereof. So long as no Event of Default or
event that, with the passage of time, the giving of notice or both, would become
an Event of Default has occurred and is continuing, all collections of
Collateral of any Company received by Fidelity shall be applied by
14
<PAGE>
Fidelity to the payment of the outstanding Advances of such Company, whether or
not then due, then to any interest due on any Advances or Term Advance to such
Company and any other fees or charges due hereunder and allocable or
attributable directly to such Company, then to such Company's Proportionate
Share of all other Obligations then due and any remaining funds shall be
delivered to such Company. Upon the occurrence of an Event of Default or an
event that, with the passage of time, the giving of notice or both, would become
an Event of Default, any such remaining funds may be applied to any of the
Obligations of the Companies, whether or not then due, or held by Fidelity as
cash collateral ("Cash Collateral") until all Obligations have been paid in full
and Fidelity has no further obligation to advance funds to the Companies. All
amounts and proceeds (including instruments and writings) received by any
Company in respect of the Collateral shall be received in trust for the benefit
of Fidelity hereunder, shall be segregated from other funds of such Company and
shall be immediately paid over to Fidelity in the same form as received (with
any necessary endorsement) to be applied in the same manner as payments received
directly by Fidelity. Notwithstanding anything to the contrary contained herein,
if Fidelity has received a request from USA Funding to deliver any amounts
otherwise distributable to a Company under this Section 7 to USA Funding to be
applied to Debt owed by the Companies to USA Funding, Fidelity hereby is
authorized to, and shall deliver, such amounts directly to USA Funding.
Section 8. Power of Attorney. Each Company grants to Fidelity an
irrevocable power of attorney coupled with an interest authorizing and
permitting Fidelity, at its option, with or without notice to such Company, to
do any or all of the following: (a) endorse the name of such Company on any
checks or other evidences of payment whatsoever that may come into the
possession of Fidelity regarding Collateral, including checks received by
Fidelity pursuant to Section 7 hereof; (b) receive, open and forward any mail
addressed to such Company and received at the Remittance Address; (c) pay,
settle, compromise, prosecute or defend any action, claim, conditional waiver
and release, or proceeding relating to Collateral; (d) upon the occurrence of an
Event of Default, notify, in the name of such Company, the U.S. Post Office to
change the address for delivery of mail addressed to such Company to such
address as Fidelity may designate (provided that Fidelity shall turn over to
such Company all such mail not relating to Collateral); and (e) execute and file
on behalf of such Company any financing statement, amendment thereto or
continuation thereof (i) deemed necessary or appropriate by Fidelity to protect
Fidelity's interest in and to the Collateral or (ii) required or permitted under
any provision of this Agreement. The authority granted to Fidelity herein is
irrevocable until this Agreement is terminated and all amounts due to Fidelity
hereunder have been paid in full. Each Company acknowledges that Fidelity may
verify or confirm the Eligible Accounts from time to time, by among other means,
contacting the related Account Debtors, and each Company consents to such
verification and confirmation.
Section 9. Default. An event of default ("Event of Default") shall be
deemed to have occurred hereunder, and Fidelity shall have no further obligation
to make any further Advances or Term Advance and may immediately exercise its
rights and remedies with respect to the Collateral under this Agreement, the UCC
and applicable law, upon the happening of one or more of the following:
(a) Any Company shall fail to pay on demand or otherwise as and when
required or due any amount required to be paid or owed by such Company to
Fidelity, whether hereunder or otherwise.
(b) Any Company shall breach any covenant or agreement made herein or in
any other Transaction Document (other than those covered by clause (a) above)
and the same shall not be cured to Fidelity's satisfaction within thirty days
after the earlier of (i) the date on which Company first obtains knowledge that
such covenant or agreement has been breached or (ii) the date on which Fidelity
notifies the Companies that such covenant or agreement has been breached.
(c) Any warranty or representation made herein or in any other Transaction
Document shall be untrue in any material respect when made or any report,
certificate, schedule, financial statement, profit and loss statement or other
statement furnished by any Company, or by any other Person on behalf of any
Company, to Fidelity is not true and correct in all material respects when
furnished.
(d) There shall be commenced by or against any Company any voluntary or
involuntary case under the federal Bankruptcy Code, or any Company shall make an
assignment for the benefit of its creditors, or of a receiver or custodian shall
be appointed for any Company for a substantial portion of its assets.
15
<PAGE>
(e) Any Company other than YMC shall become insolvent in that its debts
are greater than the fair value of its assets, or any Company is generally not
paying its debts as they become due.
(f) Any involuntary lien, garnishment, attachment or the like in the
amount of $100,000 or more shall be issued against or shall attach to the
Collateral and the same is not released or bonded or insured to the satisfaction
of Fidelity within ten days.
(g) An event or circumstance shall have occurred which Fidelity believes
has or may result in a material adverse change in any Company's financial
condition, business or operations or the value of the Collateral.
(h) Any Company shall have a federal or state tax lien filed against any
of its properties, or shall fail to pay any federal or state tax when due, or
shall fail to file any federal or state tax form or report as and when due;
provided, however, that the failure of YMC to pay approximately $33,000 of past
due federal withholding taxes shall not constitute an "Event of Default" unless
YMC defaults under its payment plan with respect thereto with the Internal
Revenue Service.
(i) Either (i) any "accumulated funding deficiency" (as defined in Section
412(a) of the Internal Revenue Code of 1986, as amended) in excess of $100,000
exists with respect to any ERISA Plan, or (ii) any Termination Event occurs with
respect to any ERISA Plan and the then current value of such ERISA Plan's
benefit liabilities exceeds the then current value of such ERISA Plan's assets
available for the payment of such benefit liabilities by more than $100,000.
(j) Any Company suffers the entry against it a final judgment for the
payment of money in excess of $100,000, and either (i) such judgment is not paid
in full within 45 days after the entry of such judgment or (ii) such judgement
is not bonded or insured to the satisfaction of Fidelity.
(k) Fidelity shall believe that the prospect for payment or performance of
the Obligations has become impaired.
(l) Any guarantor of the Obligations shall repudiate his, her or its
obligations in respect of such guaranty.
(m) Century shall cease to own, directly or indirectly, 100% of the
outstanding capital stock of any Company.
(n) An "event of default" beyond any applicable cure period shall have
occurred under any Century Document or the Related Loan Agreement.
(o) An "event of default" beyond any applicable cure period shall have
occurred under any agreement, document or instrument evidencing any Debt
exceeding $100,000 of any Company and such "event of default" is not waived by
the holder of such Debt or otherwise cured by such Company, or any Debt
exceeding $100,000 of any Company is accelerated or called for payment prior to
the due date thereof.
Upon the occurrence of an Event of Default described in subsection (d) of this
section, all of the Obligations owing by the Companies to Fidelity under any of
the Transaction Documents shall thereupon be immediately due and payable,
without demand, presentment, notice of demand or of dishonor and nonpayment, or
any other notice or declaration of any kind, all of which are hereby expressly
waived by the Companies. During the continuation of any other Event of Default,
Fidelity, at any time and from time to time, may declare any or all of the
Obligations owing by the Companies to Fidelity under any of the Transaction
Documents immediately due and payable, all without notice, demand, presentment,
notice of demand or of dishonor and nonpayment, or any notice or declaration of
any kind, all of which are hereby expressly waived by the Companies. After any
such acceleration (whether automatic or due to declaration by Fidelity), any
obligation of Fidelity to make any further Advances or Term Advances or loans of
any kind under this Agreement or any other agreement with any Company shall
terminate.
The enumeration of Events of Default shall not impair the nature of the
Obligations as demand obligations, at all times payable upon demand pursuant
hereto.
16
<PAGE>
Section 10. Remedies and application of Proceeds.
10.1 In addition to, and without limitation of, the foregoing provisions
of this Agreement, if an Event of Default shall have occurred and be continuing,
Fidelity may from time to time in its discretion, without limitation and without
notice except as expressly herein: (a) exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein, under the other
Transaction Documents or otherwise available to it, all the rights and remedies
of a secured party on default under the UCC (whether or not the UCC applies to
the affected Collateral); (b) require any Company to, and each Company hereby
agrees that it will at its expense, assemble all or part of the Collateral as
directed by Fidelity and make it available to Fidelity at a place to be
designated by Fidelity that is reasonably convenient to both parties; (c) reduce
its claim to judgment or foreclose or otherwise enforce, in whole or in part,
the security interest created hereby by any available judicial procedure; (d)
dispose of; at its office, on the premises or any Company or elsewhere, all or
any part of the Collateral, as a unit or in parcels, by public or private
proceedings; (e) buy the Collateral, or any part thereof; at any public sale, or
at any private sale if the Collateral is of a type customarily sold in a
recognized market or is of a type that is the subject to widely distributed
standard price quotations; (1) apply by appropriate judicial proceedings for
appointment of a receiver for the Collateral, or any part thereof, and each
Company hereby consents to any such appointment; and (g) at its discretion,
retain the Collateral in satisfaction of the Obligations whenever the
circumstances are such that Fidelity is entitled to do so under the UCC or
otherwise. Each Company agrees that, to the extent notice of sale shall be
required by law, at least five days' notice to such Company of the time and
place of any public sale of the Collateral or the time after which any private
sale of the Collateral is to be made shall constitute reasonable notification.
Fidelity shall not be obligated to make any sale of Collateral regardless of
whether any notice of sale has been given. Fidelity may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time and
place to which it was so adjourned.
10.2 If any Event of Default shall have occurred and be continuing,
Fidelity may in its discretion apply any Cash Collateral, and any cash proceeds
received by Fidelity in respect of any sale of; collection from, or other
realization upon all or any part of the Collateral, to any or all of the
following in such order as Fidelity may elect: (a) the repayment of all or any
portion of the Obligations; (b) the repayment of reasonable costs and expenses,
including reasonable attorneys' fees and legal expenses, incurred by Fidelity in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral, (iii) the exercise or enforcement of any of
the rights of Fidelity hereunder, or (iv) the failure of any Company to perform
or observe any of the provisions hereof; (c) the payment or other satisfaction
of any liens and other encumbrances upon any of the Collateral; (d) the
reimbursement of Fidelity for the amount of any obligations of any Company paid
or discharged by Fidelity, and of any expenses of Fidelity payable by any
Company hereunder or under the other Transaction Documents; (e) by holding the
same as Collateral; (I) the payment of any other amounts required by applicable
law (including, without limitation, Part 5 of Article 9 of the UCC or any
successor or similar applicable statutory provision); (g) after all Obligations
have been satisfied in full, at the request of USA Funding, by delivery to USA
Funding to be applied against Debt owed by the Companies to USA funding; and (h)
by delivery to such Company or to whomsoever shall be lawfully entitled to
receive the same or as a court of competent jurisdiction shall direct.
Section 11. Miscellaneous.
11.1 In the event that any Company commits any act or omission that
prevents or unreasonably interferes with (a) Fidelity's exercise of the rights
and privileges arising under the power of attorney granted in Section 8 of this
Agreement or (b) Fidelity's perfection of or levy upon the security interest
granted in the Collateral, including any seizure of any Collateral, such Company
acknowledges that such conduct will cause immediate, severe, incalculable and
irreparable harm and injury, and agrees that such conduct shall constitute
sufficient grounds to entitle Fidelity to an injunction, writ of possession, or
other applicable relief in equity, and to make such application for such relief
in any court of competent jurisdiction, without any prior notice to such
Company.
11.2 All rights, remedies and powers granted to Fidelity in this
Agreement, or in any other instrument or agreement given by any Company to
Fidelity or otherwise available to Fidelity in equity or at law, are cumulative
and may be exercised singularly or concurrently with such other rights as
Fidelity may have. These rights may be exercised from time to time as to all or
any part of the Collateral as Fidelity in its discretion may determine. No
waiver by Fidelity of its rights and remedies shall be effective unless the
waiver is in writing and signed by Fidelity. A waiver by
17
<PAGE>
Fidelity of a right or remedy under this Agreement or any other Transaction
Document on one occasion shall not be deemed to be a waiver of such right or
remedy on any subsequent occasion. An Advance by Fidelity during the
continuation of an Event of Default shall not obligate Fidelity to make any
further Advances during the continuation of such Event of Default.
11.3 Any notice or communication with respect to this Agreement or any
other Transaction Document shall be given in writing, sent by (i) personal
delivery, (ii) expedited delivery service with proof of delivery, (iii) United
States mail, postage prepaid, registered or certified mail, or (iv) prepaid
telegram, telex or telecopy, addressed to each party hereto at its address set
forth below its signature hereon or to such other address or to the attention of
such other Person as hereafter shall be designated in writing by the applicable
party sent in accordance herewith. Any such notice or communication shall be
deemed to have been given either at the time of personal delivery or, in the
case of delivery service or mail, as of the date of first attempted delivery at
the address and in the manner provided herein, or in the case of telegram, telex
or telecopy, upon receipt. The Companies hereby agree that Fidelity may
publicize the transaction contemplated by this Agreement in newspapers, trade
and similar publications including, without limitation, the publication of a
"tombstone".
11.4 The term of this Agreement shall be for three years from the date
hereof (the original term and any extension thereof are herein called the
"Term") and from year to year thereafter unless either party hereto gives notice
to the other party hereto not more than 90 days or less than 60 days prior to
the end of the Term; provided, however, that Fidelity may terminate this
Agreement at any time effective immediately upon the occurrence of an Event of
Default; and provided, further, however, that the Companies may terminate this
Agreement upon the payment in full of the Obligations, including, without
limitation, any early termination fee required below. The Companies acknowledge
that termination of this Agreement at any time prior to the end of the Term
would result in the loss by Fidelity of the benefits of this Agreement and that
the damages incurred by Fidelity as a result of such termination would be
difficult and impractical to ascertain. Therefore, in the event this Agreement
is terminated prior to the end of the Term for any reason, the Companies shall
pay to Fidelity an early termination fee in an amount equal to (i) 3.00% of the
sum of the Facility Limit and the Term Limit if such termination occurs during
the first year of the Term, (ii) 2.00% of the sum of the Facility Limit and the
Term Limit if such termination occurs during the second year of the Term, or
(iii) 1.00% of the sum of the Facility Limit and the Term Limit if such
termination occurs thereafter during the Term, in each case to the maximum
extent permitted by applicable law. Any termination of this Agreement shall not
affect Fidelity's security interest in the Collateral, and this Agreement shall
continue to be effective, until all Obligations have been completed and
satisfied in full. No Company shall be entitled to terminate this Agreement as
to itself only, unless all Companies terminate this Agreement or Fidelity
consents to such termination. The Companies may not terminate this Agreement
unless they also simultaneously terminate the Related Loan Agreement in
accordance with the terms thereof.
11.5 Each and every provision, condition, covenant and representation
contained in this Agreement is, and shall be construed, to be a separate and
independent covenant and agreement. If any term or provision of this Agreement
shall to any extent be invalid or unenforceable, the remainder of the Agreement
shall not be affected thereby.
11.6 The Companies jointly and severally agree to indemnify, hold harmless
and defend all Indemnified Persons from and against any and all Indemnified
Claims other than those arising out of the gross negligence or willful
misconduct of the applicable Indemnified Person. THE FOREGOING INDEMNIFICATION
SHALL APPLY WHETHER OR NOT SUCH INDEMNIFIED CLAIMS ARE IN ANY WAY OR TO ANY
EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY,
OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY
INDEMNIFIED PERSON. Upon notification and demand, the Companies agree to provide
defense of any Indemnified Claim and to pay all costs and expenses of counsel
selected by any Indemnified Person in respect thereof. Any Indemnified Person
against whom any Indemnified Claim may be asserted reserves the right to settle
or compromise any such Indemnified Claim as such Indemnified Person may
determine in its sole discretion, and the obligations of such Indemnified
Person, if any, pursuant to any such settlement or compromise shall be deemed
included within the Indemnified Claims. Except as specifically provided in this
section, the Companies waive all notices from any Indemnified Person. The
provisions of this Section 11.6 shall survive the termination of this Agreement.
18
<PAGE>
11.7 All grants, covenants and agreements contained in this Agreement
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that the Companies may not delegate
or assign any of their duties or obligations under this Agreement without the
prior written consent of Fidelity. FIDELITY RESERVES THE RIGHT TO ASSIGN ITS
RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT IN WHOLE OR IN PART TO ANY PERSON OR
ENTITY. Without limiting the generality of the foregoing, Fidelity may from time
to time grant participations in all or any part of the Obligations to any Person
on such terms and conditions as may be determined by Fidelity in its sole and
absolute discretion, provided that the grant of such participation shall not
relieve Fidelity of its obligations hereunder nor create any additional
obligation of the Companies.
11.8 Any action permitted or provided to be taken or omitted by Fidelity
hereunder may be taken or omitted, as the case may be, by Fidelity in its sole
and absolute discretion, and any consent or waiver required of Fidelity or
determination to be made by Fidelity hereunder may be given, withheld or made,
as the case may be, by Fidelity in its sole and absolute discretion.
11.9 ALL OBLIGATIONS HEREUNDER ARE THE JOINT AND SEVERAL OBLIGATION OF ALL
COMPANIES. ALL OBLIGATIONS AND INDEBTEDNESS NOW OR HEREAFTER OWING TO FIDELITY
BY THE COMPANIES JOINTLY AND SEVERALLY OR BY ANY COMPANY INDIVIDUALLY SHALL BE
SECURED BY ALL OF THE COLLATERAL, AND FIDELITY MAY HOLD AND APPLY AND REAPPLY
ALL MONIES, PROPERTY AND OTHER COLLATERAL OF ANY COMPANY IN PAYMENT OF ANY
INDEBTEDNESS, LIABILITIES OR OBLIGATIONS OF ANY OF THE COMPANIES UNDER THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT. NO COMPANY SHALL HAVE, AND EACH
COMPANY EXPRESSLY WAIVES, ANY, RIGHTS OF SUBROGATION, REIMBURSEMENT, INDEMNITY,
EXONERATION, CONTRIBUTION OR ANY SIMILAR CLAIM OR AGAINST ANY OTHER COMPANY OR
ANY OTHER PERSON DIRECTLY OR CONTINGENTLY LIABLE FOR THE OBLIGATIONS OR AGAINST
OR WITH RESPECT TO ANY OTHER COMPANY'S PROPERTY (INCLUDING, WITHOUT LIMITATION,
ALL OF SUCH COMPANY'S PROPERTY WHICH SERVES AS COLLATERAL FOR ITS OBLIGATIONS TO
FIDELITY). IN ADDITION, EACH COMPANY WAIVES ANY RIGHT TO ENFORCE ANY REMEDY
WHICH FIDELITY NOW HAS OR MAY HEREAFTER HAVE AGAINST ANY OTHER COMPANY.
NOTWITHSTANDING THE FOREGOING OR ANY OTHER PROVISION OF THIS AGREEMENT, IT IS
UNDERSTOOD AND AGREED THAT NO COMPANY SHALL BE LIABLE HEREUNDER FOR ANY PORTION
OF THE OBLIGATIONS IN EXCESS OF SUCH COMPANY'S "MAXIMUM LIABILITY AMOUNT." AS
USED HEREIN, THE TERM "MAXIMUM LIABILITY AMOUNT" SHALL MEAN, WITH RESPECT TO ANY
COMPANY, THE LESSER OF (a) THE AMOUNT OF THE OBLIGATIONS OR (b) THE SUM OF (I)
THE OUTSTANDING PRINCIPAL BALANCE OF THE ADVANCES TO SUCH COMPANY HEREUNDER,
ACCRUED AND UNPAID INTEREST THEREON, ANY OTHER FEES AND CHARGES HEREUNDER
ALLOCABLE OR ATTRIBUTABLE DIRECTLY TO SUCH COMPANY AND SUCH COMPANY'S
PROPORTIONATE SHARE OF ANY OTHER FEES AND CHARGES HEREUNDER AND (ii) THE MAXIMUM
ADDITIONAL AMOUNT THAT WOULD NOT RESULT IN SUCH COMPANY'S LIABILITY HEREUNDER
CONSTITUTING A FRAUDULENT TRANSFER OR CONVEYANCE UNDER APPLICABLE STATE OR
FEDERAL LAW AS DETERMINED BY A COURT OF COMPETENT JURISDICTION.
11.10 THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO THE RULES
THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED, HOWEVER, THAT ALL MATTERS OR
ISSUES PERTAINING TO USURY OR THE MAXIMUM ALLOWABLE CHARGE UNDER LAW FOR THE
USE, DETENTION OR FORBEARANCE OF MONEY SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF CALIFORNIA. EACH COMPANY HEREBY IRREVOCABLY SUBMITS ITSELF TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN DALLAS COUNTY,
TEXAS AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY
LEGAL PROCEEDING RELATING TO THIS AGREEMENT, ANY BORROWING HEREUNDER OR ANY
OTHER RELATIONSHIP BETWEEN FIDELITY AND EACH COMPANY BY ANY MEANS ALLOWED UNDER
STATE OR FEDERAL LAW. ANY LEGAL PROCEEDING ARISING OUT OF OR IN ANY WAY RELATED
TO THIS AGREEMENT, ANY
19
<PAGE>
BORROWING HEREUNDER OR ANY OTHER RELATIONSHIP BETWEEN FIDELITY AND EACH COMPANY
SHALL BE BROUGHT AND LITIGATED EXCLUSIVELY IN ANY ONE OF THE STATE OR FEDERAL
COURTS LOCATED IN DALLAS COUNTY, TEXAS HAVING JURISDICTION. THE PARTIES HERETO
HEREBY WAIVE AND AGREE NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR
OTHERWISE, THAT ANY SUCH PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT
THE VENUE THEREOF IS IMPROPER.
11.11 EACH OF EACH COMPANY AND FIDELITY HEREBY (A) IRREVOCABLY WAIVES, TO
THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE To A TRIAL BY
JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY OR ASSOCIATED HEREWITH; (B) IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (C) CERTIFIES THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD NOT, IN
THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (I))
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS PARAGRAPH.
11.12 THIS AGREEMENT AND THE DOCUMENTS DESCRIBED HEREIN AND DELIVERED IN
CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT OF THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES. NO MODIFICATION OR AMENDMENT OF OR SUPPLEMENT TO THIS AGREEMENT OR TO
ANY SUCH DOCUMENTS SHALL BE VALID OR EFFECTIVE UNLESS THE SAME IS IN WRITING AND
SIGNED BY THE PARTY AGAINST WHOM IT IS SOUGHT TO BE ENFORCED.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
20
<PAGE>
The undersigned have entered into this Agreement as of the date first
written above.
FIDELITY FUNDING, INC., a Texas corporation
By: /s/ Michael D. Haddad
---------------------------------------
Name: Michael D. Haddad
-----------------------------------
Title: President
----------------------------------
Mailing Address: 12770 Merit Drive, Suite 600
Dallas, Texas 75251
Street Address: 12770 Merit Drive, Suit 600
Dallas, Texas 75251
CENTURY ELECTRONICS MANUFACTURING
(NE), INC., a Massachusetts corporation
By: /s/ Ian McEwan
---------------------------------------
Name: Ian McEwan
-----------------------------------
Title: President
----------------------------------
Mailing Address: 274 Cedar Hill Road
Marlborough, MA 01752
Street Address: 274 Cedar Hill Road
Marlborough, MA 01752
Other Places of Business:
None.
Trade, Fictitious and Assumed Names used:
Design Circuits, Inc.
Y.M.C. MANUFACTURING COMPANY,
a California corporation
By:
---------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Mailing Address: 3240 Scott Boulevard
Santa Clara, CA 95054
Street Address: 3240 Scott Boulevard
Santa Clara, CA 95054
Trade, Fictitious and Assumed Names used:
None.
<PAGE>
The undersigned have entered into this Agreement as of the date first
written above.
FIDELITY FUNDING, INC., a Texas corporation
By:
---------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Mailing Address: 12770 Merit Drive, Suite 600
Dallas, Texas 75251
Street Address: 12770 Merit Drive, Suit 600
Dallas, Texas 75251
CENTURY ELECTRONICS MANUFACTURING
(NE), INC., a Massachusetts corporation
By:
---------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
Mailing Address: 274 Cedar Hill Road
Marlborough, MA 01752
Street Address: 274 Cedar Hill Road
Marlborough, MA 01752
Other Places of Business:
None.
Trade, Fictitious and Assumed Names used:
Design Circuits, Inc.
Y.M.C. MANUFACTURING COMPANY,
a California corporation
By: /s/ Walter Conroy
---------------------------------------
Name: Walter Conroy
-----------------------------------
Title: President, West Coast Operations
----------------------------------
Mailing Address: 3240 Scott Boulevard
Santa Clara, CA 95054
Street Address: 3240 Scott Boulevard
Santa Clan, CA 95054
Trade, Fictitious and Assumed Names used:
None.
21
<PAGE>
QUALITY MANUFACTURING SERVICES,
INC., a California corporation
By: /s/ Walter Conroy
---------------------------------------
Name: Walter Conroy
-----------------------------------
Title: President, West Coast Operations
----------------------------------
Mailing Address: 3240 Scott Boulevard
Santa Clara, CA 95054
Street Address: 3240 Scott Boulevard
Santa Clara, CA 95054
Trade, Fictitious and Assumed Names used:
None.
22
<PAGE>
EXHIBIT A
FORM OF BORROWING BASE CERTIFICATE
[COMPANY NAME]
Date:__________
Report #:___________
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
A B C
- -----------------------------------------------------------------------------------------------------------------------------------
COLLATERAL FIDELITY FIDELITY USA FUNDING
ACCOUNTS INVENTORY ACCOUNTS
RECEIVABLE RECEIVABLE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Gross Collateral as of last report
# __________ Dated: ______________
(line 6 from prior report)
- -----------------------------------------------------------------------------------------------------------------------------------
2. ADD sales and inventory additions per
attached
- -----------------------------------------------------------------------------------------------------------------------------------
3. ADD debit memos, other adjustments
per attached
- -----------------------------------------------------------------------------------------------------------------------------------
4. LESS cash collections and inventory
reductions (received by Fidelity
since prior report)
- -----------------------------------------------------------------------------------------------------------------------------------
5. LESS discounts, CMs, other
adjustments per attached
- -----------------------------------------------------------------------------------------------------------------------------------
6. GROSS COLLATERAL PER THIS REPORT
- -----------------------------------------------------------------------------------------------------------------------------------
7. Ineligible A/R (Fidelity) Ineligible Inventory/(Fidelity) Ineligible A/R (USA Funding)
- -----------------------------------------------------------------------------------------------------------------------------------
a. Past due (over 90 a. Obsolete a. Past due (over 90
days from days from
invoice) invoice)
-------- ----------------- -------------------
b. Credit over 30 b. Slow moving b. Credit over 30
days from days from
invoice) invoice)
-------- ----------------- -------------------
c. Cross Aging 50% c. Packaging c. Cross Aging 50%
-------- ----------------- -------------------
d. COD Sales d. >60 days old d. COD Sales
-------- ----------------- -------------------
e. Foreign e. Consigned/Leased e. Foreign
-------- ----------------- -------------------
f. Interco., Contra f. Other f. Interco., Contra
Accounts Accounts
-------- ----------------- -------------------
g. Unreconciled A/R g. Unreconciled A/R
Overage Overage
-------- ----------------- -------------------
h. Nortel and h. Non-Nortel and
Affiliates Affiliates
-------- ----------------- -------------------
i. Other i Other
- -----------------------------------------------------------------------------------------------------------------------------------
8. TOTAL INELIGIBLE PER THIS REPORT
(sum of 7a through h)
- -----------------------------------------------------------------------------------------------------------------------------------
9. NET ELIGIBLE COLLATERAL (line 6 minus 8)
- -----------------------------------------------------------------------------------------------------------------------------------
10. Advance Rate 80% 50% 80%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
11. Collateral Availability: Sum of (a) A/R
Availability and, if applicable, (b) lesser of
(i) Inventory Availability or (ii) $3,000,000
less Inventory in any other Company's
Borrowing Base = $_________
- --------------------------------------------------------------------------------
12. Borrowing Base: ________ lesser of Collateral
Availability or Facility Limit ($10,000,000)
less Advances to other Companies and Advances
to Company under the Related Loan Agreement
- --------------------------------------------------------------------------------
13. LESS Special Reserve
- --------------------------------------------------------------------------------
14. NET AVAILABILITY BEFORE LOAN BALANCE
(line 12 minus 13)
- --------------------------------------------------------------------------------
LOAN
- --------------------------------------------------------------------------------
15. Loan balance per last report (line 22 from
prior report)
- --------------------------------------------------------------------------------
16. LESS payments from collections (same as line 4)
- --------------------------------------------------------------------------------
17. BALANCE per Fidelity report prior to new
activity
- --------------------------------------------------------------------------------
18. LESS additional payments (other than
collections)
- --------------------------------------------------------------------------------
19. ADD loan adjustments: specify _________
(Interest, Fees, NSF, etc.)
- --------------------------------------------------------------------------------
20. ADD Line Maintenance Fee 0% of line 2
- --------------------------------------------------------------------------------
21. ADD Advance requested per this report
- --------------------------------------------------------------------------------
22. NEW LOAN BALANCE (not to exceed line 14)
- --------------------------------------------------------------------------------
23. EXCESS AVAILABILITY (line 14 minus 22)
- --------------------------------------------------------------------------------
The undersigned hereby certifies to Fidelity Funding, Inc. ("Fidelity")
and USA Funding, Inc. ("USA Funding") that:
1. He is the duly elected, qualified, and acting __________ of __________
(the "Company"), is familiar with the facts herein certified and is duly
authorized to certify such facts and make and deliver this Borrowing Base
Certificate for and on behalf of the Company, pursuant to that certain Loan and
Security Agreement (as from time to time supplemented or amended, the "Fidelity
Agreement"), dated as of December 22, 1998, among Century Electronics
Manufacturing (NE), Inc., Y.M.C. Manufacturing Company and Quality Manufacturing
Services, Inc. and Fidelity, and that certain Loan Agreement (as from time to
time supplemented or amended, the "USA Funding Agreement"), dated as of December
22, 1998, among Century Electronics Manufacturing (NE), Inc., Y.M.C.
Manufacturing Company and Quality Manufacturing Services, Inc. and USA Funding.
2. All representations and warranties made by the Company in the Fidelity
Agreement, the USA Funding Agreement or any other instrument, document,
certificate or other agreement executed in connection therewith (collectively,
the "Transaction Documents") delivered on or before the date hereof are true on
and as of the date hereof as if such representations and warranties had been
made as of the date hereof.
3. No Event of Default or any event that, with the giving of notice, the
passage of time or both, would constitute an Event of Default has occurred and
is existing.
4. The Company has performed and complied with all agreements and
conditions required in the Transaction Documents to be performed or complied
with by it on or prior to the funding of the Advances requested hereby.
<PAGE>
5. After Fidelity makes the Advances requested hereby, the aggregate
amount of all outstanding Advances will not exceed Facility Limit and the
aggregate amount of all outstanding Advances to the Company will not exceed the
Company's Borrowing Base under either the Fidelity Agreement or the USA Funding
Agreement.
6. All information contained in this Borrowing Base Certificate is true,
correct and complete.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to them in the Agreement.
IN WITNESS WHEREOF, this instrument is executed by the undersigned as
of___________, ________.
COMPANY NAME:
----------------------------------------
By:
-------------------------------------
Name
---------------------------------
Title:
-------------------------------
<PAGE>
SCHEDULE 4.2
YMC:
The following financing statements have been filed against YMC as debtor:
Filing office File Date File Number Secured Party
------------- --------- ----------- -------------
California Secretary of State 12/17/93 93253832 GECC
California Secretary of State 02/02/94 94018149 Copelco
California Secretary of State 06/12/95 9516560174 GECC
California Secretary of State 10/09/96 9628460927 GECC
California Secretary of State 12/02/96 9633960367 GECC
YMC is a defendant in a lawsuit filed by GECC related to breached
equipment leases (Action No. CV 773329 filed in the Superior Court of Santa
Clara county, California).
OMS:
----
California Secretary of State 05/18/94 94099493 Copelco
California Secretary of State 03/17/95 9507961133 Orix
California Secretary of State 08/04/95 9522060032 AT&T
California Secretary of State 01/23/96 9602460849 Bank of West
California Secretary of State 03/25/96 9608561387 CIT
California Secretary of State 09/12/96 9626060737 Colonial
California Secretary of State 07(30/97 9721860048 Colonial
California Secretary of State 07/27/98 9820860816 CIT
CEM:
----
<TABLE>
<S> <C> <C> <C>
California Secretary of State 07/27/98 9820860816 CIT
Massachusetts Secretary of State 07/01/97 480057 Continental Resources
Massachusetts Secretary of State 04/10/98 542119 Copelco
Massachusetts Secretary of State 04/13/98 542677 AT&T Leasing
</TABLE>
<PAGE>
CEM Continued:
- --------------
Marlborough Town Clerk 10/14/97 38094 NEC
Marlborough Town Clerk 04/17/98 38495 Copelco
Massachusetts Secretary of State 05/02/94 232379 Avnet
Massachusetts Secretary of State 10/20/94 268466 TAL Financial
Massachusetts Secretary of State 11/17/94 274390 TAL Financial
Massachusetts Secretary of State 12/13/94 279757 Charter Financial
Massachusetts Secretary of State 08/22/95 333568 Textron
Massachusetts Secretary of State 07/17/96 404008 AT&T Leasing
Massachusetts Secretary of State 10/14/97 503506 NEC
Massachusetts Secretary of State 11/12/93 197470 Textron
<PAGE>
SCHEDULE 4.5
QMS used to be located at 1712 Ringwood Avenue, San Jose, California 95135.
<PAGE>
SCHEDULE 6
<PAGE>
- --------------------------------------------------------------------------------
12/31/97
- --------------------------------------------------------------------------------
CLIENT C1114
- --------------------------------------------------------------------------------
DATE DATE
NO. DESCRIPTION ACQUIRED SOLD
- --- ----------- -------- ----
FORM 1120
- ---------
AUTOMOBILES / TRANSPORTATION EQUIPMENT
--------------------------------------
51 AUTO 1/27/94
79 AUTO-GMC VENDURA VAN 12/17/96
FURNITURE AND FIXTURES
----------------------
7 TABLES & SHELVES 5/01/91
24 FIXTURES 5/18/92
38 FENCE 10/31/91
61 STORAGE/SHELVES/DIVIDERS 3/15/96
62 SHELVES 5/30/96
63 STEWART OFFICE FURNITURE 9/19/96
MACHINERY AND EQUIPMENT
-----------------------
1 EQUIPMENT 1/01/90
2 CANNON COPIER 5/11/90
3 DIP LEAD CUTTIE 3/21/90
4 CANNON COPIER 9/10/90
5 N/C SATER STAT 2/11/91
6 ANSWERING MACHINE 3/15/91
8 SMT SYSTEMS 6/18/91
9 MONITOR 7/09/91
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
12/31/97
- --------------------------------------------------------------------------------
CLIENT C1114
- --------------------------------------------------------------------------------
DATE DATE
NO. DESCRIPTION ACQUIRED SOLD
- --- ----------- -------- ----
FORM 1120 (CONT)
- ----------------
MACHINERY AND EQUIPMENT (CONT)
------------------------------
10 EMZ 745 7/23/91
11 FEEDER & WIRE 8/01/91
12 FURNITURE & WIRE 11/01/91
13 RVIDV & REVIE 12/03/91
14 COMPRESSOR 7/09/91
15 CUTTER/FORMING 10/25/91
16 COMPRESSOR 6/03/92
17 COLLECTOR 5/01/92
18 LEAD CUT MACHINE 11/01/92
19 COMPUTER 7/01/92
20 SOLDER 2/22/92
21 EQUIPMENT 3/31/92
22 TOOLS 7/22/92
23 EQUIP QUAD SYS 1/07/92
25 DISCS & LAMP 11/07/91
26 SCR PRINTER 6/04/93
27 R & C MACHINE 10/21/93
28 R & C REFLOW OVEN 11/16/93
29 FUJI EQUIPMENT 12/01/93
30 TEXTRON EQUIPMENT 12/01/93
31 COMPUTER 4/06/94
32 COMPUTER 4/08/94
33 COMPUTER 11/08/94
34 COMPUTER 12/05/94
35 COMPUTER 12/29/94
36 COMPUTER 12/29/94
37 FURNITURE 5/19/94
39 EQUIPMENT 2/01/94
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
12/31/97
- --------------------------------------------------------------------------------
CLIENT C1114
- --------------------------------------------------------------------------------
DATE DATE
NO. DESCRIPTION ACQUIRED SOLD
- --- ----------- -------- ----
FORM 1120 (CONT)
- ----------------
MACHINERY AND EQUIPMENT (CONT)
------------------------------
40 TELEPHONE 6/21/94
41 EQUIPMENT 6/30/94
42 MACHINE 8/10/94
43 EQUIPMENT 9/29/94
44 EQUIPMENT 10/17/94
45 EQUIPMENT 11/08/94
46 MACHINE 11/28/94
47 MACHINE 12/15/94
48 EQUIPMENT 12/27/94
49 EQUIPMENT 12/27/94
50 MACHINE 9/12/94
52 MACHINE 11/08/94
53 EQUIPMENT 1/01/90
54 FIX MACHINE 3/06/95
55 CP VI & WAVE SO 6/05/95
56 MACHINERY 6/28/95
57 WATER CLEANER 7/10/95
58 DISPENSER 81/1/95
59 TRX I-MISER 8/11/95
60 FEEDER 9/11/95
64 CNC COMM. -PHONE INSTALL 10/28/96
65 CNC COMM. - PHONE 11/04/96
66 EQUIP CONCEPTRONICS 2/21/96
67 SCREEN PRINTER 3/07/96
68 TEST EQUIPMENT 3/13/96
69 EQUIPMENT 3/31/96
70 REFLOW OVEN 4/18/96
71 EQUIPMENT 5/08/96
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
12/31/97
- --------------------------------------------------------------------------------
CLIENT C1114
- --------------------------------------------------------------------------------
DATE DATE
NO. DESCRIPTION ACQUIRED SOLD
- --- ----------- -------- ----
FORM 1120 (CONT)
- ----------------
MACHINERY AND EQUIPMENT (CONT)
------------------------------
72 EQUIPMENT - CONVEYOR TECH 8/07/96
73 NTI/AUTOPRINT STENCIL PEN 8/15/96
74 TOSHIBA COPIER 9/23/96
75 CDC4100/CONVEYOR 10/03/96
76 TAPE CUT MACHINE 10/30/96
77 TAPE CUT MACHINE 10/30/96
78 CHIP PACER/FEEDER 10/31/96
83 COMPUTER 1/13/97
84 COMPUTER NETWORKING 1/31/97
IMPROVEMENTS
------------
80 LNI-NEW BLDG DEMOLITION 6/22/96
81 LNI-ELECTRICAL 8/23/96
82 LNI-ARCHITECH DRAWING 9/04/96
GRAND TOTAL DEPRECIATION
- --------------------------------------------------------------------------------
<PAGE>
SCHEDULE 2
Legal Description of Leased Premises
All that certain real property situated in the City of Santa Clara, County
of Santa Clara, State of California, described as follows:
All of Parcel 1 as shown on that certain Parcel Map filed for record in
the Office of the Recorder of Santa Clara County on May 22,1980 in Book 463 of
Maps, Page 42.
Record Owners of Leased Premises
Michael Roosevelt, Trustee for the Eva Bensen
Buck Charitable Trust A, under Trust Agreement
dated June 25, 1980, as amended
Michael Roosevelt, Trustee for the Eva Bensen
Buck Charitable Trust B, under Trust Agreement
dated June 25,1980, as amended
Michael Roosevelt, Trustee for the Charitable
Lead Trust, under Trust Agreement dated
March 17,1987, as amended
Laurence E. Lange, Co-Trustee for the Buck
Trust for the benefit of Paul Buck under
Irrevocable Trust Agreement dated March 17,
1987, as amended
Dwight L. Barker, Co-Trustee for the Buck
Trust for the benefit of Paul Buck under
Irrevocable Trust Agreement dated March 17,
1987, as amended
PACE PARTNERS,
a California limited partnership
THE BIANCHI JOINT VENTURE,
a California General Partnership
ONE SOUTH PARK INVESTORS,
a California General Partnership
FKLM PROPERTIES,
a California General Partnership
<PAGE>
Supporting Schedules 1997
Company: Quality Manufacturing Services, Inc. EIN: 77-041173
********************************************************************************
Form 4562 Asset Listing, Electronics
- --------------------------------------------
- -----Asset---------- Acq. Pct. I
# Description T Date Used C
- --------------------------------------------
1 FURNITURE & N 070190 100% N
2 MACHINERY/EQ N 070192 100% N
3 MACHINERY/EQ N 010193 100% N
4 FURNITURE & N 070193 100% N
5 MACHINERY/EQ N 100193 100% N
6 REFRIGERATOR N 013194 100% N
7 MICROWAVE N 013194 100% N
8 AQ PLASTIC T N 013194 100% N
9 REP MACHINE N 013194 100% N
10 TEST KIT S M N 013194 100% N
11 FURNITURE N 073194 100% N
12 QUAD SYSTEM N 073194 100% N
13 QU PLASTIC T N 073194 100% N
14 CAMERA LENS N 073194 100% N
15 (2) 486DX CO N 073194 100% N
16 (2) COMPUTER N 073194 100% N
17 QUAD IVC (LE N 090194 100% N
18 SHELVES N 093094 100% N
19 QA PLASTIC N 093094 100% N
20 DE HAART PRI N 093094 100% N
21 CAMERA LENS N 093094 100% N
22 QUAD SYSTEMS N 031095 100% N
23 QUAD IIC (LE N 031095 100% N
24 SHELVES/ACTI N 031495 100% N
25 QUAD SYSTEMS N 052095 100% N
26 T E BOUTON N 060895 100% N
27 QUAD SYSTEMS N 060995 100% N
28 LEASEHELD IM N 071595 100% N
29 MANUAL SCREE N 081495 100% N
30 L/H - COSTEL N 083195 100% N
31 L/H AP I DES N 083195 100% N
32 SHELVES/ACTI N 090195 100% N
33 FGR-RIB TIT N 090595 100% N
34 WATER FILTER N 091195 100% N
35 BENCH/C & H N 092095 100% N
36 QUAD SYSTEMS N 120495 100% N
37 HEPOCO N 123195 100% N
38 HI-TECH N 123195 100% N
39 FURNITURE/MS N 010696 100% N
40 TONICS WATER N 012496 100% N
41 CLEANER/AMTS N 030196 100% N
42 FEEDER/REEL N 030696 100% N
43 QUAD QSP-W D N 031396 100% N
44 20 X 20 QUIC N 032096 100% N
45 WAVE SOLDER N 080296 100% N
46 AIR POWERED N 080596 100% N
47 WAVE SOLDER N 080696 100% N
48 AMISTAR AXIA N 090996 100% N
49 TESTER FOR T N 101496 100% N
50 TWO COMPUTER N 123196 100% N
<PAGE>
Supporting Schedules 1997
Company: Quality Manufacturing Services, Inc. EIN: 77-041173
********************************************************************************
Form 4562 Asset Listing. Electronics
- --------------------------------------------
- -----Asset---------- Acq. Pct. I
# Description T Date Used C
- --------------------------------------------
51 CHEVY VAN N 021397 100% N
52 MESH POLYPRO N 033197 100% N
53 WORK-HOLDER- N 040997 100% N
54 2 TECHMEDIA N 060597 100% N
55 QUAD IIC ASS N 071097 100% N
-------
Prior Year Totals
Current Year Totals
=======
<PAGE>
Supporting Schedules 1997
Company: Quality Manufacturing Services, Inc. EIN: 77-041173
********************************************************************************
Form 4562 Schedules, Electronics
Alternative Minimum Tax/Tax Preferences
Depr. of property placed in service after 1986
- --------------------------------------------------------------------------------
Acq.
# Description Date
- --------------------------------
1 MACHINERY/EQ 010193
2 FURNITURE & 070193
3 MACHINERY/EQ 100193
4 QUAD IVC (LE 090194
5 QUAD SYSTEMS 031095
6 QUAD IIC (LE 031095
7 SHELVES/ACTI 031495
8 QUAD SYSTEMS 052095
9 T E BOUTON 060895
10 QUAD SYSTEMS 060995
11 LEASEHOLD IM 071595
12 MANUAL SCREE 081495
13 L/H - COSTEL 083195
14 L/H AP I DES 083195
15 SHELVES/ACTI 090195
16 FGR-RIB TIT 090595
17 WATER FILTER 091195
18 BENCH/C & H 092095
19 QUAD SYSTEMS 120495
20 HEPOCO 123195
23 IONICS WATER 012496
24 CLEANER/AMTS 030196
25 FEEDER/REEL 030696
26 QUAD QSP-W D 031396
27 20 1 20 QUIC 032096
28 WAVE SOLDER 080296
29 AIR POWERED 080596
30 WAVE SOLDER 080696
31 AMISTAR AXIA 090996
32 TESTER FOR T 101496
33 TWO COMPUTER 123196
34 CHEVY VAN 19 021397
35 MESH POLYPRO 033197
36 WORK-HOLDER- 040997
37 2 TECHMEDIA 060597
38 QUAD IIC ASS 071097
Prior Year Totals
Current: Year Totals
<PAGE>
Supporting Schedules 1997
Company: Quality Manufacturing Services, Inc. EIN: 77-041173
********************************************************************************
Form 4562 Schedules. Electronics
State Depreciation
- --------------------------------------------------------------------------------
Asset Acq.
# Description Date
- --------------------------------
1 FURNITURE & 070190
2 MACHINERY/EQ 070192
3 MACHINERY/EQ 010193
4 FURNITURE & 070193
5 MACHINERY/EQ 100193
6 REFRIGERATOR 013194
7 MICROWAVE 013194
8 AQ PLASTIC T 013194
9 REP MACHINE 013194
10 TEST KIT S M 013194
11 FURNITURE 073194
12 QUAD SYSTEM 073194
13 QU PLASTIC T 073194
14 CAMERA LENS 073194
15 (2) 486DX CO 073194
16 (2) COMPUTER 073194
17 QUAD IVC (LE 090194
18 SHELVES 093094
19 QA PLASTIC 093094
20 DE HAART PRI 093094
22 CAMERA LENS 093094
22 QUAD SYSTEMS 031095
23 QUAD IIC (LE 031095
24 SHELVES/ACTI 031495
25 QUAD SYSTEMS 052095
26 T B BOUTON 060895
27 QUAD SYSTEMS 060995
28 LEASEHOLD IM 071595
29 MANUAL SCREE 081495
30 L/H - COSTEL 083195
31 L/H AP I DES 083195
32 SHELVES/ACTI 090195
33 FGR-RIB TIT 090595
34 WATER FILTER 091195
35 BENCH/C & H 092095
36 QUAD SYSTEMS 120495
37 HEPOCO 123195
38 HI-TECH 123195
39 FURNITURE/MS 010696
40 IONICS WATER 012496
41 CLEANER/AMTS 030196
42 FEEDER/REEL 030696
43 QUAD QSP-W D 031396
44 20 X 20 QUIC 032096
45 WAVE SOLDER 080296
46 AIR POWERED 080596
<PAGE>
Supporting Schedules 1997
Company: Quality Manufacturing Services, Inc. EIN: 77-041173
********************************************************************************
Form 4562 Schedules. Electronics
State Depreciation
- --------------------------------------------------------------------------------
Asset Acq.
# Description Date
- --------------------------------
47 WAVE SOLDER 080696
48 AMISTAR AXIA 090996
49 TESTER FOR T 101496
50 TWO COMPUTER 123196
51 CHEVY VAN 19 021397
52 MESH POLYPRO 033197
53 WORK-HOLDER- 040997
54 2 TECHMEDIA 060597
55 QUAD IIC ASS 071097
Prior Year Totals
Current Year Totals
<PAGE>
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
1 LOT Tables, Hand & Power Tools, Vise, Parts $
Cabinets, Stack Chairs
2 1 Multiton MXL2760 Hydraulic Pallet Jack, 30001
3 LOT Delta Double End Grinder, Drill Press,
Router, Bench, Electric Tools, Power Drill,
Skil Saw, Screw Gun
4 1 BMA TM-SC Environmental Test chamber, -100
Deg. F - 400 Deg. F, s/n 318
5 LOT Approx. 74' of 27" Roller Conveyor
6 LOT 2 Desks, Pile, Bookcase, Chair
7 LOT Desk, Table, Bookcase, Chair
8 LOT Desk, Table, File, Bookcase, Chairs
9 LOT 2 Desks, Portable Cart, Table
10 LOT Pallet Rack & 6 Sections of Shelving, Table,
Stairway, Wire Chrome Rack
11 1 Gardner Denver Electra-Screw Model EBBSDB,
15 Horsepower s/n U76540, w/Integrated
Dryer, Vertical Tank & Water Separator
12 8 Quad 44mm Feeders
13 1 West Kleen Formula 3M Plus Water Di System,
s/n 3M Plus/793/4CD3350, Aqueous Cleaning/
Filters System, 20" w/Vacuum Blower,
Prewash, Wash, Air Knives, Dryer, H20 180
Gal. Plastic Holding Tank v/Pump & Filtration
14 3 Vision Eng. Mantis Inspection Stations, s/n
H06767 & N/A
15 5 2-Sided Assembly Stations w/Mag Lamps,
Solderers, Hand Tools
16 LOT Approx. 2000 Black Totes
17 LOT Approx. 600 Black Board Trays
18 LOT Stools, Benches, Shelving, Folding Tables,
Refrigerator, Wire Chrome Racks, Supply
Cabinets
- --------------------------------------------------------------------------------
<PAGE>
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
19 2 2-Sided Workstations $
20 LOT Shelving, Chairs, Pallet Rack, Blowers,
Heaters, 2 Temp. Controllers, Power Strips,
Totes
21 LOT Pallet Jack, Hand Truck, Desk, Tables, Pallet
Racks, Dock Plate, Furniture
22 1 Chemical Storage Room, 15'x8'x10' w/Exhaust
23 1 2-Dr. Chemical Cabinet
24 2 Presto Self-Charging Electric Stackers, 1000#
& 300# Cap.
25 3 Component Counting Meters
26 1 Genrad 1692 RLC Digi Bridge
27 LOT Floor Polisher, Vacuum, Band Truck, Supply
Cabinet
28 1 Blue M. Bench Top Oven
29 1 Mech-El Model 202 Wire Bonder, s/n 5507
30 1 Mech-El Model 9010 Wire Bonder, Aluminum, s/n
0140
31 1 Mech-El Model 907 Wedge Bonder, s/n 5496-1983
32 1 Mech-El Model 907 Wedge Bonder, s/n 3718 (No
Scope)
33 LOT 5 Folding Tables, File, Shelving, Chairs.
Refrigerator., Vacuum, Pump
34 LOT 2 Desks, Bookcases, File, Test Kit, Shelving,
Refrigerator, Supply Cabinet
35 1 23 1/2x13 3/4 Manual Screen Printer
36 LOT Approx. 120 Aluminum Screen Frames
37 2 Vision Mantis Inspection Stations
38 3 12"x12" Screen Printers
- --------------------------------------------------------------------------------
<PAGE>
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
39 1 Ersa Model 300 12" Conveyor Tunnel Oven, $
8-Zone, s/n 4574-7, l-R
40 11 Workstations w/Mag Lumps, Solder Workstations
41 1 OK Ind. MTR5000 series Solder Rework
Stations w/OK SMW1000 Table
42 1 Universal Dyna/Pert System Sequencer, 40 Station
43 1 Universal Multi-Nodule Dip Inserter
44 1 Universal A-I Inserter VCD Single Read l8"X
18" Rotary Table
45 12 4' Steel 2-Sided Assembly Stations
46 1 Hewlett Packard 6236B Power Supply
47 1 Hollis 16" Wave Solderer, Finger Type Model
20521-5, s/n AT11422
48 1 Electrovert Ultrapak 445 4" Wave Solderer,
3-Stage Preheat, Flux Type UPK-445 15" F,
Dual Wave, s/n UPK12466-0937-1990, 1800 Lb.
Cap., Finger Type
49 1 Blue M 10-Tray Elec. Oven, Model DC-246G, s/n
DC-5377, 360 Deg. C - 600 Deg. F
50 1 Kenco Model 500 Omega Meter Ionic Contamination
Test Systems, s/n 5035
51 LOT 2 AMP FPCTM Crimpers, s/n 121814 & 128171,
w/AMP Program
52 LOT Approx. 32 Assorted Benches, Tables w/Mag
Lamps, Solder Stations, Stools, Etc. in Area
53 1 Automated Production Super Dip Straightener,
s/n 18803131
54 1 Branson Model 2000 Smart ZSonic Ultrasonic
Board Cleaner w/Branson Series 7000 Ultrasonic
Generator
55 16 Metro Board Racks w/carts
- --------------------------------------------------------------------------------
<PAGE>
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
56 LOT Desks, Chair, Piles, Bookcases, Shelving in $
Offices Along Wall
57 LOT G&D 15 Horsepower Rotary Screw conveyor &
Dryer
58 2 Busch Vacuum Pumps, 3 & 5 Horsepower
59 LOT Desk, Tables, Files, Chairs, Bookcases
in 2 Offices
60 1 2-Door Chemical Cabinet
61 1 Tek 2225 O-Scope
62 1 Tekscope 100 Mhz Scope/DMM Digital Real Time,
Model THS-720STD
63 1 Alix Computer System, Ultima 1/120
64 1 Cam/Alot Systems Model 2800 Epoxy Dispenser
Dual Head, Vision Top System, s/n 2032, w/IBM
F75 Programmer
65 1 Cam/Alot 2800 Dual Epoxy Dispenser, Vision
System, s/nh 2015
66 1 Cam/Alot Model 2000 Epoxy Dispenser, 2 Head,
Downward Vision, s/n 2016
67 2 Quad Detachable Tray Carts
68 1 ATI Model 3110-2 Inspection Table, s/n
4111-11-1996, Scallop Table
69 2 JOT J206-01 Inspection Workstations, 5', s/n
75108A-3.2 & 75108A-3.1
70 1 Quad Profile HTD7 Solder Reflow Conveyor,
7-Zone, Nitrogen Capability, s/n 9702623,
20", Chain conveyor
71 1 1996 Quad QSP-2, High Speed Assembly, Pick &
Place Machine, No Vision, s/n 2942, 140-8mm
Stations
72 1 1996 Quad QSP-2 Pick & Place Machine, s/n
2909, w/Upward Vision System
- --------------------------------------------------------------------------------
<PAGE>
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
73 1 Quad Profile-7 Model ORS-Profile, Solder
Reflow Oven, Nitrogen Capability, 7-Zone, s/n
9703631
74 1 SM Tech/Quad AVP 300 Auto Screen Printer, s/n
300159
75 1 1995 Quad QSP-2 Pick & Place Machine, s/n
2684, High Speed Assembler, 140-Sun Stations,
No Detachable Base, No Vision
76 1 1996 Quad QSP-2 Pick & Place Machine, s/n
2894, High Speed Assembler, 140-8mm Stations,
No Detachable Base w/VU-S Vision System
77 LOT Assorted Quad Feeders for Machines
78 1 1996 Quad QSP-2 High Speed Assembly Machine,
VU-8, s/n 2944, Detachable Base
79 1 Quad AVP300 Screen Printer, s/n 300155
80 1 Quad Detachable Cart, s/n 074
81 1 Fuji CPII Chip Shooters, CPII 4000, s/n 1307,
1989, 100-Station, Visual Centering, 2-Head,
12-Turret 14500 CPM, 150 Tape Feeders
82 1 Fuji CPII Chip Shooters, CPII 4000, s/n 800,
1988, 100-Station, Visual Centering, 2-Head,
12-Turret 14500 CPM 150 Tape Feeders
83 2 Small Refrigerators
84 1 Smart Sonic Ultrasonic Stencil Cleaner
95 4 Dynapack 3' Board Conveyors
86 1 Dynapack 5' Board Conveyor
87 1 Dynapack 90 Deg. Conveyor
88 1 Dynapack Shuttle Gate Conveyor
89 1 Electrovert Plus Finger Type Dual Wave
Wave Solderer, Model EPK-400/F, s/n
M0940121070, 1994, w/USI Ultra Spray Fluxer
- --------------------------------------------------------------------------------
<PAGE>
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
90 1 Heller 1800 8-Zone Reflow Oven 24", s/n
0396274 1996
91 1 Cyber optics LSM/Large 110 Solder Paste
Measurer, s/n 5922, 1995, w/Sony PVM-134Q
92 2 Sony PVM-1342Q Monitors
93 1 Stencil Rack
94 1 B&S Microhite Electronic Gauge, s/n 60116
95 LOT Surface Plate, Mitutoyo Height Gauge
96 1 Unitron Neomet Microscope w/Surface Measurer
97 1 Panasonic CL-110 Color Camera
98 1 Mitutoyo Microscope
99 33 Blue Electrified Work Benches
100 55 Small Chrome Wire Racks
101 50 Swivel Chairs
102 3 Small Smoke-Eaters
103 1 Blue N Aerotronic Burn-In Chamber, s/n
870507-5164
104 1 Axil Ultima 1/170 Workstation, 128 KB
w/Lancast Network
105 2 Hewlett Packard Laserjet Printers
106 1 Hewlett Packard High Speed Laser Printer
107 7 486 PCs
108 10 Assorted Laptop PCs
109 6 Pentium 100 PCs
110 16 Hewlett Packard Deskjet Printers
111 1 Epson 800 Printer
- --------------------------------------------------------------------------------
<PAGE>
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
112 1 Printronix P300 Printer
113 2 Logitech Scanner
114 20 Pentium 166 PCs
115 3 Hewlett Packard Color Printers
116 1 Hewlett Packard 6PSE Laserjet Printer
117 1 Laser Scanner
118 1 Stylus Color Printer
119 1 Micron Server
120 1 Lexmark Printer
121 6 Pentium 233 PCs
122 1 Pentium 300 PC
123 10 Micron PCs
124 1 Micron Dual 266 PC
125 8 Micron PC
126 1 BTU Conveyor Furnace VIP148A, s/n CZESM-1,
20", 10-Zone, Elec., 1997
127 1 Air Vac Rework Station, Model DRS22C, s/n
13022, 1997
128 LOT Assorted Fuji Feeders for 8mm x 4mm, Approx.
100
129 1 Nicolet Auto X-Ray Machine, s/n 1819700408,
Model 14001MZ, 1997
130 1 Fuji CP-111 5000 chip shooter:, s/n 0282,
1991, 140-Station, 12-Nozzle Turret
131 1 Fuji CP-111 5000 Chip Shooters, s/n 2236,
1993, 140-Station, 12-Nozzle Turret
132 1 Fjui CP-111 4000 Chip Shooter, s/n 1871,
1990
- --------------------------------------------------------------------------------
<PAGE>
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
133 1 Dir Vac PCBRM-12 Reflow Station, s/n 1140
134 2 Zebra 105 Barcode Label Printers
135 LOT (6) Assorted Auto Screw Guns
136 LOT Special Built Burn-In Chamber w/HVAC System
& Power Supplies
137 1 ZEN Tempscan Omega Multiscan 1200, 1998
138 1 SRT Rework Station
139 20 Chrome Wire Racks
140 26 Nag Lamps
141 14 Microscopes
142 5 Metcal, Solderer.
143 1 Ingersoll Rand 3-stage Air Compressor
144 1 Onan Generator
145 TOTAL OWNED EQUIPMENT
146 LEASED EQUIPMENT
147 1 Executone Phone System w/PC
148 2 Quad Detachable Tray Carts
149 1 JOT Workstation, Type J206-10B, s/n
21532A-12, 5'
150 1 JOT J210-02 Board Destacker, s/n 75100A-1.2
151 1 JOT J204-021V Cue-Up Board Conveyor, s/n
41075A-8.4
152 1 SM Tech/Quad AVP300 Auto Screen Printer, 14x
18, s/n 136
153 1 JOT J204-02 Pass-Thru Conveyor, s/n
75096A-1.3
- --------------------------------------------------------------------------------
<PAGE>
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
154 1 ATI/Quad Model 3110-2 Pass-Thru Conveyor, $
24", s/n 4111-2
155 1 1996 Quad QSP-2 Pick & Place Machine, Upward
Vision, s/n 2012, 4 Read, High Speed
Assembler, 2 Gantry, 136 8mm Cap.
156 1 1996 Quad QSP-2 Pick & Place Machine, Upward
Vision, s/n 3075, 4 Head, High Speed
Assembler, 2 Gantry, 136 8mm Cap.
157 1 6' ATI/Quad Model 3100-3 Conveyor, s/n
10-19223-3966
158 1 ATI/Quad 7510 6' Transfer Conveyor, s/n
412.1-6
159 1 4' ATI/Quad 3110-2 Conveyor, s/n 4106-2
160 1 Quad 3110-2 2' Pass-Thru Conveyor, s/n
4111-a
161 1 MI/Quad 32.00-2 4' Conveyor, s/n
10-19222-3852
162 2 JOT 5' Workstations, Model J206-01, s/n
75123A-1.1 & 75123A-1.2
163 1 ATI/Quad 6' Conveyro, Model 7510, s/n 41111-2
164 1 JOT J210-02 2' Board Destacker, s/n
75100A-1.1
165 1 JOT J204-02 Cue-Up Board Infeeder, s/n
75136B-1.3
166 1 JOT J204-02 Board Conveyor, s/n 75096A-1.5
167 1 ATI/Quad 3110-2 2' Transfer Conveyor, s/n
4065-1
168 1 ATI/Quad 3110-2 Transfer Conveyor, s/n
4111-9
169 1 JOT J206-01 5' Transfer Conveyor, s/n
75136B-2.1
170 1 Genrad Full Board Tester, 22811-9714-00,
896 Pins, s/n 233, w/Seko DPU-5300 Printer
- --------------------------------------------------------------------------------
<PAGE>
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
171 1 JOT J210-03 Board Destacker, s/n J5022A-1 $
172 1 JOT J204-02-1B Cue-Up Board Infeed, s/n
41075A-6.2
173 1 SM Tech AVP300 Screen Printer, Automatic, s/n
300165
174 1 ATI/Quad 3110-2 6' Conveyor, Scallop, s/n
4111-5
175 1 ATI 3110-2 Inspection Station, 6' Conveyor,
s/n 4106-3
176 1 Quad Profile-7 7-Zone Solder Reflow,
Nitrogen Capability, s/n 9702624
177 2 ATI 3110-2 2' Conveyors, s/n 4065-2 & 4111-3
178 2 1994 Quad IVC/QA High Speed Pick & Place
Machines, s/n 2450 & 2451, 68-Station, Upward
Vision
179 1 JOT J204-02 Conveyor. 2', s/n 75096A-1.2
180 1 ATI 3100-2 42", Conveyor, s/n 10-19220-3852
181 1 1994 Quad IVC/90 Pick & Place Machine.
90-Station, s/n 2128, Upward Vision
182 1 1994 Quad IVC/90 Pick & Place Machine,
90-Station, s/n 2129, Upward Vision w/(2)
Quad Feeders
183 5 Quad Fixed Cart Stations
184 LOT Quad Feeder Racks on Shelving & Benches
w/40 Bases
185 1 West Kleen II-MIL/SMT Conveyor 18" Wash
System, 3R-790-481-146, w/Separation Tech
ST1090 Aquacycler Filtration System, 3
Knives, 2 Wash, 1 Rinse
186 1 Genrad GR2286-VPC Full Board Tester, Model
2286-9778-ER, s/n 183, 1920 Pins
187 1 Quad AVX400 Auto Incline Screen Printer, s/n
400169, 1997 w/Dispenser
- --------------------------------------------------------------------------------
<PAGE>
Re: CENTURY ELECTRONICS MANUFACTURING - AV Date:
QUANTITY DESCRIPTION
- --------------------------------------------------------------------------------
188 1 Quad APS-1 Advanced Packaging Machine, s/n
2764, w/Waffle Tray Handler
189 1 Genrad 2287L-9744-00 Full Board Tester, s/n
141
190 TOTAL LEASED EQUIPMENT
================
APPRAISAL TOTAL:
<PAGE>
EXHIBIT B
FORM
OF
MONTHLY OFFICERS' CERTIFICATE
Reference is made to the (a) Loan and Security Agreement (the "Fidelity
Agreement"), dated as of December 22,1998, among Century Electronics
Manufacturing (NE), Inc. ("CEM"), a Massachusetts corporation, Y.M.C.
Manufacturing Company ("YMC"), a California corporation, and Quality
Manufacturing Services, Inc. ("QMS"), a California corporation, and Fidelity
Funding, Inc., a Texas corporation ("Fidelity'), and (b) the Loan and Security
Agreement (the "USA Funding Agreement"), dated as of December 22, 1998, among
CEM, YMC, QMS and USA Funding. Inc., a Delaware corporation ("USA Funding").
Capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Fidelity Agreement and the USA Funding Agreement. The
undersigned, the President and Chief Financial Officer of _____________ (the
"Company"), hereby certify to Fidelity and USA Funding that, to the best of
their knowledge and belief:
1. The financial statements of the Company for and as of the end of the
month of_________ (the "Reporting Month") attached hereto have been prepared in
accordance with GAAP, are true, correct and accurate in all material respects
and fairly and accurately present the financial condition and results of
operations of the Company as of the dates and for the periods indicated therein.
2. They have reviewed all Borrowing Base Certificates and supporting
information relating thereto delivered by the Company to Fidelity or USA Funding
during the Reporting Month, and such Borrowing Base Certificates and supporting
information are complete, true, correct and accurate in all materials respects.
3. Except as indicated below, no Event of Default or event or circumstance
that would, with the giving of notice, the passage of time or both, constitute
an Event of Default, has occurred and is continuing:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXECUTED on______________
--------------------------------------
President
--------------------------------------
Chief Financial Officer
<PAGE>
Exhibit 10.17
FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
This First Amendment to Loan and Security Agreement (this "Amendment") is
made and entered into effective as of July 9, 1999, by and among Century
Electronics Manufacturing (NE) Inc., a Massachusetts corporation ("CEM"), Y.M.C.
Manufacturing Company, a California Corporation ("YMC"), and Quality
Manufacturing Services, Inc., a California corporation ("QMS,") and together
with CEM and YMC, (the "Companies"), and Guaranty Business Credit Corporation
d/b/a/ Fidelity Funding, a Delaware corporation ("GBCC").
The Companies and USA Funding, Inc. ("USA Funding") have entered into that
certain Loan and Security Agreement (the "Related Loan Agreement"), dated as of
December 22, 1998, and the Companies and Fidelity Funding, Inc. ("Fidelity")
have entered into that certain Loan and Security Agreement (the "Original
Agreement"), dated as of December 22, 1998. USA Funding and Fidelity have
transferred, assigned and conveyed all of their right, title and interest in, to
and under the Related Loan Agreement and the Original Agreement to GBCC. The
Companies and GBCC desire to terminate the Related Loan Agreement and to amend
the Original Agreement and, in connection therewith, hereby agree as follows:
1. The Original Agreement as amended by this Amendment is referred to
herein as the "Agreement." Capitalized terms used but not defined in this
Amendment shall have the meanings given to them in the Original Agreement.
2. The definition of Borrowing Base in Section 1.1 of the Original
Agreement hereby is amended to read in the entirety as follows:
"Borrowing Base" means, with respect to any Company, an amount, determined
by Fidelity from time to time, equal to the sum of (a) 80% of the aggregate
outstanding face amount of the Eligible Accounts of such Company and (b) the
lesser of (i) 50% of the value of the Eligible Inventory of such Company, valued
at the lower of cost or market, or (ii) the Inventory Sublimit less 50% of the
value of the Eligible Inventory of each other Company then included in each such
other Company's Borrowing Base, valued at the lower of cost or market. Fidelity
may change the percentage of Eligible Accounts and/or Eligible Inventory
constituting the Borrowing Base of any Company from time to time based upon
dilution, net collectibility and other factors deemed appropriate by Fidelity.
As used herein, the term "Inventory Sublimit" means $5,000,000; provided,
however, that the "Inventory Sublimit" shall be reduced by $500,000 on October
1, 1999 and on the first day of each calendar month thereafter until the
"Inventory Sublimit" is reduced to $3,000,000.
3. The definition of Century Documents in Section 1.1 of the Original
Agreement hereby is amended to read in the entirety as follows:
"Century Documents" means the Century Guaranty (Fidelity) and all other
documents or agreements executed by Century in connection herewith or therewith.
4. The definition of Century Guaranty (USA Funding) in Section 1.1 of the
Original Agreement hereby is deleted.
<PAGE>
5. The definition of Eligible Accounts in Section 1.1 of the Original
Agreement hereby is amended to read in the entirety as follows:
"Eligible Accounts" means, at the time of determination thereof, all
Accounts other than (i) any Account which is payable more than 30 days from
invoice date, (ii) any Account which has been outstanding for more than 90 days
from invoice date, (iii) any Account as to which Fidelity does not have a valid
and perfected, first priority security interest, (iv) to the extent that the
aggregate outstanding Accounts owed by any single Account Debtor exceeds the
Concentration Limit, any Account owed by such Account Debtor, (v) any Account
that is owed by an Account Debtor that is an Affiliate of any Company or an
officer or employee of any Company, (vi) any Account that arises out of a sale
made or services performed outside of the United States or that is owed by an
Account Debtor located outside the United States, (vii) any Account that is owed
by a creditor or supplier of any Company or with respect to which any defense,
counterclaim or right of set off has been asserted, (viii) any Account owed by
an Account Debtor if more than 50% (in dollar amount) of such Account Debtor's
Accounts, have been outstanding more than 90 days from invoice date, (ix) any
Account that is owed by the United States or any department, agency or
instrumentality thereof, unless the right to payment under such Account is
assigned to Fidelity as Collateral in full compliance with the Assignment of
Claims Act of 1940, as amended (31 U.S.C. 3727); and (x) any Account that has
not been approved by Fidelity for inclusion in the applicable Borrowing Base.
6. The definition of Facility Limit in Section 1.1 of the Original
Agreement hereby is amended to read in the entirety as follows:
"Facility Limit" means $15,000,000; provided, however, that the "Facility
Limit" shall be reduced by $500,000 on October 1, 1999 and on the first day of
each calendar month thereafter until the "Facility Limit" is reduced to
$12,000,000.
7. The definition of Intangible Assets in Section 1.1 of the Original
Agreement hereby is amended to read in its entirety as follows:
"Intangible Assets" means, with respect to any Company, such of such
Company's assets as are treated as intangible pursuant to GAAP, including,
without limitation: (a) obligations owing by officers, directors, shareholders,
employees, subsidiaries, Affiliates or any Person in which any such officer,
director, shareholder, employee, subsidiary, or Affiliate owns any interest and
(b) any asset which is intangible or lacks intrinsic or marketable value or
collectability, including, without limitation, goodwill, noncompetition
agreements, patents, copyrights, trademarks, franchises, organization or
research and development costs.
8. The definition of Net Profit Requirement in Section 1.1 of the Original
Agreement hereby is amended to read in its entirety as follows:
"Net Profit Requirement" means (a) with respect to YMC and QMS combined,
$100,000 per fiscal year beginning with the fiscal year beginning on July 1,
1999, and (b) with respect to CEM, $1,800,000 per fiscal year.
9. The definition of Related Loan Agreement in Section 1.1 of the Original
Agreement hereby is deleted.
2
<PAGE>
10. The definition of Tangible Networth Requirement in Section 1.1 of the
Original Agreement hereby is amended to read in its entirety as follows:
"Tangible Net Worth Requirement" means (a) with respect to YMC and QMS
combined, negative $300,000 until June 30, 1999 and for each calendar month
thereafter means the Tangible Net Worth Requirement of YMC and QMS combined as
of the last day of the preceding calendar month plus $8,333, and (b) with
respect to CEM, means $2,500,000 until December 30, 1998 and for each calendar
month thereafter means the Tangible Net Worth Requirement of CEM as of the last
day of the preceding calendar month plus $50,000 per month until June 30, 1999
and thereafter $150,000 per month.
11. The definition of USA Funding in Section 1.1 of the Original Agreement
hereby is deleted.
12. The definition of Working Capital Requirement in Section 1.1 of the
Original Agreement hereby is amended to read in its entirety as follows:
"Working Capital Requirement" means negative $1,500,000 until January 30,
1999 and for each calendar month thereafter means the Working Capital
Requirement as of the last day of the preceding calendar month plus $50,000 per
month until June 30, 1999 and thereafter $150,000 per month.
13. Section 2.1 of the Original Agreement hereby is amended to read in the
entirety as follows:
Subject to the terms of this Agreement, including, without limitation,
Section 3, Fidelity shall make advances to each Company (each an "Advance" and
collectively the "Advances") from time to time during the Term; provided,
however, that the aggregate principal amount of Advances outstanding at any time
to any Company shall not exceed such Company's Borrowing Base determined by
Fidelity from time to time; and provided, further, however, that the aggregate
principal amount of Advances outstanding at any time to all Companies shall not
exceed the Facility Limit. Each Advance must be in a minimum amount of $5,000
or, if less, the unadvanced portion of the applicable Borrowing Base. The
Companies hereby agree to repay to Fidelity all Advances made to the Companies
hereunder, together with interest thereon, in the manner provided herein. The
principal owing hereunder in respect of the Advances at any given time shall
equal the aggregate amount of Advances made hereunder minus all principal
payments thereon received by Fidelity hereunder. Subject to the terms and
conditions hereof, the Companies may borrow, repay and reborrow under this
Agreement. The term "Advances" specifically excludes "Term Advances."
14. Section 2.12 of the Original Agreement hereby is amended to read in
the entirety as follows:
In the event that the income earned by Fidelity during any calendar month
pursuant to Section 2.10 (excluding any income earned on any Term Advance) is
less than $45,000, the Companies shall pay to Fidelity a minimum usage fee equal
to the difference between the amount so earned by Fidelity and $45,000,
regardless of Fidelity's prior compensation. The
3
<PAGE>
minimum usage fee for each calendar month shall be due and payable on the first
day of the next calendar month, and shall be prorated for any partial calendar
month during the Term.
15. Section 4.2 of the Original Agreement hereby is amended to read in the
entirety as follows:
Except as described on Schedule 4.2 attached hereto, none of the
Collateral is subject to any lien, encumbrance, security interest or other claim
of any kind or nature, no Company has transferred, sold, pledged or given a
security interest in any of its Accounts, Inventory, machinery or equipment to
anyone other than Fidelity, and there are no financing statements on file in any
public office governing any property of any Company of any kind, real or
personal, in which such Company is named in or has signed as the debtor.
16. Section 4.3 of the Original Agreement hereby is amended to read in the
entirety as follows:
Each Company is the sole owner and holder of, and has good and marketable
title to, all Collateral purported to be owned by it. This Agreement creates a
valid security interest in the Collateral in favor of Fidelity. Such security
interest is a perfected, first-priority security interest in the Collateral
other than any Collateral covered by the financing statements described in
Schedule 4.2 superior to the rights of any other Persons therein, and a
perfected, second-priority security interest in the Collateral consisting of any
Collateral covered by the financing statements described in Schedule 4.2
superior to the rights of any other Persons therein other than the Persons whose
benefit the financing statements described in Schedule 4.2 have been filed.
17. Section 5.10 of the Original Agreement hereby is amended to read in
the entirety as follows:
No Company shall grant, create or allow to exist any security interest,
lien or other encumbrance on any of the Collateral other than (a) the lien and
security interest granted to Fidelity herein, (b) the security interests, liens
or other encumbrances described on Schedule 4.2 attached hereto and any liens
and security interests granted to holders of Debt refinancing any Debt secured
by such security interests, liens or other encumbrances to the extent permitted
by Section 5.12(c), (c) purchase money liens or security interests granted at a
time when no Event of Default or event or circumstance that would, with the
giving of notice, the passage of time or both, constitute an Event of Default,
has occurred, and (d) liens and security interests securing Debt permitted under
Section 5.12(d), and no Company shall execute any financing statement in favor
of any Person other than Fidelity, the Persons described on Schedule 4.2
attached hereto and any Person to whom a purchase money lien or security
interest or other lien or security interest permitted above has been granted. No
Company shall change its mailing address, chief executive office, principal
place of business or place where such records are maintained, open any new place
of business, close any existing place of business or change the location of any
of the Collateral or transact business under any trade, fictitious or assumed
name other than those set forth under such Company's signature hereon without
providing at least 30 days' prior written notice thereof to Fidelity.
4
<PAGE>
18. Section 5.12 of the Original Agreement hereby is amended to read in
the entirety as follows:
No Company shall incur, directly, or indirectly, any Debt for borrowed
money or otherwise under any promissory note, bond, indenture or similar
instrument, or in connection with the obligations of any Person (whether by
guaranty, suretyship, purchase or repurchase agreement or agreement to make
investments or otherwise), other than (a) Debt incurred in favor of Fidelity,
(b) Debt secured by purchase money liens or security interests permitted by
Section 5.10, (c) Debt incurred to refinance any other Debt then existing and
permitted hereunder to the extent that such Debt does not exceed the amount of
Debt refinanced and such Debt is secured only by the properties and assets that
secured the Debt refinanced, (d) Debt subordinated to the Obligations pursuant
to a written subordination agreement satisfactory to Fidelity between Fidelity
and the Person to whom such Debt is owed, or (e) Debt incurred in the normal and
ordinary course of such Company's business.
19. Section 5.14 of the Original Agreement hereby is amended to read in
the entirety as follows:
No Company shall directly or indirectly become liable in connection with
the Debt of any Person, whether by guarantee, surety, endorsement (other than
endorsement of negotiable instruments for collection in the ordinary course of
business), agreement to purchase or repurchase, agreement to make investments,
agreement to provide funds or maintain working capital, or any agreement to
assure a creditor against loss, other than in favor of Fidelity.
20. Section 5.17 of the Original Agreement hereby is amended to read in
its entirety as follows:
No Company shall make any loans or advances to or for the benefit of any
officer, director, shareholder or Affiliate of such Company; provided, however,
that each Company may make advances for routine expense allowances to its
officers and directors in the ordinary course of business; and provided,
further, however, that any Company may pay or reimburse Century for costs or
expenses incurred by Century directly on behalf of Century and overhead costs or
expenses incurred by Century and allocable to such Company in accordance with
Century's past practices; and, provided, further, however, that so long as
immediately prior thereto and after giving effect thereto, (a) no Event of
Default or any event or circumstance that, with the giving of notice, the
passage of time or both, would constitute an Event of Default, has occurred, and
(b) such Company is solvent, any Company may make loans or advances to another
Company or Century. No Company shall make any payment on any obligation owing to
any officer, director, shareholder or Affiliate of such Company; provided,
however, that any Company may pay any obligations owed to another Company as
long as both prior, and after giving effect, to such payment, (a) no Event of
Default or event or circumstance that would, with the giving of notice, the
passage of time or both, constitute an Event of Default, has occurred and (b)
such Company is solvent; and, provided, further, however, that any Company may
pay or reimburse Century for costs or expenses incurred by Century directly on
behalf of such Company and overhead costs or expenses incurred by Century and
reasonably allocated to such Company in accordance with Century's past
practices.
5
<PAGE>
21. Section 7 of the Original Amendment hereby is amended to read in the
entirety as follows:
Each invoice representing an Account shall state on its face that amounts
payable thereunder are payable only at the Remittance Address. Fidelity shall
have the right at any time, either before or after the occurrence of an Event of
Default and without notice to any Company, to notify any or all Account Debtors
on the Collateral of the assignment of the Collateral to Fidelity and to direct
such Account Debtors to make payment of all amounts due or to become due to any
Company directly to Fidelity, and to the extent permitted by law, to enforce
collection of any Collateral and to adjust, settle or compromise the amount or
payment thereof. So long as no Event of Default or event that, with the passage
of time, the giving of notice or both, would become an Event of Default has
occurred and is continuing, all collections of Collateral of any Company
received by Fidelity shall be applied by Fidelity to the payment of the
outstanding Advances of such Company, whether or not then due, then to any
interest due on any Advances or Term Advance to such Company and any other fees
or charges due hereunder and allocable or attributable directly to such Company,
then to such Company's Proportionate Share of all other Obligations then due and
any remaining funds shall be delivered to such Company. Upon the occurrence of
an Event of Default or an event that, with the passage of time, the giving of
notice or both, would become an Event of Default, any such remaining funds may
be applied to any of the Obligations of the Companies, whether or not then due,
or held by Fidelity as cash collateral ("Cash Collateral") until all Obligations
have been paid in full and Fidelity has no further obligation to advance funds
to the Companies. All amounts and proceeds (including instruments and writings)
received by any Company in respect of the Collateral shall be received in trust
for the benefit of Fidelity hereunder, shall be segregated from other funds of
such Company and shall be immediately paid over to Fidelity in the same form as
received (with any necessary endorsement) to be applied in the same manner as
payments received directly by Fidelity.
22. Clause (n) of Section 9 of the Original Agreement hereby is amended to
read in the entirety as follows:
An "event of default" beyond any applicable cure period shall have
occurred under any Century Document.
23. Section 10.2 of the Original Agreement hereby is amended to read in
the entirety as follows:
If any Event of Default shall have occurred and be continuing, Fidelity
may in its discretion apply any Cash Collateral, and any cash proceeds received
by Fidelity in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral, to any or all of the following in such
order as Fidelity may elect: (a) the repayment of all or any portion of the
Obligations; (b) the repayment of reasonable costs and expenses, including
reasonable attorneys' fees and legal expenses, incurred by Fidelity in
connection with (i) the administration of this Agreement, (ii) the custody,
preservation, use or operation of, or the sale or collection from, or other
realization upon, any Collateral, (iii) the exercise or enforcement of any of
the rights of Fidelity hereunder, or (iv) the failure of any Company to perform
or observe any of the provisions hereof; (c) the payment or other satisfaction
of any liens and other encumbrances upon any of the Collateral; (d) the
reimbursement of Fidelity for the amount of any obligations of
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<PAGE>
any Company paid or discharged by Fidelity, and of any expenses of Fidelity
payable by any Company hereunder or under the other Transaction Documents; (e)
by holding the same as Collateral; (f) the payment of any other amounts required
by applicable law (including, without limitation, Part 5 of Article 9 of the UCC
or any successor or similar applicable statutory provision); and (g) by delivery
to such Company or to whomsoever shall be lawfully entitled to receive the same
or as a court of competent jurisdiction shall direct.
24. Section 11.4 of the Original Agreement hereby is amended to read in
the entirety as follows:
The term of this Agreement shall be for three years from the date hereof
(the original term and any extension thereof are herein called the "Term") and
from year to year thereafter unless either party hereto gives notice to the
other party hereto not more than 90 days or less than 60 days prior to the end
of the Term; provided, however, that Fidelity may terminate this Agreement at
any time effective immediately upon the occurrence of an Event of Default; and
provided, further, however, that the Companies may terminate this Agreement upon
the payment in full of the Obligations, including, without limitation, any early
termination fee required below. The Companies acknowledge that termination of
this Agreement at any time prior to the end of the Term would result in the loss
by Fidelity of the benefits of this Agreement and that the damages incurred by
Fidelity as a result of such termination would be difficult and impractical to
ascertain. Therefore, in the event this Agreement is terminated prior to the end
of the Term for any reason, the Companies shall pay to Fidelity an early
termination fee in an amount equal to (3) 3.00% of the sum of the Facility Limit
and the Term Limit if such termination occurs during the first year of the Term,
(ii) 2.00% of the sum of the Facility Limit and the Term Limit if such
termination occurs during the second year of the Term, or (iii) 1.00% of the sum
of the Facility Limit and the Term Limit if such termination occurs thereafter
during the Term, in each case to the maximum extent permitted by applicable law.
Any termination of this Agreement shall not affect Fidelity's security interest
in the Collateral, and this Agreement shall continue to be effective, until all
Obligations have been completed and satisfied in full. No Company shall be
entitled to terminate this Agreement as to itself only, unless all Companies
terminate this Agreement or Fidelity consents to such termination.
25. The Related Loan Agreement hereby is terminated and shall be of no
further force or effect. All indebtedness, liabilities and obligations of the
Companies under the Related Loan Agreement as of the date hereof shall be deemed
Obligations under the Agreement on and after the date hereof. Without limiting
the generality of the foregoing, all "Advances" outstanding under the Related
Loan Agreement and all accrued but unpaid interest thereon and other fees and
costs relating thereto shall be deemed to have been made and incurred under the
Agreement.
26. In order to induce GBCC to enter into this Amendment, the Companies
represent and warrant to GBCC that:
(a) The representations and warranties contained in Section 4 of the
Original Agreement are true and correct at and as of the time of the
effectiveness hereof.
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<PAGE>
(b) Each Company is duly authorized to execute, deliver and perform
its obligations under this Amendment and is and will continue to be duly
authorized to perform its obligations under the Original Agreement as amended
hereby. Each Company has duly taken all corporate action necessary to authorize
the execution and delivery of this Amendment and to authorize the performance of
the obligations of such Company hereunder.
(c) The execution and delivery by each Company of this Amendment,
the performance by such Company of its obligations hereunder and the
consummation of the transactions contemplated hereby do not and will not
conflict with any provision of law, statute, rule or regulation or of the
articles of incorporation and bylaws of such Company, or of any material
agreement, judgment, license, order or permit applicable to or binding upon such
Company, or result in the creation of any lien, charge or encumbrance upon any
assets or properties of such Company. Except for those which have been duly
obtained, no consent, approval, authorization or order of any court or
governmental authority or third party is required in connection with the
execution and delivery by any Company of this Amendment or to consummate the
transactions contemplated hereby.
(d) The Agreement (including this Amendment) has been duly executed
and delivered by each Company and is a legal and binding instrument and
agreement of each Company, enforceable against each Company in accordance with
its terms, except as limited by bankruptcy, insolvency and similar laws and by
general principles of equity.
(e) No Event of Default or any event that, with the giving of
notice, the passage of time or both, would constitute an Event of Default has
occurred or is continuing.
27. (a) The Agreement is hereby ratified and confirmed in all respects.
The execution, delivery and effectiveness of this Amendment shall not, except as
expressly provided herein, operate as a waiver of any right, power or remedy of
GBCC under the Agreement nor constitute a waiver of any provision thereof.
(f) All representations, warranties, covenants and agreements of the
Companies herein shall survive the execution and delivery of this Amendment and
the performance hereof and shall further survive until the Agreement is
terminated.
(g) This Amendment may be separately executed in counterparts and by
the different parties hereto in separate counterparts, each of which when so
executed shall be deemed to constitute one and same Amendment.
(h) Simultaneously, with the execution and delivery, electronics
hereof, the Companies shall cause Century to issue and deliver to GBCC a warrant
(the "Warrant") in form and substance acceptable to GBCC to purchase 60,000
shares of the common stock of Century at an exercise price of $6.00 per share
and (ii) deliver to GBCC an opinion of counsel in form and substance acceptable
to GBCC regarding this Amendment and the Warrant, and the receipt by GBCC of the
Warrant and such opinion shall be conditions precedent to the effectiveness of
this Amendment.
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<PAGE>
(i) Simultaneously with the execution and delivery hereof, the
Companies shall pay to GBCC a document preparation fee of [$5,500] to cover the
fees of Brobeck Phleger and Harrison, LLP, counsel to GBCC, in connection with
the preparation, execution and delivery of this Amendment and the Warrant, and
shall reimburse GBCC for the out-of-pocket expenses of Brobeck, Phleger &
Harrison, LLP in connection herewith and therewith.
[SIGNATURES FOLLOW ON NEXT PAGE]
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<PAGE>
IN WITNESS WHEREOF, the Companies and GBCC have executed this Amendment as
of the date first written above.
GBCC: THE COMPANIES:
GUARANTY BUSINESS CREDIT CENTURY ELECTRONICS
CORPORATION D/B/A MANUFACTURING (NE) INC.,
FIDELITY FUNDING, a Massachusetts corporation
a Delaware corporation
By: /s/ Michael D. Haddad By: /s/ James M. Roller
------------------------------------- ---------------------------------
Michael D. Haddad James M. Roller
Chief Executive Officer and President Vice President - Finance &
Administration, Treasurer/
Chief Financial Officer
Y.M.C. MANUFACTURING COMPANY,
a California corporation
By:
---------------------------------
Walter Conroy
President
QUALITY MANUFACTURING SERVICES, INC.
a California corporation
By:
---------------------------------
Walter Conroy
President
<PAGE>
IN WITNESS WHEREOF, the Companies and GBCC have executed this Amendment as
of the date first written above.
GBCC: THE COMPANIES:
GUARANTY BUSINESS CREDIT CENTURY ELECTRONICS
CORPORATION D/B/A MANUFACTURING (NE) INC.,
FIDELITY FUNDING, a Massachusetts corporation
a Delaware corporation
By: By:
------------------------------------- ---------------------------------
Michael D. Haddad James M. Roller
Chief Executive Officer and President Vice President - Finance &
Administration, Treasurer/
Chief Financial Officer
Y.M.C. MANUFACTURING COMPANY,
a California corporation
By: /s/ Walter Conroy
---------------------------------
Walter Conroy
President
QUALITY MANUFACTURING SERVICES, INC.
a California corporation
By: /s/ Walter Conroy
---------------------------------
Walter Conroy
President
<PAGE>
Exhibit 10.18
GENERAL CONTINUING GUARANTY
OF
CENTURY ELECTRONICS MANUFACTURING, INC.
In order to induce Fidelity Funding, Inc. ("Fidelity"), a Texas
corporation, to extend and/or to continue to extend financial accommodations to
Century Electronics Manufacturing (NE), Inc., a Massachusetts corporation,
Y.M.C. Manufacturing Company, a California corporation, and Quality
Manufacturing Services, Inc., a California corporation (individually, a
"Company" and, collectively, the "Companies"), pursuant to the terms and
conditions of that certain Loan and Security Agreement (the "Agreement"), dated
as of the hereof, between Fidelity and the Companies or pursuant to any other
present or future agreement between Fidelity and any Company, and in
consideration of any loans, advances, or financial accommodations heretofore or
hereafter granted by Fidelity to or for the account of any Company, whether
pursuant to the Agreement or otherwise, Century Electronics Manufacturing, Inc.,
a Delaware corporation ("Guarantor"), the owner, directly or indirectly, of 100%
of the outstanding capital stock of each Company, hereby guarantees, promises
and undertakes as follows:
1. Definitions and Construction Rules.
1.1 When used herein, the following terms shall have the following
meanings:
"Advance" shall have the meaning given to it in the Agreement.
"Affiliate" means with respect to any Person, any other Person that
directly or indirectly controls, or is controlled by or under common
control with, such Person.
"Agreement" shall have the meaning given to it in the first
paragraph hereof.
"Company" or "Companies" shall have the meanings given to them in
the first paragraph hereof.
"Debt" means, with respect to any Person, all indebtedness,
obligations and liabilities of such Person, including without limitation:
(a) all liabilities which would be reflected on a balance sheet of such
Person prepared in accordance with GAAP, (b) all obligations of such
Person in respect of any guaranty of any Debt of another Person, and (c)
all obligations, indebtedness and liabilities secured by any lien on or
security interest in any property or assets of such Person.
"Effective Termination Date" shall have the meaning given to it in
Section 3.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, rules, orders, licenses, agreements
or other governmental restrictions relating to the environment or to
emissions, discharges or releases of pollutants or industrial, toxic or
hazardous substances into the environment or otherwise relating to the
<PAGE>
manufacture, processing, treatment, transport or handling of pollutants or
industrial, toxic or hazardous substances.
"ERISA Plan" means any pension benefit plan subject to Title IV of
ERISA maintained by Guarantor or any Affiliate thereof with respect to
which Guarantor has a fixed or contingent liability.
"Event of Default" has the meaning given it in Section 15.
"Fidelity" shall have the meaning given to it in the first paragraph
hereof.
"GAAP" means generally accepted accounting principles and practices
as promulgated by the American Institute of Certified Public Accountants,
applied on basis consistent with past practices.
"Guarantor" shall have the meaning given to it in the first
paragraph hereof.
"Guarantor Documents" means this Guaranty, the Related Guaranty and
all other documents, instruments or contracts executed by Guarantor in
connection herewith or therewith or the transactions contemplated hereby
or thereby.
"Guaranty" means this General Continuing Guaranty, as amended,
supplemented or otherwise modified from time to time.
"Obligations" shall have the meaning given to it in Section 2.
"Person" means any individual, corporation, joint venture,
partnership, trust, unincorporated organization or governmental entity or
agency.
"Related Guaranty" means the General Continuing Guaranty, dated as
of the date hereof, from the Guarantor to USA Funding, as amended,
modified or supplemented from time to time.
"Related Loan Agreement" means the Loan and Security Agreement,
dated as of the dated hereof, between the Companies and USA Funding, as
amended, modified or supplemented from time to time.
"Subsidiary" means any Person of which at least a majority of the
securities or other ownership interests having by their terms ordinary
voting power to elect a majority of the governing body of such Person is
directly or indirectly owned or controlled by Guarantor; provided,
however, that no Person domiciled outside of the United States of America
shall be a Subsidiary.
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<PAGE>
"Termination Event" means (a) the occurrence with respect to any
ERISA Plan of (i) a reportable event described in Sections 4043(b)(5) of
ERISA or (ii) any other reportable event described in Section 4043(b) of
ERISA other than a reportable event not subject to the provision for
30-day notice to the Pension Benefit Guaranty Corporation pursuant to a
waiver by such corporation under Section 4043(a) of ERISA or (b) the
withdrawal of Guarantor or any Affiliate of Guarantor from any ERISA Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, or (c) any event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any ERISA Plan.
"Transaction Documents" shall have the meaning given to it in the
Agreement.
"USA Funding" shall means USA Funding, Inc., a Delaware corporation.
1.2 References herein to a particular agreement, instrument or document
also shall be deemed to refer to and include all renewals, extensions and
modifications of such agreement, instrument or document. All addenda,
exhibits and schedules attached to this Guaranty are a part hereof for all
purposes. Words in the singular form shall be construed to include the
plural and vice versa, unless the context otherwise requires.
1.3 Unless otherwise expressly provided herein or unless Fidelity
otherwise consents, all financial statements and reports furnished to
Fidelity hereunder shall be prepared, and all financial computations and
determinations pursuant hereto shall be made, in accordance with GAAP on a
consolidated basis without duplication.
2. Guaranty of Obligations. Guarantor unconditionally, absolutely and
irrevocably guarantees and promises to pay to Fidelity, on order or
demand, in lawful money of the United States, any and all indebtedness,
liabilities and obligations of each Company to Fidelity whether under the
Agreement or otherwise (collectively, the "Obligations"). Without limiting
the generality of the foregoing, Guarantor further agrees to pay to
Fidelity all post-petition interest, expenses and other duties and
liabilities of each Company which would be owed by such Company but for
the fact that they are unenforceable or not allowable due to the existence
of a bankruptcy, reorganization or similar proceeding involving such
Company. The Obligations shall include any and all advances, debts,
obligations and liabilities of each Company, heretofore, now, or hereafter
made, incurred or created, whether voluntarily or involuntarily, however
arising (including, without limitation, indebtedness owing by such Company
to Fidelity under the Agreement, and any and all attorney's fees,
expenses, costs, premiums, charges and interest owed by such Company to
Fidelity, whether under the Agreement, or otherwise), whether due or not
due, absolute or contingent, liquidated or unliquidated, determined or
undetermined, whether such Company may be liable individually or jointly
with others, whether recovery upon such indebtedness may be or hereafter
becomes barred by any statute of limitations or whether such indebtedness
may be or hereafter becomes otherwise unenforceable, and also shall
include each Company's prompt, full and faithful performance, observance
and discharge of each and every term, condition, agreement,
representation, warranty undertaking and provision to
3
<PAGE>
be performed by such Company under the Agreement.
3. Continuing Guaranty. This Guaranty is a continuing guaranty and shall
remain effective until it has been expressly terminated pursuant to
paragraph 12; provided, however, that, by sending written notice (by
certified mail, return receipt requested) to Fidelity, Guarantor may
terminate this Guaranty as to (and only as to) Obligations of the
Companies under transactions having their inception after the effective
date (the "Effective Termination Date") specified in such written notice,
which shall be at least 90 days after Fidelity's receipt of such written
notice. No such termination shall affect any rights or obligations arising
out of transactions having their inception prior to the Effective
Termination Date, including, without limitation, any loans or advances
made, or any credit granted, to any Company after Fidelity's receipt
thereof pursuant to any agreement, commitment or obligation, including,
without limitation, the Agreement, made or entered into by Fidelity prior
to the Effective Termination Date.
4. Rights are Independent. Guarantor agrees that it is directly and primarily
liable to Fidelity, that the obligations of Guarantor hereunder are
independent of the obligations of the Companies and that a separate action
or actions may be brought and prosecuted against Guarantor, whether action
is brought against any Company or whether any Company is joined in any
such action or actions. Guarantor agrees that any releases which may be
given by Fidelity to any Company or any other guarantor or endorser of all
or any part of the Obligations shall not release it from this Guaranty.
5. Default. In the event that any bankruptcy, insolvency, receivership or
similar proceeding is instituted by or against Guarantor and/or any
Company or in the event that either Guarantor or any Company becomes
insolvent, makes an assignment for the benefit of creditors or attempts to
effect a composition with creditors, or if there any Event of Default or
any "Event of Default" under the Agreement (whether declared or not),
then, at Fidelity's election, without notice or demand, the obligations of
Guarantor created hereunder shall become due, payable and enforceable
against Guarantor whether or not the Obligations are then due and payable
and whether or not the Obligations are enforceable against any Company.
6. Indemnification. Guarantor agrees to indemnify, defend and hold Fidelity
harmless from and against any and all obligations, demands and
liabilities, by whomsoever asserted and against all losses in any way
suffered, incurred or paid by Fidelity as a result of or in any way
arising out of, following or consequential to transactions with the
Companies, whether under the Agreement or otherwise, and also agrees that
this indemnification shall not be impaired by any modification,
supplement, extension or amendment of any contract or agreement to which
Fidelity and any Company may hereafter agree, or by any agreements or
arrangements whatever with any Company or anyone else. THE FOREGOING
INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE
IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR
THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION
4
<PAGE>
OF ANY KIND BY FIDELITY, provided only that Fidelity shall not be entitled
under this section to receive indemnification for that portion, if any, of
any liabilities and costs proximately caused by its own individual
negligence or willful misconduct.
7. Consent to Modifications. Guarantor hereby authorizes Fidelity, without
affecting its liability hereunder, from time to time to: (a) renew,
compromise, extend, accelerate or otherwise change the time for payment or
the terms of any of the Obligations, or any part thereof, including,
without limitation, increasing or decreasing the rate of interest thereof
or the amount of indebtedness thereunder; (b) take and hold security for
the payment of the Obligations guaranteed hereby, and exchange, enforce,
waive and release any such security; (c) apply such security and direct
the order or manner of sale thereof as Fidelity in its discretion may
determine; (d) release or substitute any one or more endorsers or
guarantors of all or any part of the Obligations; and (e) assign, without
notice, this Guaranty in whole or in part and Fidelity's rights hereunder
to anyone at any time. Fidelity agrees to use its best efforts to notify
Guarantor in advance of taking any of the foregoing actions, but the
failure to so notify Guarantor shall not, in any way or respect, impair,
diminish, reduce or release Guarantor's obligation hereunder.
Guarantor agrees that Fidelity may do any or all of the foregoing in such
manner, upon such terms, and at such times as Fidelity, in its discretion,
deems advisable, without, in any way or respect, impairing, effecting,
reducing or releasing Guarantor from its undertakings hereunder, and
Guarantor hereby consents to each and all of the foregoing acts, events
and occurrences.
8. Waiver of Defenses. Guarantor hereby waives any right to assert against
Fidelity as a defense, counterclaim, set-off or cross-claim, any defense
(legal or equitable) other than payment of amounts owed, set-off,
counterclaim or cross-claim which Guarantor may now or any time hereafter
have against any Company and any other party liable to Fidelity in any way
or manner. Guarantor hereby waives all defenses, counterclaims and
off-sets of any kind or nature, arising directly or indirectly from the
present or future lack of perfection, sufficiency, validity or
enforceability of the Agreement or any security interest thereunder or any
Transaction Document.
Guarantor hereby waives any defense arising by reason of any claim or
defense based upon an election of remedies by Fidelity, which, in any
manner impairs, affects, reduces, releases, destroys or extinguishes
Guarantor's subrogation rights, rights to proceed against any Company for
reimbursement, or any other rights of Guarantor to proceed against any
Company or against any other rights of Guarantor or against any other
person or security. Guarantor waives all presentments, demands for
performance, notices of non-performance, protests, notices of protests,
notices of dishonor, notices of default, notice of acceptance of this
Guaranty, and notices of the existence, creating or incurring of new or
additional indebtedness, and all other notices or formalities to which
Guarantor may be entitled.
5
<PAGE>
As a condition to payment or performance by Guarantor under this Guaranty,
Fidelity shall not be required to, and Guarantor hereby waives any and all
rights to require Fidelity to prosecute or seek to enforce any remedies
against any Company or any other party liable to Fidelity on account of
the Obligations or to require Fidelity to seek to enforce or resort to any
remedies with respect to any security interests, liens or encumbrances
granted to Fidelity by any Company or any other party on account of the
Obligations.
All monies or other property of Guarantor at any time in Fidelity's
possession may be held by Fidelity as security for any and all obligations
of Guarantor to Fidelity no matter now existing or hereafter arising,
whether absolute or contingent, whether due or to become due, and whether
under this Guaranty or otherwise. Guarantor also agrees that Fidelity's
books and records showing the account between Fidelity and any Company
shall be admissible in any action or proceeding and shall be binding upon
Guarantor for the purpose of establishing the terms set forth therein and
shall constitute prima facie proof thereof.
9. Waiver of Rights of Subrogation. Until all of the Obligations have been
paid and performed in full, Guarantor shall have no right to exercise any
right of subrogation with respect hereto and Guarantor hereby waives any
rights to enforce any remedy which Guarantor may have against either
Company and any right to participate in any collateral securing the
Obligations until such time. If any amount shall be paid to Guarantor on
account of any subrogation rights or other remedy or collateral at any
time when all of the Obligations and all other expenses guaranteed
pursuant hereto shall not have been paid in full, such amount shall be
held in trust for the benefit of Fidelity, shall be segregated from the
other funds of Guarantor and shall forthwith be paid over to Fidelity to
be held by Fidelity as collateral for, or then or at any time thereafter
applied in whole or in part by Fidelity against, all or any portion of the
Obligations whether matured or unmatured, in such order as Fidelity shall
elect, if Guarantor shall make payment to Fidelity of all or any portion
of the Obligations and if all of the Obligations shall be finally paid in
full, Fidelity will, at Guarantor's request and expense, execute and
deliver to Guarantor (without recourse, representation or warranty)
appropriate documents necessary to evidence the transfer by subrogation to
Guarantor of an interest in the Obligations resulting from such payment by
Guarantor.
10. Subordination. Guarantor hereby subordinates any and all indebtedness of
each Company to Guarantor to the full and prompt payment and performance
of all of the Obligations. Guarantor agrees that Fidelity shall be
entitled to receive payment of all Obligations prior to Guarantor's
receipt of payment of any amount of any indebtedness of any Company to
Guarantor; provided, however, that Guarantor shall be entitled to collect
and receive regularly scheduled payments of interest and principal on any
such indebtedness so long as no Event of Default or event or circumstance
that would, with the giving of notice, the passage of time or both,
constitutes an Event of Default, has occurred. Except as provided in the
preceding sentence, any payments on such indebtedness to Guarantor, if
Fidelity so requests, shall be collected, enforced and received by
Guarantor, in trust, as trustee for Fidelity and shall be paid over to
Fidelity on account of the Obligations, but without reducing or affecting
in any manner the liability of Guarantor under the other provisions of
6
<PAGE>
this Guaranty. After the occurrence of an Event of Default or an event or
circumstance that would, with the giving of notice, the passage of time or
both, constitute an Event of Default, Fidelity is authorized and
empowered, but not obligated, in its discretion, (a) in the name of
Guarantor, to collect and enforce, and to submit claims in respect of, any
indebtedness of any Company to Guarantor and to apply any amounts received
thereon to the Obligations, and (b) to require Guarantor (i) to collect
and enforce, and to submit claims in respect of, any indebtedness of any
Company to Guarantor, and (ii) to pay any amounts received on such
indebtedness to Fidelity for application to the Obligations.
11. Financial Condition of the Companies. Guarantor is presently informed of
the financial condition of each Company and of all other circumstances
which a diligent inquiry would reveal and which bear upon the risk of
nonpayment of the Obligations. Guarantor hereby covenants that it will
continue to keep itself informed of each Company's financial condition and
of all other circumstances which bear upon the risk of nonpayment.
Guarantor hereby waives its right, if any, to require Fidelity to disclose
to Guarantor, and Fidelity is relieved of any obligation or duty to
disclose to Guarantor, any information which Fidelity may now or hereafter
acquire concerning such condition or circumstances.
12. Termination. The Guarantor's obligation under this Guaranty shall continue
in full force and effect until each Company's Obligations are fully paid,
performed and discharged and Fidelity gives the Guarantor written notice
of that fact. No Company's Obligations shall be considered fully paid,
performed and discharged unless and until all payments by such Company to
Fidelity are no longer subject to any right on the part of any person
whomsoever, including but not limited to, such Company, such Company as a
debtor-in-possession, or any trustee or receiver in bankruptcy, to set
aside such payments or seek to recoup the amount of such payments, or any
part thereof. The foregoing shall include, by way of example and not by
way of limitation, all rights to recover preferences voidable under Title
11 of the United States Code. In the event that any such payments by any
Company to Fidelity are set aside after the making thereof, in whole or in
part, or settled without litigation, to the extent of such settlement, all
of which is within Fidelity's discretion, Guarantor shall be liable for
the full amount Fidelity is required to repay plus costs, interest,
attorneys' fees and any and all expenses which Fidelity paid or incurred
in connection therewith.
13. Guarantor's Representations and Warranties. Guarantor represents and
warrants to Fidelity on the date hereof, and shall be deemed to represent
and warrant to Fidelity on each date on which an Advance or Term Advance
is made to any Company under the Agreement, that:
13.1 Each of Guarantor and each Company is a corporation or limited
liability company duly organized, validly existing and in good standing
under the laws of the state of its formation, with all requisite power and
authority to execute, deliver and perform its obligations under the
Guarantor Documents or the Transaction Documents to which it is a party
and to conduct its business as presently conducted. Each of Guarantor and
each Company is duly qualified and authorized to do business as a foreign
corporation and is in
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<PAGE>
good standing in all states in which such qualification and good standing
are necessary or desirable for the conduct of its business or the
performance of its obligations under the Guarantor Documents or the
Transaction Documents to which it is a party. The execution, delivery and
performance by Guarantor of this Guaranty and the other Guarantor
Documents to which it is a party do not and will not constitute (a) a
violation of any applicable law or Guarantor's articles or certificate of
incorporation or bylaws or (b) a material breach of any other document,
agreement or instrument to which Guarantor is a party or by which
Guarantor is bound. This Guaranty and the other Guarantor Documents to
which Guarantor is a party have been duly authorized, executed and
delivered by Guarantor, and are legal, valid and binding obligations of
Guarantor enforceable against Guarantor in accordance with their terms. No
consent of, approval by, registration or filing with or authorization from
any governmental authority or agency is required in connection with the
execution, delivery or performance by Guarantor of this Guaranty or the
other Guarantor Documents to which it is a party.
13.2 Except as described on Schedule 13.2, none of the capital stock of
any Company owned by Guarantor is subject to any lien, encumbrance,
security interest or other claim of any kind or nature, and there are no
financing statements on file in any public office governing any such
capital stock in which Guarantor is named in or has signed as the debtor.
13.3 Guarantor is the sole owner and holder of, and has good and
marketable title to, all issued and outstanding capital stock of each
Company.
13.4 The address set forth below Guarantor's signature hereon is, and for
at least the last six months has been, Guarantor's mailing address, its
chief executive office and its principal place of business. Guarantor does
not transact business, and has not transacted business during the past
five years, under any trade, fictitious or assumed name.
13.5 Guarantor and the Subsidiaries have filed all tax reports and returns
required to be filed by them and have paid all federal, state and local
taxes and governmental charges imposed upon them and then due; provided,
however, that YMC has a payment plan with the Internal Revenue Service for
the payment of approximately $33,000 of past due federal withholding
taxes.
13.6 Each of Guarantor and each of its Subsidiaries is in compliance with
ERISA, and is not required to contribute to any "multiemployer plan" as
defined in Section 4001 of ERISA. Each of Guarantor and each Company has
conducted its business in compliance with all applicable laws, including
but not limited to, applicable Environmental Laws, and maintains and is in
compliance with all licenses and permits required under any such laws to
conduct its business and perform its obligations hereunder. Neither
Guarantor nor any Company has any known material contingent liability
under any Environmental Law.
8
<PAGE>
13.7 The application made by Guarantor and the Companies to Fidelity in
connection with the Agreement and the statements made therein and in any
materials furnished in connection therewith are true and correct as of the
date hereof. All financial statements furnished by Guarantor to Fidelity
in connection with such application or hereunder have been prepared in
accordance with GAAP and fairly present the financial condition and
results of operations of Guarantor as of the dates and for the periods
indicated therein.
13.8 There is no fact which Guarantor has not disclosed to Fidelity in
writing which reasonably could be expected to materially adversely affect
the properties, business or financial condition of Guarantor or any
Company or the Collateral, or which it is necessary to disclose in order
to keep the foregoing representations and warranties from being
misleading.
14. Covenants of Guarantor. From the date hereof and until the payment and
performance in full of all of the Obligations, Guarantor covenants with
Fidelity that:
14.1 Guarantor shall preserve and maintain, and shall cause each Company
to preserve and maintain, its corporate existence, good standing and
authority to transact business in all jurisdictions where necessary for
the proper conduct of its business, and shall maintain, and shall cause
each Company to maintain, all of its properties, rights, privileges and
franchises necessary or desirable in the normal conduct of its business;
provided, however, that Quality Manufacturing Services, Inc. and Y.M.C.
Manufacturing Company may merge with and into each other provided that the
conditions thereto contained in Section 5.20 of the Agreement are
satisfied.
14.2 Guarantor shall maintain, and shall cause each Company to maintain,
its books and records in accordance with GAAP. Guarantor shall furnish
Fidelity, upon request, such information and statements as Fidelity shall
request from time to time regarding the business affairs, financial
condition and results of operations of the Guarantor and each Company.
Guarantor shall provide Fidelity, within 120 days after the end of each of
Guarantor's fiscal years, audited annual consolidated and consolidating
financial statements and such certificates relating to the foregoing as
Fidelity may request including, without limitation, an annual certificate
from the president and chief financial officer of Guarantor certifying the
accuracy of such financial statements, stating whether any Events of
Default have occurred and stating in detail the nature of any such Events
of Default Any such officers' certificate shall be in the for attached
hereto as Exhibit A. In addition, Guarantor shall furnish to Fidelity such
other items of information that Fidelity may deem necessary or appropriate
from time to time. Guarantor immediately shall notify Fidelity in writing
upon becoming aware of the existence of any condition or circumstance that
constitutes an Event of Default or that would, with the giving of notice,
the passage of time or both, constitute an Event of Default. Any such
written notice shall be signed by the president and the chief financial
officer of guarantor and shall specify the nature of such condition or
circumstance, the period of the existence thereof and the action that
Guarantor proposes to take with respect thereto.
9
<PAGE>
14.3 Guarantor promptly shall notify Fidelity of any attachment or any
other legal process levied against Guarantor or any Company and any
action, suit, proceeding or other similar claim initiated against
Guarantor or any Company.
14.4 Guarantor shall keep and maintain, and shall cause each Company to
maintain, adequate insurance by with reputable and creditworthy insurers
with respect to its business, provided that no credit insurance on
accounts receivable shall be required. Such insurance shall cover loss,
damages and liability of amounts not less than reasonably requested by
Fidelity and shall include, at a minimum, business interruption insurance,
insurance for workers compensation, general premises liability, fire,
casualty, theft and all risk. Guarantor shall deliver copies of each
insurance policy to Fidelity upon request.
14.5 Guarantor shall file, and shall cause each Company to file, all tax
reports and returns required to be filed by it in the manner and at the
times required by applicable law, and shall pay, and shall cause each
Subsidiary to pay, all federal, state and local taxes and charges imposed
upon it when due; provided, however, that neither Guarantor nor any
Subsidiary shall be prohibited from contesting any such tax or charge in
good faith as long as it has set aside adequate reserves on its books and
records in accordance with GAAP to cover its liability for any such taxes
or charge.
14.6 Guarantor shall comply, and shall cause each Company to comply, with
ERISA and shall not become required to contribute, and shall not permit
any ERISA Affiliate to become required to contribute, to any
"multiemployee plan" as defined in Section 4001 of ERISA. Guarantor shall
conduct its business, and shall cause each Company to conduct its
business, in compliance with all applicable laws, and shall maintain and
comply, and shall cause each Company to maintain and comply, with all
licenses and permits required under any such laws to conduct its business
and perform its obligations under the Guarantor Documents or Transaction
Documents to which it is a party. Without limiting the generality of the
foregoing, Guarantor shall comply, and shall cause each Company to
maintain and comply, in all respects with all Environmental Laws now or
hereafter applicable to it and shall obtain, and shall cause each Company
to obtain, at or prior to the time required by applicable Environmental
Laws, all environmental, health and safety permits, licenses and other
authorizations necessary for its operations. Guarantor promptly shall
furnish to Fidelity all written notices of violation, complaints, penalty
assessments, suits or other proceedings received by Guarantor or any
Company with respect to any alleged violation of or non-compliance with
any Environmental Laws.
14.7 Guarantor shall not, without Fidelity's prior written consent, which
may be withheld in its reasonable discretion, grant, create or allow to
exist, and shall not, without Fidelity's prior written consent, which may
be withheld in its sole discretion, permit any Company to grant, create or
allow to exist, any security interest, lien or other encumbrance on any of
its assets and properties other than (a) the liens and security interests
granted to Fidelity in the Agreement or otherwise and the liens and
security interests granted to USA Funding in the Related Loan Agreement or
otherwise, (b) the liens, security interests and other encumbrances
described on Schedule 13.2 attached hereto, the liens, security interests
and
10
<PAGE>
other encumbrances described on Schedule 4.2 to the Agreement, and any
liens and security interests granted to holders of Debt refinancing any
Debt secured by the foregoing security interests, liens or other
encumbrances to the extent permitted by Section 14.8(c), (c) purchase
money liens or security interests granted at a time when no Event of
Default or event or circumstance that would, with the giving of notice,
the passage of time or both, constitutes an Event of Default, has
occurred, and (d) liens and security interests securing Debt permitted
under Section 14.8(d). Guarantor shall not change its mailing address,
chief executive office, principal place of business or place where such
records are maintained, open any new place of business, close any existing
place of business or transact business under any trade, fictitious or
assumed name without providing at least 30 days' prior written notice
thereof to Fidelity.
14.8 Guarantor shall not, without Fidelity's prior written consent, which
may be withheld in its reasonable discretion, incur, and shall not,
without Fidelity's prior written consent, which may be withheld in its
sole discretion, permit any Company to incur, directly, or indirectly, any
Debt for borrowed money or otherwise under any promissory note, bond,
indenture or similar instrument, or in connection with the obligations of
any Person (whether by guaranty, suretyship, purchase or repurchase
agreement or agreement to make investments or otherwise), other than (a)
Debt incurred in favor of Fidelity or USA Funding, (b) Debt secured by
purchase money liens or security interests permitted by Section 14.7, (c)
Debt incurred to refinance any other Debt then existing and permitted
hereunder to the extent such Debt does not exceed the amount of Debt
refinanced and such Debt is secured only by the properties and assets that
secured the Debt refinanced, (d) Debt subordinated to the Obligations
pursuant to a written subordination agreement satisfactory to Fidelity
between Fidelity and the Person to whom such Debt is owed, (e) Debt
incurred in the normal and ordinary course of Guarantor's or such
Company's business, (f) without duplication, Debt permitted under the
Agreement Guarantor shall not be prohibited from issuing its equity
securities or otherwise raising equity capital, and (g) Debt incurred by
Guarantor in connection with the repurchase by Guarantor of shares of its
capital stock.
14.9 Guarantor shall not, without Fidelity's prior written consent, which
may be withheld in its reasonable discretion, become liable, and shall
not, without Fidelity's prior written consent, which may be withheld in
its sole discretion, permit any Company to become liable, directly or
indirectly, in connection with the Debt of any Person, whether by
guarantee, surety, endorsement (other than endorsement of negotiable
instruments for collection in the ordinary course of business), agreement
to purchase or repurchase, agreement to make investments, agreement to
provide funds or maintain working capital, or any agreement to assure a
creditor against loss, other than in favor of Fidelity or USA Funding.
14.10 Guarantor shall not declare, pay or issue any dividends or other
distributions in respect of its capital stock or distribute, reserve,
secure, or otherwise make or commit distributions on account of its
capital stock, or make any payment on account of the purchase, redemption
or other acquisition or retirement of any shares of its capital stock
11
<PAGE>
(each, a "Distribution"); provided, however, that Guarantor may make any
Distribution if; immediately prior thereto and after giving effect
thereto, no Event of Default or any event or circumstance that, with the
giving of notice, the passage of time or both, would constitute an Event
of Default, has occurred.
14.11 Guarantor shall not make any loans or advances to or for the benefit
of any officer, director, Affiliate or shareholder of Guarantor other than
advances for routine expense allowances in the ordinary course of
business; provided, however, that Guarantor may make any such loan or
advance, if immediately prior thereto and after giving effect Thereto, no
Event of Default or any event or circumstance that, with the giving of
notice, the passage of time or both, would constitute an Event of Default,
has occurred. Guarantor shall not make any payment on any obligation owing
to any officer, director, shareholder or Affiliate of Guarantor, provided,
however, that Guarantor may make any such payment, if immediately prior
thereto and after giving effect thereto, no Event of Default or any event
or circumstance that, with the giving of notice, the passage of time or
both, would constitute an Event of Default, has occurred.
14.12 Guarantor shall not permit any Company to purchase or otherwise
acquire assets from any Person outside the ordinary course of business.
14.13 With Fidelity's prior written consent, which may be withheld in its
reasonable discretion, Guarantor shall not dissolve or liquidate or become
a party to any merger or consolidation with any Person. Guarantor shall
not permit any Company to sell or otherwise dispose of its assets other
than the sale of inventory in the ordinary course of business or the sale
of unusable or obsolete machinery and equipment as permitted by the
Agreement or to dissolve or liquidate or to become a party to any merger
or consolidation with any Person provided, however, that Quality
Manufacturing Services, Inc. and Y.M.C. Manufacturing Company may merge
with and into each other provided that the conditions thereto contained in
Section 5.20 of the Agreement are satisfied.
15. Events of Default An event of default ("Event of Default") shall be deemed
to have occurred hereunder upon the happening of one or more of the
following:
(a) Guarantor shall fail to pay on demand or otherwise as and when
required or due any amount required to be paid or owed by Guarantor to
Fidelity, whether hereunder or otherwise.
(b) Guarantor shall breach any covenant or agreement made herein or in any
other Guarantor Document (other than those covered by clause (a) above)
and the same shall not be cured to Fidelity's satisfaction within 30 days
alter the earlier of (i) the date of which Guarantor first obtains
knowledge that such covenant or agreement has been breached or (ii) the
date on which Fidelity notifies Guarantor that such covenant or agreement
has been breached.
12
<PAGE>
(c) Any warranty or representation made herein or in any other Guarantor
Document shall be untrue in any material respect when made or any report,
certificate, schedule, financial statement, profit and loss statement or
other statement furnished by Guarantor, or by any other person on behalf
of Guarantor, to Fidelity is not true and correct in any material respect
when furnished.
(d) There shall be commenced by or against Guarantor or any Company any
voluntary or involuntary case under the federal Bankruptcy Code, or
Guarantor or any Company shall make an assignment for the benefit of its
creditors, or of a receiver or custodian shall be appointed for Guarantor
or any Company for a substantial portion of its assets.
(e) Guarantor or any Company other than YMC shall become insolvent in that
its debts are greater than the fair value of its assets, or Guarantor or
any Company is generally not paying its debts as they become due.
(f) Any involuntary lien, garnishment, attachment or the like in the
amount of $100,000 or more shall be issued against or shall attach to the
Collateral or any assets or properties of Guarantor and the same is not
released or bonded or insured to Fidelity's satisfaction within ten days.
(g) Guarantor or any Subsidiary shall have a federal or state tax lien
filed against any of its properties.
(h) Guarantor or any Subsidiary shall fail to pay any federal or state tax
when due, or shall fail to file any federal or state tax form or report as
and when due; provided, however, that nothing contained herein shall be
deemed to prohibit Guarantor or any Subsidiary from diligently contesting
the payment of any tax owed in good faith as long as adequate reserves
therefor have been made on its books and records in accordance with GAAP;
and provided, further, however, that the failure of YMC to pay
approximately $33,000 of past due federal withholding taxes shall not
constitute an "Event of Default" unless YMC defaults under its payment
plan with respect thereto with the Internal Revenue Service.
(i) Either (i) any "accumulated funding deficiency" (as defined in Section
412(a) of the Internal Revenue Code of 1986, as amended) in excess of
$100,000 exists with respect to any ERISA Plan, or (ii) any Termination
Event occurs with respect to any ERISA Plan and the then current value of
such ERISA Plan's benefit liabilities exceeds the then current value of
such ERISA Plan's assets available for the payment of such benefit
liabilities by more than $100,000.
(j) Guarantor or any Company suffers the entry against it a final judgment
for the payment of money in excess of $100,000, and (i) either such
judgment is not satisfied in full within 45 days after such judgment
becomes final or (ii) such judgment is not bonded or insured to the
satisfaction of Fidelity.
13
<PAGE>
(k) An event or circumstance shall have occurred which Fidelity believes
in good faith has or may result in a material adverse change in the
financial condition, business or operations of the Guarantor or any
Company.
(l) Fidelity believes in good faith that the prospect for payment or
performance of the Obligations has become impaired.
(m) An "Event of Default" beyond any applicable cure period shall have
occurred under the Related Loan Agreement, the Related Guaranty, the
Agreement or any other Transaction Document or Guarantor Document.
(n) An "event of default" beyond any applicable cure period shall have
occurred under any agreement, document or instrument evidencing any Debt
in excess of $100,000 of Guarantor or any Subsidiary and the holder of
such Debt shall not have waived such "event of default" or such "event of
default" shall not have otherwise been cured, or any Debt in excess of
$100,000 of Guarantor or any Subsidiary is accelerated or called for
payment prior to the due date thereof
16. Successors and Assigns. This Guaranty shall be binding upon the successors
and assigns of the Guarantor and shall inure to the benefit of Fidelity's
successors and assigns.
17. Modifications. This Guaranty cannot be modified orally. No modification of
this Guaranty shall be effective for any purpose unless it is in writing
and executed by an officer of Fidelity authorized to do so. All prior
agreements, understandings, representations and negotiations; if any, are
merged into this Guaranty.
18. Attorneys' Fees. Guarantor agrees to pay all reasonable attorneys' fees,
post-judgment interest and all other costs and out-of-pocket expenses
which may be incurred by Fidelity in the enforcement of this Guaranty or
in any way arising out of, following, or consequential to the enforcement
of any Company's Obligations, whether under this Guaranty, the Agreement,
or otherwise.
19. Limitation on Interest. Fidelity and Guarantor intend to contract in
strict compliance with applicable usury law from time to time in effect,
and the provisions of the Agreement limiting the interest for which
Guarantor is obligated are expressly incorporated herein by reference.
20. GOVERNING LAW. ALL ACTS AND TRANSACTIONS HEREUNDER AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED, CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT
REFERENCE TO THE RULES THEREOF RELATING TO CONFLICTS OF LAW; PROVIDED,
HOWEVER, THAT ALL ISSUES OR MATTERS PERTAINING TO USURY OF THE MAXIMUM
ALLOWABLE CHARGE UNDER LAW FOR THE USE, DETENTION OR FORBEARANCE OF MONEY
SHALL BE GOVERNED BY
14
<PAGE>
THE LAWS OF THE STATE OF CALIFORNIA. GUARANTOR HEREBY IRREVOCABLY SUBMITS
TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN
DALLAS COUNTY, TEXAS, AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY
BE MADE UPON GUARANTOR IN ANY LEGAL PROCEEDING RELATING TO THIS GUARANTY
OR ANY OTHER RELATIONSHIP BETWEEN FIDELITY AND GUARANTOR BY ANY MEANS
ALLOWED UNDER STATE OR FEDERAL LAW. ANY LEGAL PROCEEDING ARISING OUT OF OR
IN ANY WAY RELATED TO THIS GUARANTY OR ANY OTHER RELATIONSHIP BETWEEN
FIDELITY AND GUARANTOR SHALL BE BROUGHT AND LITIGATED EXCLUSIVELY IN ANY
ONE OF THE STATE OR FEDERAL COURTS LOCATED IN THE STATE OF TEXAS HAVING
JURISDICTION. GUARANTOR HEREBY WAIVES AND AGREES NOT TO ASSERT, BY WAY OF
MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY SUCH PROCEEDING IS BROUGHT IN
AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER.
21. Section Numbers and Headings. Section numbers and section titles have been
set forth herein for convenience only; they shall not be construed to
limit or extend the meaning of any part of this Guaranty.
THIS GUARANTY AND THE OTHER GUARANTOR DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
15
<PAGE>
EXECUTED AND AGREED as of
December 22, 1998:
"GUARANTOR": CENTURY ELECTRONICS
MANUFACTURING, INC.
By: /s/ Leslie J. Sainsbury
--------------------------------
Name: Leslie J. Sainsbury
Title: President and CEO
Guarantor Address: 274 Cedar Hill Road
Marlborough, Massachusetts 01752
16
<PAGE>
SCHEDULE 13.2
None.
17
<PAGE>
EXHIBIT A
FORM
OF
OFFICERS' CERTIFICATE
Reference is made to the (a) General Continuing Guaranty (the "Fidelity
Guaranty"), dated as of December 22, 1998, from Century Electronics
Manufacturing, Inc., a Delaware corporation (the "Company"), in favor of
Fidelity Funding, Inc., a Texas corporation ("Fidelity"), and (b) the General
Continuing Guaranty (the "USA Funding Guaranty"), dated as of December 22, 1998,
from Century in favor of USA Funding Inc., a Delaware corporation ("USA
Funding"). Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Fidelity Guaranty and the USA Funding Guaranty. The
undersigned, the President and Chief Financial Officer of the Company, hereby
certify to Fidelity and USA Funding that, to the best of their knowledge and
belief:
1. The financial statements of the Company as of and for the fiscal year
ending __________________ (the "Reporting Year") attached hereto have been
prepared in accordance with GAAP, are true, correct and accurate in all material
respects and fairly and accurately present the financial condition and results
of operations of the Company as of the dates and for the periods indicated
therein.
2. Except as indicated below, no Event of Default or event or circumstance
that would, with the giving of notice, the passage of time or both, constitute
an Event of Default, has occurred and is continuing:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXECUTED on___________________.
___________________________________
President
___________________________________
Chief Financial Officer
18
<PAGE>
Exhibit 10.19
ARROW ELECTRONICS, INC.
LOAN PROGRAM
BORROWER
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), dated July 16, 1999,
is made by and between CENTURY ELECTRONICS MANUFACTURING, INC., whose principal
place of business is at 274 Cedar Hill Road, Marlborough, Massachusetts 01752,
(herein called the "Borrower") and SUNTRUST BANK, ATLANTA, a Georgia banking
corporation with offices at 303 Peachtree Street, Atlanta, Georgia 30308, Attn:
Mail Center 1923 (herein called the "Bank").
W I T N E S S E T H:
WHEREAS, the Borrower desires to establish a loan for business purposes.
WHEREAS, in order to finance the loan for business purposes, the Borrower
has requested that the Bank agree to extend to the Borrower a loan in the
principal amount of $3,500,000.00, and the Bank is willing to make such loan
subject to the terms and conditions hereof; and
NOW, THEREFORE, for and in consideration of the premises and agreements
contained herein and other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Terms. The Bank agrees to make a loan to the Borrower on July 16, 1999,
(the "Closing Date") in the principal amount of $3,500,000.00 (the "Loan"),
which Loan shall be evidenced by a promissory note, dated as of the Closing
Date, executed and delivered by the Borrower, payable to the order of the Bank,
in substantially the form of Exhibit A attached hereto, (the "Note") and shall
be subject to all terms and conditions set forth in the Note, all of which terms
and conditions are incorporated herein by reference.
2. Collateral. To secure the payment and performance of, the Loan, the
Note, and any other indebtedness, obligation or liability of the Borrower to the
Bank, now or hereafter existing or arising, including, without limitation, all
increases and extensions of, the Loan and the Note, (collectively, the
"Obligations"), the Borrower grants to the Bank a security interest in all of
its right, title and interest in and to its accounts, chattel paper, documents,
equipment, general intangibles, inventory and instruments, including, without
limitation, all proceeds, accessions, benefits, substitutions and replacements
of and to any of the foregoing (as such terms are defined in Article 9 of the
Uniform Commercial Code as in effect in the State of Georgia, collectively, the
"Collateral"). The Borrower hereby appoints the Bank as its attorney-in-fact to
do all acts and things which the Bank may deem necessary or desirable to perfect
and continue to perfect the security interest created by this Agreement and to
protect the Collateral. The security interests created by this Agreement are
intended to attach (i) to existing Collateral when the
<PAGE>
Borrower signs this Agreement, and (ii) to Collateral subsequently acquired by
the Borrower, immediately upon the Borrower acquiring any rights in such
Collateral. The parties do not intend to postpone the attachment of any security
interest created by this Agreement.
3. Representations. The Borrower represents and warrants that:
(i) it owns the Collateral free and clear of all liens and security
interests,
(ii) this Agreement and the Notes have been duly authorized, executed and
delivered by the Borrower and constitute the legal, valid and binding
agreements of the Borrower enforceable against the Borrower in accordance
with their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditors' right generally,
(iii) the execution, delivery and performance by the Borrower of this
Agreement and Notes (A) have been duly authorized by all requisite
corporate action and, if required, shareholder action, (B) does not
require the consent or approval of any governmental authority, and (C)
will not (1) violate (a) any provision of law, statute, rule or regulation
or the Borrower's articles of incorporation or any other organizational
document, (b) any order of any court or any rule, regulation or order of
any other agency or government binding upon the Borrower, or (c) any
provision of any indenture, agreement or other instrument to which the
Borrower is a party or by which the Borrower's properties or assets are or
may be bound, or (2) result in a breach or constitute (alone or with due
notice or lapse of time or both) a default under any indenture, agreement
or other instrument referred to in clause 3(iii)(C)(1)(c) above,
(iv) no default or Event of Default has occurred which is continuing,
(v) Century Electronics Manufacturing (NE) Inc. has available on the
Closing Date a minimum unused committed credit facility of $2,500,000 and
(vi) no part of the proceeds of the Loan will be used for "purchasing" or
"carrying" any "margin stock" within the respective meanings of each of
the quoted terms under Regulation U of the Board of Governors of the
Federal Reserve System as now and from time to time hereafter in effect or
for any purpose which violates the provisions of the regulations of such
Board of Governors. If requested by the Bank, the Borrower will furnish to
the Bank a statement to the foregoing effect in conformity with the
requirements of FR Form U-1 referred to in said Regulation U.
4. Covenants. So long as the Obligations are outstanding, the Borrower
covenants and agrees that
(a) it will promptly notify the Bank in writing of any change in its
address from that set forth below or any change in its name or corporate
organization;
<PAGE>
(b) it will pay and perform all of the Obligations according to their
terms;
(c) it will defend its title to the Collateral against all persons and
against all claims and demands whatsoever;
(d) it will not, without the Bank's prior written consent, sell, assign,
lease, pledge, transfer or dispose of any of the Collateral;
(e) it will furnish to the Bank:
(1) within 20 days after the end of each calendar quarter an
unaudited balance sheet and income statement accurately reflecting
the financial transactions and status of the Borrower as of the end
of such quarter and on a year-to-date basis, on a consolidated
basis, prepared in accordance with generally accepted accounting
procedures;
(2) within 90 days after the end of each fiscal year an audited
balance sheet and income statement of the Borrower as of the end of
such year, compiled by such firm of independent public accountants
as may be designated by the Borrower and be satisfactory to the Bank
as prepared in accordance with generally accepted accounting
procedures;
(3) concurrently with the delivery of the financial statements
referred to in Sections 4(e)(i) and 4(e)(ii), a certificate of the
chief executive officer, the chairman of the board, the president,
the chief financial officer, the chief accounting officer, any
executive or senior vice president or the treasurer of the Borrower
substantially in the form of Exhibit C; and
(4) within 60 days after the end of each fiscal year, a business
plan (including balance sheet, income statement and cash flow
statement) of the Borrower for the current fiscal year.
(f) it shall maintain and operate its business in such a manner to insure
that its subsidiary is in compliance with Section 5.7 of that certain Loan
& Security Agreement dated as of December 22, 1998 (as heretofore and as
may hereafter be amended or supplemented) by and between Century
Electronics Manufacturing (NE), Inc. and Fidelity Funding, Inc.
5. Event of Default: An "Event of Default" shall occur if: (i) the
Borrower fails to pay when due any amount owing hereunder within five (5)
business days after such amount becomes due, (ii) any representation or warranty
made or deemed made by the Borrower herein or which is contained in any
certificate, document or financial or other statement furnished by it at any
time under or in connection with this Agreement shall be false or misleading in
any material respect as of the date made or deemed to have been made, (iii) the
Borrower fails to comply with the covenants set forth in Section 4(e) or 4(f) or
(iv) the Borrower fails to perform or observe any other covenant made by the
Borrower pursuant to this Agreement and which
<PAGE>
failure is not cured within thirty (30) days after the earlier of (i) the
Borrower's actual knowledge thereof or (ii) notice to the Borrower, (v) that
certain supply agreement by and between Borrower, its subsidiaries, and Arrow
Electronics Inc. (the "Supplier") (the "Supply Agreement") is terminated
regardless of whether such termination occurs "for cause" or "without cause" as
defined therein or the occurrence of a material default occurs thereunder beyond
any applicable cure period, (vi) the Borrower or any of its subsidiaries shall
make or take any action to cause the appointment of a receiver of all or any
part of the Borrower's property, an assignment for the benefit of creditors of
the Borrower, a calling of a meeting of creditors of the Borrower, the
commencement of any proceeding under any bankruptcy, insolvency or debtor relief
laws by or against the Borrower or any guarantor or surety for the Borrower,
(vii) the Borrower or any of its subsidiaries dies, dissolves, terminates its
existence, becomes insolvent or its business fails, (viii) the Borrower is a
corporation or partnership and the persons owning the voting control of the
Borrower on the date hereof cease to own such voting control, (ix) the value of
the Collateral is reduced, due to the fault of the Borrower, in a manner that
imperils satisfaction of the Borrower's obligations under this Agreement or the
Note or (x) any lien, levy, attachment or assessment is placed on any
Collateral, and the claim is not fully discharged and satisfied within 30 days
of such filing or recordation, (xi) (i) the Borrower or any of its subsidiaries
is in default in the payment of any principal of or premium or make-whole amount
or interest on any debt of the Borrower that is outstanding in an aggregate
principal amount of at least $1,000,000 beyond any period of grace provided with
respect thereto, or the Borrower is in default in the performance of or
compliance with any term of any evidence of any debt of the Borrower in an
aggregate outstanding principal amount of at least $1,000,000 or of any
mortgage, indenture or other agreement relating thereto or any other condition
exists, and as a consequence of such default or condition such debt has become,
or has been declared (or one or more persons are entitled to declare such debt
to be), due end payable before its stated maturity or before its regularly
scheduled dates of payment, or (xii) the Borrower or any of its domestic
subsidiaries fails to pay Arrow Electronics, Inc.'s invoices, so that the
average days to pay from the date of invoice is not greater than 45 days from
closing to December 31, 1999; 40 days from January 1, 2000 to June 30, 2000; 35
days from July 1, 2000 to December 31, 2000; and 30 days thereafter, measured at
the close of each fiscal month by Arrow Electronics, Inc.
6. Remedies Upon Event of Default. If an Event of Default (other than an
Event of Default described in Section 5(v) above) shall occur and be continuing
the Bank may declare the Note, with accrued interest thereon, and all
obligations of the Borrower under this Agreement to be immediately due and
payable. If an Event of Default described in Section 5(v) above shall occur and
be continuing the Note and all accrued interest hereon, and all other
obligations of the Borrower under this Agreement shall automatically become
immediately due and payable. In addition, if an Event of Default has occurred
and is continuing, the Bank (i) may exercise any other rights or remedies
available to it under this Agreement, the Note, any other document executed by
the Borrower in connection with this Agreement or as otherwise provided by law,
(ii) shall have all of the rights and remedies with respect to the Collateral of
a secured party under Article 9 of the Uniform Commercial Code as in effect in
the State of Georgia (the "UCC") (whether or not the UCC is in effect in the
jurisdiction where the rights and remedies are asserted) and such additional
rights an remedies to which a secured party is entitled under the laws in effect
in any jurisdiction where any rights and remedies hereunder may be asserted and
<PAGE>
(iii) may, upon 10 Business Days' prior notice to the Borrower of the time and
place, with respect to the Collateral or any part thereof which shall then be or
shall thereafter come into the possession, custody or control of the Bank, sell,
lease, assign or otherwise dispose of all or any part of such Collateral, at
such place or places as the Bank deems best, and for cash or for credit or for
future delivery (without thereby assuming any credit risk), at public or private
sales, without demand of performance or notice of intention to effect any such
disposition or of the time or place thereof (except such notice as is required
above or by applicable statute and cannot be waived).
7. Release of Information. The Borrower authorizes the Bank to release
such information about the Borrower and the Loan, the Note, or the Collateral as
the Bank deems necessary or appropriate, including, without limitation, any
financial information regarding the Borrower as the Bank may possess. The Bank
may assign the Loan, the Note and the Collateral therefor to any person, at any
time, whether or not there has occurred an Event of Default.
8. Miscellaneous. No amendment or waiver of any provision of this
Agreement or the Note shall be effective unless the same shall be in writing and
signed by the Bank, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF GEORGIA. In case any
provision in or obligation under this Agreement or the Note shall be invalid,
illegal or unenforceable, in whole or in part, in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby. This Agreement shall bind and
inure to the benefit of the parties hereto and their respective legal
representatives, successors and assigns; provided, however, that the Borrower
may not assign its rights or obligations under this Agreement or the Note. The
Borrower acknowledges that the Bank may assign its rights and obligations under
this Agreement and the Note to any other party, without notice to or consent
from the Borrower. The rights and remedies herein expressly provided are
cumulative and not exclusive of any rights or remedies which the Bank or the
holder of the Note would otherwise have. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument.
9. Notices. All notices and communications provided for hereunder shall be
in writing, delivered by hand or sent by first-class, registered or certified
mail, postage prepaid, to the addresses set forth on the signature pages hereto.
Either party may change its address for notice purposes by giving written notice
to the other party in the manner specified above. Any notice given by U.S. mail
shall be deemed received on the third business day following deposit in the U.S.
mail addressed as set forth above.
10. Relations with Arrow Electronics, Inc. and its Affiliates. The
Borrower understands and acknowledges that in making the loan evidenced by this
Agreement and the Note to Borrower, the Bank is relying on certain agreements
with, and the credit support of, Arrow Electronics, Inc. (the "Sponsor") and its
affiliates (the "Related Agreements"). The
<PAGE>
Sponsor or one of its affiliates has induced the Bank to make this loan in
connection therewith. The Bank may release to the Sponsor and its affiliates
such information about the Borrower and the loan evidenced hereby as the Bank
deems necessary or appropriate, including, without limitation, any financial
information regarding the Borrower as the Bank may possess. The Bank may also
condition its agreement to any waiver, modification or amendment with respect
to this Agreement the Note on obtaining the Sponsor's or its affiliates' prior
written consent. Upon the occurrence of any Event of Default hereunder or under
the Note or event which with notice or lapse of time or both may become an Event
of Default, the Bank may, without incurring any liability to the Borrower,
notify the Sponsor or its affiliates of such Event of Default before notifying
you. The Bank shall not have any liability to the Borrower as a result of any
action taken or not taken by the Bank with respect to the loan evidenced by this
Agreement and the Note on the instructions of the Sponsor or its affiliates. The
Bank may assign the Note to the Sponsor or any other person, at any time,
whether or not there has occurred an Event of Default under this Agreement or
the Note.
11. Closing fee; Expenses of Loan Closing. The Borrower has agreed to pay
a closing fee to the Bank in the amount of 0.50% of the principal amount of the
Term Loan or $17,500.00 (the "Closing Fee") and a filing fee of $50 per Uniform
Commercial Code financing statement filing required to or advisable to perfect
the security interest created pursuant to this Agreement ("Financing
Statements") to cover the Bank's administrative costs in funding the loan. The
Borrower agrees that the closing fee is a valid administrative cost and not a
charge for the use of money. The Borrower agrees that the Bank may deduct such
closing fee from the proceeds hereof. In addition, the Borrower shall reimburse
the Bank for any out-of-pocket expenses incurred by the Bank in connection with
the loan evidenced hereby, including without limitation, any documentary stamp
tax or other taxes levied or charged in connection with this transaction, any
taxes assessed in connection with the filing of the Financing Statements and any
Uniform Commercial Code search or other related costs or expenses incurred by
the Bank.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement under seal as
of the day and year first above written.
Address for Notices: Century Electronics Manufacturing, Inc.
274 Cedar Hill Road
Marlborough, MA 01752
By: /s/ Leslie Sainsbury
---------------------------------------
Title: President & CEO
------------------------------------
[CORPORATE SEAL]
Address for Notices: SUNTRUST BANK, ATLANTA
303 Peachtree St., N.E.
Atlanta, Georgia 30308
Attention: Center No. 1923 By: /s/ Marcella H. Howard
---------------------------------------
Name: Marcella H. Howard
------------------------------------
Title: Vice President
-----------------------------------
<PAGE>
EXHIBIT A
ARROW ELECTRONICS, INC.
LOAN PROGRAM
TERM NOTE
$3,500,000.00 July 16, 1999
FOR VALUE RECEIVED, Century Electronics Manufacturing, Inc., a
Delaware corporation, (hereinafter referred to as "Maker"), promises to pay to
the order of SUNTRUST BANK, ATLANTA, a Georgia banking corporation (the "Bank",
and together with any subsequent holder hereof, the "Holder"), on the dates and
in the manner provided below, the sum of three million five hundred thousand and
no/100 dollars ($3,500,000.00), together with interest on the unpaid principal
balance thereof from the date hereof until the Maturity Date (as defined below)
maturity at a floating rate of interest per annum equal to the Prime Rate (as
hereinafter defined) plus an additional one per cent (1.0%) per annum (the
"Borrower Rate"). The term "Prime Rate" shall mean the rate of interest
designated by the Bank from time to time as its "Prime Rate" which rate is a
reference rate and not necessarily the Bank's best rate of interest; the Bank
makes loans at rates above and below the Prime Rate. Any change in the Prime
Rate shall be effective as of the date of such change.
1. Calculation of Borrower Rate; Simple Interest Disclosure.
For informational purposes only, as of the date hereof, the Prime Rate is 8.0%
per annum, thus producing an initial Borrower Rate expressed in simple interest
terms as of the date hereof of 9.0% per annum. The amount of interest accruing
and payable hereunder shall be calculated based on the actual number of days
elapsed in a 360 day year.
2. Payments of Principal and Interest.
This Note shall be repaid in twenty-four (24) consecutive equal monthly
installments of principal and interest in the amount of $159,896.60 each,
commencing on July 31, 1999 and continuing on the last day of each month
thereafter with final payment being due and payable on June 30, 2001 (the
"Maturity Date"), when all unpaid principal and accrued and unpaid interest
under this Note shall be due and payable in full unless sooner accelerated in
accordance with the terms hereof. Interest shall be calculated on the
outstanding principal balance of this Note, and shall be due and payable in
arrears; provided that, in the event of any change in the Prime Rate occurring
on or after the date when the Holder mails an invoice for the monthly payment
amount to the Borrower, any such change in the interest payment shall be
reflected as an adjustment in the next monthly invoice sent to the Maker and
shall not be deemed to be due and payable until that date.
<PAGE>
3. Place of Payment; Holidays.
(a) All amounts due and payable hereunder shall be paid by either (i)
immediately available funds by wire or ACH transfer, or (ii) check or money
order to the Bank's main office in Atlanta, Georgia, or as the Holder may
otherwise designate to the Maker in writing at the address for the Maker set
forth in the Loan and Security Agreement (as defined below).
(b) In any case where the date for any action required to be performed under
this Note or any document executed in connection herewith shall be, in the city
where the performance is to be made, a Saturday, a Sunday, a legal holiday or a
day on which banking institutions are authorized by law to close (a "Holiday"),
then such performance may be made on the next succeeding day that is not a
Holiday.
4. Interest after Due Date.
All principal outstanding after the due date therefor (whether due to
acceleration or otherwise) shall, after giving effect to any applicable grace
period, bear interest, commencing on the last day of such grace period, at the
lesser of (i) the Borrower Rate plus an additional two percent (2%) per annum or
(ii) the highest rate allowed by applicable law; provided, however, that if
such, increase in interest is prohibited by any applicable law, interest on any
amounts due hereunder after the due date therefor shall continue to be
calculated at the Borrower Rate.
5. Remedies Upon Event of Default.
Upon the occurrence of an Event of Default (as defined in the Loan and Security
Agreement) Holder shall have the rights and remedies afforded to it under the
Loan and Security Agreement.
6. Right to Prepay Note.
The Maker may prepay this Note, in whole or in part, together with all accrued
but unpaid interest on the amount prepaid, on the last day of any calendar
month; provided that, the Maker gives the Holder at least two (2) days' prior
notice of such prepayment, such notice period to exclude Holidays. Partial
prepayment of this Note shall be applied to unpaid principal payments due
hereunder in the inverse order of their maturity.
7. Costs of Collection.
If an Event of Default has occurred, or if this Note is collected through
probate or bankruptcy proceedings, or if suit is brought on the same, the Maker
agrees to pay all of the Holder's costs and expenses of collection, including
without limitation, reasonable attorney's fees and expenses, incurred as a
result of the foregoing in addition to the other sums due hereunder.
<PAGE>
8. Use of Proceeds.
The proceeds of this Note shall be used to fund expansion costs, to purchase
inventory, or for other business purposes.
9. Disbursement of Proceeds:
Maker hereby requests that the proceeds of the loan made pursuant to this Term
Note be disbursed by SunTrust Bank, Atlanta on the date hereof as follows:
1. That SunTrust Bank, Atlanta retain $17,500.00 in payment of the Closing
Fee and other out-of-pocket expenses incurred in connection with the loan; and
2. That the remaining proceeds of the advance in the amount of
$3,482,500.00 be wired to the Borrower in accordance with the following wiring
instructions:
Name of Bank: USTRUST BOSTON
City, State: Boston, MA
ABA No. 011001331
Account No. 001059811-8
Account Name: Century Electronics Manufacturing (NE) Inc.
10. Right of Set-Off.
The Holder hereof shall at all times have a right of set-off against any
indebtedness due or to become due to the Maker from the Holder in satisfaction
of the indebtedness under this Note, without notice or demand to the Maker.
11. Successors and Assigns.
This Note shall be binding upon the successors and assigns of Maker and shall
inure to the benefit of the successors and assigns of the Holder; provided,
however, that Maker shall have no right to assign its rights or obligations
hereunder to any person or entity without the prior written consent of the
Holder. The Holder may assign this Note and all accompanying security
instruments and guaranties securing the Maker's obligations hereunder at any
time to any entity including, without limitation, to Arrow Electronics, Inc.
(the "Sponsor").
12. Intent not to Violate Usury Laws.
It is the intent of the parties hereto not to violate any federal or state law,
rule or regulation pertaining either to usury or to the contracting for or
charging or collecting of interest, and should any provision of this Note be
deemed to violate any such law, rule or regulation, then the excess of interest
contracted for or charged or collected over the maximum lawful rate of interest
shall be applied to the principal amount due hereunder, without penalty.
<PAGE>
13. Cumulative Remedies; Waivers by the Maker.
No remedy referred to herein is intended to be exclusive, but each shall be
cumulative and in addition to any other remedy available to Holder, whether at
law or in equity. The Maker hereby waives presentment, demand for payment,
protest and notice of dishonor of this Note and all other notices and demands.
14. Non-waiver.
Failure on the part of the Holder to insist on the strict performance of any or
all of the terms, provisions, and covenants contained in this Note shall not be
construed as a waiver or relinquishment for the future of any term, provision or
covenant herein.
15. GOVERNING LAW; WAIVER OF JURY TRIAL.
THIS NOTE HAS BEEN DELIVERED IN GEORGIA AND THE RIGHTS AND OBLIGATIONS OF THE
HOLDER AND THE MAKER HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS (WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF)
OF THE STATE OF GEORGIA TO THE EXTENT PERMITTED BY LAW, EACH OF THE MAKER AND
THE BANK HEREBY WAIVE THE RIGHT TO TRIAL BY JURY.
16. Severability.
Any provision of this Note which is prohibited or unenforceable in any
jurisdiction, as to such jurisdiction, be effective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
17. Time of the Essence.
TIME IS OF THE ESSENCE OF THIS NOTE.
<PAGE>
IN WITNESS WHEREOF, the Maker has executed and delivered this Note
under seal as of the date first above written.
Century Electronics Manufacturing, Inc.
By: /s/ Leslie Sainsbury
---------------------------------------
Title: President
------------------------------------
[Corporate Seal]
<PAGE>
Exhibit 10.20
AMENDED AND RESTATED SECURITY AGREEMENT
THIS AMENDED AND RESTATED SECURITY AGREEMENT is made and entered into as
of the 30th day of July, 1999, by and between AMITEK CORPORATION, a Delaware
corporation ("Debtor"), and NATIONAL BANK OF CANADA, a Canadian Chartered Bank
("Secured Party").
WITNESSETH:
WHEREAS, Secured Party has previously extended financing to M&K
TECHNOLOGY, INC., a Florida corporation ("M&K"), and AMITEK CORPORATION, a
Florida corporation ("Amitek Florida", Amitek Florida and M&K collectively,
"Original Debtor"), as most recently evidenced by that certain Consolidation
Master Revolving Promissory Note in the principal amount of Fourteen Million and
00/100 Dollars ($14,000,000.00) executed by Original Debtor in favor of Secured
Party dated as of February 8, 1999, and that certain CAPEX Line/Term Promissory
Note in the original principal amount of One Million Six Hundred Seventy-Five
Thousand and 00/100 Dollars ($1,675,000.00) executed by Original Debtor in favor
of Secured Party dated as of June 4, 1998 (collectively, the "Original Notes"),
the indebtedness evidenced by the Original Notes having been assumed by Debtor,
pursuant to that certain Assumption and Modification Master Revolving Promissory
Note in the principal amount of Fourteen Million and 00/100 Dollars
($14,000,000.00) executed by Debtor in favor of Secured Party dated of even date
herewith and that certain Assumption and Modification CAPEX Line/Term Promissory
Note in the principal amount of Five Hundred Seventy-Six Thousand Three Hundred
Six and 54/100 Dollars ($576,306.54) executed by Debtor in favor of Secured
Party dated of even date herewith (collectively, as amended, extended or renewed
from time to time, the "Note" or the "Notes"); and
WHEREAS, in connection with the original indebtedness described above, the
Original Debtors and Secured Party entered into that certain Loan Agreement
dated as of June 4, 1998, as amended by First Amendment to Loan Agreement dated
as of September 23, 1998, as further amended by Second Amendment to Loan
Agreement dated as of February 8, 1999 (collectively, the "Original Loan
Agreement"), which Original Loan Agreement has been assumed by Debtor and
amended and restated pursuant to that certain Amended and Restated Loan
Agreement of even date herewith executed by Debtor and Secured Party (as amended
from time to time, the "Loan Agreement"); and
WHEREAS, as security for the indebtedness evidenced by the Original Notes
and the Original Loan Agreement, Original Debtor did executed that certain
Security Agreement in favor of Secured Party dated as of June 4, 1998, as
amended and reaffirmed by that certain Reaffirmation of Security Agreement and
Other Documents dated as of September 23, 1998, as further amended and
reaffirmed by that certain Reaffirmation of Security Agreement and Other
Documents dated as of February 8, 1999 (collectively, the "Original Security
Agreement"), whereby and whereunder, the Original Debtors granted a security
interest in Original Debtors' assets in favor of Secured Party as security for
the repayment of all debts and obligations of the Original Debtors to Secured
Party; and
<PAGE>
WHEREAS, Debtor has become the owner of all of the assets of Amitek
Florida, by virtue of Amitek Florida being merged into CENTURY ELECTRONICS
MANUFACTURING, INC., a Delaware corporation ("Century"), with Century being the
surviving corporation and Century immediately after closing of the above
described merger having conveyed all of the assets of Amitek Florida to the
Debtor, together with Debtor having assumed all liabilities of Amitek (it being
acknowledged that Debtor is a wholly owned subsidiary corporation of Century);
and
WHEREAS, Secured Party has required and Debtor has agreed to grant, and to
continue to grant, as applicable, a security interest in all of Debtor's assets
(certain of said assets being formerly owned by Amitek Florida, such that all
assets formerly owned by Amitek Florida are now owned by Debtor), in favor of
Secured Party as security for the repayment of all debts and obligations of
Debtor to Secured Party, including, without limitation, all debts and
obligations due and owing under the Notes and the Loan Agreement; and
WHEREAS, it is acknowledged that it is a condition precedent to Secured
Party allowing the assumption of the indebtedness evidenced by the Original
Notes by Debtor and the making of advances by Secured Party under the Notes and
the Loan Agreement, that Debtor shall have granted or continued to grant, as
applicable, a security interest in certain assets of Debtor in favor of Secured
Party as hereinafter provided.
NOW, THEREFORE, in consideration of the premises, and in order to induce
Secured Party to allow the assumption of the above described indebtedness by
Debtor, and, to make advances under the Notes and the Loan Agreement, Debtor
hereby agrees as follows:
1. Creation and Grant of Securities. Debtor hereby grants, assigns and
pledges, in favor of Secured Party, a security interest in all of the property
described and listed below and in all parts, accessories, attachments,
additions, replacements, accessions, substitutions, increases, profits, income,
distributions, proceeds and products thereof in any form (including, without
limitation, insurance proceeds) together with all records relating thereto (the
"Collateral"):
A. All accounts, accounts receivable, patents, trademarks, tradenames,
licenses, franchises, general intangibles, contract rights and other obligations
of any kind, whether now owned or hereafter acquired by Debtor and all proceeds
of the foregoing and all rights now or hereafter existing in and to all security
agreements, leases and other contracts securing or otherwise relating to any
such accounts, contract rights, chattel paper instruments, general intangibles
or obligations (any and all such accounts, contract rights, chattel paper
instruments, general intangibles and obligations being the "Receivables"; and
any and all such leases, security agreements and other contracts being the
"Related Contracts"); all of Debtor's right, title and interest in, to and in
respect of all goods relating to, or which by sale have resulted in Receivables,
including without limitation, all goods described in invoices, documents,
contracts or instruments, with respect to, or otherwise representing or
evidencing any Receivables or other collateral, including, without limitation,
all returned, reclaimed or repossessed goods, all deposit accounts, all books,
records, ledger cards, computer programs and other property and general
intangibles evidencing or relating to the
-2-
<PAGE>
Receivables, and any other collateral, together with the file cabinets or
containers in which the foregoing are stored, and all other general intangibles
of every kind and description, and all proceeds, profits, deposits, products and
accessions of and to all of the foregoing.
B. All of Debtor's right, title and interest as Lessee in and to all
leases and rental arrangements of any property leased by Debtor, or any part
thereof, heretofore made and entered into and in and to all leases and rental
arrangements hereafter made and entered into by or on behalf of Debtor together
with any and all guarantees of such leases or rental arrangements, and all
present and future security deposits and advance rentals.
C. All equipment (as such term is defined in the Uniform Commercial Code,
as in effect from time to time in the State of Florida), machinery, furniture,
fixtures, computer hardware and software, hand and power tools, trucks,
trailers, forklifts, automobiles and other motor vehicles, and heavy equipment
in all of its forms, wherever located, now or hereafter acquired or existing,
and all parts thereof and all accessions thereto (any and all such machinery,
equipment, fixtures, parts and accessions being the "Equipment"). The Equipment
includes, without limitation, all of the items set forth on Exhibit "A" attached
hereto and made a part hereof.
D. All inventory in all of its forms, wherever located, now or hereafter
existing, including, without limitation, raw materials, work in process, parts,
components, assemblies, supplies and materials used or consumed in Debtor's
business, finished goods and all other inventory of whatsoever kind or nature,
wherever located, whether now owned or hereafter existing or acquired by Debtor,
including, without limitation, all wrapping, packaging, advertising, shipping
materials and all other goods consumed in Debtor's business, all labels and
other devices, names or marks affixed or to be affixed thereto for purposes of
selling or identifying the same or the seller or manufacturer thereof, and all
of Debtor's right, title and interest therein and thereto; all books, records,
documents, other property and general intangibles at any time relating to the
inventory; all goods, wares and merchandise finished or unfinished, held for
sale or lease or furnished or to be furnished under contracts of sale or
service; all goods returned to or repossessed by Debtor; and all accessions
thereto and products thereof (any and all such inventory, accessions and
products being the "Inventory").
E. All fixtures, furniture, instruments, equipment, vehicles and any and
all other personal property now owned or hereafter acquired by Debtor.
F. All of Debtor's deposit accounts, certificates of deposit, investment
accounts, money market funds, mutual funds, and cash and currency authorized as
legal tender in the United States of America, Canada and/or any other country.
G. All issues, deposits, products, rents, profits and proceeds derived of
and from any and all of the foregoing collateral and, to the extent not
otherwise included, all payments under insurance (whether or not Secured Party
is the loss payee thereof) or any indemnity, warranty or guaranty, chose in
action or judgment payable by reason of loss or damage to or otherwise with
respect to any of the foregoing collateral.
-3-
<PAGE>
The Collateral also includes other assets of the same or similar class or
classes hereafter owned or acquired by Debtor, and Secured Party shall have a
security interest in all such after acquired assets and all parts, accessories,
attachments, additions, replacements, accessions, substitutions, increases,
profits, income, distributions, proceeds and products thereof in any form.
All of the above being located at the offices of the Debtor at 1701 Clint
Moore Road, Boca Raton, Florida 33487 and/or any such other place or places as
the above and foregoing Collateral may be located from time to time.
2. Security for Obligations. This Security Agreement secures the payment
of any and all indebtedness, obligations and liabilities of any kind whatsoever
of Debtor to Secured Party, and also to others to the extent of their
participations granted to or interests therein created or acquired for it by
Secured Party, now or hereafter existing, of every kind and description, whether
matured or unmatured, direct or contingent, including obligations in respect to
future advances, whether or not there shall have been made the initial advance
under the Note and Loan Agreement, and whether for principal, interest, fees,
expenses or otherwise, including, without limitation, all obligations of Debtor
now or hereafter existing: (a) under the Note and the Loan Agreement; (b) under
this Security Agreement; and (c) under existing or future promissory notes of
Debtor (all such obligations of Debtor being hereinafter referred to as the
"Obligations").
3. Debtor to Remain Liable. Anything herein to the contrary
notwithstanding: (a) Debtor shall remain liable under the contracts, leases,
policies and agreements included in the Collateral to the extent set forth
therein, to perform all of its duties and obligations thereunder to the same
extent as if this Security Agreement had not been executed; (b) the exercise by
Secured Party of any of the rights hereunder shall not release Debtor from any
of its duties or obligations under contracts, leases, policies and agreements
included in the Collateral; and (c) Secured Party shall not have any obligation
or liability under the contracts, leases, policies and agreements included in
the Collateral by reason of this Security Agreement, nor shall Secured Party be
obligated to perform any of the obligations or duties of Debtor thereunder, or
to take any action to collect or enforce any claim for payment assigned
hereunder.
4. Debtor's Covenants, Warranties and Representations. Debtor covenants,
warrants and represents the following:
(a) Except for the security interest granted hereby and except as set
forth on Exhibit "B" attached hereto and made a part hereof, Debtor is the sole
owner of the Collateral, which Collateral is free of any liens, security
interests or encumbrances, and Debtor will defend the Collateral against all
claims or demands of any person at any time claiming the same or any interest
therein.
(b) Each account constituting the Receivables is genuine and enforceable
in accordance with its terms against the party obligated to pay the same (each
an "Account Debtor").
-4-
<PAGE>
(c) The amount represented by Debtor to Secured Party as owing by each
Account Debtor is the correct amount actually and unconditionally owing by such
Account Debtor, except for normal cash discounts where applicable.
(d) To the best of Debtor's knowledge, no Account Debtor has any defense,
set-off, claim or counterclaim against Debtor which can be asserted against
Secured Party whether in any proceeding to enforce the Receivables or otherwise.
(e) Debtor will notify Secured Party immediately of any default by any
Account Debtor in payment or other performance of its obligations with respect
to any Receivables.
(f) Debtor, without Secured Party's prior written consent, will not make
or agree to make any alteration, modification or cancellation of or substitution
for or credits, adjustments or allowances on any of the Receivables.
(g) Except as set forth on Exhibit "B", none of the Collateral shall be
subject to a security interest other than in favor of Secured Party.
(h) All books and records pertaining to the Collateral and portions of the
Collateral shall be kept at the chief place of business of Debtor, which is
located at 1701 Clint Moore Road, Boca Raton, Florida 33487. Debtor shall not
remove said books and records and other information related to the Collateral or
any portion of the Collateral located at said location without the prior written
consent of Secured Party. The Collateral will not be wasted, misused or abused
or deteriorated, except to the extent of ordinary wear and tear, and will not be
used in violation of any law, ordinance or regulation of any governmental
authority.
(i) This Security Agreement creates a valid and perfected first priority
security interest in the Collateral, or Debtor's interest in the Collateral,
securing the payment of the Obligations. Debtor has executed and/or shall
execute such financing statements and/or amendments as may be required by
Secured Party to ensure that all filings and other actions necessary or
desirable to perfect such security interest have been duly taken.
(j) Debtor shall keep all personal property, Equipment and Inventory
(other than Inventory solely consumed in the ordinary course of business) at
Debtor's prime business locations or at such other place as Debtor shall have
previously notified Secured Party, or upon thirty (30) days prior written notice
to Secured Party, at such other place or places as shall have been consented to
in writing by Secured Party (in Secured Party's sole discretion) within said
thirty (30) day time period.
(k) Debtor shall cause the Equipment and all other personal property to be
maintained and preserved in the same condition, repair and working order as when
new, ordinary wear and tear excepted, and in accordance with manufacturers'
manuals and shall forthwith, or, in the case of any loss or damage to any of the
personal property or Equipment as quickly as practicable after the occurrence
thereof, make or cause to be made all repairs, replacements or other
improvements in
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connection therewith which are necessary or desirable to such end. Debtor shall
promptly furnish to Secured Party a statement respecting any loss or damage to
any of the Equipment or personal property.
(l) Debtor shall pay promptly, when due, all property and any taxes,
assessment and governmental charges or levies imposed upon and all claims
(including, claims for labor, materials and supplies) against the Equipment,
personal property and Inventory, except to the extent the validity thereof is
being contested in good faith.
(m) No authorization, approval or other action by, and no notice to or
filing with any governmental authority or regulatory body, or any other party is
required: (i) for the grant by Debtor of the security interest granted hereby,
or for the execution, delivery or performance of this Security Agreement by
Debtor; or (ii) for the perfection of or the exercise by Secured Party of its
rights and remedies hereunder, except for the filing of financing statements
and/or amendment statements with the appropriate public authorities.
(n) The Collateral which needs to be insured shall be insured with such
carriers and in such amounts and against such risks as shall be reasonably
satisfactory to Secured Party, with policies payable to Secured Party as
loss-payee. All policies of insurance shall provide for thirty (30) days written
notice of cancellation to Secured Party, and Secured Party shall be furnished
with the original policies or duplicates thereof. The insurance provisions are
further set forth in Paragraph 6 herein.
(o) Debtor will pay when due all taxes and assessments upon the Collateral
or its operation or use.
(p) At its option, and without any obligation to do so, Secured Party may
discharge or pay any taxes, liens, security interests or other encumbrances at
any time levied or placed on or against the Collateral or Debtor, and may pay
for insurance on the Collateral and may pay for the Collateral's maintenance and
preservation. Debtor agrees to reimburse Secured Party on demand for any such
payment made or expense incurred pursuant to the foregoing authorizations, or,
at Secured Party's option, any payment made by Secured Party may be added to the
balance of the Obligations then owing.
(q) The Collateral will not, without the prior written consent of Secured
Party, be sold, transferred, disposed of, or substantially modified, except in
the usual and ordinary course of business.
(r) Debtor will immediately notify Secured Party if its Receivables or
Related Contracts arise out of contracts with the United States Government or
any department, agency or instrumentality thereof, and will execute any
instruments and take any steps required by Secured Party in order that all
monies due and to become due under any such Receivables and Related Contracts
shall be assigned to Secured Party and notice thereof given to the United States
Government under the Federal Assignment of Claims Act.
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(s) Debtor will not remove the Collateral from the State of Florida, nor
change the location of its chief executive office(s), without the prior written
consent of Secured Party.
(t) The Debtor shall comply with all terms and provisions of the
franchises, licenses and all other written agreements which constitute a part of
the Collateral, and, shall fully and timely perform all material obligations to
be complied with by the Debtor in connection with the same, such that all
franchises, licenses and agreements are maintained in good standing and in full
force and effect.
(u) Debtor hereby authorizes Secured Party to file such financing
statements, amendment statements or continuation statements relating to the
Collateral, without Debtor's signature thereon, as Secured Party may deem
appropriate. Debtor shall also execute from time to time, alone or with Secured
Party, any financing statements or other documents, and do such other act or
acts considered by Secured Party to be necessary or desirable to perfect or
protect the security interest hereby created, and shall pay all costs and
expenses (including, without limitation, reasonable fees and expenses of counsel
and filing fees) related to the preparation and filing of any financing
statements, continuation statements, or other documents related to the
perfection or protection of the security interest hereby created.
(v) Debtor shall at all times comply with all terms and provisions of the
Loan Agreement.
5. Further Assurances. Debtor shall from time to time, at Debtor's
expense, promptly execute and deliver all further instruments and documents, and
take all further actions, that may be necessary or that Secured Party may
request in order to perfect and protect any security interest granted or
purported to be granted hereby, or to enable the Secured Party to exercise and
enforce its rights and remedies hereunder with respect to any of the Collateral.
Without limiting the generality of the foregoing, Debtor shall: (a) mark
conspicuously each chattel paper included in the Receivables and each Related
Contract and, at the request of Secured Party, each of its records pertaining to
the Collateral with a legend, in form and substance satisfactory to Secured
Party, indicating that such chattel paper, Related Contract or Collateral is
subject to the security interest granted hereby; (b) if any Receivable shall be
evidenced by a promissory note or other instrument or chattel paper, deliver and
pledge to Secured Party such note, instrument or chattel paper duly endorsed and
accompanied by duly executed instruments of transfer or assignment, all in form
and substance satisfactory to Secured Party; (c) hold and preserve the books and
records pertaining to the Collateral as set forth in Paragraph 4(h) above,
preserve any chattel papers related to the Receivables, and permit
representatives of Secured Party at any time during normal business hours to
inspect and make abstracts from such books, records and chattel papers; and (d)
furnish to Secured Party from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as Secured Party may reasonably request, all in reasonable
detail. All costs and expenses associated with any of the above set forth
actions (including, without limitation, reasonable fees and expenses of counsel
and filing fees) shall be the sole responsibility of Debtor.
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6. Insurance. Debtor shall maintain liability insurance, worker's
compensation insurance, business interruption insurance and hazard insurance
(with fire, extended coverage, vandalism and mischief protection) in accordance
with the following provisions:
(a) Debtor shall, at its own expense, maintain insurance with respect to
the Equipment and Inventory and all other personal property in such amounts,
against such risks, in such form and with such insurers, as shall be
satisfactory to Secured Party. Debtor shall additionally, at its own expense,
maintain business interruption insurance in such amounts as shall be required by
Secured Party. Each policy for liability insurance shall provide for all losses
to be paid on behalf of Secured Party and Debtor as its interests may appear.
Each policy for property damage insurance and business interruption insurance
shall provide for all losses to be paid directly to Secured Party upon the
request of Secured Party. Each such policy shall in addition (i) name Secured
Party as an insured and as loss payee thereunder (without any representation or
warranty by or obligation upon Secured Party), (ii) contain an agreement by the
insurer that any loss thereunder shall be payable to Secured Party
notwithstanding any action, inaction or breach of representation or warranty by
Debtor, (iii) provide that there shall be no recourse against Secured Party for
payment of premiums or other amounts with respect thereto, (iv) provide that at
least thirty (30) days prior written notice of cancellation or of lapse shall be
given to Secured Party by the insurer, and (v) provide that upon notification
from Secured Party, all payments pursuant to such policies shall be paid
directly to Secured Party. Debtor shall deliver to Secured Party original or
duplicate policies of such insurance as often as Secured Party may reasonably
request.
(b) Reimbursement under any liability insurance maintained by Debtor
pursuant to this Section 6 may be paid directly to the person who shall have
incurred liability covered by such insurance. In case of any loss involving
damage to Equipment, Inventory or any other personal property when subsection
(c) of this Section 6 is not applicable, Debtor shall make or cause to be made
the necessary repairs to or replacements of such Equipment, Inventory or other
personal property, and any proceeds of insurance maintained by Debtor pursuant
to this Section 6 shall be paid to Debtor as reimbursement for the costs of such
repairs or replacements, unless otherwise paid directly to Secured Party upon
the request of Secured Party.
(c) Upon the occurrence and during the continuance of any Event of
Default, all insurance payments in respect of such Equipment, Inventory,
business interruption, or personal property shall be paid to and applied by
Secured Party in accordance with the terms and provisions of Subsection 12(h)
and Section 14 hereof.
With regard to the insurance set forth above, policies or certificates of
insurance coverage in favor of Debtor shall be delivered to Secured Party, with
coverage types and amounts satisfactory to Secured Party, and satisfactory
evidence of premium payments must also be provided. All policies of insurance
required hereunder shall (a) be written by carriers which are licensed or
authorized to transact business in the State of Florida and are rated "A" or
better according to the latest published Best Key Rating Guide.
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7. Secured Party Appointed Attorney-In-Fact. Debtor hereby irrevocably
appoints Secured Party as Debtor's attorney-in-fact, which appointment is
coupled with an interest, with full authority in the place and stead of Debtor
and in the name of Debtor, Secured Party or otherwise, from time to time in
Secured Party's discretion, to take any action and to execute any instrument
which Secured Party may deem necessary or advisable to accomplish the purposes
of this Security Agreement (subject to the rights of Debtors under Section 10),
including, without limitation:
(a) To obtain and adjust insurance required to be paid to Secured Party
pursuant to Section 6;
(b) To ask, demand, collect, sue for, recover, compound, receive and give
acquittance and receipt for moneys due and to become due under or in respect of
any of the Collateral;
(c) To receive, endorse, and collect any drafts or other instruments,
documents and chattel paper, in connection with Subsections 7(a) or 7(b) above;
and
(d) To file any claims to take any action or institute any proceedings
which Secured Party may deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of Secured Party with respect
to any of the Collateral.
8. Secured Party May Perform. If Debtor fails to perform any agreement
contained herein, Secured Party may itself perform, or cause performance of,
such agreement, and the expenses of Secured Party incurred in connection
therewith shall be payable by Debtor under Subsection 12(h) and Section 14
hereof.
9. Secured Party's Duties. The powers conferred on Secured Party hereunder
are solely to protect its interest in the Collateral and shall not impose any
duty upon Secured Party to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, Secured Party shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
10. Rights of Debtor Prior to Default. Until the occurrence of an Event of
Default, Debtor may use the Collateral in any lawful manner not inconsistent
with this Security Agreement and with the terms of insurance thereon.
11. Events of Default. Debtor shall be in default under this Security
Agreement upon the happening of any of the following events, each of such events
being an "Event of Default":
(a) If Debtor (i) defaults in the due performance or observance of any
obligation of Debtor under either Note, or (ii) defaults in the due performance
or observance of any obligation of Debtor under this Security Agreement and
fails to cure such latter default within fifteen (15) days after notice of the
occurrence of the default;
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(b) If any representation, warranty or guaranty made by Debtor herein or
in any other statement heretofore or hereafter furnished by Debtor to Secured
Party proves to be false or misleading in any material respect;
(c) The occurrence of any Event of Default under the Loan Agreement,
subject to any applicable notice and/or cure periods set forth therein, if any;
(d) If Debtor shall fail to comply with any other agreement, covenant,
condition, provision or term contained in any of the Loan Documents (as defined
in the Loan Agreement), subject to any applicable notice and/or cure periods set
forth therein, if any;
(e) Failure to pay any other obligation, liability or claim hereby
secured;
(f) If any obligation or liability of Debtor (other than any obligation
secured hereby) for the payment of money becomes or is declared to be due and
payable prior to the expressed maturity thereof;
(g) Loss, theft, substantial change or destruction to the Collateral which
is not adequately insured against;
(h) If Debtor subjects any Collateral to a security interest in favor of
any party other than Secured Party, excepting as set forth on Exhibit "B";
(i) The assignment for the benefit of creditors by Debtor or any principal
thereof ("Principal"), or any guarantor of the Obligations ("Guarantor") or the
admission, in writing, of any inability to pay any debts, generally, as they
become due, or ordering the winding up or liquidation of its affairs by Debtor
or any Principal or any Guarantor, or the commencement of a case by or against
Debtor or any Principal or any Guarantor under any insolvency, bankruptcy,
creditor adjustment, debtor rehabilitation or similar law, state or federal and,
which in the case of an involuntary proceeding, has not been dismissed within
forty-five (45) days of filing;
(j) The determination by Debtor or any Principal, or any Guarantor to
request relief under any insolvency, bankruptcy, creditor adjustment, debtor
rehabilitation or similar proceeding, state or federal, including, without
limitation, the consent by Debtor or any Principal, or any Guarantor to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator, or similar official for Debtor or any
Principal, or any Guarantor or for Debtor's or any Principal's, or any
Guarantor's property or assets;
(k) There shall have occurred any substantial adverse change in the
financial condition of Debtor or any Guarantor;
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(l) If Debtor loses any rights under any franchise agreements, license
agreements or other material agreements, which adversely affects the business
operations of Debtor; or
(m) There shall be entered against Debtor or any Guarantor one (1) or more
judgments or decrees.
Then, upon the happening of any of the foregoing Events of Default, or
whenever Secured Party deems itself insecure for any reason whatsoever, the
promissory note or notes and all other obligations, liabilities and claims
secured hereby shall become immediately due and payable. Debtor expressly waives
any presentment, demand, protest or other notice of any kind.
12. Secured Party's Remedies and Additional Rights After Default. Upon the
occurrence of an Event of Default, Secured Party shall have the rights and
remedies of a secured party under the Florida Uniform Commercial Code, the laws
of the State of New York, and any other applicable law. Without limiting the
generality of the foregoing, Secured Party may exercise any of the following
rights and remedies:
(a) Secured Party may peaceably, or by its own means or with judicial
assistance by injunction or otherwise, enter Debtor's premises and take
possession of the Collateral, or render it unusable, or dispose of the
Collateral on Debtor's premises, and Debtor will not resist or interfere with
such action;
(b) Secured Party may with judicial assistance by injunction, or
otherwise, require Debtor, at Debtor's expense, to assemble all or any part of
the Collateral and make it available to Secured Party at any place designated by
Secured Party. Debtor hereby agrees that Debtor's chief place of business or any
place designated by Secured Party within Palm Beach County, Florida, or Broward
County, Florida, are places reasonably convenient to Debtor to assemble such
Collateral;
(c) Debtor hereby agrees that a notice to Debtor, at least five (5) days
before the time of any intended sale or of the time after which any public or
private sale or other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other disposition;
(d) In the event of sale or other disposition of any such Collateral,
Secured Party may apply the proceeds of any such sale or disposition to the
satisfaction of its reasonable attorneys' fees, legal expenses, and other costs
and expenses incurred in connection with its taking, retaking, holding,
preparing for sale and selling of the Collateral;
(e) Without precluding any other methods of sale, the sale of Collateral
shall have been made in a commercially reasonable manner if conducted in
conformity with reasonable commercial practices but, in any event, Secured Party
may sell on such terms as it may choose, without assuming any credit risk and
without any obligation to advertise;
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(f) The Collateral need not be present at any public or private sale or in
view of the purchaser or purchasers, and title shall pass upon such sale
wherever the property or any part thereof is located with like effect as though
all the property were present and in the possession of the person conducting the
sale and were physically delivered to the purchaser or purchasers; Secured Party
may bid for and purchase at any public or private sale the Collateral offered
for sale or any part thereof, and by such purchase shall become the owner
thereof
(g) Any sale or other disposition of the Collateral, or any portion
thereof, or of any other property of Debtor held by Secured Party, or any
portion thereof, made under or by virtue of this Security Agreement shall
operate to divest all of the estate, right, title, interest, claim and demand
whatsoever at law or in equity of Debtor (including, without limitation, any and
all rights of redemption) and all persons claiming by, through or under Debtor
in and to the properties and rights so sold, whether sold to Secured Party or to
others. The receipt of Secured Party or its designated agent shall be a
sufficient discharge to the purchaser or purchasers at any such sale or other
disposition for its or their purchase money, and such purchaser or purchasers
and their respective successors, assigns and personal representatives shall not,
after paying such purchase money and receiving such receipt of Secured Party or
of such agent of Secured Party, be obligated to see to the application of such
purchase money or be in any way answerable for any loss, misapplication or
non-application thereof;
(h) Secured Party may deduct from the gross proceeds of any public or
private sale the expenses incurred by Secured Party in connection therewith,
including any expenses set forth in Section 14 hereof, reasonable attorneys'
fees and brokers' commissions, if any, and the net proceeds then remaining shall
be applied first to the satisfaction of the amount owed to Secured Party by
Debtor, including payment of all of the Obligations, and any amount then
remaining shall be returned to Debtor;
(i) Secured Party may (i) notify the Account Debtors under any and all of
Debtor's accounts, including, without limitation, the Receivables and Related
Contracts, of Secured Party's interest therein, and direct such Account Debtors
to make payments due and to become due thereunder directly and solely to Secured
Party, and (ii) accept and take control of all payments and proceeds received
from the Account Debtors, and, at the expense of Debtor, enforce collection of
any such Receivables and Related Contracts and adjust, settle or compromise the
amount for payment thereof in the same manner and to the same extent as Debtor
might have done. Additionally, all amounts and proceeds (including instruments)
received by Debtor in respect of the Receivables and Related Contracts shall be
received in trust for the benefit of Secured Party, shall be segregated from
other funds of Debtor and shall be forthwith paid over to Secured Party in the
same form as so received (with any necessary endorsement) to be held as cash
collateral and either (i) released to Debtor so long as no Event of Default
shall be continuing or if Secured Party no longer deems itself insecure, or (ii)
if any Event of Default shall have occurred and be continuing, or if Secured
Party deems itself insecure, applied against Secured Party's reasonable
attorneys' fees and expenses and all other expenses of Secured Party incurred in
connection with this Security Agreement, and then applied as provided in
Subsection 12(h), and, Debtor shall not adjust, settle or compromise the
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amount or payment of any Receivable or Related Contract, or release wholly or
partly any Account Debtor or obligor thereof, or allow any credit or discount
thereon. The above shall not be deemed to constitute a foreclosure by Secured
Party or an election by Secured Party of any remedy limiting the right of
Secured Party to recover the unpaid balance of the Obligations, such that
Secured Party shall be entitled to all other remedies set forth herein;
(j) The Secured Party may, in addition to any other rights it may have,
appoint by instrument in writing a receiver or receiver and manager (both of
which are herein called a "Receiver") of all or any part of the Collateral or
may institute proceedings in any court of competent jurisdiction for the
appointment of such a Receiver. Any such Receiver is hereby given and shall have
the same powers and rights and exclusions and limitations of liability as the
Secured Party has under this Security Agreement, at law or inequity. In
exercising any such powers, any such Receiver shall, to the extent permitted by
law, act as and for all purposes shall be deemed to be the agent of the Debtor,
and the Secured Party shall not be responsible for any act or default of any
such Receiver. The Secured Party may appoint one or more Receivers hereunder and
may remove any such Receiver or Receivers and appoint another or others in his
or their stead from time to time. Any Receiver so appointed may be an officer or
employee of the Secured Party. A court need not appoint, ratify the appointment
by the Secured Party of or otherwise supervise in any manner the actions of any
Receiver. Upon the Debtor receiving notice from the Secured Party of the taking
of possession of the Collateral or the appointment of a Receiver, all powers,
functions, rights and privileges of each of the directors and officers of the
Debtor with respect to the Collateral shall cease, unless specifically continued
by the written consent of the Secured Party;
(k) The Secured Party may carry on, or concur in the carrying on of, all
or any part of the business or undertaking of the Debtor, may, to the exclusion
of all others, including the Debtor, enter upon, occupy and use all or any of
the premises, buildings, plant and undertaking of or occupied or used by the
Debtor and may use all or any of the tools, machinery, equipment and intangibles
of the Debtor for such time as the Secured Party sees fit, free of charge, to
carry on the business of the Debtor and, if applicable, to manufacture or
complete the manufacture of any Inventory and to pack and ship the finished
product;
(l) Secured Party may proceed directly against Debtor, and any Guarantor
and obtain judgments against the same; and
(m) No right, power, or remedy of Secured Party as provided in this
Security Agreement, the Loan Agreement or in any other loan document associated
herewith, is intended to be exclusive of any other right, power, or remedy of
Secured Party, but each and every such right, power and remedy shall be
cumulative and concurrent and in addition to any other right, power or remedy
available to Secured Party now or hereafter existing at law or in equity. The
failure of Secured Party to exercise any such right, power or remedy shall in no
event be construed as a waiver or release thereof
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13. Right of Set-off. In addition to and not in limitation of all rights
of offset that Secured Party may have under applicable law, Secured Party shall,
upon the occurrence of an Event of Default and whether or not Secured Party has
made any demand, or the Obligations are matured, and without notice to Debtor
(any such notice being expressly waived by Debtor), have the right to set off
and apply to the payment of the Obligations all deposits of Debtor (general or
special, time or demand, provisional or final) at any time held by Secured Party
and other indebtedness or property at any time owing by Secured Party to or for
the credit or the account of Debtor against any and all of the Obligations of
Debtor to Secured Party.
14. Indemnity and Expenses. Debtor shall indemnify and hold harmless
Secured Party as follows:
(a) Debtor agrees to and shall indemnify Secured Party from and against
any and all claims, losses and liabilities growing out of or resulting from this
Security Agreement (including, without limitation, enforcement of this Security
Agreement), except claims, losses or liabilities resulting solely from Secured
Party's gross negligence or willful misconduct; and
(b) Debtor will, upon demand, pay to Secured Party the amount of any and
all reasonable expenses, including the reasonable fees and disbursements of
Secured Party's counsel and of any experts and agents, which Secured Party may
incur in connection with (i) the administration of this Security Agreement, (ii)
the custody, preservation, use or operation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of Secured Party hereunder or (iv) the failure
by Debtors to perform or observe any of the provisions hereof.
15. Non-Judicial Process. Secured Party may enforce its rights hereunder
without resort to prior judicial process or judicial hearing, and Debtor hereby
waives (i) any right Debtor may have to notice and a hearing before possession
or sale of Collateral is effected by Secured Party by self-help, replevin,
attachment or otherwise, (ii) any requirement that Secured Party post a bond or
other security which might be required by any court prior to allowing Secured
Party to exercise any of Secured Party's remedies, and (iii) the benefit of all
appraisement, extension and exemption laws, such waivers being consistent with
commercial necessity. Nothing herein is intended to prevent Secured Party from
resorting to judicial process at its option.
16. Injunctive Relief Debtor recognizes that, in the event Debtor fails to
perform, observe or discharge any of its obligations or liabilities under this
Security Agreement, any remedy at law may prove to be inadequate relief to
Secured Party. Secured Party, if Secured Party so requests, shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
17. VENUE OF ACTIONS. IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT NO
SUIT OR ACTION SHALL BE COMMENCED BY THE DEBTOR, OR BY ANY SUCCESSOR, PERSONAL
REPRESENTATIVE OR ASSIGNEE OF DEBTOR, WITH RESPECT
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TO THE INDEBTEDNESS SECURED HEREBY, WITH RESPECT TO THIS SECURITY AGREEMENT, OR
ANY OF THE OTHER LOAN DOCUMENTS, OTHER THAN IN A STATE COURT OF COMPETENT
JURISDICTION IN AND FOR THE COUNTY OF THE STATE IN THE UNITED STATES IN WHICH
THE PRINCIPAL PLACE OF BUSINESS OF THE SECURED PARTY IS SITUATED, OR IN THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT IN THE UNITED STATES IN WHICH THE
PRINCIPAL PLACE OF BUSINESS OF THE SECURED PARTY IS SITUATED, AND NOT ELSEWHERE.
NOTHING IN THIS PARAGRAPH CONTAINED SHALL PROHIBIT SECURED PARTY FROM
INSTITUTING SUIT IN ANY COURT OF COMPETENT JURISDICTION FOR THE ENFORCEMENT OF
ITS RIGHTS HEREUNDER, IN THE NOTES, IN THE LOAN AGREEMENT, OR IN ANY OTHER LOAN
DOCUMENT.
18. Automatic Stay. Debtor hereby agrees that, in consideration of the
recitals and mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, in
the event Debtor shall (i) file with any bankruptcy court of competent
jurisdiction or be the subject of any petition under title 11 of the U.S. Code,
as amended, (ii) be the subject of any order for relief issued under such Title
11 of the U.S. Code, as amended, (iii) file or be the subject of any petition
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future federal or state act
or law relating to bankruptcy, insolvency, or other relief for debtors, (iv)
have sought or consented to or acquiesced in the appointment of any trustee,
receiver, conservator, or liquidator, or (v) be the subject of any order,
judgment, or decree entered by any court of competent jurisdiction approving a
petition filed against such party for any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under any
present or future federal or state act or law relating to bankruptcy,
insolvency, or relief for debtors, then Secured Party shall thereupon be
entitled to relief from any automatic stay imposed by Section 362 of Title 11 of
the U.S. Code, as amended, or otherwise, on or against the exercise of the
rights and remedies otherwise available to Secured Party as provided in the
Note, the Loan Agreement, this Security Agreement and all associated loan
documents, and as otherwise provided by law. Debtor hereby agrees not to object
to Secured Party immediately seeking relief from the automatic stay, to allow
Secured Party to proceed immediately to exercise the rights and remedies
provided under this Security Agreement, including, without limitation, the right
to take title to the Collateral, to conduct a foreclosure sale of the Collateral
and to issue a Certificate of Title to the Collateral in connection with any
foreclosure sale, and/or to proceed against and realize upon the Collateral for
the Obligations and to otherwise allow Secured Party to take all such actions as
Secured Party may elect in its sole discretion in pursuance of the other rights
and remedies available in the event of a default by Debtor under the loan
documents. Debtor hereby waives any protection afforded under 11 U.S.C., Section
362(a).
19. Addresses for Notices. All notices, demands or requests, and responses
thereto, required or permitted to be given pursuant to this Security Agreement
shall be in writing and shall be delivered by hand delivery, expedited courier,
facsimile or sent by certified mail, postage prepaid, return receipt requested,
and addressed as provided below or at such other place Debtor or Secured Party
may from time to time designate in a notice to the other party. All such notices
and other
-15-
<PAGE>
communications shall, when mailed, addressed as aforesaid, be effective three
(3) days after deposit in the mail, when federal expressed, be effective one (1)
day after deposit with Federal Express, and, when sent by facsimile, be
effective immediately. Rejection or other refusal to accept or inability to
deliver because of changed address of which no notice has been given shall
constitute receipt of the notice, demand or request sent. Any such notice if
given to Debtor shall be addressed as follows:
AMITEK CORPORATION
1701 Clint Moore Road
Boca Raton, Florida 33487
Attn: Leslie J. Sainsbury, President
if given to Secured Party shall be addressed as follows:
NATIONAL BANK OF CANADA
5100 Town Center Circle
Suite 430
Boca Raton, Florida 33486
Attn: Jean E. Page, Vice President
20. Continuing Security Interest; Transfer of Note. This Security
Agreement shall create a continuing security interest in the Collateral and
shall (i) remain in full force and effect until payment in full of the
Obligations, (ii) be binding upon Debtor, its successors and assigns and (iii)
inure to the benefit of Secured Party and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (iii), Secured
Party may assign or otherwise transfer the Notes held by it to any other person
or entity, and such other person or entity shall thereupon become vested with
all the benefits in respect thereof granted to Secured Party herein or
otherwise. Upon the payment in full of the Obligations, the security interest
granted hereby shall terminate and all rights to the Collateral shall revert to
Debtor. Upon any such termination, Secured Party will, at Debtor's expense,
execute and deliver to Debtor such documents as Debtor shall reasonably request
to evidence such termination.
21. Amendments, Etc. No amendment or waiver of any provision of this
Security Agreement nor consent to any departure by Debtor herefrom shall in any
event be effective unless the same shall be in writing and signed by Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
22. Waiver. No failure on the part of Secured Party to exercise or delay
in exercising any right or remedy hereunder shall operate as a waiver thereof,
nor shall any singular or partial exercise by Secured Party of any right or
remedy hereunder preclude any other or future exercise thereof, or the exercise
of any other right or remedy.
23. Additional Waivers of Debtor. To the fullest extent that it may
lawfully so agree, Debtor agrees that it will not at any time insist upon,
claim, plead or take any benefit or advantage
-16-
<PAGE>
of any appraisement, valuation, stay, extension, moratorium, redemption or
similar law now or hereafter in force in order to prevent, delay or hinder the
enforcement of this Security Agreement or the absolute sale of any part of the
Collateral. Debtor, for itself and all who claim through it, so far as it now or
hereafter lawfully may do so, hereby waives the benefit of all such laws, and
all rights to have the Collateral marshaled upon any foreclosure hereof, and
agrees that any court having jurisdiction to foreclose this Security Agreement
may order the sale of the Collateral as an entirety. Without limiting the
generality of the foregoing, Debtor hereby: (i) authorizes Secured Party in its
sole discretion and without notice to or demand upon Debtor and without
otherwise affecting the obligations of Debtor hereunder from time to time to
take and hold other collateral (in addition to the Collateral) for payment of
any Obligations, or any part thereof, and to exchange, enforce or release such
other collateral or any part thereof and to accept and hold any endorsement or
guarantee of payment of the Obligations, or any part thereof and to release or
substitute any endorser or guarantor or any other person granting security for
or in any other way obligated upon any Obligations or any part thereof; and (ii)
waive and release any and all right to require Secured Party to collect any of
the Obligations from any specific item or items of the Collateral or from any
other party liable as guarantor or in any other manner in respect of any of the
Obligations or from any collateral (other than the Collateral) for any of the
Obligations.
24. Successors and Assigns. All of the terms, conditions, and covenants of
this Security Agreement shall inure to the benefit of and bind the heirs,
personal representatives, successors and assigns of the respective parties
hereto.
25. Severability. If performance of any provision hereof or any
transaction related hereto is limited by law, then the obligation to be
performed shall be reduced accordingly, and if any clause or provision herein
contained operates or would operate to invalidate this Security Agreement in
part, then the invalid part of said clause or provisions only shall be treated
as though not contained herein, and the remainder of this Security Agreement
shall remain operative and in full force and effect.
26. Currency. Unless otherwise provided for herein, all monetary amounts
referred to herein shall refer to lawful currency of the United States of
America.
27. Modification. This Security Agreement may not be changed orally, but
only by an instrument in writing, and signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
28. Entire Agreement. This Security Agreement constitutes the entire
agreement between the parties hereto.
29. Amended and Restated Security Agreement. THIS AGREEMENT CONSTITUTES AN
ASSUMPTION OF AND AMENDS AND RESTATES THE ORIGINAL SECURITY AGREEMENT SUCH THAT
THE SECURITY INTERESTS, RIGHTS, DUTIES AND OBLIGATIONS OF THE DEBTOR AND THE
SECURED PARTY CREATED BY THE ORIGINAL SECURITY AGREEMENT ARE NOT EXTINGUISHED
BUT ARE REAFFIRMED
-17-
<PAGE>
AND REMAIN IN FULL FORCE AND EFFECT AS MODIFIED BY THIS AMENDED AND RESTATED
SECURITY AGREEMENT.
30. Governing Law. This Agreement shall be governed by and construed in
accordance with the statutes and laws of the State of New York, except as
required by mandatory provisions of laws and except to the extent that the
validity or perfection of the security interest created hereby, or remedies
hereunder, in respect of any particular Collateral are governed by the laws of a
jurisdiction other than the State of New York. If any provision hereof is in
conflict with the provision of the Loan Agreement, the provisions of the Loan
Agreement shall control.
30. WAIVER OF JURY TRIAL. DEBTOR AND SECURED PARTY HEREBY MUTUALLY,
KNOWINGLY, WILLINGLY, INTENTIONALLY AND VOLUNTARILY WAIVE THEIR RIGHT TO TRIAL
BY JURY AND NO PARTY NOR ANY ASSIGNEE, SUCCESSOR, HEIR, OR LEGAL REPRESENTATIVE
OF THE PARTIES (ALL OF WHOM ARE HEREINAFTER COLLECTIVELY REFERRED TO AS THE
"PARTIES") SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM OR
ANY OTHER LITIGATION PROCEEDING BASED UPON OR ARISING OUT OF THIS SECURITY
AGREEMENT OR ANY ASSOCIATED LOAN DOCUMENTS OR ANY INSTRUMENT EVIDENCING,
SECURING OR RELATING TO THE OBLIGATIONS SECURED HEREBY OR ANY RELATED AGREEMENT
OR INSTRUMENT, ANY OTHER COLLATERAL FOR THE OBLIGATIONS SECURED HEREBY OR ANY
COURSE OF ACTION, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS RELATING TO THE OBLIGATIONS OR TO THIS SECURITY AGREEMENT. THE PARTIES
ALSO WAIVE ANY RIGHT TO CONSOLIDATE ANY ACTION IN WHICH A JURY TRIAL HAS BEEN
WAIVED WITH ANY OTHER ACTION IN WHICH A JURY TRIAL HAS NOT BEEN WAIVED. THE
PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY NEGOTIATED BY THE PARTIES. THE
WAIVER CONTAINED HEREIN IS IRREVOCABLE, CONSTITUTES A KNOWING AND VOLUNTARY
WAIVER, AND SHALL BE SUBJECT TO NO EXCEPTIONS. SECURED PARTY HAS IN NO WAY
AGREED WITH OR REPRESENTED TO DEBTOR OR ANY OTHER PARTY THAT THE PROVISIONS OF
THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Security Agreement the day and year first above written.
WITNESSES: DEBTOR:
AMITEK CORPORATION, a Delaware corporation
/s/ Teresa A. Belmonte By: /s/ Jim Roller
- ------------------------------ --------------------------------
Title: Secretary & Treasurer
- ------------------------------ -----------------------------
(Corporate Seal)
-18-
<PAGE>
SECURED PARTY:
NATIONAL BANK OF CANADA, a Canadian
Chartered Bank
By: /s/ Jean Page
- ------------------------------ --------------------------------
/s/ Teresa A. Belmonte Title: VP
- ------------------------------ -----------------------------
-19-
<PAGE>
AMITEK DEPRECIATION DETAIL
ELECTRICAL EQUIPMENT
ACCT 1515-0000
AMITEK CORPORATION
DEPRECIATION SCHEDULE BY CATEGORY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET ACCT DATE LIFE COST OR ACC DEPR CURRENT
NO. DESCRIPTION NO. ACQUIRED METHOD YR/MO BASIS 01-01-95 DEPR.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- AVEX (RECLASSIFIED) 1515 07-31-94 ST LINE 05/00 (700.00) (70.01) (140.02)
- HEAT GUN FOR REPAIR 1515 08-31-94 ST LINE 05/00 512.00 51.21 102.41
- UNIVERSAL REPLACEMENT PARTS 1515 08-31-94 ST LINE 05/00 5,660.00 566.06 1,132.13
- UNIVERSAL WEARABLE PARTS 1515 08-31-94 ST LINE 05/00 490.00 49.01 98.01
- UNIVERSAL WEARABLE PARTS 1515 08-31-94 ST LINE 05/00 1,205.20 120.53 241.07
- TOOLSMITH SCREWDRIVER 1515 08-31-94 ST LINE 05/00 1,050.00 105.01 210.02
- MARSHALL SCREWFEEDER (2) 1515 08-31-94 ST LINE 05/00 1,049.80 104.99 209.98
- DIGI-KEY WEARABLE PARTS 1515 09-30-94 ST LINE 05/00 72.39 7.24 14.48
ELEC EQUIP - MARSHALL WEARABLE PARTS 1515 10-31-94 ST LINE 05/00 118.44 11.84 23.69
ELEC EQUIP - CONTACT SERVICE CALL 1515 10-31-94 ST LINE 05/00 279.00 27.90 55.80
-------------------------------------------------------------------------------------------------------------------------
COPELCO LEASE - SIPLACE 80S 1515 11-27-95 ST LINE 10/00 321,442.32 0.00 6,164.65
-------------------------------------------------------------------------------------------------------------------------
COPELCO LEASE - SIPLACE 80F 1515 11-27-95 ST LINE 10/00 321,538.15 0.00 6,166.48
COPELCO LEASE - SIEMENS COMP PROG SYS 1515 11-27-95 ST LINE 05/00 25,116.94 0.00 481.69
COPELCO LEASE - SIEMENS SIPLACE ACCESS 1515 11-27-95 ST LINE 05/00 21,638.59 0.00 414.99
- SIEMENS / CITICORP / SIPLACE FEEDERS 1515 12-31-95 ST LINE 10/00 179,021.28 0.00 18,123.49
- FIFO BUFFER CONVEYOR 1515 01-26-95 ST LINE 05/00 14,500.00 0.00 1,467.93
- DUAL DRIVE CONVEYOR BELT 1515 01-26-95 ST LINE 05/00 5,500.00 0.00 556.80
- MACDONALD ELECTRIC 1515 02-01-95 ST LINE 05/00 1,991.70 0.00 201.63
- MOTOROLA MASS SOLDERING MACHINE 1515 05-18-95 ST LINE 05/00 1,800.00 0.00 182.23
- DUKANE ULTRASONIC WELDER 1515 05-22-95 ST LINE 05/00 6,119.80 0.00 619.55
- H/P LASER JET PRINTER 1515 08-17-95 ST LINE 05/00 2,118.94 0.00 214.51
- TOSHIBA LAPTOP COMPUTERS (2) 1515 09-06-95 ST LINE 05/00 4,242.62 0.00 429.51
- MACDONALD ELECTRIC 1515 02-01-95 ST LINE 05/00 1,991.71 0.00 201.63
- SALES TAX ON EQUIPMENT 1515 10-20-95 ST LINE 05/00 10,315.06 0.00 1,044.26
- 22 BUTTON SPEAKER PHONES (8) 1515 10-03-95 ST LINE 05/00 2,120.00 0.00 214.62
- 1 / 8 PORT ANALOG CARD 1515 10-03-95 ST LINE 05/00 316.58 0.00 32.05
- REXON EQUIPMENT 1515 12-31-95 ST LINE 05/00 110,000.00 0.00 11,136.01
MBT - 250 System 8007-0206A Kurt Whitlock & Assc 1515 01-05-96 ST LINE 05/00 1,272.00 0.00 0.00
-------------------------------------------------------------------------------------------------------------------------
Model 64 Tester 115 Vac - 5211048-Cablescan V3115 1515 01-16-96 ST LINE 05/00 948.50 0.00 0.00
-------------------------------------------------------------------------------------------------------------------------
Performa 630 8/500 CD Monitor Keyboard - Macnet 1515 01-16-96 ST LINE 05/00 1,550.64 0.00 0.00
Power filter FA Series for Siemens - Datamax 1515 05-20-96 ST LINE 05/00 4,165.80 0.00 0.00
Elec Vitronics Oven - E. W. Electric 1515 06-13-96 ST LINE 05/00 1,464.90 0.00 0.00
Computer 1515 10-31-96 ST LINE 05/00 765.10 0.00 0.00
Computer 1515 10-09-96 ST LINE 05/00 742.50 0.00 0.00
Mech Test Flat E/T Tech 1515 10-10-96 ST LINE 05/00 1,294.73 0.00 0.00
200A 3 Phase Squ D Lead Center - Breakers 1515 12-09-96 ST LINE 05/00 3,500.00 0.00 0.00
Power Supply Board 100S1564 for Screenprinter 1515 12-31-96 ST LINE 05/00 942.83 0.00 0.00
Elec Equipment - from Rescue 1515 12-31-96 ST LINE 05/00 25,000.00 0.00 0.00
COASTAL SECURITY SYSTEM 1515 1/1/97 ST LINE 05/00 2,183.60 0.00 0.00
ACL 10 ELEC SCREWDRIVER (3 @ 590) 1515 01/29/97 ST LINE 05/00 1,876.60 0.00 0.00
-------------------------------------------------------------------------------------------------------------------------
92TPS001 TPS-001 SLODAPROS S/W MULTICORE 1515 01/31/97 ST LINE 05/00 2,686.00 0.00 0.00
ET TECHNOLOGIES CHANNEL TEST FIX 1515 2/18/97 ST LINE 05/00 3,200.00 0.00 0.00
COMPUSA HP LASERJET 5 1515 3/18/97 ST LINE 05/00 1,299.99 0.00 0.00
NATION-1 ELECTRICAL OVEN 1515 3/13/97 ST LINE 05/00 966.75 0.00 0.00
COMPUSA OKI ML32IT 9 PIN 12 OV 1515 3/18/97 ST LINE 05/00 2,492.10 0.00 0.00
CURLIN CONVEYOR SYSTEM U STYLE 1515 3/25/97 ST LINE 05/00 508.75 0.00 0.00
SOUND ADVISE YAMAHA 70W STEREO 1515 4/3/97 ST LINE 05/00 3,930.00 0.00 0.00
HUGHES FA026-005 OENAC POWER 1515 4/3/97 ST LINE 05/00 2,850.00 0.00 0.00
BELL ELECTRIC (ELECTRICAL WORK) 1515 4/14/97 ST LINE 05/00 6,402.00 0.00 0.00
CHS BEK ELECTRICAL COMPONENTS NEW COMPUTERS 1515 4/30/97 ST LINE 05/00 3,527.19 0.00 0.00
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET ACC DEPR WRITE CURRENT ACC DEPR WRITE CURRENT
NO. DESCRIPTION 12-31-95 OFF DEPR. 12-31-96 OFF DEPR.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- AVEX (RECLASSIFIED) (210.02) (140.00) (350.02) 0.00
- HEAT GUN FOR REPAIR 153.62 102.40 256.02 102.40
- UNIVERSAL REPLACEMENT PARTS 1,698.19 1,132.00 2,830.19 1,132.00
- UNIVERSAL WEARABLE PARTS 147.02 98.00 245.02 98.00
- UNIVERSAL WEARABLE PARTS 361.60 241.04 602.64 241.04
- TOOLSMITH SCREWDRIVER 315.03 210.00 525.03 210.00
- MARSHALL SCREWFEEDER (2) 314.97 209.96 524.93 209.96
- DIGI-KEY WEARABLE PARTS 21.72 14.48 36.20 14.48
ELEC EQUIP - MARSHALL WEARABLE PARTS 35.53 23.69 59.22 23.69
ELEC EQUIP - CONTACT SERVICE CALL 83.70 55.80 139.50 55.80
-------------------------------------------------------------------------------------------------------------------------
COPELCO LEASE - SIPLACE 80S 6,164.65 32,144.23 38,308.88 32,144.23
-------------------------------------------------------------------------------------------------------------------------
COPELCO LEASE - SIPLACE 80F 6,166.48 32,153.82 38,320.30 32,153.82
COPELCO LEASE - SIEMENS COMP PROG SYS 481.69 5,023.39 5,505.08 5,023.39
COPELCO LEASE - SIEMENS SIPLACE ACCESS 414.99 4,327.72 4,742.71 4,327.72
- SIEMENS / CITICORP / SIPLACE FEEDERS 18,123.49 17,902.13 36,025.62 17,902.13
- FIFO BUFFER CONVEYOR 1,467.93 2,900.00 4,367.93 2,900.00
- DUAL DRIVE CONVEYOR BELT 556.80 1,100.00 1,656.80 1,100.00
- MACDONALD ELECTRIC 201.63 398.34 599.97 398.34
- MOTOROLA MASS SOLDERING MACHINE 182.23 360.00 542.23 360.00
- DUKANE ULTRASONIC WELDER 619.55 1,223.96 1,843.51 1,223.96
- H/P LASER JET PRINTER 214.51 423.79 638.30 423.79
- TOSHIBA LAPTOP COMPUTERS (2) 429.51 848.52 1,278.03 848.52
- MACDONALD ELECTRIC 201.63 398.34 599.97 398.34
- SALES TAX ON EQUIPMENT 1,044.26 2,063.01 3,107.27 2,063.01
- 22 BUTTON SPEAKER PHONES (8) 214.62 424.00 638.62 424.00
- 1 / 8 PORT ANALOG CARD 32.05 63.32 95.37 63.32
- REXON EQUIPMENT 11,136.01 22,000.00 33,136.01 22,000.00
MBT - 250 System 8007-0206A Kurt Whitlock & Assc 0.00 127.20 127.20 254.40
-------------------------------------------------------------------------------------------------------------------------
Model 64 Tester 115 Vac - 5211048-Cablescan V3115 0.00 98.45 98.45 189.70
-------------------------------------------------------------------------------------------------------------------------
Performa 630 8/500 CD Monitor Keyboard - Macnet 0.00 155.07 155.07 310.03
Power filter FA Series for Siemens - Datamax 0.00 416.58 416.58 833.16
Elec Vitronics Oven - E. W. Electric 0.00 146.49 146.49 292.98
Computer 0.00 76.51 76.51 153.02
Computer 0.00 74.25 74.25 148.50
Mech Test Flat E/T Tech 0.00 129.47 129.47 258.95
200A 3 Phase Squ D Lead Center - Breakers 0.00 350.00 350.00 700.00
Power Supply Board 100S1564 for Screenprinter 0.00 94.28 94.28 188.57
Elec Equipment - from Rescue 0.00 2,500.00 2,500.00 5,000.00
COASTAL SECURITY SYSTEM 0.00 0.00 0.00 218.36
ACL 10 ELEC SCREWDRIVER (3 @ 590) 0.00 0.00 0.00 187.66
-------------------------------------------------------------------------------------------------------------------------
92TPS001 TPS-001 SLODAPROS S/W MULTICORE 0.00 0.00 0.00 268.60
ET TECHNOLOGIES CHANNEL TEST FIX 0.00 0.00 0.00 320.00
COMPUSA HP LASERJET 5 0.00 0.00 0.00 130.00
NATION-1 ELECTRICAL OVEN 0.00 0.00 0.00 96.68
COMPUSA OKI ML32IT 9 PIN 12 OV 0.00 0.00 0.00 249.21
CURLIN CONVEYOR SYSTEM U STYLE 0.00 0.00 0.00 50.88
SOUND ADVISE YAMAHA 70W STEREO 0.00 0.00 0.00 393.00
HUGHES FA026-005 OENAC POWER 0.00 0.00 0.00 285.00
BELL ELECTRIC (ELECTRICAL WORK) 0.00 0.00 0.00 640.20
CHS BEK ELECTRICAL COMPONENTS NEW COMPUTERS 0.00 0.00 0.00 352.72
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ASSET ACC DEPR WRITE CURRENT ACC DEPR BOOK
NO. DESCRIPTION 35795 OFF DEPR. 36160 VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- AVEX (RECLASSIFIED) 0.00 0.00 0.00 0.00
- HEAT GUN FOR REPAIR 358.42 102.40 460.82 51.18
- UNIVERSAL REPLACEMENT PARTS 3,962.19 1,132.00 5,094.19 565.81
- UNIVERSAL WEARABLE PARTS 343.02 98.00 441.02 48.98
- UNIVERSAL WEARABLE PARTS 843.68 241.04 1,084.72 120.48
- TOOLSMITH SCREWDRIVER 735.03 210.00 945.03 104.97
- MARSHALL SCREWFEEDER (2) 734.89 209.96 944.85 104.95
- DIGI-KEY WEARABLE PARTS 50.68 14.48 65.16 7.24
ELEC EQUIP - MARSHALL WEARABLE PARTS 82.91 23.69 106.60 11.85
ELEC EQUIP - CONTACT SERVICE CALL 195.30 55.80 251.10 27.90
-------------------------------------------------------------------------------------------------------------
COPELCO LEASE - SIPLACE 80S 70,453.11 32,144.23 102,597.34 218,844.97
-------------------------------------------------------------------------------------------------------------
COPELCO LEASE - SIPLACE 80F 70,474.11 32,153.82 102,627.93 218,910.23
COPELCO LEASE - SIEMENS COMP PROG SYS 10,528.47 5,023.39 15,551.85 9,565.09
COPELCO LEASE - SIEMENS SIPLACE ACCESS 9,070.43 4,327.72 13,398.14 8,240.45
- SIEMENS / CITICORP / SIPLACE FEEDERS 53,927.75 17,902.13 71,829.87 107,191.41
- FIFO BUFFER CONVEYOR 7,267.93 2,900.00 10,167.93 4,332.07
- DUAL DRIVE CONVEYOR BELT 2,756.80 1,100.00 3,856.80 1,643.20
- MACDONALD ELECTRIC 998.31 398.34 1,396.65 595.05
- MOTOROLA MASS SOLDERING MACHINE 902.23 360.00 1,262.23 537.77
- DUKANE ULTRASONIC WELDER 3,067.47 1,223.96 4,291.43 1,828.37
- H/P LASER JET PRINTER 1,062.09 423.79 1,485.87 633.07
- TOSHIBA LAPTOP COMPUTERS (2) 2,126.56 848.52 2,975.08 1,267.54
- MACDONALD ELECTRIC 998.31 398.34 1,396.66 595.05
- SALES TAX ON EQUIPMENT 5,170.28 2,063.01 7,233.30 3,081.76
- 22 BUTTON SPEAKER PHONES (8) 1,062.62 424.00 1,486.62 633.38
- 1 / 8 PORT ANALOG CARD 158.68 63.32 222.00 94.58
- REXON EQUIPMENT 55,136.01 22,000.00 77,136.01 32,863.99
MBT - 250 System 8007-0206A Kurt Whitlock & Assc 381.60 254.40 636.00 636.00
-------------------------------------------------------------------------------------------------------------
Model 64 Tester 115 Vac - 5211048-Cablescan V3115 288.15 189.70 477.85 470.65
-------------------------------------------------------------------------------------------------------------
Performa 630 8/500 CD Monitor Keyboard - Macnet 465.20 310.03 775.33 775.31
Power filter FA Series for Siemens - Datamax 1,249.74 833.16 2,082.90 2,082.90
Elec Vitronics Oven - E. W. Electric 439.47 292.98 732.45 732.45
Computer 229.53 153.02 382.55 382.55
Computer 222.75 148.50 371.25 371.25
Mech Test Flat E/T Tech 388.42 258.95 647.36 647.37
200A 3 Phase Squ D Lead Center - Breakers 1,050.00 700.00 1,750.00 1,750.00
Power Supply Board 100S1564 for Screenprinter 282.85 188.57 471.41 471.42
Elec Equipment - from Rescue 7,500.00 5,000.00 12,500.00 12,500.00
COASTAL SECURITY SYSTEM 218.36 436.72 655.08 1,528.52
ACL 10 ELEC SCREWDRIVER (3 @ 590) 187.66 375.32 562.98 1,313.62
-------------------------------------------------------------------------------------------------------------
92TPS001 TPS-001 SLODAPROS S/W MULTICORE 268.60 537.20 805.80 1,880.20
ET TECHNOLOGIES CHANNEL TEST FIX 320.00 640.00 960.00 2,240.00
COMPUSA HP LASERJET 5 130.00 260.00 390.00 909.99
NATION-1 ELECTRICAL OVEN 96.68 193.35 290.03 676.73
COMPUSA OKI ML32IT 9 PIN 12 OV 249.21 496.42 747.63 1,744.47
CURLIN CONVEYOR SYSTEM U STYLE 50.88 101.75 152.63 356.13
SOUND ADVISE YAMAHA 70W STEREO 393.00 786.00 1,179.00 2,751.00
HUGHES FA026-005 OENAC POWER 285.00 570.00 855.00 1,995.00
BELL ELECTRIC (ELECTRICAL WORK) 640.20 1,280.40 1,920.60 4,481.40
CHS BEK ELECTRICAL COMPONENTS NEW COMPUTERS 352.72 705.44 1,058.16 2,469.03
</TABLE>
ACCUMULATED DEPRECIATION ACCT = 1545-0000
<PAGE>
AMITEK DEPRECIATION DETAIL
ELECTRICAL EQUIPMENT
ACCT 1515-0000
AMITEK CORPORATION
DEPRECIATION SCHEDULE BY CATEGORY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET ACCT DATE LIFE COST OR ACC DEPR CURRENT
NO. DESCRIPTION NO. ACQUIRED METHOD YR/MO BASIS 01-01-95 DEPR.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REX NUNN (COMP. COMPONENTS) 1515 5/1/97 ST LINE 05/00 3,000.00 0.00 0.00
CHS BEK COMPUTER COMPONENTS 1515 5/16/97 ST LINE 05/00 7,316.50 0.00 0.00
CHS BEK COMPUTER COMPONENTS 1515 5/22/97 ST LINE 05/00 5,670.00 0.00 0.00
SIEMENS EQUIPMENT 1515 5/31/97 ST LINE 10/00 585,893.72 0.00 0.00
CHIP TECH COMPUTER COMPONENTS 1515 6/1/97 ST LINE 05/00 1,915.00 0.00 0.00
ZYXEL ISDN ROUTER 1515 6/11/97 ST LINE 05/00 514.00 0.00 0.00
CHS BEK COMPUTER COMPONENTS 1515 6/19/97 ST LINE 05/00 1,612.00 0.00 0.00
CHS BEK COMPUTER COMPONENTS 1515 6/24/97 ST LINE 05/00 1,006.00 0.00 0.00
CHS BEK COMPUTER COMPONENTS 1515 7/2/97 ST LINE 05/00 1,866.00 0.00 0.00
CHS BEK COMPUTER COMPONENTS 1515 7/30/97 ST LINE 05/00 864.00 0.00 0.00
CURLIN INC GRAVITY CONVEYOR 1515 7/1/97 ST LINE 05/00 758.11 0.00 0.00
CURLIN INC 1515 7/2/97 ST LINE 05/00 674.11 0.00 0.00
PACE MACHINERY & TOOL 1515 8/8/97 ST LINE 05/00 8,632.64 0.00 0.00
COMPAQ COMPUTER AMEX ELECTRONIC EQUIP 1515 8/11/97 ST LINE 05/00 3,587.57 0.00 0.00
CHS BEK COMPUTER COMPONENTS 1515 8/14/97 ST LINE 05/00 1,019.00 0.00 0.00
SIEMENS ENERGY SCANNING UNIT 1515 8/18/97 ST LINE 05/00 4,040.72 0.00 0.00
SIEMENS ENERGY TRIPLE AXIS PC BOARD 1515 8/18/97 ST LINE 05/00 3,931.54 0.00 0.00
SIEMENS ENERGY TRIPLE AXIS PC BOARD 1515 8/19/97 ST LINE 05/00 3,931.54 0.00 0.00
CHIPTECH COMPUTER COMPONENTS 1515 8/26/97 ST LINE 05/00 1,538.00 0.00 0.00
CHS BEK COMPUTER COMPONENTS 1515 8/27/97 ST LINE 05/00 1,573.00 0.00 0.00
TECH DATA COMPUTER COMPONENTS 1515 9/1/97 ST LINE 05/00 430.00 0.00 0.00
TECH DATA COMPUTER COMPONENTS 1515 9/4/97 ST LINE 05/00 735.00 0.00 0.00
ELECTROVERT (DIFFERENCE TO BE REVERSED LATER) 1515 9/18/97 ST LINE 05/00 2,500.00 0.00 0.00
SIEMENS FEEDER 1515 9/24/97 ST LINE 05/00 11,040.96 0.00 0.00
CHIPTECH COMPUTER COMPONENTS 1515 9/24/97 ST LINE 05/00 3,264.00 0.00 0.00
ADVANCE CAM TECH 1515 9/24/97 ST LINE 05/00 2,185.00 0.00 0.00
BELL ELECTRICAL 1515 9/23/97 ST LINE 05/00 2,490.00 0.00 0.00
ADVANCE CAM TECH 1515 10/2/97 ST LINE 05/00 250.00 0.00 0.00
COMP SERVICE S. FLA 1515 10/10/97 ST LINE 05/00 9,741.42 0.00 0.00
DUKANE ULTRASONIC 1515 10/10/97 ST LINE 05/00 5,565.00 0.00 0.00
DIVERSIFIED POWER SOLUTIONS 1515 10/31/97 ST LINE 05/00 2,458.00 0.00 0.00
HEWLETT PACKARD 1515 10/31/97 ST LINE 05/00 4,499.80 0.00 0.00
SIEMENS EQUIP 1515 10/31/97 ST LINE 10/00 468,566.64 0.00 0.00
ELECTROVERT 1515 10/31/97 ST LINE 10/00 63,335.00 0.00 0.00
MPM EQUIP 1515 10/31/97 ST LINE 10/00 138,601.54 0.00 0.00
RADIAL MACHINE FROM DRI 1515 10/31/97 ST LINE 10/00 114,000.00 0.00 0.00
ELECTROVERT USA 1515 11/6/97 ST LINE 05/00 2,134.35 0.00 0.00
DIVERSIFIED POWER SOLUTIONS 1515 11/11/97 ST LINE 05/00 2,458.00 0.00 0.00
PACE MACHINERY & TOOL 1515 11/11/97 ST LINE 05/00 2,607.60 0.00 0.00
CROWN SIMPLIMATIC 1515 11/12/97 ST LINE 05/00 11,304.90 0.00 0.00
CABLESCAN 1515 11/17/97 ST LINE 05/00 948.70 0.00 0.00
DUKANE ULTRASONIC 1515 11/17/97 ST LINE 05/00 7,500.00 0.00 0.00
ARCO DISTRIB 1515 11/26/97 ST LINE 05/00 675.00 0.00 0.00
CENTRAL AUDIO VISUAL 1515 11/22/97 ST LINE 05/00 5,830.00 0.00 0.00
RELOCATE NORTH LINE 1515 11/30/97 ST LINE 05/00 3,160.00 0.00 0.00
BELL ELECTRIC 1515 12/29/97 ST LINE 05/00 5,115.00 0.00 0.00
MECH PLUS SERVICES 1515 12/29/97 ST LINE 05/00 3,500.00 0.00 0.00
CROWN SIMPLIMATIC 1515 1/2/98 ST LINE 05/00 33,673.02
NATIONAL TIME SYSTEM (TIME CLOCK SYSTEM) 1515 1/28/98 ST LINE 05/00 8,259.20
CHIPTECH COMPUTER COMPONENTS 1515 1/20/98 ST LINE 05/00 8,674.42
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET ACC DEPR WRITE CURRENT ACC DEPR WRITE CURRENT
NO. DESCRIPTION 12-31-95 OFF DEPR. 12-31-96 OFF DEPR.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
REX NUNN (COMP. COMPONENTS) 0.00 0.00 0.00 300.00
CHS BEK COMPUTER COMPONENTS 0.00 0.00 0.00 731.65
CHS BEK COMPUTER COMPONENTS 0.00 0.00 0.00 567.00
SIEMENS EQUIPMENT 0.00 0.00 0.00 28,294.69
CHIP TECH COMPUTER COMPONENTS 0.00 0.00 0.00 191.50
ZYXEL ISDN ROUTER 0.00 0.00 0.00 51.40
CHS BEK COMPUTER COMPONENTS 0.00 0.00 0.00 161.20
CHS BEK COMPUTER COMPONENTS 0.00 0.00 0.00 100.80
CHS BEK COMPUTER COMPONENTS 0.00 0.00 0.00 186.60
CHS BEK COMPUTER COMPONENTS 0.00 0.00 0.00 86.40
CURLIN INC GRAVITY CONVEYOR 0.00 0.00 0.00 75.81
CURLIN INC 0.00 0.00 0.00 67.41
PACE MACHINERY & TOOL 0.00 0.00 0.00 863.26
COMPAQ COMPUTER AMEX ELECTRONIC EQUIP 0.00 0.00 0.00 358.76
CHS BEK COMPUTER COMPONENTS 0.00 0.00 0.00 101.90
SIEMENS ENERGY SCANNING UNIT 0.00 0.00 0.00 404.07
SIEMENS ENERGY TRIPLE AXIS PC BOARD 0.00 0.00 0.00 393.15
SIEMENS ENERGY TRIPLE AXIS PC BOARD 0.00 0.00 0.00 393.15
CHIPTECH COMPUTER COMPONENTS 0.00 0.00 0.00 153.80
CHS BEK COMPUTER COMPONENTS 0.00 0.00 0.00 157.30
TECH DATA COMPUTER COMPONENTS 0.00 0.00 0.00 43.00
TECH DATA COMPUTER COMPONENTS 0.00 0.00 0.00 73.50
ELECTROVERT (DIFFERENCE TO BE REVERSED LATER) 0.00 0.00 0.00 250.00
SIEMENS FEEDER 0.00 0.00 0.00 1,104.10
CHIPTECH COMPUTER COMPONENTS 0.00 0.00 0.00 326.40
ADVANCE CAM TECH 0.00 0.00 0.00 218.50
BELL ELECTRICAL 0.00 0.00 0.00 249.00
ADVANCE CAM TECH 0.00 0.00 0.00 25.00
COMP SERVICE S. FLA 0.00 0.00 0.00 974.14
DUKANE ULTRASONIC 0.00 0.00 0.00 556.50
DIVERSIFIED POWER SOLUTIONS 0.00 0.00 0.00 245.80
HEWLETT PACKARD 0.00 0.00 0.00 449.96
SIEMENS EQUIP 0.00 0.00 0.00 23,428.33
ELECTROVERT 0.00 0.00 0.00 3,166.75
MPM EQUIP 0.00 0.00 0.00 6,930.06
RADIAL MACHINE FROM DRI 0.00 0.00 0.00 5,700.00
ELECTROVERT USA 0.00 0.00 0.00 213.44
DIVERSIFIED POWER SOLUTIONS 0.00 0.00 0.00 245.80
PACE MACHINERY & TOOL 0.00 0.00 0.00 260.76
CROWN SIMPLIMATIC 0.00 0.00 0.00 1,130.49
CABLESCAN 0.00 0.00 0.00 94.87
DUKANE ULTRASONIC 0.00 0.00 0.00 750.00
ARCO DISTRIB 0.00 0.00 0.00 67.50
CENTRAL AUDIO VISUAL 0.00 0.00 0.00 583.00
RELOCATE NORTH LINE 0.00 0.00 0.00 316.00
BELL ELECTRIC 0.00 0.00 0.00 511.50
MECH PLUS SERVICES 0.00 0.00 0.00 350.00
CROWN SIMPLIMATIC
NATIONAL TIME SYSTEM (TIME CLOCK SYSTEM)
CHIPTECH COMPUTER COMPONENTS
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ASSET ACC DEPR WRITE CURRENT ACC DEPR BOOK
NO. DESCRIPTION 35795 OFF DEPR. 36160 VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REX NUNN (COMP. COMPONENTS) 300.00 600.00 900.00 2,100.00
CHS BEK COMPUTER COMPONENTS 731.65 1,463.30 2,194.95 5,121.55
CHS BEK COMPUTER COMPONENTS 567.00 1,134.00 1,701.00 3,969.00
SIEMENS EQUIPMENT 28,294.69 56,589.67 84,884.06 501,009.66
CHIP TECH COMPUTER COMPONENTS 191.50 383.00 574.50 1,340.50
ZYXEL ISDN ROUTER 51.40 102.80 154.20 359.80
CHS BEK COMPUTER COMPONENTS 161.20 322.40 483.60 1,128.40
CHS BEK COMPUTER COMPONENTS 100.80 201.60 302.40 705.60
CHS BEK COMPUTER COMPONENTS 186.60 373.20 559.80 1,306.20
CHS BEK COMPUTER COMPONENTS 86.40 172.80 259.20 604.80
CURLIN INC GRAVITY CONVEYOR 75.81 151.62 227.43 530.68
CURLIN INC 67.41 134.82 202.23 471.88
PACE MACHINERY & TOOL 863.26 1,726.53 2,589.79 6,042.85
COMPAQ COMPUTER AMEX ELECTRONIC EQUIP 358.76 717.51 1,076.27 2,511.30
CHS BEK COMPUTER COMPONENTS 101.90 203.80 305.70 713.30
SIEMENS ENERGY SCANNING UNIT 404.07 808.14 1,212.22 2,828.50
SIEMENS ENERGY TRIPLE AXIS PC BOARD 393.15 786.31 1,179.46 2,752.08
SIEMENS ENERGY TRIPLE AXIS PC BOARD 393.15 786.31 1,179.46 2,752.08
CHIPTECH COMPUTER COMPONENTS 153.80 307.60 461.40 1,076.60
CHS BEK COMPUTER COMPONENTS 157.30 314.60 471.90 1,101.10
TECH DATA COMPUTER COMPONENTS 43.00 86.00 129.00 301.00
TECH DATA COMPUTER COMPONENTS 73.50 147.00 220.50 514.50
ELECTROVERT (DIFFERENCE TO BE REVERSED LATER) 250.00 500.00 750.00 1,750.00
SIEMENS FEEDER 1,104.10 2,208.19 3,312.29 7,728.67
CHIPTECH COMPUTER COMPONENTS 326.40 652.80 979.20 2,284.80
ADVANCE CAM TECH 218.50 437.00 655.50 1,529.50
BELL ELECTRICAL 249.00 498.00 747.00 1,743.00
ADVANCE CAM TECH 25.00 50.00 75.00 175.00
COMP SERVICE S. FLA 974.14 1,948.28 2,922.42 6,819.99
DUKANE ULTRASONIC 556.50 1,113.00 1,669.50 3,895.50
DIVERSIFIED POWER SOLUTIONS 245.80 491.60 737.40 1,720.60
HEWLETT PACKARD 449.96 899.96 1,349.94 3,149.88
SIEMENS EQUIP 23,428.33 46,856.66 70,285.00 398,281.64
ELECTROVERT 3,166.75 6,333.50 9,500.25 53,834.75
MPM EQUIP 6,930.06 13,860.15 20,790.23 117,811.31
RADIAL MACHINE FROM DRI 5,700.00 11,400.00 17,100.00 96,900.00
ELECTROVERT USA 213.44 426.87 640.31 1,494.05
DIVERSIFIED POWER SOLUTIONS 245.80 491.60 737.40 1,720.60
PACE MACHINERY & TOOL 260.76 521.52 782.28 1,825.32
CROWN SIMPLIMATIC 1,130.49 2,260.98 3,391.47 7,913.43
CABLESCAN 94.87 189.74 284.61 664.09
DUKANE ULTRASONIC 750.00 1,500.00 2,250.00 5,250.00
ARCO DISTRIB 67.50 135.00 202.50 472.50
CENTRAL AUDIO VISUAL 583.00 1,166.00 1,749.00 4,081.00
RELOCATE NORTH LINE 316.00 632.00 948.00 2,212.00
BELL ELECTRIC 511.50 1,023.00 1,534.50 3,580.50
MECH PLUS SERVICES 350.00 700.00 1,050.00 2,450.00
CROWN SIMPLIMATIC 3,367.30 3,367.30 30,305.72
NATIONAL TIME SYSTEM (TIME CLOCK SYSTEM) 825.92 825.92 7,433.28
CHIPTECH COMPUTER COMPONENTS 867.44 867.44 7,806.98
</TABLE>
ACCUMULATED DEPRECIATION ACCT = 1545-0000
<PAGE>
AMITEK DEPRECIATION DETAIL
ELECTRICAL EQUIPMENT
ACCT 1515-0000
AMITEK CORPORATION
DEPRECIATION SCHEDULE BY CATEGORY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
ASSET ACCT DATE LIFE COST OR
NO. DESCRIPTION NO. ACQUIRED METHOD YR/MO BASIS
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SIEMENS (SMT MACHINE) 1515 1/1/98 ST LINE 05/00 5,952.60
BELL ELECTRIC (SMT MACHINE) 1515 2/3/98 ST LINE 05/00 1,075.00
CITICORP LEASING 1515 2/28/98 ST LINE 10/00 140,874.00
SANYO CITCORP (SMT MACHINE) 1515 3/31/98 ST LINE 10/00 365,170.00
CR TECH COPELCO 9055136Q 1515 3/31/98 ST LINE 10/00 105,894.00
CHIPTECH (COMPUTER COMPONENTS) 1515 3/31/98 ST LINE 05/00 2,610.00
INSERTECH (NEW SMT MACHING PARTS & LABOR) 1515 3/31/98 ST LINE 10/00 10,164.18
CHIPTECH (COMPUTER COMPONENTS) 1515 3/31/98 ST LINE 05/00 3,447.00
SIEMENS (NEW SMT MACHINE) 1515 3/31/98 ST LINE 10/00 29,471.32
BELL ELECTRICAL 1515 3/31/98 ST LINE 10/00 3,555.00
SIEMENS (NEW SMT MACHINE) 1515 3/31/98 ST LINE 10/00 15,999.50
COMPUSA (COMPAQ PC) 1515 3/31/98 ST LINE 05/00 2,377.77
RACAL MACHINERY 1515 3/31/98 ST LINE 05/00 18,000.00
SURVEILLANCE ONE 1515 3/31/98 ST LINE 05/00 15,423.00
BELL ELECTRICAL 1515 3/31/98 ST LINE 05/00 2,825.00
MPS (MECHANICAL PLUS SERVICES) TRANSPORT SMT 1515 3/31/98 ST LINE 05/00 3,100.00
1515 3/31/98 ST LINE 10/00 2,706.00
ROBERTS & ASSOCIATES 1515 4/21/98 ST LINE 05/00 8,200.00
SURVEILLANCE ONE 1515 4/2/98 ST LINE 05/00 1,802.00
FION SYSTEK INC. 1515 4/3/98 ST LINE 05/00
TECH DATA 1515 4/7/98 ST LINE 05/00 1,820.00
TECH DATA 1515 4/27/98 ST LINE 05/00 970.00
TECH DATA 1515 4/27/98 ST LINE 05/00 21.00
TECH DATA 1515 4/27/98 ST LINE 05/00 540.00
RACAL DATACOM 1515 5/4/98 ST LINE 05/00 2,000.00
SEIMENS EQUIPMENT (SMT) 1515 5/31/98 ST LINE 05/00 290,871.42
GENRAD EQUIPMENT 1515 5/31/98 ST LINE 10/00 192,481.64
FKN SYSTEK 1515 5/31/98 ST LINE 10/00 (3,450.00)
CABLES TO GO 1515 5/31/98 ST LINE 05/00 31.68
CABLES TO GO 1515 5/31/98 ST LINE 05/00 37.20
TECH DATA 1515 5/31/98 ST LINE 05/00 2,310.00
TECH DATA 1515 5/31/98 ST LINE 05/00 126.00
CHIP TECH 1515 5/31/98 ST LINE 05/00 5,600.00
TECH DATA 1515 5/31/98 ST LINE 05/00 (970.00)
CABLES TO GO 1515 5/31/98 ST LINE 05/00 963.30
CABLES TO GO 1515 5/31/98 ST LINE 05/00 2,265.20
CABLES TO GO 1515 5/31/98 ST LINE 05/00 537.20
CABLES TO GO 1515 5/31/98 ST LINE 05/00 764.00
COMPUTER ASSOCIATES 1515 5/31/98 ST LINE 05/00 795.00
COMPUTER ASSOCIATES 1515 5/31/98 ST LINE 05/00 495.00
ROBERTS & ASSOCIATES 1515 5/31/98 ST LINE 05/00 75.00
DUKANE ULTRASONIC 1515 5/31/98 ST LINE 05/00 8,995.00
DUKANE ULTRASONIC 1515 5/31/98 ST LINE 05/00 740.00
DUKANE ULTRASONIC 1515 5/31/98 ST LINE 05/00 2,200.00
DUKANE ULTRASONIC 1515 5/31/98 ST LINE 05/00 2,205.00
DUKANE ULTRASONIC 1515 5/31/98 ST LINE 05/00 2,170.00
NORTHWEST ANALYTICAL 1515 5/31/98 ST LINE 05/00 3,595.00
AMERICAN EXPRESS 1515 5/31/98 ST LINE 05/00 1,407.17
CABLES TO GO 1515 5/31/98 ST LINE 05/00 92.00
CABLES TO GO 1515 5/31/98 ST LINE 05/00 106.50
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
ASSET ACC DEPR CURRENT ACC DEPR WRITE CURRENT ACC DEPR WRITE
NO. DESCRIPTION 01-01-95 DEPR. 12-31-95 OFF DEPR. 12-31-96 OFF
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SIEMENS (SMT MACHINE)
BELL ELECTRIC (SMT MACHINE)
CITICORP LEASING
SANYO CITCORP (SMT MACHINE)
CR TECH COPELCO 9055136Q
CHIPTECH (COMPUTER COMPONENTS)
INSERTECH (NEW SMT MACHING PARTS & LABOR)
CHIPTECH (COMPUTER COMPONENTS)
SIEMENS (NEW SMT MACHINE)
BELL ELECTRICAL
SIEMENS (NEW SMT MACHINE)
COMPUSA (COMPAQ PC)
RACAL MACHINERY
SURVEILLANCE ONE
BELL ELECTRICAL
MPS (MECHANICAL PLUS SERVICES) TRANSPORT SMT
ROBERTS & ASSOCIATES
SURVEILLANCE ONE
FION SYSTEK INC.
TECH DATA
TECH DATA
TECH DATA
TECH DATA
RACAL DATACOM
SEIMENS EQUIPMENT (SMT)
GENRAD EQUIPMENT
FKN SYSTEK
CABLES TO GO
CABLES TO GO
TECH DATA
TECH DATA
CHIP TECH
TECH DATA
CABLES TO GO
CABLES TO GO
CABLES TO GO
CABLES TO GO
COMPUTER ASSOCIATES
COMPUTER ASSOCIATES
ROBERTS & ASSOCIATES
DUKANE ULTRASONIC
DUKANE ULTRASONIC
DUKANE ULTRASONIC
DUKANE ULTRASONIC
DUKANE ULTRASONIC
NORTHWEST ANALYTICAL
AMERICAN EXPRESS
CABLES TO GO
CABLES TO GO
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
ASSET CURRENT ACC DEPR WRITE CURRENT ACC DEPR BOOK
NO. DESCRIPTION DEPR. 35795 OFF DEPR. 36160 VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SIEMENS (SMT MACHINE) 595.26 595.26 5,357.34
BELL ELECTRIC (SMT MACHINE) 107.50 107.50 967.50
CITICORP LEASING 7,043.70 7,043.70 133,830.30
SANYO CITCORP (SMT MACHINE) 18,258.50 18,258.50 346,911.50
CR TECH COPELCO 9055136Q 5,294.70 5,294.70 100,599.30
CHIPTECH (COMPUTER COMPONENTS) 261.00 261.00 2,349.00
INSERTECH (NEW SMT MACHING PARTS & LABOR) 508.21 508.21 9,655.97
CHIPTECH (COMPUTER COMPONENTS) 344.70 344.70 3,102.30
SIEMENS (NEW SMT MACHINE) 1,473.57 1,473.57 27,997.75
BELL ELECTRICAL 177.75 177.75 3,377.25
SIEMENS (NEW SMT MACHINE) 799.98 799.96 15,199.53
COMPUSA (COMPAQ PC) 237.78 237.78 2,139.99
RACAL MACHINERY 1,800.00 1,800.00 16,200.00
SURVEILLANCE ONE 1,542.30 1,542.30 13,880.70
BELL ELECTRICAL 282.50 282.50 2,542.50
MPS (MECHANICAL PLUS SERVICES) TRANSPORT SMT 155.00 155.00 2,945.00
270.60 270.60 2,435.40
ROBERTS & ASSOCIATES 820.00 820.00 7,380.00
SURVEILLANCE ONE 180.20 180.20 1,621.80
FION SYSTEK INC. 0.00 0.00 0.00
TECH DATA 182.00 182.00 1,638.00
TECH DATA 97.00 97.00 873.00
TECH DATA 2.10 2.10 18.90
TECH DATA 54.00 54.00 486.00
RACAL DATACOM 200.00 200.00 1,800.00
SEIMENS EQUIPMENT (SMT) 14,543.57 14,543.57 276,327.85
GENRAD EQUIPMENT 9,623.08 9,623.08 182,838.58
FKN SYSTEK (345.00) (345.00) (3,105.00)
CABLES TO GO 3.17 3.17 28.51
CABLES TO GO 3.72 3.72 33.48
TECH DATA 231.00 231.00 2,079.00
TECH DATA 12.60 12.60 113.40
CHIP TECH 560.00 560.00 5,040.00
TECH DATA (97.00) (97.00) (873.00)
CABLES TO GO 96.33 96.33 866.97
CABLES TO GO 226.52 226.52 2,038.68
CABLES TO GO 53.72 53.72 483.48
CABLES TO GO 76.40 76.40 687.60
COMPUTER ASSOCIATES 79.50 79.50 715.50
COMPUTER ASSOCIATES 49.50 49.50 445.50
ROBERTS & ASSOCIATES 7.50 7.50 87.50
DUKANE ULTRASONIC 899.50 899.50 8,095.50
DUKANE ULTRASONIC 74.00 74.00 666.00
DUKANE ULTRASONIC 220.00 220.00 1,960.00
DUKANE ULTRASONIC 220.50 220.50 1,964.50
DUKANE ULTRASONIC 271.00 271.00 2,439.00
NORTHWEST ANALYTICAL 359.50 359.50 3,325.50
AMERICAN EXPRESS 140.72 140.72 1,266.45
CABLES TO GO 9.20 9.20 82.80
CABLES TO GO 10.65 10.65 95.85
</TABLE>
ACCUMULATED DEPRECIATION ACCT = 1545-0000
<PAGE>
AMITEK DEPRECIATION DETAIL
ELECTRICAL EQUIPMENT
ACCT 1515-0000
AMITEK CORPORATION
DEPRECIATION SCHEDULE BY CATEGORY
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
ASSET ACCT DATE LIFE COST OR
NO. DESCRIPTION NO. ACQUIRED METHOD YR/MO BASIS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NATIONAL TIME 1515 6/30/98 ST LINE 05/00 3,030.86
COMP EQUIP DELL FINANCIAL SERVICE 1515 6/30/98 ST LINE 05/00 43,246.25
KURT WHITLK 1515 6/30/98 ST LINE 05/00 105,205.00
CHIPTECH 1515 6/30/98 ST LINE 05/00 6,495.00
CHIPTECH 1515 6/30/98 ST LINE 05/00 200.00
CABLES TO GO 1515 6/30/98 ST LINE 05/00 174.15
CABLES TO GO 1515 6/30/98 ST LINE 05/00 26.86
MULTISYSTEMS BAR CODE SOLUTIONS 1515 6/30/98 ST LINE 05/00 3,699.00
TECH DATA 1515 6/30/98 ST LINE 05/00 1,377.32
TECH DATA 1515 6/30/98 ST LINE 05/00 848.84
TECH DATA 1515 6/30/98 ST LINE 05/00 199.84
TECH DATA 1515 6/30/98 ST LINE 05/00 275.04
PC CONNECTION 1515 6/30/98 ST LINE 05/00 399.00
PC CONNECTION 1515 6/30/98 ST LINE 05/00 2,258.00
HR ENTERPRISES USA 1515 6/30/98 ST LINE 05/00 3,072.80
HR ENTERPRISES USA 1515 6/30/98 ST LINE 05/00 65.20
HR ENTERPRISES USA 1515 6/30/98 ST LINE 05/00 984.54
HR ENTERPRISES USA 1515 6/30/98 ST LINE 05/00 102.00
HR ENTERPRISES USA 1515 6/30/98 ST LINE 05/00 253.57
BAR CODE ASSOCIATES 1515 6/30/98 ST LINE 05/00 2,390.00
BAR CODE ASSOCIATES 1515 6/30/98 ST LINE 05/00 143.40
HR ENTERPRISES USA 1515 6/30/98 ST LINE 05/00 1.72
SANYP NSA 1515 6/30/98 ST LINE 05/00 12,540.00
CHIPTECH 1515 6/30/98 ST LINE 05/00 2,640.00
CHIPTECH 1515 6/30/98 ST LINE 05/00 610.00
CHIPTECH 1515 6/30/98 ST LINE 05/00 45.00
PC CONNECTIONS 1515 6/30/98 ST LINE 05/00 499.00
PC CONNECTIONS 1515 6/30/98 ST LINE 05/00 3,999.00
CITICORP 1515 7/30/98 ST LINE 10/00 49,364.20
PC CONNECTION 1515 7/30/98 ST LINE 05/00 (89.85)
PC CONNECTION 1515 7/30/98 ST LINE 05/00 (6.95)
CHIPTECH 1515 7/30/98 ST LINE 05/00 3,729.00
CHIPTECH 1515 7/30/98 ST LINE 05/00 576.00
CHIPTECH 1515 7/30/98 ST LINE 05/00 590.00
ELECTROVERT USA 1515 7/30/98 ST LINE 05/00 99,600.00
EMC GLOBAL TECH 1515 7/30/98 ST LINE 05/00 15,100.00
EMC GLOBAL TECH 1515 7/30/98 ST LINE 05/00 550.00
RON GO FORTH 1515 7/30/98 ST LINE 05/00 2,200.00
MOTOROLA MFG SYSTEMS 1515 8/30/98 ST LINE 10/00 294,320.00
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 3,790.00
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 725.00
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 1,750.00
AC-1000 CART FEEDER FIR SANYO TCM 1800 1515 8/30/98 ST LINE 05/00 2,780.00
CENTER RAIL SUPPORT OMNI FLOW 1515 8/30/98 ST LINE 05/00 8,034.00
RDC-2 DIGITAL CAMERA 1515 8/30/98 ST LINE 05/00 599.00
AC ADAPTER FOR CAMERA 1515 8/30/98 ST LINE 05/00 29.95
ATA FLASH CARD 1515 8/30/98 ST LINE 05/00 199.95
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 439.95
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 3,762.00
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 915.00
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
ASSET ACC DEPR CURRENT ACC DEPR WRITE CURRENT ACC DEPR WRITE
NO. DESCRIPTION 01-01-95 DEPR. 12-31-95 OFF DEPR. 12-31-96 OFF
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NATIONAL TIME
COMP EQUIP DELL FINANCIAL SERVICE
KURT WHITLK
CHIPTECH
CHIPTECH
CABLES TO GO
CABLES TO GO
MULTISYSTEMS BAR CODE SOLUTIONS
TECH DATA
TECH DATA
TECH DATA
TECH DATA
PC CONNECTION
PC CONNECTION
HR ENTERPRISES USA
HR ENTERPRISES USA
HR ENTERPRISES USA
HR ENTERPRISES USA
HR ENTERPRISES USA
BAR CODE ASSOCIATES
BAR CODE ASSOCIATES
HR ENTERPRISES USA
SANYP NSA
CHIPTECH
CHIPTECH
CHIPTECH
PC CONNECTIONS
PC CONNECTIONS
CITICORP
PC CONNECTION
PC CONNECTION
CHIPTECH
CHIPTECH
CHIPTECH
ELECTROVERT USA
EMC GLOBAL TECH
EMC GLOBAL TECH
RON GO FORTH
MOTOROLA MFG SYSTEMS
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
AC-1000 CART FEEDER FIR SANYO TCM 1800
CENTER RAIL SUPPORT OMNI FLOW
RDC-2 DIGITAL CAMERA
AC ADAPTER FOR CAMERA
ATA FLASH CARD
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
ASSET CURRENT ACC DEPR WRITE CURRENT ACC DEPR BOOK
NO. DESCRIPTION DEPR. 35795 OFF DEPR. 36160 VALUE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NATIONAL TIME 303.09 303.09 2,727.77
COMP EQUIP DELL FINANCIAL SERVICE 4,324.63 4,324.63 38,921.63
KURT WHITLK 10,520.50 10,520.50 94,684.50
CHIPTECH 649.50 649.50 5,845.50
CHIPTECH 20.00 20.00 180.00
CABLES TO GO 17.42 17.42 156.74
CABLES TO GO 2.69 2.69 24.17
MULTISYSTEMS BAR CODE SOLUTIONS 369.90 369.90 3,329.10
TECH DATA 137.73 137.73 1,239.59
TECH DATA 84.88 84.88 763.96
TECH DATA 19.96 19.96 179.86
TECH DATA 27.50 27.50 371.50
PC CONNECTION 39.90 39.90 247.54
PC CONNECTION 225.80 225.80 359.10
HR ENTERPRISES USA 307.28 307.28 2,032.20
HR ENTERPRISES USA 6.52 6.52 2,765.52
HR ENTERPRISES USA 98.45 98.45 56.68
HR ENTERPRISES USA 10.20 10.20 888.09
HR ENTERPRISES USA 25.36 25.36 91.80
BAR CODE ASSOCIATES 239.00 239.00 228.21
BAR CODE ASSOCIATES 14.34 14.34 2,151.00
HR ENTERPRISES USA 0.17 0.17 129.06
SANYP NSA 1,254.00 1,254.00 1.55
CHIPTECH 264.00 264.00 11,266.00
CHIPTECH 61.00 61.00 2,376.00
CHIPTECH 4.50 4.50 549.00
PC CONNECTIONS 49.90 49.90 40.50
PC CONNECTIONS 399.90 399.90 449.10
CITICORP 2,468.21 2,468.21 3,599.10
PC CONNECTION (8.99) (8.99) 46,895.99
PC CONNECTION (0.70) (0.70) (80.87)
CHIPTECH 372.90 372.90 (6.26)
CHIPTECH 57.60 57.60 3,356.10
CHIPTECH 59.00 59.00 518.40
ELECTROVERT USA 9,960.00 9,960.00 531.00
EMC GLOBAL TECH 1,510.00 1,510.00 89,640.00
EMC GLOBAL TECH 55.00 55.00 13,590.00
RON GO FORTH 220.00 220.00 294,100.00
MOTOROLA MFG SYSTEMS 14,716.00 14,716.00 495.00
COMPUTER EQUIPMENT 379.00 379.00 1,960.00
COMPUTER EQUIPMENT 72.50 72.50 279,604.00
COMPUTER EQUIPMENT 175.00 175.00 3,411.00
AC-1000 CART FEEDER FIR SANYO TCM 1800 278.00 278.00 652.50
CENTER RAIL SUPPORT OMNI FLOW 803.40 803.40 1,575.00
RDC-2 DIGITAL CAMERA 59.90 59.90 2,502.00
AC ADAPTER FOR CAMERA 3.00 3.00 7,230.60
ATA FLASH CARD 20.00 20.00 26.96
COMPUTER EQUIPMENT 44.00 44.00 395.96
COMPUTER EQUIPMENT 376.20 376.20 3,385.80
COMPUTER EQUIPMENT 91.50 91.50 832.50
</TABLE>
ACCUMULATED DEPRECIATION ACCT = 1545-0000
<PAGE>
AMITEK DEPRECIATION DETAIL
ELECTRICAL EQUIPMENT
ACCT 1515-0000
AMITEK CORPORATION
DEPRECIATION SCHEDULE BY CATEGORY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET ACCT DATE LIFE COST OR
NO. DESCRIPTION NO. ACQUIRED METHOD YR/MO BASIS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 3,300.00
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 117.00
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 1,926.60
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 528.00
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 440.00
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 680.00
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 156.00
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 1,975.00
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 4,375.00
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 599.97
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 479.98
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 7,995.00
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 295.00
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 2,995.00
COMPUTER EQUIPMENT 1515 8/30/98 ST LINE 05/00 295.00
SUPERMOLE DELUXE KIT 1515 8/30/98 ST LINE 05/00 5,495.00
BATTERY PACK 1515 8/30/98 ST LINE 05/00 219.00
SAMSUNG MACHINE 1515 9/30/98 ST LINE 05/00 18,105.00
SIEMENS 1515 9/30/98 ST LINE 05/00 650.00
CHIPTECH 1515 9/30/98 ST LINE 05/00 50.00
CHIPTECH 1515 9/30/98 ST LINE 05/00 90.00
CHIPTECH 1515 9/30/98 ST LINE 05/00 4,398.00
STARBOARD TECH 1515 9/30/98 ST LINE 05/00 5,640.00
AIRVAC 1515 10/31/98 ST LINE 05/00 6,151.45
MOTOROLA MFG 1515 10/31/98 ST LINE 05/00 3,187.00
MOTOROLA MFG 1515 10/31/98 ST LINE 05/00 400.00
BELL ELECTRICAL 1515 10/31/98 ST LINE 05/00 2,360.00
BELL ELECTRICAL 1515 10/31/98 ST LINE 05/00 425.00
CHIPTECH 1515 10/31/98 ST LINE 05/00 49,966.00
CHIPTECH 1515 10/31/98 ST LINE 05/00 1,975.00
CHIPTECH 1515 10/31/98 ST LINE 05/00 4,375.00
CHIPTECH 1515 10/31/98 ST LINE 05/00 12.00
CHIPTECH 1515 10/31/98 ST LINE 05/00 3,970.00
CHIPTECH 1515 10/31/98 ST LINE 05/00 480.00
CHIPTECH 1515 10/31/98 ST LINE 05/00 2,100.00
BELL ELECTRICAL 1515 10/31/98 ST LINE 05/00 2,410.00
JEMICAL SALE OF EQUIPMENT 1515 11/30/98 ST LINE 05/00 $ (2,000.00)
ENTERPRISE 530660 TECH BENCH 30"X60" 1515 11/30/98 ST LINE 05/00 $ 3,614.00
ENTERPRISE 515600 RISER SHELF 15"X60" 1515 11/30/98 ST LINE 05/00 $ 2,117.00
ENTERPRISE 10113L TABLE TOP 29"X61-1/4" 1515 11/30/98 ST LINE 05/00 $ 218.82
ENTERPRISE 10113R TABLE TOP 29"X61-1/4" 1515 11/30/98 ST LINE 05/00 $ 218.82
ENTERPRISE 101113 TABLE TOP 29"X61" 1515 11/30/98 ST LINE 05/00 $ 211.38
ENTERPRISE 10248 - UNDERSHELF LIGHT 48" 1515 11/30/98 ST LINE 05/00 $ 819.35
ENTERPRISE SALES TAX 1515 11/30/98 ST LINE 05/00 $ 420.00
RECLASS SIEMANS 1515 12/31/98 ST LINE 05/00 $ 45,485.00
BELL ELECTRICAL 1515 12/31/98 ST LINE 05/00 $ 625.00
VIDEOJET SYSTEMS INTL 1515 12/31/98 ST LINE 05/00 $ 9,280.00
VIDEOJET SYSTEMS INTL 1515 12/31/98 ST LINE 05/00 $ 199.00
VIDEOJET SYSTEMS INTL 1515 12/31/98 ST LINE 05/00 $ 210.00
VIDEOJET SYSTEMS INTL 1515 12/31/98 ST LINE 05/00 $ 1,890.00
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
ASSET ACC DEPR CURRENT ACC DEPR WRITE CURRENT ACC DEPR WRITE
NO. DESCRIPTION 01-01-95 DEPR. 12-31-95 OFF DEPR. 12-31-96 OFF
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
COMPUTER EQUIPMENT
SUPERMOLE DELUXE KIT
BATTERY PACK
SAMSUNG MACHINE
SIEMENS
CHIPTECH
CHIPTECH
CHIPTECH
STARBOARD TECH
AIRVAC
MOTOROLA MFG
MOTOROLA MFG
BELL ELECTRICAL
BELL ELECTRICAL
CHIPTECH
CHIPTECH
CHIPTECH
CHIPTECH
CHIPTECH
CHIPTECH
CHIPTECH
BELL ELECTRICAL
JEMICAL SALE OF EQUIPMENT
ENTERPRISE 530660 TECH BENCH 30"X60"
ENTERPRISE 515600 RISER SHELF 15"X60"
ENTERPRISE 10113L TABLE TOP 29"X61-1/4"
ENTERPRISE 10113R TABLE TOP 29"X61-1/4"
ENTERPRISE 101113 TABLE TOP 29"X61"
ENTERPRISE 10248 - UNDERSHELF LIGHT 48"
ENTERPRISE SALES TAX
RECLASS SIEMANS
BELL ELECTRICAL
VIDEOJET SYSTEMS INTL
VIDEOJET SYSTEMS INTL
VIDEOJET SYSTEMS INTL
VIDEOJET SYSTEMS INTL
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
ASSET CURRENT ACC DEPR WRITE CURRENT ACC DEPR BOOK
NO. DESCRIPTION DEPR. 35795 OFF DEPR. 36160 VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMPUTER EQUIPMENT 330.00 330.00 2,970.00
COMPUTER EQUIPMENT 11.70 11.70 105.30
COMPUTER EQUIPMENT 192.68 192.68 1,733.94
COMPUTER EQUIPMENT 52.80 52.80 475.20
COMPUTER EQUIPMENT 44.00 44.00 396.00
COMPUTER EQUIPMENT 68.00 68.00 612.00
COMPUTER EQUIPMENT 15.60 15.60 140.40
COMPUTER EQUIPMENT 197.50 197.50 1,777.50
COMPUTER EQUIPMENT 437.50 437.50 3,937.50
COMPUTER EQUIPMENT 60.00 60.00 539.97
COMPUTER EQUIPMENT 48.00 48.00 431.98
COMPUTER EQUIPMENT 799.50 799.50 7,195.50
COMPUTER EQUIPMENT 29.50 29.50 265.50
COMPUTER EQUIPMENT 299.50 299.50 2,695.50
COMPUTER EQUIPMENT 29.50 29.50 265.50
SUPERMOLE DELUXE KIT 549.50 549.50 4,945.20
BATTERY PACK 21.90 21.90 197.10
SAMSUNG MACHINE 905.25 905.25 17,199.75
SIEMENS 65.00 65.00 585.00
CHIPTECH 5.00 5.00 45.00
CHIPTECH 9.00 9.00 81.00
CHIPTECH 439.80 439.80 3,958.20
STARBOARD TECH 564.00 564.00 5,076.00
AIRVAC 615.15 615.15 5,536.31
MOTOROLA MFG 318.70 318.70 2,868.30
MOTOROLA MFG 40.00 40.00 360.00
BELL ELECTRICAL 236.00 236.00 2,124.00
BELL ELECTRICAL 42.50 42.50 382.50
CHIPTECH 499.60 499.60 4,496.40
CHIPTECH 197.50 197.50 1,777.50
CHIPTECH 437.50 437.50 3,937.50
CHIPTECH 1.20 1.20 10.80
CHIPTECH 397.00 397.00 3,573.00
CHIPTECH 48.00 48.00 432.00
CHIPTECH 210.00 210.00 1,890.00
BELL ELECTRICAL 241.00 241.00 2,169.00
JEMICAL SALE OF EQUIPMENT (200.00) (200.00) (1,800.00)
ENTERPRISE 530660 TECH BENCH 30"X60" 361.40 361.40 3,252.60
ENTERPRISE 515600 RISER SHELF 15"X60" 211.76 211.76 1,905.60
ENTERPRISE 10113L TABLE TOP 29"X61-1/4" 21.88 21.88 196.94
ENTERPRISE 10113R TABLE TOP 29"X61-1/4" 21.88 21.88 196.94
ENTERPRISE 101113 TABLE TOP 29"X61" 21.14 21.14 190.24
ENTERPRISE 10248 - UNDERSHELF LIGHT 48" 61.94 61.94 557.42
ENTERPRISE SALES TAX 42.00 42.00 378.00
RECLASS SIEMANS 4,548.50 4,548.50 40,936.50
BELL ELECTRICAL 62.50 62.50 562.50
VIDEOJET SYSTEMS INTL 928.00 928.00 8,352.00
VIDEOJET SYSTEMS INTL 19.90 19.90 179.10
VIDEOJET SYSTEMS INTL 21.00 21.00 189.00
VIDEOJET SYSTEMS INTL 189.00 189.00 1,701.00
</TABLE>
ACCUMULATED DEPRECIATION ACCT = 1545-0000
<PAGE>
AMITEK DEPRECIATION DETAIL
ELECTRICAL EQUIPMENT
ACCT 1515-0000
AMITEK CORPORATION
DEPRECIATION SCHEDULE BY CATEGORY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET ACCT DATE LIFE COST OR ACC DEPR CURRENT
NO. DESCRIPTION NO. ACQUIRED METHOD YR/MO BASIS 01-01-95 DEPR.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
VIDEOJET SYSTEMS INTL 1515 12/31/96 ST LINE 05/00 $ 1,322.06
MARSHALL INDUSTRIES 1515 12/31/96 ST LINE 05/00 $ 965.00
VIDEOJET SYSTEMS INTL 1515 12/31/96 ST LINE 05/00 $ (627.34)
OKI TELECOM 1515 12/31/96 ST LINE 05/00 $ 995.00
OKI TELECOM 1515 12/31/96 ST LINE 05/00 $ 995.00
OKI TELECOM 1515 12/31/96 ST LINE 05/00 $ 995.00
5,034,582.98
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET ACC DEPR WRITE CURRENT ACC DEPR WRITE CURRENT
NO. DESCRIPTION 12-31-95 OFF DEPR. 12-31-96 OFF DEPR.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
VIDEOJET SYSTEMS INTL
MARSHALL INDUSTRIES
VIDEOJET SYSTEMS INTL
OKI TELECOM
OKI TELECOM
OKI TELECOM
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
ASSET ACC DEPR WRITE CURRENT ACC DEPR BOOK
NO. DESCRIPTION 35795 OFF DEPR. 36160 VALUE
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
VIDEOJET SYSTEMS INTL 132.21 132.21 1,189.87
MARSHALL INDUSTRIES 96.50 96.50 868.50
VIDEOJET SYSTEMS INTL (62.73) (62.73) (564.61)
OKI TELECOM 99.50 99.50 895.50
OKI TELECOM 99.50 99.50 895.50
OKI TELECOM 99.50 99.50 895.50
695,972.72 6,487.05 482,411.05 1,105,210.84
</TABLE>
ACCUMULATED DEPRECIATION ACCT = 1545-0000
<PAGE>
AMITEK DEPRECIATION DETAIL
PHONE EQUIPMENT
ACCT 1516
AMITEK CORPORATION
DEPRECIATION SCHEDULE BY CATEGORY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET ACCT DATE LIFE COST OR ACC DEPR CURRENT
NO. DESCRIPTION NO. ACQUIRED METHOD YR/MO BASIS 01-01-95 DEPR.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PHONE SYSTEM 1516 3/31/96 ST LINE 07/00 34,820.44
PHONE SYSTEM 1516 1/15/97 ST LINE 07/00 4,641.19
PHONE SYSTEM 1516 1/1/98 ST LINE 07/00 7,632.00
PHONE SYSTEM 1516 3/1/98 ST LINE 07/00 1,144.80
PHONE SYSTEM 1516 3/1/98 ST LINE 07/00 1,144.80
PHONE SYSTEM 1516 3/1/98 ST LINE 07/00 538.62
PHONE SYSTEM 1516 3/1/98 ST LINE 07/00 920.08
PHONE SYSTEM 1516 7/1/98 ST LINE 07/00 1,418.28
PHONE SYSTEM 1516 7/1/98 ST LINE 07/00 373.12
PHONE SYSTEM 1516 7/1/98 ST LINE 07/00 1,852.88
PHONE SYSTEM 1516 7/1/98 ST LINE 07/00 1,584.70
PHONE SYSTEM 1516 9/3/98 ST LINE 07/00 2,033.08
PHONE SYSTEM 1516 10/1/98 ST LINE 07/00 1,684.87
PHONE SYSTEM 1516 10/1/98 ST LINE 07/00 326.48
PHONE SYSTEM 1516 10/1/98 ST LINE 07/00 475.41
60,590.75
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET ACC DEPR WRITE CURRENT ACC DEPR WRITE CURRENT
NO. DESCRIPTION 12-31-95 OFF DEPR. 12-31-96 OFF DEPR.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PHONE SYSTEM 2,487.17 2,487.17 4,974.35
PHONE SYSTEM 331.51
PHONE SYSTEM
PHONE SYSTEM
PHONE SYSTEM
PHONE SYSTEM
PHONE SYSTEM
PHONE SYSTEM
PHONE SYSTEM
PHONE SYSTEM
PHONE SYSTEM
PHONE SYSTEM
PHONE SYSTEM
PHONE SYSTEM
PHONE SYSTEM
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
ASSET ACC DEPR WRITE CURRENT ACC DEPR BOOK
NO. DESCRIPTION 35795 OFF DEPR. 36160 VALUE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PHONE SYSTEM 7,461.52 4,974.35 12,435.87 22,384.57
PHONE SYSTEM 331.51 663.03 994.54 3,646.65
PHONE SYSTEM 545.14 545.14 7,066.86
PHONE SYSTEM 81.77 81.77 1,063.03
PHONE SYSTEM 81.77 81.77 1,063.03
PHONE SYSTEM 38.47 38.47 500.15
PHONE SYSTEM 65.72 65.72 854.36
PHONE SYSTEM 101.31 101.31 1,316.97
PHONE SYSTEM 26.65 26.65 346.47
PHONE SYSTEM 132.35 132.35 1,720.53
PHONE SYSTEM 113.19 113.19 1,471.51
PHONE SYSTEM 145.22 145.22 1,887.86
PHONE SYSTEM 120.35 120.35 1,564.52
PHONE SYSTEM 23.32 23.32 303.16
PHONE SYSTEM 33.96 33.96 441.45
7,793.03 7,146.60 14,939.63 45,651.12
</TABLE>
ACCUMULATED DEPRECIATION ACCT = 1517-0000
<PAGE>
AMITEK DEPRECIATION DETAIL
FURNITURE AND FIXTURES
ACCT 1510
AMITEK CORPORATION
DEPRECIATION SCHEDULE BY CATEGORY
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
ASSET ACCT DATE LIFE COST OR ACC DEPR CURRENT ACC DEPR WRITE
NO. DESCRIPTION NO. ACQUIRED METHOD YR/MO BASIS 01-01-95 DEPR. 12-31-95 OFF
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CARPET 1510 12-03-92 200% DB 07/00S 750.00 381.12 52.70 433.82
FURNITURE AND FIXTURES 1510 01-31-93 ST LINE 05/00 546.00 163.80 109.20 273.00
FURNITURE/FIXTURES ADDS-1994 1510 06-30-94 ST LINE 07/00 38,214.42 2,729.60 5,459.20 8,188.80
FURNITURE/FIXTURES ADDS-1995 1510 06-30-95 ST LINE 07/00 13,315.18 0.00 964.11 964.11
FURNITURE/FIXTURES ADDS-1996 1510 01-15-96 ST LINE 07/00 2,778.19 0.00 0.00
FURNITURE/FIXTURES ADDS-1997 1510 1/15/97 ST LINE 07/00 30,612.40 86,216.19
STARBOARD TECHNOLOGY 1510 5/4/98 ST LINE 07/00 270.00
STARBOARD TECHNOLOGY 1510 5/4/98 ST LINE 07/00 16.20
STARBOARD TECHNOLOGY 1510 5/4/98 ST LINE 07/00 540.00
STARBOARD TECHNOLOGY 1510 5/4/98 ST LINE 07/00 32.40
SARRAFF & SONS 1510 5/16/98 ST LINE 07/00 999.60
SARRAFF & SONS 1510 5/16/98 ST LINE 07/00 4,536.00
SARRAFF & SONS 1510 5/16/98 ST LINE 07/00 148.68
SARRAFF & SONS 1510 5/16/98 ST LINE 07/00 369.48
93,128.55
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET CURRENT ACC DEPR WRITE CURRENT ACC DEPR WRITE CURRENT ACC DEPR BOOK
NO. DESCRIPTION DEPR. 12-31-96 OFF DEPR. 35795 OFF DEPR. 36160 VALUE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CARPET 90.34 524.16 53.57 577.73 172.27 750.00 (0.00)
FURNITURE AND FIXTURES 109.20 382.20 39.00 421.20 109.20 530.40 15.60
FURNITURE/FIXTURES ADDS-1994 5,459.20 13,648.00 2,729.60 15,001.62 5,459.20 20,460.82 17,753.60
FURNITURE/FIXTURES ADDS-1995 1,902.17 2,866.28 1,902.17 4,768.45 1,902.17 6,670.62 6,644.56
FURNITURE/FIXTURES ADDS-1996 396.88 396.88 198.44 595.32 396.88 992.21 1,785.98
FURNITURE/FIXTURES ADDS-1997 2,186.60 2,186.60 2,186.60 4,373.20 25,737.52 4,373.20 8,746.40 21,866.00
STARBOARD TECHNOLOGY 19.29 19.29 250.71
STARBOARD TECHNOLOGY 1.16 1.16 15.04
STARBOARD TECHNOLOGY 38.57 38.57 501.43
STARBOARD TECHNOLOGY 2.31 2.31 30.09
SARRAFF & SONS 71.40 71.40 928.20
SARRAFF & SONS 324.00 324.00 4,212.00
SARRAFF & SONS 10.62 10.62 138.06
SARRAFF & SONS 26.39 26.39 343.09
25,737.52 12,906.67 38,644.19
</TABLE>
ACCUMULATED DEPRECIATION ACCT = 1520-0000
<PAGE>
AMITEK DEPRECIATION DETAIL
LEASEHOLD IMPROVEMENTS
ACCT 1550
AMITEK CORPORATION
DEPRECIATION SCHEDULE BY CATEGORY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
ASSET ACCT DATE LIFE COST OR ACC DEPR CURRENT ACC DEPR WRITE
NO. DESCRIPTION NO. ACQUIRED METHOD YR/MO BASIS 01-01-95 DEPR. 12-31-95 OFF
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LEASEHOLD IMPROVEMENTS 1550 06/30/95 ST LINE 07/00 26,632.40 341.44 341.44
LEASEHOLD IMPROVEMENTS 1550 1/15/97 ST LINE 07/00 11,598.32
STRZELECKI 1550 1/15/97 ST LINE 07/00 725.00
LIGHTING FIXTURE 1550 4/1/98 ST LINE 07/00 3,525.00
HIGH BAY LIGHTING 1550 5/1/98 ST LINE 07/00 2,115.00
LIGHTING FIXTURES PURCHASING 1550 6/1/98 ST LINE 07/00 2,570.00
STRZELECKI 1550 6/1/98 ST LINE 07/00 1,460.00
STRZELECKI 1550 7/1/99 ST LINE 07/00 2,920.00
ROOF WORK A/C UNIT 1550 7/1/98 ST LINE 07/00 2,400.00
L/H IMPROVEMENT (NEED DETAIL) 1550 7/1/98 ST LINE 07/00 932.80
INSTALL NEW A/C 1550 7/1/98 ST LINE 07/00 23,150.00
SCREEN BUILDERS 1550 8/1/98 ST LINE 07/00 3,400.00
STRZELECKI 1550 8/1/98 ST LINE 07/00 2,765.00
STRZELECKI 1550 8/1/98 ST LINE 07/00 665.00
SCREEN BUILDERS 1550 8/1/98 ST LINE 07/00 15,314.00
STRZELECKI 1550 8/1/98 ST LINE 07/00 665.00
STRZELECKI 1550 8/1/98 ST LINE 07/00 2,125.00
LEES HOUSE OF RUGS 1550 8/1/98 ST LINE 07/00 789.76
FANS & DUCTWORK 1550 8/1/98 ST LINE 07/00 3,340.00
ELECTRICAL (NEW BATHROOM) 1550 8/1/98 ST LINE 07/00 120.00
WALDO GUY 1550 9/1/98 ST LINE 07/00 2,000.00
SCREEN BUILDERS 1550 9/1/98 ST LINE 07/00 14,971.00
STRZELECKI 1550 9/1/98 ST LINE 07/00 1,062.50
SCREEN BUILDERS 1550 9/1/98 ST LINE 07/00 3,743.00
SOUTHERN AWNING 1550 9/1/98 ST LINE 07/00 2,185.00
BOLT FIRE PROTECTION 1550 9/1/98 ST LINE 07/00 756.00
STRZELECKI 1550 9/1/98 ST LINE 07/00 1,062.50
LEES HOUSE OF RUGS 1550 9/1/98 ST LINE 07/00 146.55
BELL ELECTRICAL 1550 9/1/98 ST LINE 07/00 1,875.00
BELL ELECTRICAL 1550 9/1/98 ST LINE 07/00 6,275.00
MECH SERVICE PLUS 1550 9/1/98 ST LINE 07/00 3,600.00
M14CHEE FILTER 1550 9/1/98 ST LINE 07/00 194.28
MECH SERVICE PLUS 1550 9/1/98 ST LINE 07/00 6,000.00
BELL ELECTRICAL 1550 9/1/98 ST LINE 07/00 13,755.00
WALDO GUY 1550 10/1/98 ST LINE 07/00 2,000.00
HIGH REACH 1550 10/1/98 ST LINE 07/00 481.77
WIRE PARTITION 1550 10/1/98 ST LINE 07/00 1,169.18
L/H IMPROVEMENT (NEED DETAIL) 1550 10/1/98 ST LINE 07/00 6,440.00
HIGH REACH 1550 11/1/98 ST LINE 07/00 402.27
HIGH REACH 1550 12/1/98 ST LINE 07/00 560.28
BELL ELECTRICAL 1550 12/1/98 ST LINE 07/00 230.00
BELL ELECTRICAL 1550 12/1/98 ST LINE 07/00 325.00
BELL ELECTRICAL 1550 12/1/98 ST LINE 07/00 1,150.00
177,596.61
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET CURRENT ACC DEPR WRITE CURRENT ACC DEPR WRITE CURRENT ACC DEPR BOOK
NO. DESCRIPTION DEPR. 12-31-96 OFF DEPR. December-97 OFF DEPR. December-97 VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LEASEHOLD IMPROVEMENTS 682.88 1,024.32 682.88 1,707.21 11,608.99 13,316.20 13,316.20
LEASEHOLD IMPROVEMENTS 148.70 148.70 1,656.90 1,805.90 9,792.42
STRZELECKI 51.79 51.79 673.21
LIGHTING FIXTURE 251.79 251.79 3,273.21
HIGH BAY LIGHTING 151.07 151.07 1,963.93
LIGHTING FIXTURES PURCHASING 183.57 183.57 2,386.43
STRZELECKI 104.29 104.29 1,355.71
STRZELECKI 206.57 206.57 2,711.43
ROOF WORK A/C UNIT 171.43 171.43 2,228.57
L/H IMPROVEMENT (NEED DETAIL) 66.63 66.63 866.17
INSTALL NEW A/C 1,653.57 1,653.57 21,496.43
SCREEN BUILDERS 242.86 242.86 3,157.14
STRZELECKI 197.50 197.50 2,567.50
STRZELECKI 47.50 47.50 617.50
SCREEN BUILDERS 1,093.86 1,093.86 14,220.14
STRZELECKI 47.50 47.50 617.50
STRZELECKI 151.79 151.79 1,973.21
LEES HOUSE OF RUGS 56.41 56.41 733.35
FANS & DUCTWORK 238.57 238.57 3,101.43
ELECTRICAL (NEW BATHROOM) 8.57 8.57 111.43
WALDO GUY 142.86 142.86 1,857.14
SCREEN BUILDERS 1,069.36 1,069.36 13,901.64
STRZELECKI 75.89 75.89 986.61
SCREEN BUILDERS 267.36 267.36 3,475.64
SOUTHERN AWNING 156.07 156.07 2,028.93
BOLT FIRE PROTECTION 54.00 54.00 702.00
STRZELECKI 75.89 75.89 986.61
LEES HOUSE OF RUGS 10.47 10.47 136.08
BELL ELECTRICAL 133.93 133.93 1,741.07
BELL ELECTRICAL 448.21 448.21 5,826.79
MECH SERVICE PLUS 257.14 257.14 3,342.86
M14CHEE FILTER 13.88 13.88 180.40
MECH SERVICE PLUS 428.57 428.57 5,571.43
BELL ELECTRICAL 962.50 962.50 12,772.50
WALDO GUY 142.86 142.86 1,857.14
HIGH REACH 34.41 34.41 447.36
WIRE PARTITION 83.51 83.51 1,085.67
L/H IMPROVEMENT (NEED DETAIL) 460.00 460.00 5,980.00
HIGH REACH 28.73 28.73 373.54
HIGH REACH 40.02 40.02 520.26
BELL ELECTRICAL 16.43 16.43 213.57
BELL ELECTRICAL 23.21 23.21 301.79
BELL ELECTRICAL 82.14 82.14 1,067.86
1,855.90 23,220.60 25,076.50
</TABLE>
ACCUMULATED DEPRECIATION ACCT = 1555-0000
<PAGE>
AMITEK DEPRECIATION DETAIL
ELECTRICAL EQUIPMENT
ACCT 1515-0000
AMITEK CORPORATION
DEPRECIATION SCHEDULE BY CATEGORY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ASSET ACCT DATE LIFE COST OR ACC DEPR CURRENT
NO. DESCRIPTION NO. ACQUIRED METHOD YR/MO BASIS 01-01-95 DEPR.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ELECTRIC WORK 1515 11-19-92 200% DB 07/00 4,478.00 2,274.94 629.45
EASTERN ELEC - CONVEYOR SYSTEM 1515 10-31-92 200% DB 05/00 3,807.00 2,505.00 520.80
EASTERN ELEC - WAVE SOLDERER 1515 10-31-92 200% DB 05/00 $11,843.98 $2,462.41
EASTERN ELEC - WAVE SOLDER 1515 10-31-92 200% DB 05/00 20,000.00 13,159.97 2,736.01
EASTERN ELEC - PREP EQUIPMENT 1515 10-31-92 200% DB 05/00 900.00 592.20 123.12
REFLOW OVEN 1515 12-22-92 200% DB 05/00 13,721.00 9,028.40 1,877.04
POWER SUPPLY 1515 11-17-92 200% DB 05/00 947.00 623.00 129.60
WAVE SOLDER CONNECTION 1515 11-25-92 200% DB 05/00 12,075.00 7,945.44 1,651.82
MULTIMOD(DOWN PAYMENT) 1515 12-16-92 200% DB 05/00 12,500.00 8,225.00 1,710.00
AIR COMPRESSOR TANK 1515 10-07-92 200% DB 05/00 2,645.00 1,740.42 361.87
BUILDING SUPPLIES 1515 12-01-92 200% DB 05/00S 82.00 53.92 5.62
CONVEYORS AND FEEDERS 1515 12-28-92 200% DB 05/00 7,003.00 4,609.20 958.32
GENRAD PC BOARD TESTER - DOWN PAYMENT 1515 01-15-93 ST LINE 05/00 11,400.00 3,420.00 2,280.00
ELEC EQUIP - BRUCE RIENDEAU 1515 02-26-93 ST LINE 05/00 1,110.00 333.00 222.00
ELEC EQUIP - BOARD HOLDER 1515 02-26-93 ST LINE 05/00 1,500.00 450.00 300.00
ELEC EQUIP - HEPCO PREP SET 1515 02-26-93 ST LINE 05/00 2,645.00 793.50 529.00
ELEC EQUIP - GENRAD PCB TEST (FINAL PAY) 1515 03-31-93 ST LINE 05/00 7,600.00 2,280.00 1,520.00
ELEC EQUIP - MULTI-MOD(FINAL PAYMENT) 1515 03-31-93 ST LINE 05/00 12,500.00 3,750.00 2,500.00
ELEC EQUIP - VCD SURFACE MOUNT MACHINE 1515 04-30-93 ST LINE 05/00 33,000.00 9,900.00 6,600.00
ELEC EQUIP - DISPENSOR 1515 04-30-93 ST LINE 05/00 10,000.00 3,000.00 2,000.00
ELEC EQUIP - SEQUENCER 1515 04-30-93 ST LINE 05/00 24,000.00 7,200.00 4,800.00
ELEC EQUIP - O TEST INC. 1515 05-31-93 ST LINE 05/00 1,250.00 375.00 250.00
ELEC EQUIP - ADJ., FRT TO CAP (LINE ITEM 22) 1515 05-31-93 ST LINE 05/00 3,974.00 1,192.20 794.80
CAPITILIZED SALES TAX 1515 07-31-93 ST LINE 05/00 14,552.00 4,365.60 2,910.40
ELEC EQUIP - FHP 4000 W/FEEDERS 1515 08-31-93 ST LINE 05/00 25,000.00 7,500.00 5,000.00
ELEC EQUIP - BGK REFLOW OVEN 1515 08-31-93 ST LINE 05/00 10,000.00 3,000.00 2,000.00
ELEC EQUIP - COMPUTER ACCESSORIES 1515 12-31-93 ST LINE 05/00 1,327.22 398.24 265.49
ELEC EQUIP - BURN-IN ROOM 1515 12-31-93 ST LINE 05/00 2,774.02 832.36 554.91
- ------------------------------------------------------------------------------------------------------------------------------------
ELEC EQUIP - ADJ., SALE OF MACHINE 1515 01-31-94 ST LINE 05/00 1,500.00 120.31 240.62
- ------------------------------------------------------------------------------------------------------------------------------------
ELEC EQUIP - AIR COMPRESSOR 1515 02-24-94 ST LINE 05/00 2,495.00 200.12 400.23
ELEC EQUIP - OSCILLOSCOPE 1515 02-14-94 ST LINE 05/00 2,846.37 228.30 456.59
ELEC EQUIP - ADDITIONAL COMPUTER MEMORY 1515 02-14-94 ST LINE 05/00 608.00 48.77 97.53
ELEC EQUIP - PARTS SCALE 1515 03-17-94 ST LINE 05/00 850.00 68.18 136.35
ELEC EQUIP - 2-ZOOM STEREO MICROSCOPES 1515 03-21-94 ST LINE 05/00 1,855.00 148.78 297.57
- LOOSE PARTS FEEDER 1515 05-31-94 ST LINE 05/00 1,321.30 134.89 269.78
- LEAD PROCESSOR 1515 05-31-94 ST LINE 05/00 810.90 82.78 165.57
- REEL HOLDER 1515 05-31-94 ST LINE 05/00 115.00 11.74 23.48
- HP LASER JET PRINTER 1515 05-31-94 ST LINE 05/00 1,546.54 157.88 315.77
- CONTACT SERVICE CALL 1515 05-31-94 ST LINE 05/00 1,200.00 122.51 245.01
- AVEX 1515 05-31-94 ST LINE 05/00 700.00 71.46 142.92
- NU/ERA WAVE SOLDER MACHINE - COP #1 1515 05-31-94 ST LINE 05/00 39,112.40 3,992.91 7,985.80
- QUAD SCREEN PRINTER - COP #2 1515 05-31-94 ST LINE 05/00 38,417.78 3,921.99 7,843.98
- WORK STATIONS AND SLIDE-LINE - COP #3 1515 05-31-94 ST LINE 05/00 7,347.17 750.06 1,500.12
- INCLINE FEEDER CONVEYOR - COP #4 1515 05-31-94 ST LINE 05/00 3,617.80 369.33 738.67
- CM5000 WAVE UNLOAD BELT - COP #4 1515 05-31-94 ST LINE 05/00 6,000.00 612.53 1,225.06
- Q CORP MASS LEAD TRIMMER 1515 07-31-94 ST LINE 05/00 1,060.00 106.01 212.02
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ASSET ACC DEPR WRITE CURRENT ACC DEPR WRITE CURRENT
NO. DESCRIPTION 12-31-95 OFF DEPR. 12-31-96 OFF DEPR.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ELECTRIC WORK 2,904.39 449.60 3,353.99 321.15
EASTERN ELEC - CONVEYOR SYSTEM 3,025.80 312.48 3,338.28 187.49
EASTERN ELEC - WAVE SOLDERER $14,306.40 $1,477.44 15,783.84 $(18,000.00) (6,313.54)
EASTERN ELEC - WAVE SOLDER 15,895.98 1,641.61 17,537.59 984.96
EASTERN ELEC - PREP EQUIPMENT 715.32 73.87 789.19 44.32
REFLOW OVEN 10,905.44 1,126.22 12,031.66 675.74
POWER SUPPLY 752.60 77.76 830.36 46.66
WAVE SOLDER CONNECTION 9,597.26 991.10 10,588.36 594.66
MULTIMOD(DOWN PAYMENT) 9,935.00 1,026.00 10,961.00 615.60
AIR COMPRESSOR TANK 2,102.19 217.12 2,319.41 130.28
BUILDING SUPPLIES 59.54 8.96 68.50 5.39
CONVEYORS AND FEEDERS 5,567.52 574.99 6,142.51 345.00
GENRAD PC BOARD TESTER - DOWN PAYMENT 5,700.00 2,280.00 7,980.00 2,280.00
ELEC EQUIP - BRUCE RIENDEAU 555.00 222.00 777.00 222.00
ELEC EQUIP - BOARD HOLDER 750.00 300.00 1,050.00 300.00
ELEC EQUIP - HEPCO PREP SET 1,322.50 529.00 1,851.50 529.00
ELEC EQUIP - GENRAD PCB TEST (FINAL PAY) 3,800.00 1,520.00 5,320.00 1,520.00
ELEC EQUIP - MULTI-MOD(FINAL PAYMENT) 6,250.00 2,500.00 8,750.00 2,500.00
ELEC EQUIP - VCD SURFACE MOUNT MACHINE 16,500.00 6,600.00 23,100.00 6,600.00
ELEC EQUIP - DISPENSOR 5,000.00 2,000.00 7,000.00 2,000.00
ELEC EQUIP - SEQUENCER 12,000.00 4,800.00 16,800.00 4,800.00
ELEC EQUIP - O TEST INC. 625.00 250.00 875.00 250.00
ELEC EQUIP - ADJ., FRT TO CAP (LINE ITEM 22) 1,987.00 794.80 2,781.80 794.80
CAPITILIZED SALES TAX 7,276.00 2,910.40 10,186.40 2,910.40
ELEC EQUIP - FHP 4000 W/FEEDERS 12,500.00 5,000.00 17,500.00 5,000.00
ELEC EQUIP - BGK REFLOW OVEN 5,000.00 2,000.00 7,000.00 2,000.00
ELEC EQUIP - COMPUTER ACCESSORIES 663.73 265.44 929.17 265.44
ELEC EQUIP - BURN-IN ROOM 1,387.27 554.80 1,942.07 554.80
- -----------------------------------------------------------------------------------------------------------------------------------
ELEC EQUIP - ADJ., SALE OF MACHINE 360.93 300.00 660.93 300.00
- -----------------------------------------------------------------------------------------------------------------------------------
ELEC EQUIP - AIR COMPRESSOR 600.35 499.00 1,099.35 499.00
ELEC EQUIP - OSCILLOSCOPE 684.89 569.27 1,254.16 569.27
ELEC EQUIP - ADDITIONAL COMPUTER MEMORY 146.30 121.60 267.90 121.60
ELEC EQUIP - PARTS SCALE 204.53 170.00 374.53 170.00
ELEC EQUIP - 2-ZOOM STEREO MICROSCOPES 446.35 371.00 817.35 371.00
- LOOSE PARTS FEEDER 399.69 264.26 663.95 264.26
- LEAD PROCESSOR 245.30 162.18 407.48 162.18
- REEL HOLDER 34.79 23.00 57.79 23.00
- HP LASER JET PRINTER 467.83 309.31 777.14 309.31
- CONTACT SERVICE CALL 363.00 240.00 603.00 240.00
- AVEX 211.75 140.00 351.75 140.00
- NU/ERA WAVE SOLDER MACHINE - COP #1 11,831.47 7,822.48 19,653.95 7,822.48
- QUAD SCREEN PRINTER - COP #2 11,621.35 7,683.56 19,304.91 7,683.56
- WORK STATIONS AND SLIDE-LINE - COP #3 2,222.51 1,469.43 3,691.94 1,469.43
- INCLINE FEEDER CONVEYOR - COP #4 1,094.38 723.56 1,817.94 723.56
- CM5000 WAVE UNLOAD BELT - COP #4 1,815.00 1,200.00 3,015.00 1,200.00
- Q CORP MASS LEAD TRIMMER 318.04 212.00 530.04 212.00
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ASSET ACC DEPR WRITE CURRENT ACC DEPR BOOK
NO. DESCRIPTION 35795 OFF DEPR. 36160 VALUE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ELECTRIC WORK 3,675.14 802.86 0.00 4,478.00 0.00
EASTERN ELEC - CONVEYOR SYSTEM 3,525.77 281.23 0.00 3,807.00 0.00
EASTERN ELEC - WAVE SOLDERER 0.00 0.00 0.00 0.00
EASTERN ELEC - WAVE SOLDER 18,522.55 1,477.45 0.00 20,000.00 0.00
EASTERN ELEC - PREP EQUIPMENT 833.51 66.49 0.00 900.00 0.00
REFLOW OVEN 12,707.40 1,013.60 0.00 13,721.00 0.00
POWER SUPPLY 877.02 69.96 0.00 947.00 0.00
WAVE SOLDER CONNECTION 11,183.02 891.96 0.00 12,075.00 0.00
MULTIMOD(DOWN PAYMENT) 11,576.60 923.40 0.00 12,500.00 0.00
AIR COMPRESSOR TANK 2,449.59 195.41 0.00 2,645.00 0.00
BUILDING SUPPLIES 73.91 8.09 0.00 82.00 0.00
CONVEYORS AND FEEDERS 6,487.51 517.49 0.00 7,005.00 0.00
GENRAD PC BOARD TESTER - DOWN PAYMENT 10,260.00 1,140.00 11,400.00 0.00
ELEC EQUIP - BRUCE RIENDEAU 999.00 111.00 1,110.00 0.00
ELEC EQUIP - BOARD HOLDER 1,350.00 150.00 1,500.00 0.00
ELEC EQUIP - HEPCO PREP SET 2,380.50 264.50 2,645.00 0.00
ELEC EQUIP - GENRAD PCB TEST (FINAL PAY) 6,840.00 760.00 7,600.00 0.00
ELEC EQUIP - MULTI-MOD(FINAL PAYMENT) 11,250.00 1,250.00 12,500.00 0.00
ELEC EQUIP - VCD SURFACE MOUNT MACHINE 29,700.00 3,300.00 33,000.00 0.00
ELEC EQUIP - DISPENSOR 9,000.00 1,000.00 10,000.00 0.00
ELEC EQUIP - SEQUENCER 21,600.00 2,400.00 24,000.00 0.00
ELEC EQUIP - O TEST INC. 1,125.00 125.00 1,250.00 0.00
ELEC EQUIP - ADJ., FRT TO CAP (LINE ITEM 22) 3,576.60 397.40 3,974.00 0.00
CAPITILIZED SALES TAX 13,096.80 1,455.20 14,552.00 0.00
ELEC EQUIP - FHP 4000 W/FEEDERS 22,500.00 2,500.00 25,000.00 0.00
ELEC EQUIP - BGK REFLOW OVEN 9,000.00 1,000.00 10,000.00 0.00
ELEC EQUIP - COMPUTER ACCESSORIES 1,194.61 132.60 1,327.22 0.00
ELEC EQUIP - BURN-IN ROOM 2,496.87 277.14 2,774.02 0.00
- -----------------------------------------------------------------------------------------------------------------------
ELEC EQUIP - ADJ., SALE OF MACHINE 960.93 239.07 300.00 1,260.93 0.00
- -----------------------------------------------------------------------------------------------------------------------
ELEC EQUIP - AIR COMPRESSOR 1,598.35 499.00 2,097.35 397.65
ELEC EQUIP - OSCILLOSCOPE 1,823.43 569.27 2,392.71 453.66
ELEC EQUIP - ADDITIONAL COMPUTER MEMORY 389.50 121.60 511.10 96.90
ELEC EQUIP - PARTS SCALE 544.53 170.00 714.53 135.47
ELEC EQUIP - 2-ZOOM STEREO MICROSCOPES 1,188.35 371.00 1,559.35 295.65
- LOOSE PARTS FEEDER 928.21 264.26 1,192.47 128.83
- LEAD PROCESSOR 569.66 162.18 731.84 79.06
- REEL HOLDER 80.79 23.00 103.79 11.21
- HP LASER JET PRINTER 1,086.45 309.31 1,395.75 150.79
- CONTACT SERVICE CALL 843.00 240.00 1,083.00 117.00
- AVEX 491.75 140.00 631.75 68.25
- NU/ERA WAVE SOLDER MACHINE - COP #1 27,476.43 7,822.48 35,298.91 3,813.49
- QUAD SCREEN PRINTER - COP #2 26,988.46 7,683.56 34,672.03 3,745.76
- WORK STATIONS AND SLIDE-LINE - COP #3 5,161.35 1,469.43 6,630.81 716.36
- INCLINE FEEDER CONVEYOR - COP #4 2,541.50 723.56 3,265.06 352.74
- CM5000 WAVE UNLOAD BELT - COP #4 4,215.00 1,200.00 5,415.00 585.00
- Q CORP MASS LEAD TRIMMER 742.04 212.00 954.04 105.96
</TABLE>
ACCUMULATED DEPRECIATION ACCT = 1545-0000
<PAGE>
Exhibit 10.21
THIS PROMISSORY NOTE IS BEING EXECUTED AND DELIVERED OUTSIDE OF THE STATE OF
FLORIDA. ACCORDINGLY, THIS PROMISSORY NOTE IS EXEMPT FROM DOCUMENTARY STAMP TAX
PURSUANT TO THE FLORIDA ADMINISTRATIVE CODE.
ASSUMPTION AND MODIFICATION MASTER REVOLVING PROMISSORY NOTE
$14,000,000.00 EXECUTED AT BOSTON, MASSACHUSETTS
DATED AS OF JULY 30, 1999
The undersigned, AMITEK CORPORATION, a Delaware corporation (hereinafter
called "Maker" or "Obligor"), promises to pay to the order of NATIONAL BANK OF
CANADA, a Canadian Chartered Bank (hereinafter, together with any holder hereof,
called "Holder"), at its office in New York, New York, or at such other place as
Holder may from time to time designate, the principal sum of Fourteen Million
and 00/100 Dollars ($14,000,000.00), with interest thereon from the date hereof
at the variable interest rate set forth below; however, in no event to exceed
the maximum rate permitted by applicable law.
This Note and sums represented hereby are to be repaid as follows:
The proceeds of this Note shall be used for the purpose of (i) partially
financing the merger of AMITEK CORPORATION, a Florida corporation ("Amitek
Florida"), into the Guarantor (as defined in the Loan Agreement), with
Guarantor being the surviving corporation, provided that Guarantor
immediately after closing of the above described merger shall have
conveyed all of the assets of Amitek Florida to the Maker and Maker shall
have assumed all liabilities of Amitek Florida (it being acknowledged that
Maker is a wholly owned subsidiary corporation of the Guarantor), and,
(ii) supporting general working capital requirements of the Maker, as more
fully set forth in that certain Amended and Restated Loan Agreement
executed by Maker and Holder dated as of July 30, 1999, as the same may be
amended from time to time (the "Loan Agreement"). Advances made under this
Note shall be made in accordance with and subject to the terms and
provisions of the Loan Agreement, and, shall bear interest at a rate of
two percent (2%) over the Prime Rate (as defined herein) in effect from
time to time, to be adjusted daily with any change in said Prime Rate.
Payments of interest only on the outstanding principal balance shall be
due and payable on a monthly basis, with the first payment due and owing
on the 1st day of August, 1999, with monthly payments of interest only,
due and payable on like date each month thereafter through and until the
Maturity Date (as defined and set forth below). All of said payments shall
be effectuated by means of an advance under this Note, provided, however,
that if there is not adequate availability under the Loan Agreement to
effectuate any such advance, Maker shall be responsible for payment of the
same. Interest under this Note shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed. All
PLEASE INITIAL JM
----
<PAGE>
payments hereunder shall be made in such coin or currency of the United
States of America as at the time of payment shall be legal tender for
payment of public or private debts, and, shall be applied first to
interest and lawful charges and expenses then accrued, and the remainder
to principal. The entire outstanding principal balance of this Note and
all accrued and unpaid interest thereon and all other applicable charges
shall be due and payable in full on the 4th day of June, 2001 (the
"Maturity Date").
The interest rate charged hereunder shall change on the date that National
Bank of Canada changes its announced United States Prime Lending Rate to the
aforesaid two percent (2%) above the United States Prime Lending Rate
established on such date, and shall be the effective rate until the next date
that the Prime Rate announced by National Bank of Canada as its United States
Prime Lending Rate is changed. The Holder hereof shall not be required to notify
Maker of any such changes in said rate of interest, which shall be reflected
sorely by the billing thereof to Maker. Further, the Maker acknowledges that the
aforesaid National Bank of Canada United States Prime Lending Rate is the
interest rate announced by National Bank of Canada from time to time as its
United States Prime Lending Rate, which rate is purely discretionary, and is not
necessarily the best or lowest rate charged to borrowing customers of the Holder
(the "Prime Rate").
In order to compensate Holder for loss and expense occasioned by handling
delinquent payments, which include but are not limited to the cost of processing
and collecting delinquencies, Maker shall pay to Holder, in addition to any
interest or other sums payable under this Note, a service charge equal to five
percent (5%) of the amount of any payment not received by Holder on or before
the due date thereof. If insufficient funds were available under the Loan
Agreement to effectuate an Advance (under this Note) with which to make a
payment due and owing under this Note, the above set forth service charge will
not be due and owing until five (5) days after the date that Holder provides
Maker with notice of the required payment.
This Note may be prepaid in whole or in part at any time without premium
or penalty.
From and after the date upon which any payment of principal or interest
hereunder becomes due and payable (whether by acceleration or otherwise) if the
same is not timely paid, or, upon the occurrence of any other default under this
Note or any default under any of the Loan Documents, interest shall be payable
on all sums outstanding hereunder, at the maximum rate permitted by applicable
law, and shall be due and payable ON DEMAND.
The indebtedness evidenced by this Note, and all other indebtedness of
Obligor (as hereinafter defined) to Holder, however and whenever incurred or
evidenced, whether primary, secondary, direct, indirect, absolute, contingent,
sole, joint or several, due or to become due, or which may be hereafter
contracted or acquired, whether arising in the ordinary course of business or
otherwise (hereinafter with this Note, collectively called "Liabilities") is
secured by the Loan Agreement, an Amended and Restated Security Agreement, UCC
Financing Statements, an Amended and Restated Security, Cash Collateral Account
and Lockbox Agreement, an Absolute Unconditional and Continuing Guaranty and all
associated loan documents (collectively the "Loan Documents") encumbering
certain property of the
2 PLEASE INITIAL JM
----
<PAGE>
Obligor, including all proceeds thereof and rights in connection therewith,
which property, together with additions and substitutions, is called the
"Collateral". Holder shall have such rights with respect to the Collateral as is
authorized by law. It is expressly agreed that if the Collateral or a portion
thereof is real estate, all of the covenants, conditions and agreements
contained in the mortgages are hereby made a part of this Note. If Obligor has
other loans with Holder, or if Obligor takes out other loans with Holder in the
future, collateral securing those loans will also secure this Note.
Maker and any endorsers, sureties, guarantors and all others who are or at
some future date may become liable for the payments required hereunder (all of
whom are hereinafter called "Obligor"), jointly and severally agree as follows:
Additions to, releases, reductions or exchanges of or substitutions for
the Collateral, payments on account of this loan or increases of the same, or
other loans made partially or wholly upon the Collateral, may from time to time
be made without affecting the provisions of this Note or the Liabilities of any
party hereto. If any of the Collateral is personal property, Holder shall
exercise reasonable care in the custody and preservation of the Collateral in
its possession, and shall be deemed to have exercised reasonable care if it
takes such action for that purpose as Maker shall reasonably request in writing,
but no omission to comply with any request of Maker shall of itself be deemed a
failure to exercise reasonable care. Holder shall not be bound to take any steps
necessary to preserve any rights in the Collateral against prior parties, and
Maker shall take all necessary steps for such purposes. Holder or its nominee
need not collect interest on or principal of any Collateral or give any notice
with respect thereto.
If the Collateral shall at any time become unsatisfactory to Holder, or if
Holder shall at any time deem itself insecure, or upon default, Maker shall, at
the option of Holder and in addition to all other remedies available to Holder,
within five (5) business days after demand, deposit with Holder as part of the
Collateral additional property which is satisfactory to Holder.
Obligor shall be in default hereunder upon: (a) nonpayment of any interest
or principal hereunder within five (5) days of its due date; (b) failure of any
Obligor to perform any agreement hereunder or otherwise a part of this loan
transaction or to pay in full, when due, any Liabilities whatsoever to Holder or
any installment thereof or interest thereon, or failure to pay when due any
premium upon any life insurance policy held as Collateral hereunder; (c) the
death, dissolution, termination of existence, insolvency, or business failure of
any Obligor to this Note, appointment of a receiver of any part of the property
of any such party, assignment for the benefit of creditors by or the
commencement of any proceedings in bankruptcy or insolvency by or against Maker
or any Obligor and, in the case of an involuntary proceeding, which has not been
dismissed within forty-five (45) days; (d) the entry of a judgment against any
Obligor; (e) the issuing of any attachment or garnishment, or the filing of any
lien against any property of any Obligor; (f) the taking of possession of any
substantial part of the property of any Obligor at the instance of any
governmental authority; (g) the merger, consolidation or reorganization of any
Obligor without the prior written consent of Holder, which consent shall be in
Holder's sole and absolute discretion; (h) the determination by Holder that a
material adverse change has occurred in the financial condition of any Obligor
from the condition set forth in the most recent
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<PAGE>
financial statements of such Obligor heretofore furnished to Holder or from the
condition of such Obligor as heretofore most recently disclosed to Holder in any
manner; (i) falsity in any material respect of, or any material omission in, any
representation or statement made to Holder by or on behalf of any Obligor in
connection with this Note; (j) the pledge, assignment, transfer or granting of a
security interest by any Obligor of any equity in any of the Collateral without
the written consent of Holder; (k) cancellation of any guaranty with respect
hereto, without the prior written consent of the Holder; or (1) the occurrence
of any event of default under any of the Loan Documents, subject to any
applicable notice and cure periods set forth therein, if any.
Holder shall have all of the rights and remedies of a creditor, mortgagee,
and secured party under all applicable law. Without limiting the generality of
the foregoing, if Holder shall deem itself insecure or upon the occurrence of
any default hereunder, Holder may, at its option and without notice or demand:
(1) declare the entire unpaid principal and accrued interest accelerated and due
and payable at once, together with any and all other Liabilities of any Obligor
or any of such Liabilities selected by Holder; and (2) set off against this Note
all money owed by Holder in any capacity to each or any Obligor whether or not
due, and also set off against all other Liabilities of Maker to Holder all money
owed by Holder in any capacity to Maker, and Holder shall be deemed to have
exercised such right of setoff and to have made a charge against any such money
immediately upon the occurrence of such default although made or entered on the
books subsequent thereto. To the extent that any of the Collateral is personal
property and the Holder elects to proceed with respect to it in accordance with
the Uniform Commercial Code, then unless that Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Holder will give Maker reasonable notice of the time and
place of any public or private sale thereof. The requirement of reasonable
notice shall be met if such notice is mailed, postage prepaid, to Maker at the
address given below or at any other address shown on the records of Holder at
least five (5) days before the time of sale. Upon disposition of any Collateral
after the occurrence of any default hereunder, Maker shall be and shall remain
liable for any deficiency; and Holder shall account to Maker for any surplus,
but Holder shall have the right to apply all or part of such surplus (or to hold
the same as a reserve) against any and all other Liabilities of Maker to Holder.
Holder may, at any time, whether or not this Note is due: (i) pledge or
transfer this Note and its interest in the Collateral, whereupon Holder shall be
relieved of all duties and responsibilities hereunder and relieved from any and
all liability with respect to any Collateral so pledged or transferred, and
pledgee or transferee shall, for all purposes, stand in the place of Holder
hereunder and have all the rights of Holder hereunder; (ii) transfer the whole
or any part of the Collateral into the name of itself or its nominee; (iii) vote
the Collateral; (iv) notify the Obligor on any Collateral to make payment to
Holder of any amounts due or to become due thereon; (v) demand, sue for,
collect, or make any compromise or settlement it deems desirable with reference
to the Collateral; (vi) take possession or control of any proceeds of the
Collateral; and (vii) exercise all other rights necessary required, in Holder's
discretion, in order to protect its interests hereunder.
In no event shall Holder be entitled to unearned or unaccrued interest or
other charges or rebates, except as may be authorized by law; nor shall any such
party be entitled to receive at any time
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<PAGE>
any such charges not allowed or permitted by law, or any interest in excess of
the highest lawful rate. Any payments of interest in excess of the highest
lawful rate shall be credited by Holder on interest accrued or principal or
both; except that Maker shall have an option to demand refund as to any such
interest or charges in excess of the highest lawful rate. Holder may, in
determining the maximum rate permitted under applicable law in effect from time
to time, take advantage of (i) the maximum rate of interest permitted under New
York law or federal law, whichever is higher, including any laws regarding
parity among lenders; and (ii) any other law, rule or regulation in effect from
time to time available to Holder, which exempts Holder from any limit upon the
rate of interest it may charge, or grants to Holder the right to charge a higher
rate of interest than that permitted by applicable statutes.
No delay or omission on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or of any other rights under
this Note. Presentment, demand, protest, notice of dishonor and all other
notices are hereby waived by each and every Obligor. Obligor, jointly and
severally, promises and agrees to pay all costs of collection and reasonable
attorney's fees, including reasonable attorney's fees of any suit, out of court,
in trial, on appeal, in bankruptcy proceedings or otherwise, incurred or paid by
Holder in enforcing this Note or preserving any right or interest of Holder
hereunder. Any notice to Maker shall be sufficiently served for all purposes if
delivered or furnished pursuant to Section 14.7 of the Loan Agreement.
This Note is not assumable without the Holder's prior written consent,
which consent may be granted by the Holder or denied by Holder in Holder's sole
and absolute discretion.
All rights and obligations hereunder shall be governed and construed
according to the internal statutes and laws of the State of New York without
regard to principles of conflicts of laws, except as required by mandatory
provisions of law, but giving effect to federal laws applicable to national
banks to the extent applicable.
THE MAKER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ALL STATE AND FEDERAL COURTS SITTING IN NEW YORK
COUNTY, NEW YORK AND AGREES THAT ALL SUMMONS AND OTHER COURT PROCESS ISSUED BY
SAID COURTS MAY BE SERVED UPON THE MAKER, WITHIN OR OUTSIDE SAID COURTS'
TERRITORIAL JURISDICTION, BY MAILING THE SAME, BY REGISTERED OR CERTIFIED MAIL,
OR BY PERSONAL SERVICE, TO THE MAKER AT ITS ADDRESS SPECIFIED HEREIN; PROVIDED
THAT NOTHING CONTAINED HEREIN SHALL LIMIT THE HOLDER HEREOF'S RIGHT TO SUE THE
MAKER IN ANY OTHER COURT HAVING JURISDICTION OVER THE MAKER OR ITS ASSETS AND TO
SERVE SUMMONS OR OTHER COURT PROCESS UPON THE MAKER IN ANY MANNER PERMITTED BY
APPLICABLE LAW.
MAKER IS SIMULTANEOUSLY HEREWITH EXECUTING THAT CERTAIN ASSUMPTION AND
MODIFICATION CAPEX LINE/TERM PROMISSORY NOTE IN THE PRINCIPAL AMOUNT OF FIVE
HUNDRED SEVENTY-SIX THOUSAND THREE HUNDRED SIX AND 54/100 DOLLARS ($576,306.54)
IN FAVOR OF HOLDER DATED AS OF EVEN DATE
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<PAGE>
HEREWITH (THE "CAPEX NOTE"). THIS NOTE IS CROSS-DEFAULTED WITH THE CAPEX
NOTE, SUCH THAT A DEFAULT UNDER THIS NOTE SHALL BE AND CONSTITUTE A DEFAULT
UNDER THE CAPEX NOTE AND A DEFAULT UNDER THE CAPEX NOTE SHALL BE AND CONSTITUTE
A DEFAULT UNDER THIS NOTE.
THIS PROMISSORY NOTE CONSTITUTES AND IS AN ASSUMPTION OF, AND MODIFICATION
OF THAT CERTAIN CONSOLIDATION MASTER REVOLVING PROMISSORY NOTE DATED AS OF
FEBRUARY 8, 1999 IN THE PRINCIPAL AMOUNT OF FOURTEEN MILLION AND 00/100 DOLLARS
($14,000,000.00) EXECUTED BY M&K TECHNOLOGY, INC., A FLORIDA CORPORATION, AND,
AMITEK CORPORATION, A FLORIDA CORPORATION, IN FAVOR OF HOLDER (THE "ORIGINAL
NOTE"). ACCORDINGLY, THIS PROMISSORY NOTE CONSTITUTES AN ASSUMPTION BY MAKER OF
THE ORIGINAL NOTE. ADDITIONALLY, AND AS SET FORTH ABOVE, THIS PROMISSORY NOTE IS
BEING EXECUTED AND DELIVERED OUTSIDE OF THE STATE OF FLORIDA. ACCORDINGLY, NO
DOCUMENTARY STAMP TAXES ARE DUE AND OWING IN CONNECTION WITH THE EXECUTION AND
DELIVERY OF THIS PROMISSORY NOTE.
INTENTIONALLY LEFT BLANK
6 PLEASE INITIAL JM
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<PAGE>
Waiver of Trial by Jury. MAKER AND HOLDER HEREBY MUTUALLY, KNOWINGLY,
WILLINGLY, INTENTIONALLY AND VOLUNTARILY WAIVE THEIR RIGHT TO TRIAL BY JURY,
AND, NO PARTY, NOR ANY ASSIGNEE, SUCCESSOR, HEIR, OR LEGAL REPRESENTATIVE OF THE
PARTIES (ALL OF WHOM ARE HEREINAFTER REFERRED TO AS THE "PARTIES") SHALL SEEK A
JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION
PROCEEDING BASED UPON OR ARISING OUT OF THIS NOTE OR THE LOAN DOCUMENTS, OR ANY
INSTRUMENT EVIDENCING, SECURING, OR RELATING TO THE INDEBTEDNESS AND OTHER
OBLIGATIONS EVIDENCED HEREBY OR ANY RELATED AGREEMENT OR INSTRUMENT, ANY OTHER
COLLATERAL FOR THE INDEBTEDNESS EVIDENCED HEREBY OR ANY COURSE OF ACTION, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS RELATING TO THIS
NOTE OR THE LOAN DOCUMENTS. THE PARTIES ALSO WAIVE ANY RIGHT TO CONSOLIDATE ANY
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY
NEGOTIATED BY THE PARTIES. THE WAIVER CONTAINED HEREIN IS IRREVOCABLE,
CONSTITUTES A KNOWING AND VOLUNTARY WAIVER, AND SHALL BE SUBJECT TO NO
EXCEPTIONS. HOLDER HAS IN NO WAY AGREED WITH OR REPRESENTED TO MAKER OR ANY
OTHER PARTY THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN
ALL INSTANCES.
AMITEK CORPORATION, a Delaware corporation
1701 Clint Moore Road
- -----------------------------
(address) By: /s/ James Roller
-----------------------------
Boca Raton., Florida 33487 Title: Secretary & Treasurer
- ----------------------------- --------------------------
(Corporate Seal)
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF SUFFOLK )
The foregoing instrument was acknowledged before me this 30th day of July,
1999, by James M. Roller, as Secretary & Treasurer of and on behalf of AMITEK
CORPORATION, a Delaware corporation, who |_| is personally known to me or |_|
produced his/her driver's license as identification.
/s/ Beth A. Good
------------------------------
NOTARY PUBLIC
Commonwealth of Massachusetts
Print/Type/Stamp Name:
Commission Expiration Date:
Notary Seal:
[NOTARY'S STAMP]
(Signing as a Notary and not as a
Maker or Obligor of this Note.)
<PAGE>
Exhibit 10.22
THIS PROMISSORY NOTE IS BEING EXECUTED AND DELIVERED OUTSIDE OF THE STATE OF
FLORIDA. ACCORDINGLY. THIS PROMISSORY NOTE IS EXEMPT FROM DOCUMENTARY STAMP TAX
PURSUANT TO THE FLORIDA ADMINISTRATIVE CODE.
ASSUMPTION CAPEX LINE/TERM PROMISSORY NOTE
$576,306.54, EXECUTED AT BOSTON, MASSACHUSETTS
Original Amount $1,675,000.00 DATED AS OF JULY 30, 1999
The undersigned, AMITEK CORPORATION, a Delaware corporation (hereinafter
called "Maker" or "Obligor"), promises to pay to the order of NATIONAL BANK OF
CANADA, a Canadian Chartered Bank (hereinafter, together with any holder hereof,
called "Holder"), at its office in New York City, New York, or at such other
place as Holder may from time to time designate, the principal sum of Five
Hundred Seventy-Six Thousand Three Hundred Six and 54/100 Dollars ($576,306.54),
with interest thereon from the date hereof at the variable interest rate set
forth below; however, in no event to exceed the maximum rate permitted by
applicable law.
This Note and sums represented hereby are to be repaid as follows:
The proceeds of this Note have been used for the purpose of partially
financing machinery and equipment expenditures, as more fully set forth in
that certain Amended and Restated Loan Agreement executed by Maker and
Holder dated of even date herewith, as the same may be amended from time
to time (the "Loan Agreement"). This Note shall bear interest at a
variable interest rate of two and one-quarter percent (2.25%) over the
Prime Rate (as defined herein) in effect from time to time, adjusted daily
with any change in said Prime Rate. Payments of interest on the
outstanding principal balance shall be due and payable on a monthly basis,
with the first payment due and owing on the 1st day of August, 1999, with
monthly payments of interest, due and payable on like date each month
thereafter, through and until the Maturity Date (as defined and set forth
below). In addition to the monthly payments of interest, monthly payments
of principal in the amount of Six Thousand Nine Hundred Forty-Three and
46/100 Dollars ($6,943.46) shall be due and payable with the first such
payment to be due and payable on the 1st day of the August, 1999, with
like payments of principal due on the 1st day of each month thereafter
through and until the Maturity Date. All payments required to be made
under this Note shall be effectuated by means of an Advance under the
Revolving Note, provided however, that if there is not adequate
availability under the Loan Agreement to effectuate any such Advance,
Maker shall be responsible for payment of the same. Interest under this
Note shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed. All payments hereunder shall
be made in such coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of public and
private debts, and shall be applied first to interest and lawful charges
and expenses then accrued, and the remainder to principal. The
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<PAGE>
entire outstanding principal balance of this Note and all accrued and
unpaid interest thereon and all other applicable charges shall be due and
payable in full on the 4th day of June, 2001 (the "Maturity Date").
The interest rate charged hereunder shall change on the date that National
Bank of Canada changes its announced United States Prime Lending Rate to the
aforesaid two and one-quarter percent (2.25%) above the United States Prime
Lending Rate established on such date, and shall be the effective rate until the
next date that the Prime Rate announced by National Bank of Canada as its United
States Prime Lending Rate is changed. The Holder hereof shall not be required to
notify Maker of any such changes in said rate of interest, which shall be
reflected solely by the billing thereof to Maker. Further, the Maker
acknowledges that the aforesaid National Bank of Canada United States Prime
Lending Rate is the interest rate announced by National Bank of Canada from time
to time as its United States Prime Lending Rate, which rate is purely
discretionary, and is not necessarily the best or lowest rate charged to
borrowing customers of the Holder (the "Prime Rate").
In order to compensate Holder for loss and expense occasioned by handling
delinquent payments, which include but are not limited to the cost of processing
and collecting delinquencies, Maker shall pay to Holder in addition to any
interest or other sums payable under this Note a service charge equal to five
(5%) percent of the amount of any payment not received by Holder on or before
the due date thereof. If insufficient funds were available under the Loan
Agreement to effectuate an Advance (under the Revolving Note) with which to make
a payment due and owing under this Note, the above set forth service charge will
not be due and owing until five (5) days after the date that Holder provides
Maker with notice of the required payment.
This Note may be prepaid in whole or in part at any time without premium
or penalty. Any partial prepayment shall be applied in the inverse order of
maturity and shall not delay or reduce the amount of the next scheduled payment
under this Note.
From and after the date upon which any payment of principal or interest
hereunder becomes due and payable (whether by acceleration or otherwise) if the
same is not timely paid, or, upon the occurrence of any other default under this
Note or any default under any of the Loan Documents, interest shall be payable
on all sums outstanding hereunder, at the maximum rate permitted by applicable
law, and shall be due and payable ON DEMAND.
The indebtedness evidenced by this Note, and all other indebtedness of
Obligor (as hereinafter defined) to Holder, however and whenever incurred or
evidenced, whether primary, secondary, direct, indirect, absolute, contingent,
sole, joint or several, due or to become due, or which may be hereafter
contracted or acquired, whether arising in the ordinary course of business or
otherwise (hereinafter with this Note, collectively called "Liabilities") is
secured by the Loan Agreement, an amended and Restated Security Agreement, UCC
Financing Statements, an Amended and Restated Security, Cash Collateral Account
and Lockbox Agreement, an Absolute Unconditional and Continuing Guaranty, and
all associated loan documents (collectively the "Loan Documents") encumbering
certain property of the Obligor, including all proceeds thereof and rights in
connection therewith, which property, together with additions and substitutions,
is called the "Collateral". Holder shall have such rights with
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<PAGE>
respect to the Collateral as is authorized by law. It is expressly agreed that
if the Collateral or a portion thereof is real estate, all of the covenants,
conditions and agreements contained in the mortgages are hereby made a part of
this Note. If Obligor has other loans with Holder, or if Obligor takes out other
loans with Holder in the future, collateral securing those loans will also
secure this Note.
Maker, and any endorsers, sureties, guarantors and all others who are or
at some future date may become liable for the payments required hereunder (all
of whom are hereinafter called "Obligor"), jointly and severally agree as
follows:
Additions to, releases, reductions or exchanges of or substitutions for
the Collateral, payments on account of this loan or increases of the same, or
other loans made partially or wholly upon the Collateral, may from time to time
be made without affecting the provisions of this Note or the Liabilities of any
party hereto. If any of the Collateral is personal property, Holder shall
exercise reasonable care in the custody and preservation of the Collateral in
its possession, and shall be deemed to have exercised reasonable care if it
takes such action for that purpose as Maker shall reasonably request in writing,
but no omission to comply with any request of Maker shall of itself be deemed a
failure to exercise reasonable. care. Holder shall not be bound to take any
steps necessary to preserve any rights in the Collateral against prior parties,
and Maker shall take all necessary steps for such purposes. Holder or its
nominee need not collect interest on or principal of any Collateral or give any
notice with respect thereto.
If the Collateral shall at any time become unsatisfactory to Holder, or if
Holder shall at any time deem itself insecure, or upon default, Maker shall, at
the option of Holder and in addition to all other remedies available to Holder,
within five (5) business days after demand, deposit with Holder as part of the
Collateral additional property which is satisfactory to Holder.
Obligor shall be in default hereunder upon: (a) nonpayment of any interest
or principal hereunder within five (5) days of its due date; (b) failure of any
Obligor to perform any agreement hereunder or otherwise a part of this loan
transaction or to pay in full, when due, any Liabilities whatsoever to Holder or
any installment thereof or interest thereon, or failure to pay when due any
premium upon any life insurance policy held as Collateral hereunder; (c) the
death, dissolution, termination of existence, insolvency, or business failure of
any Obligor to this Note, appointment of a receiver of any part of the property
of any such party, assignment for the benefit of creditors by or the
commencement of any proceedings in bankruptcy or insolvency by or against Maker
or any Obligor and, in the case of an involuntary proceeding, which has not been
dismissed within forty-five (45) days; (d) the entry of a judgment against any
Obligor; (e) the issuing of any attachment or garnishment, or the filing of any
lien against any property of any Obligor; (f) the taking of possession of any
substantial part of the property of any Obligor at the instance of any
governmental authority; (g) the merger, consolidation or reorganization of any
Obligor without the prior written consent of Holder, which consent shall be in
Holder's sole and absolute discretion; (h) the determination by Holder that a
material adverse change has occurred in the financial condition of any Obligor
from the condition set forth in the most recent financial statements of such
Obligor heretofore furnished to Holder or from the condition of such Obligor as
heretofore most recently disclosed to Holder in any
PLEASE INITIAL JR
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<PAGE>
manner; (i) falsity in any material respect of, or any material omission in, any
representation or statement made to Holder by or on behalf of any Obligor in
connection with this Note; Ci) the pledge, assignment, transfer or granting of a
security interest by any Obligor of any equity in any of the Collateral without
the written consent of Holder; (k) cancellation of any guaranty with respect
hereto, without the prior written consent of the Holder; or (1) the occurrence
of any event of default under any of the Loan Documents, subject to any
applicable notice and/or cure periods set forth therein, if any.
Holder shall have all of the rights and remedies of a creditor, mortgagee,
and secured party under all applicable law. Without limiting the generality of
the foregoing, if Holder shall deem itself insecure or upon the occurrence of
any default hereunder, Holder may, at its option and without notice or demand:
(1) declare the entire unpaid principal and accrued interest accelerated and due
and payable at once, together with any and all other Liabilities of any Obligor
or any of such Liabilities selected by Holder; and (2) set off against this Note
all money owed by Holder in any capacity to each or any Obligor whether or not
due, and also set off against all other Liabilities of Maker to Holder all money
owed by Holder in any capacity to Maker, and Holder shall be deemed to have
exercised such right of setoff and to have made a charge against any such money
immediately upon the occurrence of such default although made or entered on the
books subsequent thereto. To the extent that any of the Collateral is personal
property and the Holder elects to proceed with respect to it in accordance with
the Uniform Commercial Code, then unless that Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, Holder will give Maker reasonable notice of the time and
place of any public or private sale thereof. The requirement of reasonable
notice shall be met if such notice is mailed, postage prepaid, to Maker at the
address given below or at any other address shown on the records of Holder at
least five (5) days before the time of sale. Upon disposition of any Collateral
after the occurrence of any default hereunder, Maker shall be and shall remain
liable for any deficiency; and Holder shall account to Maker for any surplus,
but Holder shall have the right to apply all or part of such surplus (or to hold
the same as a reserve) against any and all other Liabilities of Maker to Holder.
Holder may, at any time, whether or not this Note is due: (i) pledge or
transfer this Note and its interest in the Collateral, whereupon Holder shall be
relieved of all duties and responsibilities hereunder and relieved from any and
all liability with respect to any Collateral so pledged or transferred, and
pledgee or transferee shall, for all purposes, stand in the place of Holder
hereunder and have all the rights of Holder hereunder; (ii) transfer the whole
or any part of the Collateral into the name of itself or its nominee; (iii) vote
the Collateral; (iv) notify the Obligor on any Collateral to make payment to
Holder of any amounts due or to become due thereon; (v) demand, sue for,
collect, or make any compromise or settlement it deems desirable with reference
to the Collateral; (vi) take possession or control of any proceeds of the
Collateral; and (vii) exercise all other rights necessary or required, in
Holder's discretion, in order to protect its interests hereunder.
In no event shall Holder be entitled to unearned or unaccrued interest or
other charges or rebates, except as may be authorized by law; nor shall any such
party be entitled to receive at any time any such charges not allowed or
permitted by law, or any interest in excess of the highest lawful rate. Any
payments of interest in excess of the highest lawful rate shall be credited by
Holder on interest
PLEASE INITIAL JR
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<PAGE>
accrued or principal or both; except that Maker shall have an option to demand
refund as to any such interest or charges in excess of the highest lawful rate.
Any payments of interest in excess of the highest lawful rate shall be credited
by Holder on interest accrued or principal or both; except that Maker shall have
an option to demand refund as to any such interest or charges in excess of the
highest lawful rate. Holder may, in determining the maximum rate permitted under
applicable law in effect from time to time, take advantage of (i) the maximum
rate of interest permitted under New York law or federal law, which ever is
higher, including any laws regarding parity among lenders; and (ii) any other
law, rule or regulation in effect from time to time available to Holder, which
exempts Holder from any limit upon the rate of interest it may charge, or grants
to Holder the right to charge a higher rate of interest than that permitted by
applicable statutes.
No delay or omission on the part of Holder in exercising any right
hereunder shall operate as a waiver of such right or of any other rights under
this Note. Presentment, demand, protest, notice of dishonor and all other
notices are hereby waived by each and every Obligor. Obligor, jointly and
severally, promises and agrees to pay all costs of collection and reasonable
attorney's fees, including reasonable attorney's fees of any suit, out of court,
in trial, on appeal, in bankruptcy proceedings or otherwise, incurred or paid by
Holder in enforcing this Note or preserving any right or interest of Holder
hereunder. Any notice to Maker shall be sufficiently served for all purposes if
delivered or furnished pursuant to Section 14.7 of the Loan Agreement.
This Note is not assumable without the Holder's prior written consent,
which consent may be granted by the Holder or denied by Holder in Holder's sole
and absolute discretion.
All rights and obligations hereunder shall be governed and construed
according to the internal statutes and laws of the State of New York, without
regard to principles of conflicts of laws, except as required by mandatory
provisions of law, but giving effect to federal laws applicable to national
banks to the extent applicable.
THE MAKER HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ALL STATE AND FEDERAL COURTS SITTING IN NEW YORK
COUNTY, NEW YORK AND AGREES THAT ALL SUMMONS AND OTHER COURT PROCESS ISSUED BY
SAID COURTS MAY BE SERVED UPON THE MAKER, WITHIN OR OUTSIDE SAID COURTS'
TERRITORIAL JURISDICTION, BY MAILING THE SAME, BY REGISTERED OR CERTIFIED MAIL,
OR BY PERSONAL SERVICE, TO THE MAKER AT ITS ADDRESS SPECIFIED HEREIN; PROVIDED
THAT NOTHING CONTAINED HEREIN SHALL LIMIT THE HOLDER HEREOF'S RIGHT TO SUE THE
MAKER IN ANY OTHER COURT HAVING JURISDICTION OVER THE MAKER OR ITS ASSETS AND TO
SERVE SUMMONS OR OTHER COURT PROCESS UPON THE MAKER IN ANY MANNER PERMITTED BY
APPLICABLE LAW.
THIS PROMISSORY NOTE IS BEING EXECUTED SIMULTANEOUSLY WITH THAT CERTAIN
ASSUMPTION AND MODIFICATION MASTER REVOLVING PROMISSORY NOTE IN THE PRINCIPAL
AMOUNT OF FOURTEEN MILLION AND 00/100 DOLLARS ($14,000,000.00) EXECUTED BY MAKER
IN FAVOR OF HOLDER DATED OF EVEN DATE
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<PAGE>
HEREWITH (THE "REVOLVING NOTE"). THIS NOTE IS CROSS-DEFAULTED WITH THE REVOLVING
NOTE, SUCH THAT A DEFAULT UNDER THIS NOTE SHALL BE AND CONSTITUTE A DEFAULT
UNDER THE REVOLVING NOTE AND A DEFAULT UNDER THE REVOLVING NOTE SHALL BE AND
CONSTITUTE A DEFAULT UNDER THIS NOTE.
THIS PROMISSORY NOTE CONSTITUTES AND IS AN ASSUMPTION OF AND MODIFICATION
OF THAT CERTAIN CAPEX LINE/TERM PROMISSORY NOTE DATED AS OF JUNE 4, 1998 IN THE
ORIGINAL PRINCIPAL AMOUNT OF ONE MILLION SIX HUNDRED SEVENTY-FIVE THOUSAND AND
00/100 DOLLARS ($1,675,000.00) EXECUTED BY M&K TECHNOLOGY, INC., A FLORIDA
CORPORATION, AND, AMITEK CORPORATION, A FLORIDA CORPORATION, IN FAVOR OF HOLDER
(THE "ORIGINAL NOTE"). ACCORDINGLY, THIS PROMISSORY NOTE CONSTITUTES AN
ASSUMPTION BY MAKER OF THE ORIGINAL NOTE. ADDITIONALLY, AND AS SET FORTH ABOVE,
THIS PROMISSORY NOTE IS BEING EXECUTED AND DELIVERED OUTSIDE OF THE STATE OF
FLORIDA. ACCORDINGLY, NO DOCUMENTARY STAMP TAXES ARE DUE AND OWING IN CONNECTION
WITH THE EXECUTION AND DELIVERY OF THIS PROMISSORY NOTE.
INTENTIONALLY LEFT BLANK
PLEASE INITIAL JR
----
-6-
<PAGE>
Waiver of Trial by Jury. MAKER AND HOLDER HEREBY MUTUALLY, KNOWINGLY,
WILLINGLY, INTENTIONALLY AND VOLUNTARILY WAIVE THEIR RIGHT TO TRIAL BY JURY,
AND, NO PARTY, NOR ANY ASSIGNEE, SUCCESSOR, HEIR, OR LEGAL REPRESENTATIVE OF THE
PARTIES (ALL OF WHOM ARE HEREINAFTER REFERRED TO AS THE "PARTIES") SHALL SEEK A
JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, OR ANY OTHER LITIGATION
PROCEEDING BASED UPON OR ARISING OUT OF THIS NOTE OR THE LOAN DOCUMENTS, OR ANY
INSTRUMENT EVIDENCING, SECURING, OR RELATING TO THE INDEBTEDNESS AND OTHER
OBLIGATIONS EVIDENCED HEREBY OR ANY RELATED AGREEMENT OR INSTRUMENT, ANY OTHER
COLLATERAL FOR THE INDEBTEDNESS EVIDENCED HEREBY OR ANY COURSE OF ACTION, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS RELATING TO THIS
NOTE OR THE LOAN DOCUMENTS. THE PARTIES ALSO WAIVE ANY RIGHT TO CONSOLIDATE ANY
ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED, WITH ANY OTHER ACTION IN WHICH A
JURY TRIAL HAS NOT BEEN WAIVED. THE PROVISIONS OF THIS PARAGRAPH HAVE BEEN FULLY
NEGOTIATED BY THE PARTIES. THE WAIVER CONTAINED HEREIN IS IRREVOCABLE,
CONSTITUTES A KNOWING AND VOLUNTARY WAIVER, AND SHALL BE SUBJECT TO NO
EXCEPTIONS. HOLDER HAS IN NO WAY AGREED WITH OR REPRESENTED TO MAKER OR ANY
OTHER PARTY THAT THE PROVISIONS OF THIS PARAGRAPH WILL NOT BE FULLY ENFORCED IN
ALL INSTANCES.
AMITEK CORPORATION, a Delaware corporation
1701 Clint Moore Road
- ---------------------------- By: /s/ Jim Roller
(address) -------------------------------
Boca Raton., Florida 33487 Title: Secretary & Treasurer
- ---------------------------- ----------------------------
(Corporate Seal)
COMMONWEALTH OF MASSACHUSETTS )
COUNTY OF Suffolk )
The foregoing instrument was acknowledged before me this 30th day of July,
1999, by Jim Roller, as Sec/Treas. of and on behalf of AMITEK CORPORATION, a
Delaware corporation, who is personally known to me or produced his/her driver's
license as identification.
/s/ Beth A. Good
-------------------------------------
NOTARY PUBLIC
Commonwealth of Massachusetts
Print/Type/Stamp Name
Commission Expiration Date:
Notary Seal:
BETH A. GOOD, Notary Public:
My Commission Expires April 22, 2005
(Signing as a Notary and not as a
Maker or Obligor of this Note.)
-7-
<PAGE>
Exhibit 10.23
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD ABSENT AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER THEREOF THAT SUCH REGISTRATION HAS BEEN
EFFECTED OR AN EXEMPTION THEREFROM IS AVAILABLE. TRANSFER MAY BE REFUSED IN THE
ABSENCE OF SUCH OPINION. THE RIGHTS OF THE HOLDER HEREUNDER, INCLUDING THE RIGHT
TO RECEIVE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THIS NOTE, ARE SUBJECT TO
SET-OFF IN ACCORDANCE WITH SECTION 9.7 OF THE MERGER AGREEMENT (AS DEFINED
BELOW).
SECURED PROMISSORY NOTE
July 30, 1999 $1,419,609
FOR VALUE RECEIVED, the undersigned, Century Electronics Manufacturing,
Inc., a Delaware corporation (the "Company"), hereby agrees and promises to pay
to Sung Woo Kwon or, provided that the registration provision of Section 7 of
this Note has been satisfied, to the successors and assigns of Sung Woo Kwon
(Kwon), together with any subsequent holders of this Note, the "Payee"), the
principal sum of One Million, Four Hundred Nineteen Thousand, Six Hundred Nine
Dollars ($1,419,609) in lawful money of the United States of America, together
with interest from and after September 30, 1999 on the unpaid principal amount
hereof from time to time outstanding until the entire principal amount hereof
has been paid in full, at a rate equal to the prime rate as published from time
to time in the Wall Street Journal plus 1 % (such rate to be adjusted quarterly
in arrears to the weighted average prime rate for the quarter). Principal shall
be payable quarterly in arrears from and after September 30, 1999 until the
entire principal amount hereof has been paid in full. Interest shall be paid
quarterly in arrears beginning December 31, 1999 until the entire principal
amount hereof has been paid in full. If the date set for any payment or
prepayment of principal or interest hereunder is a Saturday, Sunday or legal
holiday, then such payment or prepayment shall be made on the next preceding
business day.
Principal is to be paid on the following schedule:
<PAGE>
Date Payment Principal Balance
---- ------- -----------------
December 31, 1999 $ 65,818.40 $1,353,790.60
March 31, 2000 $ 65,818.40 $1,287,972.20
June 30, 2000 $169,059.40 $1,118,912.80
September 30, 2000 $ 65,818.40 $1,053,094.40
December 31, 2000 $ 65,818.40 $ 987,276.00
March 31, 2001 $ 65,818.40 $ 921,457.60
June 30, 2001 $ 65,818.40 $ 855,639.20
September 30, 2001 $ 65,818.40 $ 789,820.80
December 31, 2001 $ 65,818.40 $ 724,002.40
March 31, 2002 $ 65,818.40 $ 658,184.00
June 30, 2002 $ 65,818.40 $ 592,365.60
September 30, 2002 $ 65,818.40 $ 526,547.20
December 31, 2002 $ 65,818.40 $ 460,728.80
March 31, 2003 $ 65,818.40 $ 394,910.40
June 30, 2003 $ 65,818.40 $ 329,092.00
September 30, 2003 $ 65,818.40 $ 263,273.60
December 31, 2003 $ 65,818.40 $ 197,455.20
March 31, 2004 $ 65,818.40 $ 131,636.80
June 30, 2004 $ 65,818.40 $ 65,818.40
September 30, 2004 $ 65,818.40 -0-
This Note has been delivered to evidence indebtedness of the Company to
the Payee arising in connection with the merger of Amitek Corporation, a Florida
corporation ("Amitek"), with and into the Company, in accordance with the terms
of the Agreement and Plan of Merger ("Merger Agreement") among the Company,
Amitek, and certain of the stockholders of Amitek. Capitalized terms used but
not otherwise defined in this Note are used herein as defined in the Merger
Agreement. Payment of the principal of and interest on this
-2-
<PAGE>
Note is secured pursuant to the terms of a Stock Pledge Agreement dated as of
the date hereof among the Company, the stockholders of Amitek and Amitek
Corporation, a Delaware corporation ("NewSub") (the "Pledge Agreement"),
reference to which is made for a description of the collateral provided thereby
and the rights of the Payee and any subsequent holder of this Note in respect of
such collateral.
Notwithstanding anything to the contrary herein, (i) the entire unpaid
principal amount of indebtedness evidenced by this Note and all accrued and
unpaid interest, to the extent not theretofore paid or prepaid as provided for
herein, shall be paid in full upon the closing of an Initial Public Offering and
(ii) $103,241 of the principal of this Note and all accrued and unpaid interest
in respect thereof, to the extent not theretofore paid or prepaid as provided
for herein, shall be paid in full upon the payment in full of or upon the
termination, discharge or refinancing of the indebtedness of NewSub to the
National Bank of Canada under the Amended and Restated Loan Agreement dated July
30, 1999 between NewSub and the National Bank of Canada.
This Note is subject to the following further terms and conditions:
1. Payment and Prepayment. All payments and prepayments of principal of
and interest on this Note shall be made to the Payee or his order, or to the
legal holder of this Note or such holder's order, in lawful money of the United
States of America at the address specified in Section 6 of this Note (or at such
other place as the holder hereof shall notify the Company in writing). The
Company may, at its option, prepay the obligations under this Note in whole or
in part at any time or from time to time without penalty or premium; provided,
however, no prepayment of this Note shall be permitted unless the obligations of
the Company and NewSub under Section 1 of each of the Bonus and Settlement for
Past Services Agreements shall have also been prepaid pro rata. Any prepayments
of any portion of the principal amount of this Note shall be accompanied by
payment of all interest accrued but unpaid hereunder. Upon final payment of
principal of and interest on this Note it shall be surrendered for cancellation.
The Pledge Agreement requires payment or prepayment of all obligations under
this Note as a condition precedent to the release of, or transfer of the
Company's interests in, the collateral subject to the Pledge Agreement, all as
described more fully in the Pledge Agreement.
2. Waivers. The Company waives to the extent not prohibited by applicable
law (i) all presentments, demands for performance, notices of nonperformance
(except to the extent
-3-
<PAGE>
required by the provisions hereof), protests, notices of protest and notices of
dishonor, (ii) any requirement of diligence or promptness on the part of the
Payee in the enforcement of his rights under this Note, (iii) all notices of
every kind which may be required to be given by any statute or rule of law, (iv)
any valuation, stay, appraisement or redemption laws and (v) any defense of any
kind (other than payment or in connection with the Company's exercise of its
right of set-off in accordance with the provisions of Section 9.7 of the Merger
Agreement) which it may now or hereafter have with respect to its liability
under this Note.
3. Course of Dealing. No course of dealing between the Company and the
Payee shall operate as a waiver of any of the Payee's rights under this Note. No
delay or omission on the part of the Payee in exercising any right under this
Note shall operate as a waiver of such right or any other right hereunder. No
amendment or waiver hereof shall be binding unless it is in writing and signed
by the Payee.
4. Set-Off Only As Permitted by Section 9.7 of the Merger Agreement. The
obligation of Company to pay amounts due under this Note is unconditional and
there shall be no right for the Company to set-off any principal or interest due
hereunder against any obligations owed by the Payee to the Company, except as,
and only to the extent, specifically permitted by Section 9.7 of the Merger
Agreement. Any exercise of any set-off inconsistent with this Section 4 shall
constitute an Event of Default hereunder.
5. Events of Default. Upon the occurrence of any of the following events
("Events of Default"):
(a) Failure to pay the principal of this Note, including any
prepayments required hereunder or under the Pledge Agreement, when due,
provided that there shall be no Event of Default unless such failure shall
remain unremedied for seven days following notice from the Payee to
Company of such failure; or
(b) Failure to pay any interest installment due under this Note
which shall remain unremedied for seven business days following notice
from the Payee to Company of such failure; or
(c) Failure of the Company or NewSub to perform their respective
obligations under the Pledge Agreement beyond any applicable grace
periods;
-4-
<PAGE>
(d) Failure of the Company or NewSub to perform their respective (i)
payment obligations under Sections 2.5, 2.9, 2.10, 2.11, or 5.10(e) of the
Merger Agreement, (ii) indemnification obligations in excess of $10,000
under Sections 5.11, 5.12, 5.13 and 9 of the Merger Agreement, (iii)
payment obligations under Sections 2(a), 2(b) and 3 of the Employment
Agreement, or (iv) payment obligations under paragraph 4 of that certain
Intercompany Inventory Purchase and Assumption of Liabilities Agreement by
and between Amitek and M & K Technology, Inc., in each case which failure
shall remain unremedied for thirty (30) days following notice from the
Payee to the Company;
(e) Failure of the Company or NewSub to perform their respective
obligations under the Bonus Plan, under Section 1 of any of the Bonus and
Settlement for Past Services Agreements, or in respect of the Amitek Stock
Options, which failure shall remain unremedied for thirty (30) days
following notice from the Payee to the Company;
(f) The Company or any Subsidiary of the Company shall be involved
in financial difficulties as evidenced:
(1) by its admitting its inability to pay its debts
generally as they become due or otherwise acknowledging
its insolvency;
(2) by its filing a petition in bankruptcy or for
reorganization or for the adoption of an arrangement
under the United States Bankruptcy Act (or similar law
of the United States or any other jurisdiction which
relates to the liquidation or reorganization of
companies or to the modification or alteration of the
rights of creditors, each such law, as from time to time
in effect, being sometimes referred to as a "bankruptcy
act", each as now or in the future amended) or an answer
or other pleading admitting or failing to deny the
material allegations of such a petition or seeking,
consenting to or acquiescing in the relief therein
provided;
-5-
<PAGE>
(3) by its making an assignment, or so-called trust mortgage
or the like, for the benefit of its creditors or by its
making a proposal to its creditors under any bankruptcy
act;
(4) by its consent to the appointment of a receiver or a
trustee (or other person performing a similar function)
for all or a substantial part of its property;
(5) by its being adjudicated a bankrupt;
(6) by the entry of a court order which shall not be
vacated, set aside or stayed within 120 days from the
date of entry, (i) appointing a receiver or a trustee
for all or a substantial part of its property, or (ii)
approving a petition filed or application made against
it for, or effecting an arrangement in, bankruptcy or
for a reorganization or other relief pursuant to any
bankruptcy act or for any other judicial modification or
alteration of the rights of creditors; or
(7) by the assumption of custody or sequestration by a court
of competent jurisdiction of all or substantially all of
its property, which custody or sequestration shall not
be suspended or terminated within 120 days from its
inception.
(g) The Company or any Subsidiary of the Company shall fail to make
any payment of any principal of or interest on any Indebtedness of the
Company or any Subsidiary of the Company to National Bank of Canada, USA
Funding, Inc. or Fidelity Funding, Inc., and their respective affiliates,
successors and assigns (collectively, "Senior Indebtedness", including any
renewals, extensions and refinancings thereof, whether involving such
lenders or other lenders), or to perform or observe the terms of any
agreement or mortgage relating to such Senior Indebtedness, and such
default shall continue, without having been duly cured, waived or
consented to, beyond the period of grace, if any, therein specified, and
(i) the principal of and interest on such Senior Indebtedness in an amount
exceeding $1,000,000 in the aggregate shall have been declared by the
payee thereof to be forthwith due and payable, or (ii) any security
interest in or lien on any property of the Company or any Subsidiary of
the Company
-6-
<PAGE>
securing any such Senior Indebtedness in an amount exceeding $1,000,000 in
the aggregate shall be enforced.
then, and in any such event, the holder of this Note may declare, by notice of
default given to the Company, the entire principal amount of this Note to be
forthwith due and payable, whereupon the entire principal amount of this Note
outstanding and any accrued and unpaid interest hereunder shall become due and
payable without presentment, demand, protest, notice of dishonor and all other
demands and notices of any kind, all of which are hereby expressly waived. Upon
the occurrence of an Event of Default, outstanding principal and accrued and
unpaid interest hereunder shall thereafter bear interest at the rate of twelve
percent (12%) per annum, but in no event shall such interest be charged which
would violate any applicable usury law. If an Event of Default shall occur
hereunder, the Company shall pay costs of collection, including reasonable
attorneys' fees, incurred by the holder in the enforcement hereof.
An Event of Default hereunder shall also constitute a breach by the
Company of the Merger Agreement.
Upon an Event of Default under Section 5(a), 5(b) or 5(e) hereunder, the
Principal Sellers' payment obligations under Section 9 of the Merger Agreement
shall be suspended until such time as the principal balance of, all accrued but
unpaid interest hereon, and all costs due hereunder, are paid in full.
No delay or failure by the holder of this Note in the exercise of any
right or remedy shall constitute a waiver thereof, and no single or partial
exercise by the holder hereof of any right or remedy shall preclude other or
future exercise thereof or the exercise of any other right or remedy.
6. Notices. Any notice or demand in connection with this Note shall be
deemed to be delivered if in writing addressed as provided below (or at such
other address as the addressee shall have specified by notice actually received
by the addressor) and if either (i) actually delivered at such address or (ii)
in the case of a letter, five business days shall have elapsed after the same
shall have been deposited in the United States mail, postage prepaid and
registered or certified:
If to the Company, to it at the following address:
-7-
<PAGE>
274 Cedar Hill Road
Marlborough, MA 01752
Attention: James Roller, Chief Financial Officer
If to the Payee, to him at the following address:
5887 NW 79th Way
Parkland, FL 33067
7. Transfer; Assignment; Registration. This Note is transferable in whole
or in part upon surrender of this Note for transfer at the principal executive
offices of the Company duly endorsed by or accompanied by a written instrument
of transfer in form satisfactory to the Company and duly executed by the Payee
or the trustee, receiver, liquidator, guardian, conservator, executor or
personal representative of the Payee, and thereupon a new Note or Notes of the
same tenor (except for the payee) in an aggregate principal amount of the unpaid
principal amount of the Note so surrendered for transfer will be issued to, and
in the name of, the transferee or transferees; provided, however, that for a
period of two years from and after the date of this Note, this Note shall not be
transferable or assignable by the Payee to any person or entity other than a
Permitted Transferee. This Note shall not be transferrable unless the Company
shall have been provided a written notice describing the proposed transfer in
reasonable detail and an opinion of counsel reasonably satisfactory to the
Company that the proposed transfer of the Note may be effected without
registration of such Note under the Securities Act of 1933. No transfer or
assignment by Payee of all or any portion of its interests, rights and
obligations under this Note shall be effective until the identity of the
transferee or assignee is registered on the books and records maintained by the
Company or any agent of the Company. A certificate that such registration has
been completed shall be promptly provided by the Company to Payee and any
assignee or successor thereof and such certificate shall constitute conclusive
evidence of such registration and the effectiveness of such transfer or
assignment. For purposes of this Note, "Permitted Transferee" means (a) any
member of the family of the Payee or any trust for the benefit of such Payee or
family member or (b) the trustee, receiver, liquidator, guardian, conservator,
executor or personal representative of the Payee.
8. Governing Law: Consent to Jurisdiction; Waiver of Jury Trial; Reliance
The parties hereto acknowledge and agree that the provisions of
Sections 11.8,
-8-
<PAGE>
11.9, 11.10 and 11.11 of the Merger Agreement are fully applicable to this
Note.
9. Headings
The headings contained in this Note are for reference purposes only
and shall not affect in any way the meaning or interpretation of the
provisions hereof.
-9-
<PAGE>
IN WITNESS WHEREOF, this Note has been duly executed and delivered by the
Company on the date first above written.
CENTURY ELECTRONICS
MANUFACTURING, INC.
Witness: By: /s/ Leslie J. Sainsbury
-----------------------------------
Name: Leslie J. Sainsbury
/s/ Jim Roller Title: President
- ---------------------
<PAGE>
Exhibit 10.24
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD ABSENT AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER THEREOF THAT SUCH REGISTRATION HAS BEEN
EFFECTED OR AN EXEMPTION THEREFROM IS AVAILABLE. TRANSFER MAY BE REFUSED IN THE
ABSENCE OF SUCH OPINION. THE RIGHTS OF THE HOLDER HEREUNDER, INCLUDING THE RIGHT
TO RECEIVE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THIS NOTE, ARE SUBJECT TO
SET-OFF IN ACCORDANCE WITH SECTION 9.7 OF THE MERGER AGREEMENT (AS DEFINED
BELOW).
SECURED PROMISSORY NOTE
July 30, 1999 $2,117,701
FOR VALUE RECEIVED, the undersigned, Century Electronics Manufacturing,
Inc., a Delaware corporation (the "Company"), hereby agrees and promises to pay
to the order of Myung Ho Park (the "Payee") or to the legal holder of this Note
at the time of payment, the principal sum of Two Million, One Hundred Seventeen
Thousand, Seven Hundred One Dollars ($2,117,701) in lawful money of the United
States of America, together with interest from and after September 30, 1999 on
the unpaid principal amount hereof from time to time outstanding until the
entire principal amount hereof has been paid in full, at a rate equal to the
prime rate as published from time to time in the Wall Street Journal plus 1 %
(such rate to be adjusted quarterly in arrears to the weighted average prime
rate for the quarter). Principal shall be payable quarterly in arrears from and
after September 30, 1999 until the entire principal amount hereof has been paid
in full. Interest shall be paid quarterly in arrears beginning December 31, 1999
until the entire principal amount hereof has been paid in full. If the date set
for any payment or prepayment of principal or interest hereunder is a Saturday,
Sunday or legal holiday, then such payment or prepayment shall be made on the
next preceding business day.
Principal is to be paid on the following schedule:
Date Payment Principal Balance
---- ------- -----------------
December 31, 1999 $ 98,184.60 $2,019,516.40
March 31, 2000 $ 98,184.60 $1,921,331.80
<PAGE>
Date Payment Principal Balance
---- ------- -----------------
June 30, 2000 $252,193.60 $1,669,138.20
September 30, 2000 $ 98,184.60 $1,570,953.60
December 31, 2000 $ 98,184.60 $1,472,769.00
March 31, 2001 $ 98,184.60 $1,374,584.40
June 30, 2001 $ 98,184.60 $1,276,399.80
September 30, 2001 $ 98,184.60 $1,178,215.20
December 31, 2001 $ 98,184.60 $1,080,030.60
March 31, 2002 $ 98,184.60 $ 981,846.00
June 30, 2002 $ 98,184.60 $ 883,661.40
September 30, 2002 $ 98,184.60 $ 785,476.80
December 31, 2002 $ 98,184.60 $ 687,292.20
March 31, 2003 $ 98,184.60 $ 589,107.60
June 30, 2003 $ 98,184.60 $ 490,923.00
September 30, 2003 $ 98,184.60 $ 392,738.40
December 31,2003 $ 98,184.60 $ 294,553.80
March 31, 2004 $ 98,184.60 $ 196,369.20
June 30, 2004 $ 98,184.60 $ 98,184.60
September 30, 2004 $ 98,184.60 -0-
This Note has been delivered to evidence indebtedness of the Company to
the Payee arising in connection with the merger of Amitek Corporation, a Florida
corporation ("Amitek"), with and into the Company, in accordance with the terms
of the Agreement and Plan of Merger ("Merger Agreement") among the Company,
Amitek, and certain of the stockholders of Amitek. Capitalized terms used but
not otherwise defined in this Note are used herein as defined in the Merger
Agreement. Payment of the principal of and interest on this Note is secured
pursuant to the terms of a Stock Pledge Agreement dated as of the date hereof
among the Company, the stockholders of Amitek and Amitek Corporation, a Delaware
corporation ("NewSub") (the "Pledge Agreement"), reference to which is made for
a
-2-
<PAGE>
description of the collateral provided thereby and the rights of the Payee and
any subsequent holder of this Note in respect of such collateral.
Notwithstanding anything to the contrary herein, (i) the entire unpaid
principal amount of indebtedness evidenced by this Note and all accrued and
unpaid interest, to the extent not theretofore paid or prepaid as provided for
herein, shall be paid in full upon the closing of an Initial Public Offering and
(ii) $154,009 of the principal of this Note and all accrued and unpaid interest
in respect thereof, to the extent not theretofore paid or prepaid as provided
for herein, shall be paid in full upon the payment in full of or upon the
termination, discharge or refinancing of the indebtedness of NewSub to the
National Bank of Canada under the Amended and Restated Loan Agreement dated July
30, 1999 between NewSub and the National Bank of Canada.
This Note is subject to the following further terms and conditions:
1. Payment and Prepayment. All payments and prepayments of principal of
and interest on this Note shall be made to the Payee or his order, or to the
legal holder of this Note or such holder's order, in lawful money of the United
States of America at the address specified in Section 6 of this Note (or at such
other place as the holder hereof shall notify the Company in writing). The
Company may, at its option, prepay the obligations under this Note in whole or
in part at any time or from time to time without penalty or premium; provided,
however, no prepayment of this Note shall be permitted unless the obligations of
the Company and NewSub under Section 1 of each of the Bonus and Settlement for
Past Services Agreements shall have also been prepaid pro rata. Any prepayments
of any portion of the principal amount of this Note shall be accompanied by
payment of all interest accrued but unpaid hereunder. Upon final payment of
principal of and interest on this Note it shall be surrendered for cancellation.
The Pledge Agreement requires payment or prepayment of all obligations under
this Note as a condition precedent to the release of, or transfer of the
Company's interests in, the collateral subject to the Pledge Agreement, all as
described more fully in the Pledge Agreement.
2. Waivers. The Company waives to the extent not prohibited by applicable
law (i) all presentments, demands for performance, notices of nonperformance
(except to the extent required by the provisions hereof), protests, notices of
protest and notices of dishonor, (ii) any requirement of diligence or promptness
on the part of the Payee in the enforcement of his rights under this Note, (iii)
all notices of every kind which may be required to be given by any
-3-
<PAGE>
statute or rule of law, (iv) any valuation, stay, appraisement or redemption
laws and (v) any defense of any kind (other than payment or in connection with
the Company's exercise of its right of set-off in accordance with the provisions
of Section 9.7 of the Merger Agreement) which it may now or hereafter have with
respect to its liability under this Note.
3. Course of Dealing. No course of dealing between the Company and the
Payee shall operate as a waiver of any of the Payee's rights under this Note. No
delay or omission on the part of the Payee in exercising any right under this
Note shall operate as a waiver of such right or any other right hereunder. No
amendment or waiver hereof shall be binding unless it is in writing and signed
by the Payee.
4. Set-Off Only As Permitted by Section 9.7 of the Merger Agreement. The
obligation of Company to pay amounts due under this Note is unconditional and
there shall be no right for the Company to set-off any principal or interest due
hereunder against any obligations owed by the Payee to the Company, except as,
and only to the extent, specifically permitted by Section 9.7 of the Merger
Agreement. Any exercise of any set-off inconsistent with this Section 4 shall
constitute an Event of Default hereunder.
5. Events of Default. Upon the occurrence of any of the following events
("Events of Default"):
(a) Failure to pay the principal of this Note, including any
prepayments required hereunder or under the Pledge Agreement, when due,
provided that there shall be no Event of Default unless such failure shall
remain unremedied for seven days following notice from the Payee to
Company of such failure; or
(b) Failure to pay any interest installment due under this Note
which shall remain unremedied for seven business days following notice
from the Payee to Company of such failure; or
(c) Failure of the Company or NewSub to perform their respective
obligations under the Pledge Agreement beyond any applicable grace
periods;
(d) Failure of the Company or NewSub to perform their respective (i)
payment obligations under Sections 2.5, 2.9, 2.10, 2.11, or 5.10(e) of the
Merger Agreement, (ii) indemnification obligations in excess of $10,000
under Sections 5.11, 5.12, 5.13
-4-
<PAGE>
and 9 of the Merger Agreement, (ill) payment obligations under Sections
2(a), 2(b) and 3 of the Employment Agreement, or (iv) payment obligations
under paragraph 4 of that certain Intercompany Inventory Purchase and
Assumption of Liabilities Agreement by and between Amitek and M & K
Technology, Inc., in each case which failure shall remain unremedied for
thirty (30) days following notice from the Payee to the Company;
(e) Failure of the Company or NewSub to perform their respective
obligations under the Bonus Plan, under Section 1 of any of the Bonus and
Settlement for Past Services Agreements, or in respect of the Amitek Stock
Options, which failure shall remain unremedied for thirty (30) days
following notice from the Payee to the Company;
(f) The Company or any Subsidiary of the Company shall be involved
in financial difficulties as evidenced:
(1) by its admitting its inability to pay its debts
generally as they become due or otherwise acknowledging
its insolvency;
(2) by its filing a petition in bankruptcy or for
reorganization or for the adoption of an arrangement
under the United States Bankruptcy Act (or similar law
of the United States or any other jurisdiction which
relates to the liquidation or reorganization of
companies or to the modification or alteration of the
rights of creditors, each such law, as from time to time
in effect, being sometimes referred to as a "bankruptcy
act", each as now or in the future amended) or an answer
or other pleading admitting or failing to deny the
material allegations of such a petition or seeking,
consenting to or acquiescing in the relief therein
provided;
(3) by its making an assignment, or so-called trust mortgage
or the like, for the benefit of its creditors or by its
making a proposal to its creditors under any bankruptcy
act;
-5-
<PAGE>
(4) by its consent to the appointment of a receiver or a
trustee (or other person performing a similar function)
for all or a substantial part of its property;
(5) by its being adjudicated a bankrupt;
(6) by the entry of a court order which shall not be
vacated, set aside or stayed within 120 days from the
date of entry, (i) appointing a receiver or a trustee
for all or a substantial part of its property, or (ii)
approving a petition filed or application made against
it for, or effecting an arrangement in, bankruptcy or
for a reorganization or other relief pursuant to any
bankruptcy act or for any other judicial modification or
alteration of the rights of creditors; or
(7) by the assumption of custody or sequestration by a court
of competent jurisdiction of all or substantially all of
its property, which custody or sequestration shall not
be suspended or terminated within 120 days from its
inception.
(g) The Company or any Subsidiary of the Company shall fail to make
any payment of any principal of or interest on any Indebtedness of the
Company or any Subsidiary of the Company to National Bank of Canada, USA
Funding, Inc. or Fidelity Funding, Inc., and their respective affiliates,
successors and assigns (collectively, "Senior Indebtedness", including any
renewals, extensions and refinancings thereof, whether involving such
lenders or other lenders), or to perform or observe the terms of any
agreement or mortgage relating to such Senior Indebtedness, and such
default shall continue, without having been duly cured, waived or
consented to, beyond the period of grace, if any, therein specified, and
(i) the principal of and interest on such Senior Indebtedness in an amount
exceeding $1,000,000 in the aggregate shall have been declared by the
payee thereof to be forthwith due and payable, or (ii) any security
interest in or lien on any property of the Company or any Subsidiary of
the Company securing any such Senior Indebtedness in an amount exceeding
$1,000,000 in the aggregate shall be enforced.
-6-
<PAGE>
then, and in any such event, the holder of this Note may declare, by notice of
default given to the Company, the entire principal amount of this Note to be
forthwith due and payable, whereupon the entire principal amount of this Note
outstanding and any accrued and unpaid interest hereunder shall become due and
payable without presentment, demand, protest, notice of dishonor and all other
demands and notices of any kind, all of which are hereby expressly waived. Upon
the occurrence of an Event of Default, outstanding principal and accrued and
unpaid interest hereunder shall thereafter bear interest at the rate of twelve
percent (12%) per annum, but in no event shall such interest be charged which
would violate any applicable usury law. If an Event of Default shall occur
hereunder, the Company shall pay costs of collection, including reasonable
attorneys' fees, incurred by the holder in the enforcement hereof.
An Event of Default hereunder shall also constitute a breach by the
Company of the Merger Agreement.
Upon an Event of Default under Section 5(a), 5(b) or 5(e) hereunder, the
Principal Sellers' payment obligations under Section 9 of the Merger Agreement
shall be suspended until such time as the principal balance of, all accrued but
unpaid interest hereon, and all costs due hereunder, are paid in full.
No delay or failure by the holder of this Note in the exercise of any
right or remedy shall constitute a waiver thereof, and no single or partial
exercise by the holder hereof of any right or remedy shall preclude other or
future exercise thereof or the exercise of any other right or remedy.
6. Notices. Any notice or demand in connection with this Note shall be
deemed to be delivered if in writing addressed as provided below (or at such
other address as the addressee shall have specified by notice actually received
by the addressor) and if either (i) actually delivered at such address or (ii)
in the case of a letter, five business days shall have elapsed after the same
shall have been deposited in the United States mail, postage prepaid and
registered or certified:
If to the Company, to it at the following address:
274 Cedar Hill Road
Marlborough, MA 01752
Attention: James Roller, Chief Financial Officer
-7-
<PAGE>
If to the Payee, to him at the following address:
5887 NW 79th Way
Parkland, FL 33067
7. Transfer. This Note is transferable in whole or in part upon surrender
of this Note for transfer at the principal executive offices of the Company duly
endorsed by or accompanied by a written instrument of transfer in form
satisfactory to the Company and duly executed by the Payee or the trustee,
receiver, liquidator, guardian, conservator, executor or personal representative
of the Payee, and thereupon a new Note or Notes of the same tenor (except for
the payee) in an aggregate principal amount of the unpaid principal amount of
the Note so surrendered for transfer will be issued to, and in the name of, the
transferee or transferees; provided, however, that for a period of two years
from and after the date of this Note, this Note shall not be transferable or
assignable by the Payee to any person or entity other than a Permitted
Transferee. This Note shall not be transferrable unless the Company shall have
been provided a written notice describing the proposed transfer in reasonable
detail and an opinion of counsel reasonably satisfactory to the Company that the
proposed transfer of the Note may be effected without registration of such Note
under the Securities Act of 1933. For purposes of this Note, "Permitted
Transferee" means (a) any member of the family of the Payee or any trust for the
benefit of such Payee or family member or (b) the trustee, receiver, liquidator,
guardian, conservator, executor or personal representative of the Payee.
8. Governing Law: Consent to Jurisdiction; Waiver of Jury Trial; Reliance
The parties hereto acknowledge and agree that the provisions of
Sections 11.8, 11.9, 11.10 and 11.11 of the Merger Agreement are fully
applicable to this Note.
9. Headings
The headings contained in this Note are for reference purposes only
and shall not affect in any way the meaning or interpretation of the
provisions hereof.
-8-
<PAGE>
IN WITNESS WHEREOF, this Note has been duly executed and delivered by the
Company on the date first above written.
CENTURY ELECTRONICS
MANUFACTURING, INC.
Witness: By: /s/ Leslie J. Sainsbury
-----------------------------------
Name: Leslie J. Sainsbury
/s/ Jim Roller Title: President
- ---------------------
<PAGE>
Exhibit 10.25
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD ABSENT AN OPINION OF
COUNSEL SATISFACTORY TO THE ISSUER THEREOF THAT SUCH REGISTRATION HAS BEEN
EFFECTED OR AN EXEMPTION THEREFROM IS AVAILABLE. TRANSFER MAY BE REFUSED IN THE
ABSENCE OF SUCH OPINION. THE RIGHTS OF THE HOLDER HEREUNDER, INCLUDING THE RIGHT
TO RECEIVE PAYMENT OF THE PRINCIPAL OF AND INTEREST ON THIS NOTE, ARE SUBJECT TO
SET-OFF IN ACCORDANCE WITH SECTION 9.7 OF THE MERGER AGREEMENT (AS DEFINED
BELOW).
SECURED PROMISSORY NOTE
July 30, 1999 $3,681,690
FOR VALUE RECEIVED, the undersigned, Century Electronics Manufacturing,
Inc., a Delaware corporation (the "Company"), hereby agrees and promises to pay
to the order of Yoon Jung Park (the "Payee") or to the legal holder of this Note
at the time of payment, the principal sum of Three Million, Six Hundred Eighty
One Thousand, Six Hundred Ninety Dollars ($3,681,690) in lawful money of the
United States of America, together with interest from and after September 30,
1999 on the unpaid principal amount hereof from time to time outstanding until
the entire principal amount hereof has been paid in full, at a rate equal to the
prime rate as published from time to time in the Wall Street Journal plus 1%
(such rate to be adjusted quarterly in arrears to the weighted average prime
rate for the quarter). Principal shall be payable quarterly in arrears from and
after September 30, 1999 until the entire principal amount hereof has been paid
in full. Interest shall be paid quarterly in arrears beginning December 31, 1999
until the entire principal amount hereof has been paid in full. If the date set
for any payment or prepayment of principal or interest hereunder is a Saturday,
Sunday or legal holiday, then such payment or prepayment shall be made on the
next preceding business day.
Principal is to be paid on the following schedule:
Date Payment Principal Balance
---- ------- -----------------
December 31, 1999 $170,697 $3,510,993.00
March 31, 2000 $170,697 $3,340,296.00
<PAGE>
Date Payment Principal Balance
---- ------- -----------------
June 30, 2000 $438,447 $2,901,849.00
September 30, 2000 $170,697 $2,731,152.00
December 31, 2000 $170,697 $2,560,455.00
March 31, 2001 $170,697 $2,389,758.00
June 30, 2001 $170,697 $2,219,061.00
September 30, 2001 $170,697 $2,048,364.00
December 31, 2001 $170,697 $1,877,667.00
March 31, 2002 $170,697 $1,706,970.00
June 30, 2002 $170,697 $1,536,273.00
September 30, 2002 $170,697 $1,365,576.00
December 31, 2002 $170,697 $1,194,879.00
March 31, 2003 $170,697 $1,024,182.00
June 30, 2003 $170,697 $ 853,485.00
September 30, 2003 $170,697 $ 682,788.00
December 31, 2003 $170,697 $ 512,091.00
March 31, 2004 $170,697 $ 341,394.00
June 30, 2004 $170,697 $ 170,697.00
September 30, 2004 $170,697 -0-
This Note has been delivered to evidence indebtedness of the Company to
the Payee arising in connection with the merger of Amitek Corporation, a Florida
corporation ("Amitek"), with and into the Company, in accordance with the terms
of the Agreement and Plan of Merger ("Merger Agreement") among the Company,
Amitek, and certain of the stockholders of Amitek. Capitalized terms used but
not otherwise defined in this Note are used herein as defined in the Merger
Agreement. Payment of the principal of and interest on this Note is secured
pursuant to the terms of a Stock Pledge Agreement dated as of the date hereof
among the Company, the stockholders of Amitek and Amitek Corporation, a Delaware
corporation ("NewSub") (the "Pledge Agreement"), reference to which is made for
a
-2-
<PAGE>
description of the collateral provided thereby and the rights of the Payee and
any subsequent holder of this Note in respect of such collateral.
Notwithstanding anything to the contrary herein, (i) the entire unpaid
principal amount of indebtedness evidenced by this Note and all accrued and
unpaid interest, to the extent not theretofore paid or prepaid as provided for
herein, shall be paid in full upon the closing of an Initial Public Offering and
(ii) $267,750 of the principal of this Note and all accrued and unpaid interest
in respect thereof, to the extent not theretofore paid or prepaid as provided
for herein, shall be paid in full upon the payment in full of or upon the
termination, discharge or refinancing of the indebtedness of NewSub to the
National Bank of Canada under the Amended and Restated Loan Agreement dated July
30, 1999 between NewSub and the National Bank of Canada.
This Note is subject to the following further terms and conditions:
1. Payment and Prepayment. All payments and prepayments of principal of
and interest on this Note shall be made to the Payee or his order, or to the
legal holder of this Note or such holder's order, in lawful money of the United
States of America at the address specified in Section 6 of this Note (or at such
other place as the holder hereof shall notify the Company in writing). The
Company may, at its option, prepay the obligations under this Note in whole or
in part at any time or from time to time without penalty or premium; provided,
however, no prepayment of this Note shall be permitted unless the obligations of
the Company and NewSub under Section 1 of each of the Bonus and Settlement for
Past Services Agreements shall have also been prepaid pro rata. Any prepayments
of any portion of the principal amount of this Note shall be accompanied by
payment of all interest accrued but unpaid hereunder. Upon final payment of
principal of and interest on this Note it shall be surrendered for cancellation.
The Pledge Agreement requires payment or prepayment of all obligations under
this Note as a condition precedent to the release of, or transfer of the
Company's interests in, the collateral subject to the Pledge Agreement, all as
described more fully in the Pledge Agreement.
2. Waivers. The Company waives to the extent not prohibited by applicable
law (i) all presentments, demands for performance, notices of nonperformance
(except to the extent required by the provisions hereof), protests, notices of
protest and notices of dishonor, (ii) any requirement of diligence or promptness
on the part of the Payee in the enforcement of his rights under this Note, (iii)
all notices of every kind which may be required to be given by any
-3-
<PAGE>
statute or rule of law, (iv) any valuation, stay, appraisement or redemption
laws and (v) any defense of any kind (other than payment or in connection with
the Company's exercise of its right of set-off in accordance with the provisions
of Section 9.7 of the Merger Agreement) which it may now or hereafter have with
respect to its liability under this Note.
3. Course of Dealing. No course of dealing between the Company and the
Payee shall operate as a waiver of any of the Payee's rights under this Note. No
delay or omission on the part of the Payee in exercising any right under this
Note shall operate as a waiver of such right or any other right hereunder. No
amendment or waiver hereof shall be binding unless it is in writing and signed
by the Payee.
4. Set-Off Only As Permitted by Section 9.7 of the Merger Agreement. The
obligation of Company to pay amounts due under this Note is unconditional and
there shall be no right for the Company to set-off any principal or interest due
hereunder against any obligations owed by the Payee to the Company, except as,
and only to the extent, specifically permitted by Section 9.7 of the Merger
Agreement. Any exercise of any set-off inconsistent with this Section 4 shall
constitute an Event of Default hereunder.
5. Events of Default. Upon the occurrence of any of the following events
("Events of Default"):
(a) Failure to pay the principal of this Note, including any
prepayments required hereunder or under the Pledge Agreement, when due,
provided that there shall be no Event of Default unless such failure shall
remain unremedied for seven days following notice from the Payee to
Company of such failure; or
(b) Failure to pay any interest installment due under this Note
which shall remain unremedied for seven business days following notice
from the Payee to Company of such failure; or
(c) Failure of the Company or NewSub to perform their respective
obligations under the Pledge Agreement beyond any applicable grace
periods;
(d) Failure of the Company or NewSub to perform their respective (i)
payment obligations under Sections 2.5, 2.9, 2.10, 2.11, or 5.10(e) of the
Merger Agreement, (ii) indemnification obligations in excess of $10,000
under Sections 5.11, 5.12, 5.13
-4-
<PAGE>
and 9 of the Merger Agreement, (iii) payment obligations under Sections
2(a), 2(b) and 3 of the Employment Agreement, or (iv) payment obligations
under paragraph 4 of that certain Intercompany Inventory Purchase and
Assumption of Liabilities Agreement by and between Amitek and M & K
Technology, Inc., in each case which failure shall remain unremedied for
thirty (30) days following notice from the Payee to the Company;
(e) Failure of the Company or NewSub to perform their respective
obligations under the Bonus Plan, under Section 1 of any of the Bonus and
Settlement for Past Services Agreements, or in respect of the Amitek Stock
Options, which failure shall remain unremedied for thirty (30) days
following notice from the Payee to the Company;
(f) The Company or any Subsidiary of the Company shall be involved
in financial difficulties as evidenced:
(1) by its admitting its inability to pay its debts
generally as they become due or otherwise acknowledging
its insolvency;
(2) by its filing a petition in bankruptcy or for
reorganization or for the adoption of an arrangement
under the United States Bankruptcy Act (or similar law
of the United States or any other jurisdiction which
relates to the liquidation or reorganization of
companies or to the modification or alteration of the
rights of creditors, each such law, as from time to time
in effect, being sometimes referred to as a "bankruptcy
act", each as now or in the future amended) or an answer
or other pleading admitting or failing to deny the
material allegations of such a petition or seeking,
consenting to or acquiescing in the relief therein
provided;
(3) by its making an assignment, or so-called trust mortgage
or the like, for the benefit of its creditors or by its
making a proposal to its creditors under any bankruptcy
act;
-5-
<PAGE>
(4) by its consent to the appointment of a receiver or a
trustee (or other person performing a similar function)
for all or a substantial part of its property;
(5) by its being adjudicated a bankrupt;
(6) by the entry of a court order which shall not be
vacated, set aside or stayed within 120 days from the
date of entry, (i) appointing a receiver or a trustee
for all or a substantial part of its property, or (ii)
approving a petition filed or application made against
it for, or effecting an arrangement in, bankruptcy or
for a reorganization or other relief pursuant to any
bankruptcy act or for any other judicial modification or
alteration of the rights of creditors; or
(7) by the assumption of custody or sequestration by a court
of competent jurisdiction of all or substantially all of
its property, which custody or sequestration shall not
be suspended or terminated within 120 days from its
inception.
(g) The Company or any Subsidiary of the Company shall fail to make
any payment of any principal of or interest on any Indebtedness of the
Company or any Subsidiary of the Company to National Bank of Canada, USA
Funding, Inc. or Fidelity Funding, Inc., and their respective affiliates,
successors and assigns (collectively, "Senior Indebtedness", including any
renewals, extensions and refinancings thereof, whether involving such
lenders or other lenders), or to perform or observe the terms of any
agreement or mortgage relating to such Senior Indebtedness, and such
default shall continue, without having been duly cured, waived or
consented to, beyond the period of grace, if any, therein specified, and
(i) the principal of and interest on such Senior Indebtedness in an amount
exceeding $1,000,000 in the aggregate shall have been declared by the
payee thereof to be forthwith due and payable, or (ii) any security
interest in or lien on any property of the Company or any Subsidiary of
the Company securing any such Senior Indebtedness in an amount exceeding
$1,000,000 in the aggregate shall be enforced.
-6-
<PAGE>
then, and in any such event, the holder of this Note may declare, by notice of
default given to the Company, the entire principal amount of this Note to be
forthwith due and payable, whereupon the entire principal amount of this Note
outstanding and any accrued and unpaid interest hereunder shall become due and
payable without presentment, demand, protest, notice of dishonor and all other
demands and notices of any kind, all of which are hereby expressly waived. Upon
the occurrence of an Event of Default, outstanding principal and accrued and
unpaid interest hereunder shall thereafter bear interest at the rate of twelve
percent (12%) per annum, but in no event shall such interest be charged which
would violate any applicable usury law. If an Event of Default shall occur
hereunder, the Company shall pay costs of collection, including reasonable
attorneys' fees, incurred by the holder in the enforcement hereof.
An Event of Default hereunder shall also constitute a breach by the
Company of the Merger Agreement.
Upon an Event of Default under Section 5(a), 5(b) or 5(e) hereunder, the
Principal Sellers' payment obligations under Section 9 of the Merger Agreement
shall be suspended until such time as the principal balance of, all accrued but
unpaid interest hereon, and all costs due hereunder, are paid in full.
No delay or failure by the holder of this Note in the exercise of any
right or remedy shall constitute a waiver thereof, and no single or partial
exercise by the holder hereof of any right or remedy shall preclude other or
future exercise thereof or the exercise of any other right or remedy.
6. Notices. Any notice or demand in connection with this Note shall be
deemed to be delivered if in writing addressed as provided below (or at such
other address as the addressee shall have specified by notice actually received
by the addressor) and if either (i) actually delivered at such address or (ii)
in the case of a letter, five business days shall have elapsed after the same
shall have been deposited in the United States mail, postage prepaid and
registered or certified:
If to the Company, to it at the following address:
274 Cedar Hill Road
Marlborough, MA 01752
Attention: James Roller, Chief Financial Officer
-7-
<PAGE>
If to the Payee, to him at the following address:
5887 NW 79th Way
Parkland, FL 33067
7. Transfer. This Note is transferable in whole or in part upon surrender
of this Note for transfer at the principal executive offices of the Company duly
endorsed by or accompanied by a written instrument of transfer in form
satisfactory to the Company and duly executed by the Payee or the trustee,
receiver, liquidator, guardian, conservator, executor or personal representative
of the Payee, and thereupon a new Note or Notes of the same tenor (except for
the payee) in an aggregate principal amount of the unpaid principal amount of
the Note so surrendered for transfer will be issued to, and in the name of, the
transferee or transferees; provided, however, that for a period of two years
from and after the date of this Note, this Note shall not be transferable or
assignable by the Payee to any person or entity other than a Permitted
Transferee. This Note shall not be transferrable unless the Company shall have
been provided a written notice describing the proposed transfer in reasonable
detail and an opinion of counsel reasonably satisfactory to the Company that the
proposed transfer of the Note may be effected without registration of such Note
under the Securities Act of 1933. For purposes of this Note, "Permitted
Transferee" means (a) any member of the family of the Payee or any trust for the
benefit of such Payee or family member or (b) the trustee, receiver, liquidator,
guardian, conservator, executor or personal representative of the Payee.
8. Governing Law; Consent to Jurisdiction, Waiver of Jury Trial, Reliance
The parties hereto acknowledge and agree that the provisions of
Sections 11.8, 11.9, 11.10 and 11.11 of the Merger Agreement are fully
applicable to this Note.
9. Headings
The headings contained in this Note are for reference purposes only
and shall not affect in any way the meaning or interpretation of the
provisions hereof.
-8-
<PAGE>
IN WITNESS WHEREOF, this Note has been duly executed and delivered by the
Company on the date first above written.
CENTURY ELECTRONICS
MANUFACTURING, INC.
Witness: By: /s/ Leslie J. Sainsbury
-----------------------------------
Name: Leslie J. Sainsbury
/s/ Jim Roller Title: President
- ---------------------
<PAGE>
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors
Century Electronics Manufacturing, Inc.
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Boston, Massachusetts
August 31, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANT
I consent to the inclusion in this Registration Statement on Form S-1 of my
report dated March 20, 1997 and June 30, 1999, on my audit of Amitek
Corporation's financial statements for the year ended December 31, 1996. I also
consent to the reference to my name under the section entitled "Experts".
/s/ LAWRENCE N. LEGG
--------------------------------------
Lawrence N. Legg, CPA, PA
August 27, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated June 15, 1999, except as to the fifth paragraph of Note 5, which is
as of June 25, 1999, relating to the financial statements of Amitek Corporation,
which appear in such Registration Statement. We also consent to the reference to
us under the headings "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Miami, Florida
August 27, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
F-3 CONSOLIDATED BALANCE SHEETS, F-11 PROPERTY, PLANT & EQUIPMENT NOTE TO
CONSOLIDATED FINANCIAL STATEMENTS, F-4 CONSOLIDATED STATEMENTS OF
OPERATIONS, AND F-6 CONSOLIDATED STATEMENTS OF CASH FLOWS
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> JUN-30-1999 JUN-30-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<CASH> 1,219,939 1,629,655
<SECURITIES> 0 0
<RECEIVABLES> 20,392,494 11,846,110
<ALLOWANCES> (240,000) (320,000)
<INVENTORY> 14,877,572 6,433,521
<CURRENT-ASSETS> 38,430,274 20,659,768
<PP&E> 24,815,499 19,961,125
<DEPRECIATION> (7,653,274) (4,817,743)
<TOTAL-ASSETS> 57,231,316 36,820,712
<CURRENT-LIABILITIES> 34,821,569 20,256,744
<BONDS> 3,133,429 2,556,200
0 0
17,281,971 13,900,000
<COMMON> 63,219 65,219
<OTHER-SE> 405,734 (1,837,597)
<TOTAL-LIABILITY-AND-EQUITY> 57,231,316 36,820,712
<SALES> 121,677,408 69,944,592
<TOTAL-REVENUES> 121,677,408 69,944,592
<CGS> 107,617,612 65,078,570
<TOTAL-COSTS> 107,617,612 65,078,570
<OTHER-EXPENSES> 7,718,473 14,681,649
<LOSS-PROVISION> 30,618 40,000
<INTEREST-EXPENSE> 1,838,984 856,673
<INCOME-PRETAX> 4,502,339 (10,672,300)
<INCOME-TAX> 1,688,491 (218,439)
<INCOME-CONTINUING> 2,813,848 (10,453,861)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,813,848 (10,453,861)
<EPS-BASIC> 0.44 (1.33)
<EPS-DILUTED> 0.24 (1.33)
</TABLE>
