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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended July 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 0-25554
Continental Circuits Corp.
(Exact name of registrant as specified in its charter)
Delaware 86-0267198
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3502 East Roeser Road, Phoenix, Arizona 85040
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 602-268-3461
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of October 20, 1997, 7,261,239 shares of Common Stock were
outstanding, and the aggregate market value of the Common Stock (based upon the
$18.75 closing sale price on that date in the Nasdaq National Market) held by
nonaffiliates (excludes shares reported as beneficially owned by directors and
officers - does not constitute an admission as to affiliate status) was
approximately $123,869,325,
DOCUMENTS INCORPORATED BY REFERENCE
<TABLE>
<CAPTION>
Part of Form 10-K Into Which Portions of
Document Document are Incorporated
<S> <C>
Annual Report to Shareholders for the fiscal ended year ended July 31, 1997 Part II
Proxy Statement for 1997 Annual Meeting of Shareholders Part III
</TABLE>
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PART I
The following discussion should be read in conjunction with, and is
qualified in its entirety by, the Company's Financial Statements and the Notes
thereto included in the Company's 1997 Annual Report to Shareholders. Historical
results are not necessarily indicative of trends in operation results for any
future period.
Except for the historical information contained herein, the discusion in
this Form 10-K contain or may contain certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995, and
the Company intends that such forward-looking statements be subject to the safe
harbors created thereby. The forward-looking statements included herein are
based on current expectations that involve a number of risks and uncertainties,
and on assumptions that involve judgments with respect to, among other things,
future economic, competitive and market conditions, and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond the control of the Company. Although the Company
believes that the assumptions underlying the forward-looking statements, many of
which are beyond the control of the Company, are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in forward-looking information will be realized.
Important factors which may cause actual results to differ materially from those
contemplated or implied by such forward-looking statements are discussed in more
detail in this Form 10-K and the Company's 1997 Annual Report to Shareholders.
In light of the significant uncertainties inherent in the forward-looking
information included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved.
Item 1. Business.
GENERAL
Continental Circuits Corp. (the "Company" or "Continental") manufactures complex
multilayer, surface mount circuit boards used in sophisticated electronic
equipment in the computer, communications, instrumentation and industrial
controls industries. The Company's circuit boards are used principally in
workstations, desktop and notebook computers, computer networking products,
storage devices, medical equipment, cellular telephones and pagers.
Circuit boards, also called printed circuit boards or printed wiring boards, are
essential components in virtually all sophisticated electronic products. The
circuit board is the basic platform used to interconnect and mount electronic
components such as microprocessors, resistor networks and capacitors. Circuit
boards consist of copper traces on an insulating (dielectric) base, which
provide electrical interconnections for electronic components. The development
of more sophisticated electronic equipment by original equipment manufacturers
("OEMs") combining higher performance and reliability with reduced size and cost
has created a demand for increased complexity, miniaturization and density in
the circuit traces. In response to this demand, multilayer boards have been
developed in which several layers of circuitry are laminated together to form a
single board with both horizontal and vertical electrical interconnections.
Further circuit board sophistication is currently being achieved by utilizing
advanced materials, decreasing the width and separation of the traces, drilling
smaller holes to connect the internal trace layers and precisely situating the
traces and pads on the board surface to accommodate surface mount components. In
fiscal 1997, multilayer surface mount circuit boards comprised approximately 97%
of the Company's net sales.
Suppliers to the worldwide circuit board market consist of independent merchant
manufacturers such as the Company ("merchant manufacturers") and captive
manufacturing facilities owned by OEMs ("captive manufacturers"). The Institute
for Interconnecting and Packaging Electronic Components ("IPC"), an
international trade association, estimates that the worldwide market for all
types of circuit boards was $29.7 billion in 1996, of which the U.S. market
comprised $7.7 billion. According to the IPC, in 1996 OEMs purchased
approximately 87% of their total circuit board requirements from merchant
manufacturers, compared to approximately 62% in
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1988. This increasing market share for merchant suppliers is the result of a
trend among OEMs toward greater outsourcing of their circuit board requirements.
The Company sells its products primarily to leading OEMs and contract
manufacturers in the United States and abroad. The Company has focused its
marketing efforts on the development of strategic relationships with key
customers who are leaders in their industries and who utilize the most advanced
circuit board technology. The Company's principal customers include OEMs such as
Hewlett-Packard, Digital Equipment, IBM, Rockwell International/Allen-Bradley
and Compaq Computer and contract manufacturers such as Solectron, SCI Systems,
Jabil Circuit and Electronic Assembly. During fiscal years 1995, 1996 and 1997,
exports to the foreign operations of U.S.-based customers, primarily in
Singapore, Puerto Rico, Ireland and the United Kingdom, accounted for 31.2%,
27.3% and 26.2% of net sales respectively.
The Company was redomesticated in Delaware by merger in September 1987 and is
the successor to an Arizona corporation of the same name which was formed in
1972. The Company's executive offices are located at 3502 East Roeser Road,
Phoenix, Arizona and its telephone number is (602) 268-3461.
In April 1997, the Company acquired the assets and assumed certain liabilities
of a division of Radian International LLC. Radian owned and operated an
electronic panel business in Austin, Texas. The Company periodically discusses
with third parties the possible acquisition of technology, product lines and
businesses in the circuit board business and from time to time enters into
letters of intent that provide the Company with an exclusivity period during
which it considers possible acquisitions.
CUSTOMERS AND MARKETS
Set forth below is a description of the Company's markets, representative
customers (listed alphabetically) and end product applications:
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MARKETS CUSTOMERS APPLICATIONS
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<S> <C> <C>
Computers Bay Networks Workstations, desktop computers,
Cisco Systems notebook and portable computers,
Compaq Computer servers and other computer network
Digital Equipment Corporation products, midrange and mainframe
Hewlett-Packard Company computers
International Business Machines
Corporation
Sun Microsystems, Incorporated*
U.S. Robotics Access Group
3-COM*
Memory and Storage Digital Equipment Corporation 2.5", 3.5" and 5.25" disk drives,
Devices Exabyte Corporation PCMCIA products, tape drives,
Hewlett-Packard Company optical drives, SIMMs, mass storage
International Business Machines products
Corporation
Quantum Corporation
Western Digital
Peripherals International Business Machines Printers, office equipment, modems,
Corporation option cards
QMS, Inc.
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<TABLE>
<S> <C> <C>
Communications AT&T Corp./Lucent Technologies Telephone switching and transmission
Dictaphone Corporation systems, global navigation products,
Digital Switch Americas/Asia, Inc. satellite and microwave transmission
Elex/Telrad products, cellular telephones, pagers,
Motorola, Inc. wireless communications products
Northern Telecom Ltd./Nortel
Olicom A/S
Instrumentation and Hewlett-Packard Company Test and measurement equipment,
Industrial Controls Lockheed-Martin Corporation flight controls, medical equipment,
Rockwell International/Allen-Bradley machine and process control systems
</TABLE>
* Serviced by the Company solely through one or more contract manufacturers.
Markets
Set forth below is a table showing the percentage of the Company's
total net sales attributable to the indicated markets for fiscal years 1995,
1996 and 1997, together with a brief description of each market.
<TABLE>
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FISCAL YEAR ENDED
JULY 31,
--------------------------
<S> <C> <C> <C>
MARKETS 1995 1996 1997
Computers ..................................... 37% 49% 48%
Memory and storage devices .................... 29 14 8
Communications ................................ 14 21 24
Instrumentation and industrial controls ....... 11 13 12
Peripherals ................................... 9 3 8
--- --- ---
Totals ............................... 100% 100% 100%
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Computers. This segment includes computer workstations, desktop
computers, notebook computers, docking stations and PDAs. The desktop computers
which have served as the link to local area networks (LANs) in offices,
factories and universities are being replaced by more powerful computers capable
of national and global networking. In addition, increased functionality and
portability is rapidly expanding the notebook computer market, associated
Internet applications and a variety of other on-line services.
Memory and Storage Devices. Disk drives are used in desktop computers,
disk array and mass storage systems. In addition, the increasing variety and
complexity of available software requires more memory capability, which is being
satisfied with more powerful disk drives, CD ROM and plug-in, "credit card" size
memory modules. The Personal Computer Memory Card International Association
("PCMCIA") has created standards for these memory modules, which are tailored to
the mobile computing market. An industry source projects that total shipments of
these memory modules will increase significantly through the year 2000.
Communications. The increasingly popular portable communications
products such as cellular phones and pagers require sophisticated circuit
boards. In addition, cellular telephones are expected to become a feature
incorporated into notebook computers. Global navigation systems and, with the
introduction of low level satellites, wireless communications and computing are
expected to further expand this market segment.
Instrumentation and Industrial Controls. This segment includes test and
measurement equipment widely used in the medical and avionics industries,
including monitoring equipment, flight controls, and navigational
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instrumentation. The applications for machine and process control systems are
increasing as automation and monitoring continues to replace certain manual
processes.
Peripherals. This segment includes office equipment such as color laser
printers, scanners and sophisticated "copy centers" which are networked with
desktop computers and add-on option cards to expand graphics, sound, fax/modem
and networking capabilities. Approximately two-thirds of PCMCIA cards sold today
are for such peripheral applications.
Contract Manufacturing. In addition to direct sales to OEMs, the
Company also sells to contract manufacturers. Contract manufacturing has
experienced dramatic growth in recent years as OEMs have determined that they
can earn higher rates of return by concentrating on research and development and
product marketing rather than manufacturing capabilities. In addition, contract
manufacturers aid OEMs in dealing with short product development and life cycles
by providing the specialized expertise and infrastructure to permit products to
be introduced more quickly. Continental's sales to contract manufacturers during
fiscal 1997 were 28% of net sales.
The Company's principal contract manufacturing customers include
Solectron Corporation, SCI Systems, Jabil Circuit, Electronic Assembly, Elex,
Digital Equipment, and XeTel.
SALES AND MARKETING
The Company markets its products through a direct non-commissioned
sales force of 16 people who focus on specific customers without regard to
territory. Each sales person is teamed with a customer quality engineer to
provide additional technical support to the customer. Ten sales people operate
out of the Phoenix office. Additional sales offices are maintained in Salem, New
Hampshire; Huntsville, Alabama; Santa Clara, California; Austin, Texas; Houston,
Texas; and Singapore.
The Company concentrates its marketing activities on a select number of
OEMs with sizable complex multilayer, surface mount circuit board requirements.
Sales to Hewlett-Packard and Compaq Computer represented approximately 20% and
15% of total net sales, respectively, in fiscal 1997 and the Company's ten
largest customers accounted for approximately 75% of net sales in that year.
Concentrating on a selected number of leading OEMs allows the Company to target
a market and product mix which enhances manufacturing efficiency and
profitability.
International sales accounted for 31.2%, 27.3% and 26.2% of total net
sales in fiscal years 1995, 1996 and 1997 respectively. Substantially all the
Company's international sales are direct sales to the foreign operations of
United States-based customers, primarily in Singapore, Puerto Rico, Ireland and
the United Kingdom. The Company maintains sales and technical support offices in
Singapore.
The Company's products are typically sold on 30-day terms. The Company
offers no formal warranty but generally adheres to a 30-day replacement policy
of products with defects in materials or workmanship. Replacement costs in
fiscal 1997 were less than $250,000.
MANUFACTURING AND ENGINEERING
The production of complex multilayer, surface mount circuit boards is a
complicated sequential process. This process requires the extensive use of a
variety of manufacturing operations including graphic operations such as
photoprinting, screen printing, and phototool generation; chemical operations
such as electroplating and etching; mechanical operations such as drilling and
routing; and electronic operations such as CAD/CAM, automated optical inspection
and electrical testing. The equipment and processes used are highly specialized,
and the Company believes its equipment is among the most modern and advanced in
the United States.
The Company embraces Total Quality Management (TQM) techniques in its
daily operations. The Company's quality management system has been ISO-9002
certified since 1992, including recertification to the stricter 1994 standards
in December 1994.
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The Company believes that its high level of capital investment and its
manufacturing expertise in a number of specialized areas has contributed to its
position as a leader in the production of commercial volumes of complex
multilayer, surface mount circuit boards in the United States. The Company
believes that its capabilities in the following areas are of special importance:
CAD/CAM. Continental receives customer generated CAD (computer aided
design) data by telephonic data transmission directly to its CAM (computer aided
manufacturing) system. This enables the Company to incorporate customer design
modifications more effectively and to enhance manufacture ability and board
quality on an interactive basis. It also improves customer service and enhances
the Company's ability to work closely with its customers early in the product
design phase. After modification, design data is transferred to a phototool
(film or glass) using a laser plotter. In addition, the CAD data provides the
information in digital format for phototooling and to program the drilling
machines, automated optical inspection equipment, routing machines and
electrical test equipment.
Sophisticated Tooling System. The dimensional accuracy and
layer-to-layer registration precision required to produce complex multilayer,
surface mount circuit boards often necessitates the use of an image medium
unaffected by variations in temperature and humidity. To achieve this accuracy
and precision, the Company fabricates glass phototooling for use in the
manufacturing imaging process.
Drilling Equipment. Complex multilayer, surface mount circuit boards
require a large number of small (from .020" to .007" diameter) holes. The
Company has highly sophisticated drilling equipment capable of drilling more
than 50 million holes daily.
Automatic Inspection and Test Equipment. The Company utilizes automatic
optical inspection ("AOI") and electrical test equipment to ensure the circuit
patterns meet customer specifications. In the AOI process, customer data is used
as the criteria to compare the optical findings on the production circuit board
to the digitized pattern in memory. The key parameters inspected are line
widths, pad sizes and line spacing.
Management Information System. The Company has a management information
system designed to provide the information necessary for improving quality,
delivery and throughput in the production process. The Company utilizes this
system to track products on a real time basis (as opposed to batch processing)
and to record product process history. The electronically stored information
provides the data necessary for analysis and continual process improvement.
The Company has developed proprietary techniques and manufacturing
expertise, particularly in the area of complex multilayer, surface mount circuit
boards. The Company has no patents for these proprietary techniques and chooses
to rely on trade secret protection. The Company believes that although such
techniques and expertise are subject to misappropriation or obsolescence,
development of improved methods and processes and new techniques by the Company
will continue on an ongoing basis as dictated by the technological needs of the
business. Current areas of manufacturing process development include reducing
circuit widths and hole sizes, providing increased registration control,
developing processes for ultra-fine pitch surface mount applications and thinner
multilayer product, increasing the plating aspect ratio, implementing
alternative surface finishes, and developing new materials applications.
The circuit boards manufactured by the Company require clean
environments to ensure high yields. The Company utilizes clean rooms in areas
where tiny particles can create defects on the circuit pattern. As circuit
densities increase and line widths and spaces decrease, only those manufacturers
having extremely clean manufacturing areas, such as those used by the Company,
will be capable of producing these technologically complex products.
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Manufacturing occurs primarily on a three-shift, five-day-a-week
schedule with the weekend used for routine preventive maintenance and limited
production as required, although testing and innerlayer operations are conducted
on a seven-day-a-week schedule. The manufacturing workforce is well-trained,
providing a solid foundation for improvements in cycle time, cost and quality.
SUPPLIER RELATIONSHIPS
In order to reduce lead times and inventory carrying costs, to enhance
the quality and reliability of its supply of raw materials and to reduce
transportation and other logistics costs, the Company has entered into strategic
relationships with certain of its suppliers of laminates, drill bits and other
raw materials which result in annual fixed price agreements.
The Company's raw materials inventory is small in comparison to sales
and must be regularly and rapidly replenished. The Company uses "just-in-time"
procurement practices to maintain its raw materials inventory at low levels. The
raw materials used on the Company's products consist mainly of laminate and
partially cured epoxy glass, copper-clad epoxy glass, copper foil, and inorganic
chemicals. The Company works closely with its suppliers to incorporate
technological advances in the raw materials it purchases. Although the Company
prefers certain suppliers for some raw materials, multiple sources exist for all
materials. Adequate amounts of all raw material have been available in the past
and the Company believes this will continue in the future.
BACKLOG
The Company defines backlog as orders for products which the Company
believes to be firm with shipment dates within the next twelve months, the
majority of which is scheduled for shipment within 90 days. At July 31, 1997,
the Company's backlog was approximately $19.5 million as compared to $16.3
million at July 31, 1996. The increase reflects the strength experienced during
the latter half of the fiscal year. Backlog has increased, as the book to bill
ratio has exceeded 1.0 since the end of fiscal 1997. The backlog is subject to
various cancellation terms depending primarily on percent of completion and
material purchased or utilized.
COMPETITION
The market for printed circuit boards in the United States is
fragmented and very competitive. According to the IPC, there are approximately
700 companies producing circuit boards in the United States. The Company
competes primarily against other merchant manufacturers. There are no dominant
manufacturers in the segment of the industry served by Continental, and the
Company believes that relatively few producers in the United States have the
technological competence and facilities to produce complex multilayer, surface
mount circuit boards in commercial volumes. Primary merchant competitors of the
Company are domestic and include Johnson Matthey (Advance Circuits, Inc.), Hadco
Corporation, Merix Corporation and Praegitzer Incorporated plus a limited number
of companies in the Far East such as Compeq and Topan. A number of the Company's
competitors are larger than the Company and have greater financial, marketing
and other resources.
The market for printed circuit boards is characterized by competitive
factors such as product quality, technological capability, responsiveness to
customers in delivery and service, and price. The Company believes that
competition in the market segments served by the Company is based on product
quality, delivery and price. The Company competes on the basis of the customer's
total cost of acquisition, which includes tangibles such as unit cost and
quality, and intangibles such as flexibility, capacity forecasting,
responsiveness and dedication to customer satisfaction.
ENVIRONMENTAL MATTERS
Circuit board manufacturing requires the use of metals and chemicals.
Water used in the manufacturing process must be treated and neutralized to
remove metals and other contaminants before it can be discharged into
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the municipal sanitary sewer system. Therefore, the Company operates and
maintains effluent water treatment systems and utilizes municipally approved
laboratory testing procedures. The Company's operations generate other hazardous
waste, consisting substantially of spent etchant and copper hydroxide sludge for
recycling.
The process to manufacture circuit boards also requires adherence to
city, county, state and federal environmental regulations regarding the storage,
use, handling and disposal of chemicals, solid wastes and other hazardous
materials as well as air quality standards. The Company believes that its
facilities are currently in compliance with applicable environmental laws.
EMPLOYEES
As of July 31, 1997, the Company had 1,339 full-time employees. None of
the employees is represented by a union and the Company believes there is an
adequate pool of labor available to satisfy its foreseeable hiring needs. The
Company considers relations with its employees to be good. The Company has not
experienced any labor-related work stoppage.
Item 2. Properties
The Company's operations are centralized in a complex of seven adjacent
modern manufacturing facilities owned by the Company located at 3502 East Roeser
Road in Phoenix, Arizona. The Company leases one additional building in Austin,
Texas, located at 15508 Bratton Lane, Austin, Texas. The facilities consist of
an aggregate of approximately 250,000 square feet of floor space, of which
220,000 square feet are in Phoenix and 30,000 square feet are in Austin. In
addition, the Company owns approximately four acres of land adjacent to existing
facilities which is currently used for parking. The foregoing facilities, with
the exception of one building, are subject to a security interest in favor of
the Company's principal lender.
Item 3. Legal Proceedings
The Company is not involved in any material pending legal proceedings
other than ordinary routine litigation incidental to its business.
Item 4. Submission to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended July 31, 1997.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers of Continental are elected by the Board of Directors
to serve until their successors are elected and qualified. The following table
sets forth certain information about the Company's executive officers:
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NAME AGE POSITION
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Frederick G. McNamee, III 40 Chairman of the Board, President and Chief Executive Officer
Joseph G. Andersen 40 Vice President -- Finance, Chief Financial Officer, Secretary and
Treasurer
James Buchanan 50 Vice President -- Sales and Marketing
Robert A. Kosciusko 48 Vice President -- Human Resources
Steven N. Lach 36 Vice President -- Manufacturing Operations
John W. Maddux 59 Vice President -- Quality and Engineering
</TABLE>
MR. MCNAMEE joined the Company as President and Chief Executive Officer in
September 1994, and has served as a Director since November 11, 1994, and as
Chairman of the Board since December 16, 1994. He spent the previous 15 years
with IBM in Austin, Texas in a variety of circuit board manufacturing positions.
He was manager of the IBM circuit board facility in Austin from November 1992 to
September 1994 during its transition from a captive manufacturer with sales
solely to IBM to a significant merchant manufacturer with sales to other OEMs.
From 1989 to 1992, Mr. McNamee served as Volume Production Manager of the IBM
facility in Austin.
MR. ANDERSEN joined the Company on September 3, 1996 as Vice President --
Finance, Chief Financial Officer, Secretary and Treasurer. Mr. Andersen served
as Vice President and Chief Financial Officer of Comptronix Corp., a Brentwood,
Tennessee-based printed circuit board assembler with operations in the United
States and Mexico, from July 1994 to August 1996, and as Director of Accounting
from July 1993 to July 1994. Prior to July 1993, he served in a variety of
senior financial management positions with Augat, Inc., a manufacturer of
connectors, chip carriers and board testers.
MR. BUCHANAN joined the Company as Vice President -- Sales and Marketing on July
28, 1997. Before joining the Company, Mr. Buchanan served as Vice President of
Sales and Marketing for Hadco Corporation, a supplier of advanced electronic
interconnect products and services based in New Hampshire, from January 1997 to
July 1997. From April 1991 to January 1997, Mr. Buchanan was Vice President of
Sales of Zycon Corp., a California based competitor of Hadco which was acquired
by Hadco in January 1997. Mr. Buchanan began his career with Zycon in 1984 and
held several sales and marketing positions.
MR. KOSCIUSKO has served the Company as Vice President -- Human Resources since
August 1995 and as Director of Human Resources from February 1991 until August
1995. From 1984 to 1991, he was Human Resources Manager for Ringier
International, a printing company.
MR. LACH joined the Company as Vice President -- Manufacturing Operations on
October 21, 1997. Before joining the Company, Mr. Lach served as Manager of
Manufacturing for Via Systems, a manufacturer of printed circuit boards located
in Richmond, Virginia, from December 1996 to October 1997. Mr. Lach joined AT&T
Corp. in Richmond, Virginia in February 1995 and was employed by AT&T until the
Richmond facility was spun off to Lucent Technologies in September 1995. Mr.
Lach was then employed by Lucent from September 1995 until the Richmond facility
was sold to Via Systems in December 1996. Prior to February 1995, Mr. Lach was
Operations Manager of Hadco-Owego from June 1991 to February 1995, and held
several positions with Parlex Nevada of Carson City, Nevada, including Plant
Manager from June 1990 to May 1991 and Operations Manager from October 1986 to
June 1990.
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MR. MADDUX has been the Vice President -- Quality and Engineering of the Company
since 1981. He joined the Company in 1979 as Manager of Quality Control. He also
served as a Director of the Company from November 1989 through November 1994.
Prior to 1979, Mr. Maddux served 19 years in manufacturing capacities relating
to circuit boards with General Electric Company and Honeywell Information
Systems in Phoenix, Arizona.
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PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Information in response to this item is incorporated herein by
reference to the information under the heading "Securities Information" in the
Registrant's 1997 Annual Report to Shareholders.
Item 6. Selected Financial Data.
Information in response to this item is incorporated herein by
reference to the information under the heading "Financial Highlights" in the
Registrant's 1997 Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
Information in response to this item is incorporated herein by
reference to the information under the heading "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Registrant's
1997 Annual Report to Shareholders.
Dependence on Electronics Industry. The Company's principal customers
are OEMs and contract manufacturers. The Company's markets are computers, memory
and storage devices, peripherals, communications and instrumentation and
industrial controls. These markets in the electronics industry are subject to
rapid technological change and product obsolescence. The electronics industry is
also subject to economic cycles and has in the past experienced, and is likely
to experience in the future, recessionary periods. A general recession or excess
capacity in the electronics industry could have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company typically does not obtain long-term volume purchase
contracts from its customers. The Company focuses on strategic business
partnerships and on building long-term relationships to obtain repeat business.
Nonetheless, customer orders may be cancelled or delayed and volume levels may
decline. There is no assurance that the Company will be able to procure timely
replacements of cancelled, delayed or reduced orders. See "Item 1 - Businsss -
Customers and Markets."
Fluctuations in Operating Results. The Company's operating results are
affected by a number of factors, including timing of orders from major
customers, process yields, timing of expenditures in anticipation of future
sales, economic conditions in the electronics industry and the mix of products,
primarily variation in the average number of layers per circuit board. As a
result, the Company's results of operations have varied and may continue to
fluctuate significantly from period to period, including on a quarterly basis.
Operating results can also be significantly influenced by development and
introduction of new products.
The Company's customers generally require short delivery cycles, and a
substantial portion of the Company's backlog is typically scheduled for delivery
within 90 days. Quarterly sales and operating results therefore depend in large
part on the volume and timing of bookings received during the quarter, which are
difficult to forecast. Results of operations in any period should not be
considered indicative of the results to be expected for any future period.
Customer Concentration. For fiscal 1997, the Company's two largest
customers, Hewlett-Packard and Compaq Computer, accounted for approximately 20%
and 15% of net sales, respectively, and the Company's ten largest customers
accounted for approximately 75% of net sales in that year. Although there can be
no assurance that the Company's principal customers will continue to purchase
products from the Company at current levels, if at all, the Company expects to
continue to depend on its principal customers for a significant portion of its
net
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sales. The loss of one or more major customers could have a material adverse
effect on the Company's business, financial condition and results of operations.
Competition and Technological Change. The market for circuit boards in
the United States is fragmented and very competitive. The Company competes
primarily against other merchant manufacturers. Company's competitors in this
market segment are primarily domestic merchant manufacturers. In addition, OEMs
with captive circuit board manufacturing operations may seek orders in the open
market to fill excess capacity, thereby increasing price competition. Although
the Company generally does not pursue high volume, low margin circuit board
business, it may be at a competitive disadvantage for such business with respect
to price when compared to manufacturers with lower cost structures, particularly
those with offshore facilities where labor, materials and other costs are lower.
The leading edge of circuit board manufacturing technology has
continued to move toward smaller drilled holes, finer lines and spaces, and
decreasing board thicknesses. While the Company believes itself to be a leader
in the commercial volume production of these boards, technological change is
rapid and continuous, and in the future, higher margin products will be the most
demanding in terms of technological and manufacturing expertise. There is no
assurance that the Company will be able to maintain its current technological
position. In addition, the circuit board industry could in the future encounter
competition from new technologies, including ceramic and/or deposited multichip
modules and other technologies that may reduce the number of circuit boards
required in electronic equipment. See "Item 1 - Business - Competition."
Manufacturing Capacity. The Company intends to expand its manufacturing
capacity and improve its manufacturing technology; however, there can be no
assurance that the Company will be able to use the expanded capacity for the
production of higher margin, higher technology products, or increase its net
sales or profits or maintain its manufacturing efficiencies at higher levels of
operations. In addition, although the Company believes the concentration of its
operations in Phoenix, Arizona has been an economic advantage to date, a local
natural disaster or other business interruption represents a greater risk to the
Company than it would if the Company operated multiple facilities in different
geographic areas. See "Item 1 - Business - Facilities."
Management of Growth; Acquisitions. The Company has initiated
significant expansion of its overall level of operations. To manage growth
effectively, the Company must add manufacturing capacity while maintaining a
high level of quality and manufacturing efficiency and expanding, training and
managing its employee base. The Company's failure to add capacity and manage
growth effectively could have a material adverse effect on the Company's results
of operations.
The Company may from time to time pursue the acquisition of other
companies, assets or product lines that complement or expand its existing
business. Acquisitions involve a number of risks that could adversely affect the
Company's operating results, including the diversion of management's attention,
the assimilation of the operations and personnel of the acquired companies, the
amortization of acquired intangible assets and the potential loss of key
employees of the acquired companies. No assurance can be given that any
acquisition by the Company will not materially and adversely affect the Company
or that any such acquisition will enhance the Company's business.
Process Failure. The Company's business involves highly complex
manufacturing processes that are subject to failure. In the past, process
failures have occurred which have resulted in delays in product shipments.
Although the Company attempts to utilize duplicate systems where practicable to
reduce the risk of such failures, there can be no assurance that failures will
not occur in the future. The loss of revenue and earnings to the Company from
such a failure could have a materially adverse effect on its results of
operations.
Borrowing Agreement Limitations. The Company is subject to various
restrictions under its term loan and revolving credit facility, including a
prohibition against the payment of cash dividends and a requirement that
12
<PAGE> 13
the Company comply with certain financial covenants relating to current ratio
and tangible equity. In addition, the facility is subject to acceleration in the
event of a change in control of the Company.
Recent Management Changes. The Company's Vice President - Finance and
Chief Financial Officer, Joseph G. Andersen joined the Company in September
1996, the Company's Vice President - Sales and Marketing, James Buchanan, joined
the Company in July 1997, and the Company's Vice President Manufacturing
Operations, Steven N. Lach, joined the Company in October 1997. The Company
believes Messrs. Andersen, Buchanan and Lach are experienced managers capable of
leading the Company's business efforts. However, there can be no assurance that
Messrs. Andersen, Buchanan and Lach along with other members of senior
management, will be successful in managing the Company's profitability or
growth. In addition, the Company's future operating results depend in part upon
its ability to retain other key members of management and attract and retain
other qualified technical, sales and support personnel for its operations. There
can be no assurance that the Company will be successful in attracting or
retaining such personnel. The failure to attract or retain such persons could
materially adversely effect the Company's business, financial condition and
results of operations.
Intellectual Property. The Company's success depends in part on its
proprietary techniques and manufacturing expertise, particularly in the area of
complex multilayer, surface mount technology circuit boards. The Company has no
patents for these proprietary techniques and chooses to rely on trade secret
protection. The Company believes that although such techniques and expertise are
subject to misappropriation or obsolescence, development of improved methods and
processes and new techniques by the Company will continue on an ongoing basis as
dictated by the technological needs of the industry.
International Sales. International sales accounted for, 31.2%, 27.3%
and 26.2% of total net sales in fiscal years 1995, 1996 and 1997, respectively.
Substantially all the Company's international sales are direct sales to the
foreign operations of United States-based customers, primarily in Singapore,
Puerto Rico, Ireland and the United Kingdom. The Company anticipates that
international sales will continue to account for a significant portion of net
sales. International sales are subject to certain risks, including unexpected
changes in regulatory requirements, exchange rates, tariffs and other barriers,
political and economic instability, and potentially adverse tax consequences. To
date the Company has not experienced any material adverse consequences from its
international sales operations, in part because substantially all its foreign
sales are direct sales to the foreign operations of existing United States-based
customers. The Company's international sales are also subject to certain
governmental restrictions, including the Export Administration Act and the
regulations promulgated thereunder. The Company's sales to date have been
denominated in United States dollars and as a result, there have been no losses
related to currency fluctuations. For the same reason, the Company has engaged
in no hedging activities. There can be no assurance that any of these factors
will not have a material adverse effect on the Company. See "Item 1 - Business -
Sales and Marketing."
Environmental Compliance. The process used to manufacture circuit
boards requires adherence to city, county, state and federal environmental
regulations regarding the storage, use, handling and disposal of chemicals,
solid wastes and other hazardous materials as well as air quality standards. The
Company believes that its facilities are currently in compliance with applicable
environmental laws, and although it regularly monitors its operations to avoid
violations arising from human error or equipment failures, there can be no
assurance that violations will not occur. In the event of a future violation of
environmental laws, the Company could be held liable for damages and for the
costs of remedial actions and could also be subject to revocation of its
effluent discharge permits. Any such revocation could require the Company to
cease or limit production at its facilities, thereby having an adverse impact on
the Company's operations. Environmental laws could become more stringent over
time, imposing greater compliance costs and increasing risks and penalties with
a violation. See "Item 1 - Business - Environmental Matters."
13
<PAGE> 14
Certain Restrictive Charter and Bylaw Provisions. The Company's
Certificate of Incorporation and Bylaws empower the Board of Directors, without
approval of the stockholders, to: fix the rights and preferences of and to issue
shares of Preferred Stock; prohibit a substantial stockholder of the Company
from entering into a business combination or otherwise significantly increasing
its interest in the stock or assets of the Company without the consent of the
Board of Directors or a two-thirds majority of the stockholders of the Company;
and prohibit stockholders of the Company from calling a special meeting unless
requested by at least 50% of the outstanding voting shares. The certificate does
not provide for cumulative voting for election of directors and does require
cause and the vote of a majority of stockholders to remove a director. These
provisions could have the effect of deterring unsolicited takeovers or other
business combinations or delaying or preventing changes in control or management
of the Company, including transactions in which stockholders might otherwise
receive a premium for their shares over then-current market prices. In addition,
these provisions may limit the ability of stockholders to approve transactions
that they may deem to be in their best interests.
Item 8. Financial Statements and Supplementary Data.
Information in response to this item is incorporated herein by
reference to "Report of Independent Auditors," "Consolidated Balance Sheets,"
"Consolidated Statements of Income," "Consolidated Statements of Shareholder's
Equity," "Consolidated Statements of Cash Flows" and "Notes to Consolidated
Financial Statements" in the Registrant's 1997 Annual Report to Shareholders.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information in response to this item is incorporated herein by
reference to (i) the information under the heading "Election of Directors" in
the Registrant's Proxy Statement for its 1997 Annual Meeting of Shareholders
(the "1997 Proxy Statement") and (ii) the information under the heading
"Executive Officers of the Registrant" in Part I hereof. The Company anticipates
filing the 1997 Proxy Statement within 120 days after July 31, 1997.
Item 11. Executive Compensation.
Information in response to this item is incorporated herein by
reference to the information under the heading "Executive Compensation" in the
1997 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information in response to this item is incorporated herein by
reference to the information under the heading "Voting Securities and Principal
Holders -- Security Ownership of Certain Beneficial Owners and Management" in
the 1997 Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
Information in response to this item is incorporated herein by
reference to the information under the heading "Certain Relationships and
Related Transactions" in the 1997 Proxy Statement.
14
<PAGE> 15
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K.
(a) Documents filed:
1. Financial statements.
The financial statements required to be filed by Item
8 hereof have been incorporated by reference to the
Registrant's 1997 Annual Report to Shareholders and consist of
the following:
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheets as of July 31, 1996 and
1997
Consolidated Statements of Income for each of the
three years ended July 31, 1995, 1996 and 1997
Consolidated Statements of Shareholders' Equity for
each of the three years ended July 31, 1995, 1996
and 1997
Consolidated Statements of Cash Flows for each of the
three years ended July 31, 1995, 1996 and 1997
Notes to Consolidated Financial Statements
2. Financial statement schedules.
All schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore have been
omitted.
3. Exhibits.
See Exhibit Index included as the last part of this report,
which Index is incorporated herein by this reference.
(b) Reports on Form 8-K:
No Current Reports on Form 8-K were filed during the quarter
ended July 31, 1997.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CONTINENTAL CIRCUITS CORP.
By /s/ Frederick G. McNamee, III Dated October 28, 1997
---------------------------------------------
Frederick G. McNamee, III
Chairman of the Board, President,
Chief Executive Officer
and Director
By /s/ Joseph G. Andersen Dated October 27, 1997
---------------------------------------------
Joseph G. Andersen
Vice President - Finance, Chief Financial
Officer, Secretary and Treasurer
(principal financial and accounting
officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Frederick G. McNamee, III Chairman of the October 28, 1997
- ----------------------------- Board, President,
Frederick G. McNamee, III Chief Executive
Officer and
Director
/s/ Angelo A. DeCaro, Jr. Director October 29, 1997
- -----------------------------
Angelo A. DeCaro, Jr.
/s/ Michael O. Flatt Director October 28, 1997
- -----------------------------
Michael O. Flatt
/s/ Albert A. Irato Director October 28, 1997
- -----------------------------
Albert A. Irato
Director October ___, 1997
- -----------------------------
Michael F. Jarko
/s/ John Nance Director October 26, 1997
- -----------------------------
John Nance
/s/ David C. Wetmore Director October 28, 1997
- -----------------------------
David C. Wetmore
<PAGE> 17
CONTINENTAL CIRCUITS CORP.
Exhibit Index to Report on Form 10-K
for the fiscal year ended July 31, 1997
<TABLE>
<CAPTION>
Filed
Exhibit Description Incorporated herein by reference Herewith
No. to:
<S> <C> <C> <C>
3.1 Certificate of Incorporation of Registrant, Exhibit 3.1 to Registrant's
as amended Registration Statement on Form
S-1 declared effective on
March 14, 1995 (SEC File 33-88368)
("March 1995 S-1")
3.2 By-Laws of Registrant, as amended Exhibit 3.2 to March 1995 S-1
4.1 Article fifth of Certificate of Incorporation Exhibit 4.1 to March 1995 S-1
of Registrant
10.1 Loan Agreement by and between X
Registrant and Bank One, Arizona, NA
dated as of July 25, 1997
10.2 Revolving Promissory Note between X
Registrant and Bank One, Arizona, NA
dated July 25, 1997
10.3 Deed of Trust, Assignment of Rents, Exhibit 10.4 to March 1995 S-1
Security Agreement, and Fixture Filing by
and among Registrant, Arizona Trust
Deed Corporation, an Arizona
Corporation, and Bank One, Arizona, NA
dated April 28, 1994
10.4 Amendment to Deed of Trust, Assignment X
of Rents, Security Agreement and Fixture
Filing by and between Registrant and
Bank One, Arizona, NA dated as of July
25, 1997
10.5 Security Agreement by Registrant in favor X
of Bank One, Arizona, NA dated as of
July 25, 1997
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
Filed
Exhibit Description Incorporated herein by reference Herewith
No. to:
<S> <C> <C> <C>
10.6 Security Agreement by CCIR of Texas X
Corp. in favor of Bank One, Arizona, NA
dated as of July 25, 1997
10.7 Pledge and Irrevocable Proxy Security X
Agreement by Registrant in favor of Bank
One, Arizona, NA dated as of July 25,
1997
10.8 Pledge and Irrevocable Proxy Security X
Agreement by CCIR of Texas Corp. in
favor of Bank One, Arizona, NA dated as
of July 25, 1997
10.9 Continuing Guaranty by CCIR of Texas X
Corp. in favor of Bank One, Arizona, NA
dated July 25, 1997
10.10 Continuing Guaranty by Registrant in X
favor of Bank One, Arizona, NA dated
July 25, 1997
10.11 Environmental Indemnity Agreement by X
Registrant in favor of Bank One, Arizona,
NA dated as of July 25, 1997
10.12 Arbitration Resolution by and among X
Bank One, Arizona, NA, Registrant,
Continental Circuits International, Inc. and
CCIR of Texas Corp. dated July 25, 1997
10.13 Landlord's Waiver and Agreement among X
HB Austin Limited Partnership, CCIR of
Texas Corp. and Bank One Arizona, NA
dated as of July 25, 1997
10.14* Form of Indemnification Agreement for Exhibit 10.9 to March 1995 S-1
Directors and Officers
10.15* Registrant's 1987 Stock Option Plan Exhibit 10.10 to March 1995 S-1
10.16* Form of Letter of Grant of options Exhibit 10.11 to March 1995 S-1
pursuant to Registrant's 1987 Stock
Option Plan (including Share Repurchase
Agreement and Consent of Spouse)
10.17* Form of Share Repurchase Agreement Exhibit 10.12 to March 1995 S-1
pursuant to Registrant's 1987 Stock
Option Plan (including Consent of
Spouse)
10.18* Form of Letter of Grant of options to Exhibit 10.13 to March 1995 S-1
Frederick G. McNamee, III
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
Filed
Exhibit Description Incorporated herein by reference Herewith
No. to:
<S> <C> <C> <C>
10.19 Registrant's Employee Stock Purchase Exhibit to Registrant's Form S-8
Plan filed December 27, 1995
10.20 Registrant's 1996 Stock Option Plan Exhibit to Registrant's Form S-8
filed August 11, 1997
10.21* Employment Agreement between X
Registrant and Frederick G. McNamee, III
dated as of August 1, 1997
10.22* Compensation Agreement between Exhibit 10.18 to March 1995 S-1
Registrant and Mark R. Hollinger dated
September 26, 1994
10.23* Termination Agreement between Exhibit 10.18 to Registrant's
Registrant and Thomas E. Linnen Annual Report on Form 10-K
effective as of July 23, 1996 for the Fiscal Year Ended July
31, 1996 ("1996 10-K")
10.24* Registrant's Employment Offer Letter to Exhibit 10.19 to 1996 10-K
Joseph G. Andersen
10.25* Registrant's Employment Offer Letter to X
James Buchanan accepted July 28, 1997
10.26* Registrant's Letter to Frederick G. X
McNamee III Regarding Transitional
Compensation dated May 8, 1997
10.27* Registrant's Letter to Mark R. Hollinger X
Regarding Transitional Compensation
dated May 8, 1997
10.28* Registrant's Letter to Joseph G. Andersen X
Regarding Transitional Compensation
dated May 8, 1997
10.29 Purchase Agreement dated April 7, 1997 Exhibit 10 to Registrant's
between Radian International, LLC and Quarterly Report on Form 10-Q
CCIR of Texas Corp. for the Quarter ended May 3,
1997
10.30 Purchase and Sale Agreement between Exhibit 10.1 to Registrant's
IPEC Planar Phoenix, Inc. and Registrant Quarterly Report on Form 10-Q
dated August 2, 1996 for the Quarter Ended November
2, 1996 ("November 1996 10-Q")
</TABLE>
- ----------
* Management contract or compensatory plan arrangement required to be filed
pursuant to Item 14(c) of Form 10-K.
<PAGE> 20
<TABLE>
<CAPTION>
Filed
Exhibit Description Incorporated herein by reference Herewith
No. to:
<S> <C> <C> <C>
10.31 Purchase and Sale Agreement between Exhibit 10.2 to November 1996
Arizona Refrigeration Supplies, Inc. and 10-Q
Registrant dated December 3, 1996
11.1 Statement re computation of per share X
earnings
13.1 Portions of 1997 Annual Report to X
Shareholders
21.1 Subsidiaries of Registrant X
23.1 Consent to Ernst & Young LLP X
27.1 Financial Data Schedule X
</TABLE>
- ----------
* Management contract or compensatory plan arrangement required to be filed
pursuant to Item 14(c) of Form 10-K.
<PAGE> 1
Exhibit 10.1
LOAN AGREEMENT
by and between
CONTINENTAL CIRCUITS CORP.
and
BANK ONE, ARIZONA, NA
Dated as of
July 25, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS................................................................................................1
ARTICLE 1 DEFINITION OF TERMS .........................................................................2
-------------------
1.1 Definitions ...........................................................................32
-----------
1.2 Terms Generally .......................................................................13
---------------
ARTICLE 2 THE RLC ....................................................................................14
------
2.1 RLC Commitment ........................................................................14
--------------
2.2 Revolving Line ........................................................................14
--------------
2.3 RLC ...................................................................................14
---
2.4 Excess Balance Repayment ..............................................................17
------------------------
2.5 Principal Prepayments .................................................................17
---------------------
2.6 Method of Payment .....................................................................18
-----------------
2.7 Conditions ............................................................................18
----------
2.8 Other RLC Advances by Lender ..........................................................18
----------------------------
2.9 Assignment ............................................................................18
----------
2.10 Issuance of Letters of Credit .........................................................19
-----------------------------
2.11 Issuance Procedure ....................................................................20
------------------
2.12 Letter of Credit Fees .................................................................20
---------------------
2.13 Disbursements .........................................................................21
-------------
2.14 Reimbursement Obligations of Borrower .................................................21
-------------------------------------
2.15 Nature of Reimbursement Obligations ...................................................21
-----------------------------------
ARTICLE 2A THE TERM LOAN .............................................................................23
-------------
2A.1 Term Loan Commitment ..................................................................23
--------------------
2A.2 Term Note .............................................................................23
---------
2A.3 Principal Prepayments .................................................................25
---------------------
2A.4 Method of Payment .....................................................................26
-----------------
2A.5 Conditions ............................................................................26
----------
2A.6 Assignment ............................................................................27
----------
ARTICLE 3 NON-USE FEE; RLC EXTENSION .................................................................28
--------------------------
3.1 Non-Use Fee ...........................................................................28
-----------
3.2 Extension .............................................................................28
---------
ARTICLE 4 SECURITY ...................................................................................29
--------
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
4.1 1994 Security Documents ...............................................................29
-----------------------
4.2 1996 Security Documents ...............................................................32
-----------------------
4.3 Deed of Trust .........................................................................32
-------------
4.4 Security Agreement ....................................................................33
------------------
4.5 Subsidiary Security Documents .........................................................33
-----------------------------
4.6 Pledge Agreements .....................................................................33
-----------------
4.7 Pledged Bond Agreement ................................................................33
----------------------
4.8 Security Documents ....................................................................33
------------------
ARTICLE 5 CONDITIONS PRECEDENT .......................................................................34
--------------------
5.1 Initial Advance .......................................................................34
---------------
5.2 No Event of Default ...................................................................36
-------------------
5.3 No Material Adverse Change ............................................................36
--------------------------
5.4 Representations and Warranties ........................................................36
------------------------------
5.5 Landlord Lien Waivers .................................................................36
---------------------
ARTICLE 6 REPRESENTATIONS AND WARRANTIES .............................................................37
------------------------------
6.1 Organization and Good Standing ........................................................37
------------------------------
6.2 Authorization and Power ...............................................................37
-----------------------
6.3 No Conflicts or Consents ..............................................................37
------------------------
6.4 Enforceable Obligations ...............................................................37
-----------------------
6.5 Financial Condition ...................................................................37
-------------------
6.6 Full Disclosure .......................................................................38
---------------
6.7 No Default ............................................................................38
----------
6.8 Significant Debt Agreements ...........................................................38
---------------------------
6.9 No Litigation .........................................................................38
-------------
6.10 Taxes .................................................................................38
-----
6.11 ERISA .................................................................................38
-----
6.12 Compliance with Law ...................................................................38
-------------------
6.13 Survival of Representations, Etc. .....................................................39
---------------------------------
6.14 Recitals ..............................................................................39
--------
6.15 No Stock Purchase .....................................................................39
-----------------
6.16 Solvent ...............................................................................39
-------
6.17 Advances ..............................................................................39
--------
6.18 Title to Collateral ...................................................................39
-------------------
6.19 Security Documents ....................................................................39
------------------
6.20 Subsidiaries ..........................................................................39
------------
ARTICLE 7 AFFIRMATIVE COVENANTS ......................................................................40
---------------------
7.1 Financial Statements, Reports and Documents ...........................................40
-------------------------------------------
7.2 Payment of Taxes and Other Indebtedness ...............................................41
---------------------------------------
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
7.3 Maintenance of Existence and Rights; Conduct of Business ...............................41
--------------------------------------------------------
7.4 Notice of Default ......................................................................41
-----------------
7.5 Other Notices ..........................................................................42
-------------
7.6 Compliance with Loan Documents .........................................................42
------------------------------
7.7 Compliance with Significant Debt Agreements ............................................42
-------------------------------------------
7.8 Operations and Properties ..............................................................42
-------------------------
7.9 Books and Records; Access ..............................................................42
-------------------------
7.10 Compliance with Law ....................................................................42
-------------------
7.11 Authorizations and Approvals ...........................................................42
----------------------------
7.12 ERISA Compliance .......................................................................42
----------------
7.13 Further Assurances .....................................................................43
------------------
7.14 News Releases ..........................................................................43
-------------
7.15 Insurance ..............................................................................43
---------
7.16 New Subsidiaries; Co-Borrower ..........................................................44
-----------------------------
7.17 Change in Control ......................................................................44
-----------------
ARTICLE 8 NEGATIVE COVENANTS .........................................................................45
------------------
8.1 Amendments to Organizational Documents ................................................45
--------------------------------------
8.2 Margin Stock ..........................................................................45
------------
8.3 Fiscal Year ...........................................................................45
-----------
8.4 Liens .................................................................................45
-----
8.5 Dividends .............................................................................45
---------
8.6 Insider Loans .........................................................................45
-------------
8.7 Transfer Collateral ...................................................................45
-------------------
8.8 Third Party Guaranties ................................................................46
----------------------
8.9 Financial Covenants ...................................................................46
-------------------
8.10 Amendments ............................................................................46
----------
ARTICLE 9 EVENTS OF DEFAULT ..........................................................................47
-----------------
9.1 Events of Default .....................................................................47
-----------------
9.2 Remedies Upon Event of Default ........................................................49
------------------------------
9.3 Performance by Lender .................................................................51
---------------------
ARTICLE 10 MISCELLANEOUS .............................................................................52
-------------
10.1 Modification ..........................................................................52
------------
10.2 Waiver ................................................................................52
------
10.3 Payment of Expenses ...................................................................52
-------------------
10.4 Notices ...............................................................................52
-------
10.5 Governing Law .........................................................................53
-------------
10.6 Invalid Provisions ....................................................................53
------------------
10.7 Binding Effect ........................................................................53
--------------
</TABLE>
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
10.8 Entirety ..............................................................................53
--------
10.9 Headings ..............................................................................54
--------
10.10 Survival ..............................................................................54
--------
10.11 No Third Party Beneficiary ............................................................54
--------------------------
10.12 Schedules and Exhibits Incorporated ...................................................54
-----------------------------------
10.13 Counterparts ..........................................................................54
------------
</TABLE>
Schedule 6.20 - Subsidiaries
Exhibit "A" - Form of Assumption Agreement
Exhibit "B" - Form of Term Note
Exhibit "C" - Form of Pledge Agreement
<PAGE> 6
LOAN AGREEMENT
BY THIS LOAN AGREEMENT (together with any amendments or modifications,
the "Loan Agreement"), entered into as of this 25th day of July, 1997 by and
between CONTINENTAL CIRCUITS CORP., a Delaware corporation (the "Borrower"), and
BANK ONE, ARIZONA, NA, a national banking association (the "Lender"), in
consideration of the mutual promises herein contained and for other valuable
consideration, the parties hereto do hereby agree as follows:
RECITALS
A. Lender has previously established with Borrower pursuant to that
Loan Agreement dated as of April 28, 1994 (the "1994 Agreement") the following
financial accommodations:
1. A revolving line of credit (the "1994 RLC") in the
principal amount of $3,000,000.00; and
2. A term loan facility (the "1994 Term Loan" and with the
1994 RLC, the "1994 Loans") in the principal amount of $15,000,000.00.
B. Lender subsequently established with Borrower pursuant to that Loan
Agreement dated as of October 31, 1995 (the "1995 Agreement") the following
financial accommodations:
1. A revolving line of credit (the "1995 RLC") in the
principal amount of Ten Million and No/100 Dollars ($10,000,000.00); and
2. A term loan facility (the "1995 Term Loan" and with the
1995 RLC, the "1995 Loans") in the principal amount of Five Million and No/100
Dollars ($5,000,000.00).
C. Lender subsequently issued for the account of Borrower pursuant to
an amendment of the 1995 Agreement dated as of September 1, 1996 (the "1996
Modification") a Letter of Credit in the Stated Amount of $1,012,329.00 (the
"1996 Letter of Credit").
D. Borrower has requested that Lender establish a new revolving line of
credit (the "RLC") in the principal amount of Forty-Five Million and No/100
Dollars ($45,000,000.00) of which an amount not exceeding Twenty-Five Million
and No/100 Dollars ($25,000,000.00) may be converted by Borrower to a term loan
facility (the "Term Loan").
E. Lender has agreed to do so upon the terms, conditions and provisions set
forth herein, after which Lender's obligation to make disbursements under the
1995 Loans shall terminate and the 1995 Agreement shall be deemed amended,
restated and replaced by this Loan Agreement; provided that all liens and
security interests that secure Borrower's obligations under the 1995
<PAGE> 7
Agreement shall continue uninterrupted in full force and effect as valid,
enforceable and perfected liens and security interests to secure repayment of
Advances made under this Loan Agreement; and provided further that for purposes
of the "Indenture" as defined in the 1996 Modification (the "1996 Indenture")
the 1995 Agreement shall have been deemed to be amended and supplemented by this
Loan Agreement and therefore to be the "Reimbursement Agreement" as defined in
the 1996 Indenture.
ARTICLE 1
DEFINITION OF TERMS
1.1 Definitions. For the purposes of this Loan Agreement, unless
the context otherwise requires, the following terms shall have
the respective meanings assigned to them in this Article 1 or
in the section hereof referred to below:
"Accounts Receivable" means, as of any date, accounts
receivable of Borrower on a consolidated basis.
"Advance" means RLC Advances.
"Affiliate" of any Person means any Person which, directly or
indirectly, controls, is controlled by, or is under common control with, such
Person. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.
"Anniversary Date" means each October 31, commencing with
October 31, 1998.
"Authorized Officer" means one or more officers of Borrower
duly authorized (and so certified to Lender by the corporate secretary of
Borrower pursuant to a certificate of authority and incumbency from time to time
satisfactory to Lender in the exercise of Lender's reasonable discretion),
acting alone, to request Advances under the provisions of this Loan Agreement
and execute and deliver documents, instruments, agreements, reports, statements
and certificates in connection herewith.
"Barbados Subsidiary" means Continental Circuits
International, Inc., a corporation organized under the laws of Barbados and a
Subsidiary.
"Bond Documents" means, as to the related Bonds, the
Indenture, the Bond Letter of Credit and any other documents delivered by the
Borrower with respect to the issuance of such Bonds.
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<PAGE> 8
"Bond Letter of Credit" means a Letter of Credit issued with
respect to an issuance of Bonds and includes without limitation the 1996 Letter
of Credit.
"Bonds" means tax-exempt bonds whose proceeds are being loaned
to Borrower.
"Borrower": See the Preamble hereto.
"Business Day" means a day of the year on which commercial
banks are not required or authorized to close in Phoenix, Arizona, and, with
respect to a Fixed Rate RLC Advance or a Fixed Rate Term Portion, a day other
than a Saturday, Sunday or any other day on which commercial banks in London are
ordered to be closed by law or executive order.
"Change in Control" means the occurrence or existence of
either of the following events or conditions without the prior written consent
of Lender, if different than the state of affairs as of the Closing Date:
(a) the acquisition by any Person or two or more Persons
acting in concert of "beneficial ownership" (within the meaning of Rule
13d-3 promulgated by the SEC under the Exchange Act or as otherwise
specified under the provisions of this Loan Agreement) of securities of
Borrower having more than 50% of the ordinary voting power for the
election of directors; or
(b) the acquisition by any Person or two or more Persons
acting in concert of Control of Borrower.
"Closing Date" means July 25, 1997.
"Co-Borrower": See Section 7.16 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means all property of Borrower and any Subsidiary
subject to the Security Documents.
"Continuing Guaranty": See Section 4.5 hereof.
"Control" when used with respect to any Person means the
power, directly or indirectly, to direct the management policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
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"Controlled Group" means, severally and collectively, the
members of the group controlling, controlled by and/or in common control of
Borrower, within the meaning of Section 4001(b) of ERISA.
"Conversion Date": See Section 2A.1 hereof.
"Current Assets" means all assets of Borrower classified as
current assets under GAAP, determined on a consolidated basis.
"Current Liabilities" means all liabilities of Borrower
classified as current liabilities under GAAP, determined on a consolidated
basis.
"Current Ratio" means as of any date the ratio of Current
Assets as of such date to Current Liabilities as of such date.
"Deed of Trust" means the 1994 Deed of Trust together with any
additional deed of trust delivered to Lender by Borrower or a Subsidiary.
"Default Rate" means an interest rate per annum equal to four
percent (4%) above the rate that would otherwise be payable under the terms of
the respective Notes.
"Disbursement": See Section 2.13.
"Disbursement Date": See Section 2.13.
"Dollars" and the sign "$" mean lawful currency of the United
States of America.
"EBIDA" means the Net Income for the prior twelve (12) month
period, plus the sum of all interest expense, depreciation and amortization
deducted in computing such Net Income.
"EBIDA Ratio" means as of any date the ratio of Funded Debt to
EBIDA.
"Equipment" means equipment as defined in Section 47-9109.2 of
the Arizona Revised Statutes, or any successor statute.
"Equity" means Borrower's stockholders' equity, determined on
a consolidated basis in accordance with GAAP.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, together with all final and permanent regulations issued
pursuant thereto. References herein to sections and subsections of ERISA are
deemed to refer to any successor or substitute provisions therefor.
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<PAGE> 10
"ESOP" means any Employee Stock Ownership Plan, as it may be
amended from time to time, adopted by Borrower.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of governors to the Federal Reserve System, as
in effect from time to time.
"Eurodollar Rate Reserve Percentage" for the Interest Period
for each Fixed Rate RLC Advance and each Fixed Rate Term Portion means the
reserve percentage applicable two (2) Business Days before the first day of such
Interest Period under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, but not limited to, any emergency,
supplemental, or other marginal reserve requirement) for a member bank of the
Federal Reserve System in San Francisco with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities (or with respect to any
other category of liabilities which includes deposits by reference to which the
Interest Rate on Fixed Rate RLC Advances and Fixed Rate Term Portions is
determined) having a term equal to such Interest Period.
"Event of Default": See Article 9.
"Exchange Act" means the Securities Exchange Act of 1934.
"Financial Covenants": See Section 8.9 hereof.
"Fixed Rate" means the rate per annum equal to the sum of (i)
the Fixed Rate Factor per annum, and (ii) the rate per annum obtained by
dividing (A) the offered rate for United States dollar deposits greater than $1
million as of 11:00 a.m., City of London time, England, two (2) Business Days
prior to the first day of the respective Interest Period as shown on the display
"British Bankers Association Interest Settlement Rates" on the Telerate System
Pages 3750 or 3740 or such other Page(s) as may replace such Pages on Telerate
for the purpose of displaying such rate or as shown on such other sources
selected by Lender by (B) a percentage equal to one hundred percent (100%) minus
the Eurodollar Rate Reserve Percentage for the period equal to such Interest
Period. The Fixed Rate will change each month to the extent of any change in the
Fixed Rate Factor during the prior month.
"Fixed Rate Factor" means:
(a) 1.50% if the EBIDA Ratio is less than 1.0 to 1.0.
(b) 1.75% if the EBIDA Ratio is less than 1.5 to 1.0, but greater than
or equal to 1.0 to 1.0.
(c) 2.0% if the EBIDA Ratio is less than 2.0 to 1.0, but greater than
or equal to 1.5 to 1.0.
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<PAGE> 11
(d) 2.25% if the EBIDA Ratio is less than 2.5 to 1.0, but greater than
or equal to 2.0 to 1.0.
(e) 2.5% if the EBIDA Ratio is greater than or equal to 2.5 to 1.0.
"Fixed Rate RLC Advance" means an RLC Advance that bears or is
requested to bear interest at the Fixed Rate. Each Fixed Rate RLC Advance shall
be in a minimum amount of $2,000,000.00 with integral multiples of $1,000,000.00
in excess thereof.
"Fixed Rate Term Portion" means any portion of the Term Loan
that at any time bears interest at a Fixed Rate. Each Fixed Rate Term Portion
shall be in a minimum amount of $2,000,000.00 with integral multiples of
$1,000,000.00 in excess thereof. At no time shall the aggregate unpaid principal
amount of Fixed Rate Term Portions exceed an amount equal to the outstanding
amount of the Term Loan less the sum of twelve (12) Principal Payments.
"Funded Debt" means, with respect to any Person, the sum of
its Indebtedness, operating lease obligations and any off-balance sheet debt,
such as any receivable securitization debt.
"GAAP" means those generally accepted accounting principles
and practices which are recognized as such by the American Institute of
Certified Public Accountants acting through its Accounting Principles Board or
by the Financial Accounting Standards Board or through other appropriate boards
or committees thereof and which are consistently applied for all periods after
the date hereof so as to properly reflect the financial condition, and the
results of operations and changes in the financial position, of Borrower,
including without limitation accounting rules promulgated pursuant to
Regulations SX and SK, except that any accounting principle or practice required
to be changed by the said Accounting Principles Board or Financial Accounting
Standards Board (or other appropriate board or committee of the said Boards) in
order to continue as a generally accepted accounting principle or practice may
be so changed.
"Governmental Authority" means any government (or any
political subdivision or jurisdiction thereof), court, bureau, agency or other
governmental authority having jurisdiction over Borrower or any of its business,
operations or properties.
"Guarantor" means each Subsidiary that has delivered a
Continuing Guaranty to Lender.
"Indebtedness" means, with respect to any Person, all of its
monetary and contingent obligations and liabilities, including without
limitation each of the following (without duplication): (a) obligations of that
Person to any other Person for payment of borrowed money, (b) capital lease
obligations, (c) notes and drafts drawn or accepted by that Person payable to
any other Person, whether or not representing obligations for borrowed money
(but without duplication of indebtedness for borrowed money), (d) any obligation
for the purchase price of property the payment of which is deferred for more
than one year or evidenced by a note or
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<PAGE> 12
equivalent instrument, (e) guarantees of Indebtedness of third parties, and (f)
a recourse or nonrecourse payment obligation of any other Person that is secured
by a Lien on any property of the first Person, whether or not assumed by the
first Person, up to the fair market value (from time to time) of such property
(absent manifest evidence to the contrary, the fair market value of such
property shall be the amount determined under GAAP for financial reporting
purposes), but excluding any trades accounts payables and any accruals.
"Indenture" means the Indenture as defined in the related Bond
Letter of Credit pursuant to which said Bonds have been issued; and includes
without limitation the 1996 Indenture.
"Issuance Date" means the date on which a Letter of Credit is
delivered to the beneficiary thereof.
"Insurance Request" means a request for a Letter of Credit
duly executed by Borrower in a form satisfactory to Lender.
"Interest Period" means:
(a) For each Fixed Rate RLC Advance, the period commencing on the date
of such Fixed Rate RLC Advance and ending on the last day of the period
selected by Borrower pursuant to the provisions herein and, thereafter,
each subsequent period commencing on the date after the last day of the
immediately preceding Interest Period and ending on the last day of the
period selected by Borrower pursuant to the provisions herein. The
duration of each Interest Period shall be one month, two months, three
months or six months, as selected by Borrower (A), for a new RLC
Advance, in the request for a Fixed Rate RLC Advance or (B), for an
outstanding RLC Advance, in the request for a Fixed Rate RLC Advance to
continue bearing interest at the Fixed Rate or (C), for an outstanding
Variable Rate RLC Advance, in the request to convert to a Fixed Rate
RLC Advance, provided, however, that:
(i) Interest Periods commencing on the same date shall be of
the same duration;
(ii) Whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last
day of such Interest Period shall be extended to occur on the
next succeeding Business Day, provided that if such extension
would cause the last day of such Interest Period to occur in
the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business
Day; and
(iii) No Interest Period with respect to any RLC Advance shall
extend beyond the RLC Maturity Date.
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<PAGE> 13
(b) For each Fixed Rate Term Portion, the period commencing on the date
of such Fixed Rate Term Portion and ending on the last day of the
period pursuant to the provisions herein and, thereafter, each
subsequent period commencing on the day after the last day of the
immediately preceding Interest Period and ending on the last day of the
period pursuant to the provisions herein. The duration of each Interest
Period shall be 30 days, provided, however, that:
(i) Whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last
day of such Interest Period shall be extended to occur on the
next succeeding Business Day, provided that if such extension
would cause the last day of such Interest Period to occur in
the next following calendar month, the last day of such
Interest Period shall occur on the next preceding Business
Day; and
(ii) No Interest Period shall extend beyond the Term Maturity
Date.
"Interest Portion" of a Bond Letter of Credit means the
Interest Portion as stated in the Bond Letter of Credit.
"Lender": See the Preamble hereto.
"Letter of Credit" means a letter of credit issued by Lender
for the account of Borrower pursuant to Section 2.10.
"Lien" means any lien, mortgage, security interest, tax lien,
pledge, encumbrance, conditional sale or title retention arrangement, or any
other interest in property designed to secure the repayment of Indebtedness
whether arising by agreement or under any statute or law, or otherwise.
"Loans" means together the Term Loan and the RLC, each being a
Loan.
"Loan Agreement": See the Preamble hereto.
"Loan Documents" means this Loan Agreement, the Notes
(including any renewals, extensions and refundings thereof), the Security
Documents, and any written agreements, certificates or documents (and with
respect to this Loan Agreement, the Notes, the Security Documents and such other
written agreements and documents, any amendments or supplements thereto or
modifications thereof) executed or delivered pursuant to the terms of this Loan
Agreement.
"Loan Fees": See Section 3.1 hereof.
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<PAGE> 14
"Material Adverse Effect" means any circumstance or event
which (i) has any material adverse effect upon the validity or enforceability of
any Loan Document, (ii) materially impairs the ability of Borrower to fulfill
its obligations under the Loan Documents, or (iii) causes an Event of Default or
any event which, with notice or lapse of time or both, would become an Event of
Default.
"Net Income" means for any period the net income of Borrower
for such period in accordance with GAAP, determined on a consolidated basis.
"New Subsidiary": See Section 7.16 hereof.
"1994 Agreement": See Recital A hereto.
"1994 Deed of Trust": See Section 4.1 hereto.
"1994 Loans": See Recital A hereto.
"1994 Pledge Agreement": See Section 4.1 hereto.
"1994 Security Agreement": See Section 4.1 hereto.
"1994 Security Documents": See Section 4.1 hereto.
"1995 Agreement": See Recital B hereto.
"1996 Indenture": See Recital E hereto.
"1996 Letter of Credit": See Recital C hereto.
"1996 Modification": See Recital C hereto.
"1996 Pledged Bond Agreement": See Section 4.2 hereof.
"Notes" means the RLC Note and the Term Note, each being a
Note.
"Obligation" means all present and future indebtedness,
obligations and liabilities of Borrower to Lender, and all renewals and
extensions thereof, or any part thereof, arising pursuant to this Loan Agreement
or represented by the Notes, including without limitation the Loans and all
interest accruing thereon, and attorneys' fees incurred in the enforcement or
collection thereof, regardless of whether such indebtedness, obligations and
liabilities are direct, indirect, fixed, contingent, joint, several or joint and
several; together with all indebtedness, obligations and liabilities of Borrower
evidenced or arising pursuant to any of the other Loan Documents, and all
renewals and extensions thereof, or part thereof.
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<PAGE> 15
"Officer Fund" means any accounts or funds maintained by
Borrower with Lender that are identified for deferred compensation for employees
of Borrower.
"Outstanding LC Balance" in effect at any time means the
maximum aggregate amount available to be drawn at such time under all
outstanding Letters of Credit, the determination of such maximum amount to
assume compliance with all conditions for a Disbursement. With respect to a Bond
Letter of Credit, such determination shall also assume no reduction for (i) any
amount drawn by the respective Trustee to make a regularly scheduled payment of
interest on the respective Bonds, or (ii) any amount not available to be drawn
because such Bonds are held by or for the account of the Borrower or pursuant to
the respective Pledged Bond Agreement; the maximum aggregate amount available to
be drawn under a Bond Letter of Credit shall equal the sum of one hundred
percent (100%) of the aggregate principal amount of the respective Bonds then
outstanding, plus the applicable Interest Portion.
"Outstanding Period": See Section 2.12.
"Payment Date" means the first day of each month, provided
that if any such day is not a Business Day, then such Payment Date should be the
next successive Business Day, commencing (i) as to the RLC, August 1, 1997, and
(ii) as to the Term Loan, the first day of the first month after the Conversion
Date.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or substantially all of the Pension Benefit Guaranty
Corporation's functions under ERISA.
"Permitted Liens" means those Liens to which the Collateral is
subject that are prior to the Liens of the Security Documents, and which consist
of the following:
(a) Liens for taxes, assessments or governmental charges not yet
delinquent;
(b) Liens to which Lender shall consent in writing, in its sole and
absolute discretion; and
(c) Liens to secure purchase money financing incurred for the purchase
or acquisition of personal property in an amount not exceeding
$20,000.00 per item, and any subsequent refinancing thereof.
"Person" includes an individual, a corporation, a joint
venture, a partnership, a trust, a limited liability company, an unincorporated
organization or a government or any agency or political subdivision thereof.
"Plan" means an employee defined benefit plan or other plan
maintained by Borrower for employees of Borrower and covered by Title IV of
ERISA, or subject to the minimum funding standards under Section 412 of the
Code.
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<PAGE> 16
"Pledge Agreement": See Section 4.6 hereof, together with the
1994 Pledge Agreement and any additional Pledge Agreement delivered to Lender by
Borrower.
"Pledged Bond Agreement" means a Custody, Pledge and Security
Agreement as to a certain issue of Bonds by and among Borrower, Lender and the
related Trustee, granting Lender a security interest in any such Bonds purchased
with a Disbursement of the related Bond Letter of Credit and in Borrower's
right, title and interest in any funds held by said Trustee under the related
Indenture for the Borrower. "Pledged Bond Agreement" includes without limitation
the 1996 Pledged Bond Agreement.
"Prime Rate" means the interest rate per annum publicly
announced by Lender, or its successors, in Phoenix, Arizona as its "prime rate"
as in effect from time to time. Borrower acknowledges that the Prime Rate is not
necessarily the best or lowest rate offered by Lender and Lender may lend to its
customers at rates that are at, above or below its Prime Rate.
"Principal Payment" means an amount sufficient to fully
amortize the Term Loan over sixty (60) equal monthly payments of principal,
based on the Term Loan Amount in effect on the Conversion Date.
"Real Property" means all of the real property currently owned
or leased and hereafter owned or leased by Borrower or any Subsidiary, wherever
located, together with all improvements located thereon.
"Regulation U" means Regulation U promulgated by the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 221, or any other
regulation hereafter promulgated by said Board to replace the prior Regulation U
and having substantially the same function.
"Regulatory Change" means any change effective after the date
of this Loan Agreement in United States federal, state, or foreign law,
regulations, or rules or the adoption or making after such date of any
interpretation, directive, or request applying to a class of banks including
Lender, of or under any United States federal, state, or foreign law, regulation
or rule (whether or not having the force of law) by any court or governmental or
monetary authority charged with the interpretation or administration thereof.
"Reportable Event" means any "reportable event" as described
in Section 4043(b) of ERISA with respect to which the thirty (30) day notice
requirement has not been waived by the PBGC.
"RLC": See Recital D hereto.
"RLC Advance" means a disbursement of the proceeds of the RLC.
"RLC Commitment" means FORTY-FIVE MILLION AND NO/100 DOLLARS
($45,000,000.00) less the Term Loan Amount.
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<PAGE> 17
"RLC Maturity Date" means October 31, 2000, unless extended
pursuant to Section 3.2.
"RLC Note" means the Revolving Promissory Note of even date
herewith in the amount of the RLC executed by Borrower and delivered pursuant to
the terms of this Loan Agreement, together with any renewals, extensions,
modifications or replacements thereof.
"SEC" means the Securities and Exchange Commission.
"Security Agreement": See Section 4.4 hereof, together with
the 1994 Security Agreement and any additional security agreement delivered to
Lender by a Subsidiary.
"Security Documents": See Section 4.8 hereof.
"Significant Debt Agreement" means all documents, instruments
and agreements executed by Borrower, evidencing, securing or ensuring any
Indebtedness of Borrower or any guaranty in excess of $50,000 in outstanding
principal (or principal equivalent) amount.
"Stated Amount" of a Letter of Credit means the Stated Amount
as stated in the Letter of Credit.
"Stated Expiry Date" of a Letter of Credit means the Stated
Expiry Date as stated in the Letter of Credit.
"Subsidiaries" means all business associations directly or
indirectly controlled by Borrower.
"Tangible Equity Percentage" means (i) Equity less the book
value of all intangible assets, divided by (ii) all assets less the book value
of all intangible assets, all determined on a consolidated basis in accordance
with GAAP.
"Term Loan": See Recital D hereto.
"Term Loan Amount" means the amount of the RLC converted to
the Term Loan on the Conversion Date. Until the Conversion Date, the Term Loan
Amount means $0.
"Term Loan Conversion": See Section 2A.1 hereof.
"Term Loan Maximum Amount" means Twenty-Five Million and
No/100 Dollars ($25,000,000.00).
"Term Maturity Date" means October 31, 2002.
"Term Note" means the Promissory Note dated as of the
Conversion Date in the amount of the Term Loan executed by Borrower and
delivered pursuant to the terms of this Loan
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<PAGE> 18
Agreement, substantially in the form of Exhibit "B" hereto together with any
renewals, extensions, modifications or replacements thereof.
"Term Portion" means either a Fixed Rate Term Portion or a
Variable Rate Term Portion, as may be applicable.
"Trustee" means the Trustee for the holders of certain Bonds,
as defined in the related Indenture.
"Variable Rate" means the rate per annum equal to the sum of
(i) the Variable Rate Factor per annum, and (ii) the Prime Rate per annum as in
effect from time to time. The Variable Rate will change on each day that the
"Prime Rate" changes.
"Variable Rate Factor" means zero percent.
"Variable Rate RLC Advance" means an Advance that bears or
that is requested to bear interest at the Variable Rate.
"Variable Rate Term Portion" means any portion of the Term
Loan that bears interest at the Variable Rate.
1.2 Terms Generally.
(a) The definitions in Section 1.1 shall apply equally to both the
singular and plural forms of the terms defined.
(b) Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.
(c) All references herein to Articles, Sections, Exhibits and Schedules
shall be deemed references to Articles and Sections of, and Exhibits
and Schedules to, this Agreement unless the context shall otherwise
require.
(d) Except as otherwise expressly provided herein, all terms of an
accounting or financial nature shall be construed in accordance with
GAAP, as in effect from time to time.
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<PAGE> 19
ARTICLE 2
THE RLC
2.1 RLC Commitment. Lender agrees to loan to or for the benefit of
Borrower, and Borrower agrees to draw upon and borrow, in the manner and upon
the terms and conditions contained in this Loan Agreement, amounts that in the
aggregate at any time outstanding shall not exceed the RLC Commitment.
2.2 Revolving Line.
(a) Subject to the terms and conditions set forth in this Loan
Agreement, the RLC shall be a revolving line of credit, against which
RLC Advances may be made to Borrower, repaid by Borrower, and new RLC
Advances made to Borrower, as Borrower may request, provided that (i)
no RLC Advance shall be made if an Event of Default shall be
continuing, (ii) no RLC Advance shall be made that would cause the
outstanding principal balance of the RLC, including without limitation
the Outstanding LC Balance, to exceed the RLC Commitment, and (iii) no
RLC Advance shall be made on or after the RLC Maturity Date.
(b) RLC Advances may be made for the purpose of providing to
Borrower and any Co-Borrower (as hereinafter defined) working capital,
financing for the purchase of Equipment or any acquisition, or in
connection with Disbursement under Letters of Credit.
2.3 RLC. The RLC shall be evidenced by the RLC Note, and shall bear
interest and be payable to Lender upon the terms and conditions contained
therein, which include the following provisions:
(a) Interest shall accrue:
(i) Except to the extent that an RLC Advance bears
interest at the Fixed Rate, on the unpaid principal of each
RLC Advance at the Variable Rate.
(ii) To the extent Borrower shall elect as provided
in the RLC Note and to the extent not otherwise provided in
the RLC Note, interest shall accrue on the unpaid principal of
an RLC Advance at the Fixed Rate.
(b) All interest shall be computed on the basis of a 360-day
year and accrue on a daily basis for the actual number of days elapsed.
All accrued interest shall be due and payable on the Payment Date.
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<PAGE> 20
(c) The entire unpaid principal balance, all accrued and
unpaid interest, and all other amounts payable under the RLC Note shall
be due and payable in full on the RLC Maturity Date.
(d) Each request for an RLC Advance shall, in addition to
complying with the other requirements in this Loan Agreement, (i)
specify the date and amount of the requested RLC Advance, (ii) specify
whether the RLC Advance shall be an RLC Advance that bears interest at
the Variable Rate or shall be an RLC Advance that bears interest at the
Fixed Rate, and (iii), if the RLC Advance is to bear interest at the
Fixed Rate, (A) specify the Interest Period, (B) be delivered to Lender
at least two (2) Business Days prior to the date of the requested RLC
Advance, and (C) be in a minimum amount of $2,000,000.00 with integral
multiples of $1,000,000.00 in excess thereof. Any RLC Advance not
complying with the foregoing requirements for an RLC Advance bearing
interest at the Fixed Rate shall bear interest at the Variable Rate.
(e) If Borrower desires that a Fixed Rate RLC Advance continue
to bear interest at the Fixed Rate after the end of an existing
Interest Period, Borrower shall deliver to Lender a notice making such
election and specifying the new Interest Period. If Borrower does not
deliver such notice within such time, then after the existing Interest
Period the Fixed Rate RLC Advance shall become a Variable Rate RLC
Advance and shall bear interest at the Variable Rate.
(f) Borrower may upon written notice to and received by Lender
not later than 12:00 p.m. (Phoenix, Arizona local time) (i) on the
second Business Day, in the case of any conversion of a Variable Rate
RLC Advance into a Fixed Rate RLC Advance and (ii) on the first
Business Day in the case of any conversion of a Fixed Rate RLC Advance
into a Variable Rate RLC Advance, prior to the date of the proposed
conversion, convert any RLC Advance of one type into an RLC Advance of
the other type, provided, however, that any conversion of a Fixed Rate
RLC Advance (A) shall only be made on the last day of the applicable
Interest Period except as otherwise provided in Section 2.5 hereof, and
(B) shall be made only as to an RLC Advance in a minimum amount of
$2,000,000.00 with integral multiples of $1,000,000.00 in excess
thereof. Each such notice of a conversion shall specify the date of
such conversion and the RLC Advance(s) to be converted.
(g) Notwithstanding any provision of the Loan Documents to the
contrary, Lender shall be entitled to fund and maintain its funding of
all or any part of any RLC Advance in any manner it sees fit, provided,
however, that for the purposes of the RLC Note, all determinations
thereunder shall be made as if Lender had actually funded and
maintained each Fixed Rate RLC Advance during the Interest Period
therefor through the purchase of deposits having a maturity
corresponding to the last day of the Interest Period and bearing an
interest rate equal to the Fixed Rate for such Interest Period.
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(h) If, due to any Regulatory Change, there shall be any
increase in the cost to Lender of agreeing to make or making, funding,
or maintaining Fixed Rate RLC Advances (including, without limitation,
any increase in any applicable reserve requirement), then Borrower
shall from time to time, upon demand by Lender, pay to Lender such
amounts as Lender may reasonably determine to be necessary to
compensate Lender for any additional costs that Lender reasonably
determines are attributable to such Regulatory Change and Lender will
notify the Borrower of any Regulatory Change that will entitle Lender
to compensation pursuant to this paragraph as promptly as practicable,
but in any event within 90 days after Lender obtains knowledge thereof,
provided, however, that if Lender fails to give such notice within 90
days after it obtains knowledge of such a Regulatory Change, Lender
shall, with respect to compensation payable in respect of any costs
resulting from such Regulatory Change, only be entitled to payment for
costs incurred from and after the date that Lender does give such
notice. Lender will furnish to Borrower a certificate setting forth in
reasonable detail the basis for the amount of each request by Lender
for compensation under this paragraph. Determinations by Lender of the
amounts required to compensate Lender shall be conclusive, absent
manifest error. Lender shall be entitled to compensation in connection
with any Regulatory Change only for costs actually incurred by Lender.
(i) Notwithstanding any provision of the Loan Documents, if
Lender shall notify Borrower that as a result of a Regulatory Change it
is unlawful for Lender to make RLC Advances at the Fixed Rate, or to
fund or maintain Fixed Rate RLC Advances, (i) the obligations of Lender
to make RLC Advances at the Fixed Rate and to convert RLC Advances to
the Fixed Rate shall be suspended until Lender shall notify Borrower
that the circumstances causing such suspension no longer exist, and
(ii) in the event such Regulatory Change makes the maintenance of RLC
Advances at the Fixed Rate unlawful, Borrower shall forthwith prepay in
full all Fixed Rate RLC Advances then outstanding, together with
interest accrued thereon and all amounts in connection with such
prepayment specified in the RLC Note, unless Borrower, within five (5)
Business Days of notice from Lender, converts all Fixed Rate RLC
Advances then outstanding into Variable Rate RLC Advances pursuant to
the conversion procedures in this Note and pays all amounts in
connection with such prepayments or conversions specified in the RLC
Note.
(j) Notwithstanding any other provision of the Loan Documents,
if prior to the commencement of any Interest Period, Lender shall
determine (i) that United States dollar deposits in the amount of any
Fixed Rate RLC Advance to be outstanding during such Interest Period
are not readily available to Lender in the London interbank market, or
(ii) by reason of circumstances affecting the London interbank market,
adequate and reasonable means do not exist for ascertaining the Fixed
Rate for such Interest Period in the manner prescribed in the
definition of "Fixed Rate", then Lender shall promptly give notice
thereof to Borrower and the obligation of Lender to create, continue,
or effect by conversion any Fixed Rate
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RLC Advance in such amount and for such Interest Period shall terminate
until United States dollar deposits in such amount and for the Interest
Period shall again be readily available in the London interbank market
and adequate and reasonable means exist for ascertaining the Fixed
Rate.
(k) After maturity, including maturity upon acceleration, the
unpaid principal balance, all accrued and unpaid interest and all other
amounts payable under the RLC Note shall bear interest at the Default
Rate.
2.4 Excess Balance Repayment. There shall be due and payable from
Borrower to Lender, and Borrower shall immediately repay to Lender, without
notice or demand, from time to time, any amount by which the outstanding
principal balance of the RLC, including without limitation the Outstanding LC
Balance, exceeds the RLC Commitment.
2.5 Principal Prepayments. Borrower may, upon at least two (2) Business
Days' notice in the case of Fixed Rate RLC Advances and one (1) Business Day's
notice in the case of Variable Rate RLC Advances to Lender stating the proposed
date and aggregate principal amount of the prepayment, and if such notice is
given Borrower shall prepay the outstanding principal balance of the RLC in
whole or in part at any time prior to the RLC Maturity Date as stated in such
notice by Borrower. With any prepayment of a Fixed Rate RLC Advance or with any
conversion of a Fixed Rate RLC Advance to a Variable Rate RLC Advance, in either
case other than on the last Business Day of the Interest Period for such Fixed
Rate RLC Advance (the "Interest Period Termination Date") (including any such
prepayment made voluntarily or involuntarily as a result of the acceleration of
maturity upon a default or otherwise), Borrower shall also pay (a) all accrued
and unpaid interest on the principal being prepaid, (b) all Other Amounts then
due, and (c) a premium, if any, equal to the product of (i) the Average Lost
Monthly Interest Income and (ii) the number of months from the date of
prepayment or conversion to the Interest Period Termination Date (with any
fraction of a month counted as a month), discounted to present value at the
Discount Rate over a period equal to one-half of the number of months in (ii)
above.
As used in the preceding paragraph:
"Average Lost Monthly Interest Income" means the amount determined by
dividing (i) the product of the Average Principal and the Lost Rate, by
(ii) 12, where:
"Average Principal" means the amount equal to either (i)
one-half the sum of (A) the amount of principal being prepaid
and (B) the amount of principal that is scheduled to be due on
the Interest Period Termination Date ("Balloon Amount"), or
(ii) the amount of principal being prepaid, if such amount is
less than the Balloon Amount; and "Lost Rate" means the rate
per annum equal to the percentage, if any, by which (i) the
yield to maturity of United States Treasury debt obligations
having a maturity date nearest to the Interest Period
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Termination Date ("Treasury Obligations") determined on the
first day of the Interest Period exceeds (ii) the yield to
maturity of Treasury Obligations determined on the date of
prepayment.
"Discount Rate" means the rate per annum equal to the yield to maturity
of Treasury Obligations determined on the date of prepayment.
"Other Amounts" means all amounts payable by Borrower to Lender under
the Note and all other Loan Documents.
The maturity date and yield to maturity of Treasury Obligations shall be
determined by Lender, in its absolute and sole discretion, on the basis of
quotations published in The Wall Street Journal or other comparable sources.
2.6 Method of Payment. All payments of principal of, and interest on,
the RLC Note shall be made to Lender before 2:00 p.m. (Phoenix, Arizona time),
in immediately available funds. All payments made on the RLC Note shall be
applied, to the extent of the amount thereof, in the order of priority to be
determined by Lender in its sole discretion: (i) to the payment of costs, fees
or other charges incurred in connection with the RLC; (ii) to the payment of
accrued interest on the RLC; and/or (iii) to the reduction of the principal
balance.
2.7 Conditions. Lender shall have no obligation to make any RLC Advance
unless and until all of the conditions and requirements of this Loan Agreement
are fully satisfied. However, Lender in its sole and absolute discretion may
elect to make one or more RLC Advances prior to full satisfaction of one or more
such conditions and/or requirements. Notwithstanding that such an RLC Advance or
RLC Advances are made, such unsatisfied conditions and/or requirements shall not
be waived or released thereby. Borrower shall be and continue to be obligated to
fully satisfy such conditions and requirements, and Lender, at any time, in
Lender's sole and absolute discretion, may stop making RLC Advances until all
conditions and requirements are fully satisfied.
2.8 Other RLC Advances by Lender. Lender, after giving ten (10) days
written notice to Borrower, from time to time, may make RLC Advances in any
amount in payment of (i) insurance premiums, taxes, assessments, liens or
encumbrances existing against property encumbered by the Security Documents,
(ii) interest accrued and payable upon the RLC, (iii) any charges and expenses
that are the obligation of Borrower under this Loan Agreement or any Security
Document, and (iv) any charges or matters necessary to preserve the property
encumbered by the Security Documents or to cure any Event of Default.
2.9 Assignment. Borrower shall have no right to any RLC Advance other
than to have the same disbursed by Lender in accordance with the disbursement
provisions contained in this Loan Agreement. Any assignment or transfer,
voluntary or involuntary, of this Loan Agreement or any right hereunder shall
not be binding upon or in any way affect Lender without
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its written consent; Lender may make RLC Advances under the disbursement
provisions herein, notwithstanding any such assignment or transfer.
2.10 Issuance of Letters of Credit.
(a) Subject to the terms and conditions of this Loan Agreement, Lender
agrees from time to time before the RLC Maturity Date to issue Letters
of Credit for the account of the Borrower either to credit enhance
Bonds or in connection with Borrower's business activities. Each
reference in this Loan Agreement to the "issue" or "issuance" or other
forms of such words in relation to Letters of Credit shall be deemed to
include any extension or renewal of a Letter of Credit.
(b) Each Letter of Credit shall (i) by its terms be issued in a Stated
Amount; (ii) have a Stated Expiry Date no later than the RLC Maturity
Date; (iii) expire or be terminated by the beneficiary thereunder on or
before its Stated Expiry Date; and (iv) not cause the outstanding
principal balance of the RLC, including the Outstanding LC Balance
after the issuance of said Letter of Credit, to exceed the RLC
Commitment.
(c) In addition to the conditions otherwise specified in this Section
2.10, the obligation of the Lender to issue a Letter of Credit shall be
subject to the further condition precedent that the following
statements shall be correct, and each of the application for such
Letter of Credit and the issuance of such Letter of Credit shall
constitute a representation and warranty by Borrower that on the date
of the issuance of such Letter of Credit such statements are correct:
(i) The representations and warranties in Article 6 are
correct on and as of the date of the issuance of such Letter
of Credit, before and after giving effect to such issuance, as
though made on and as of such date;
(ii) No Event of Default has occurred and is continuing; and
(iii) The conditions in Section 2.2 are satisfied as of the
date of issuance of the Letter of Credit, before and after
giving effect to such issuance.
(d) In addition to the conditions otherwise specified in this Section
2.10, the obligations of the Lender to issue a Letter of Credit that is
a Bond Letter of Credit shall be subject to the satisfaction of the
following conditions precedent as determined by Lender in its
reasonable discretion:
(i) The terms and provisions of the related Bond Documents
shall be reasonably acceptable to Lender, which shall provide
among
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other things that all disbursements of proceeds of the related
Bonds shall be subject to Lender's written consent.
(ii) Borrower shall have delivered to Lender an executed
Pledged Bond Agreement with respect to the related Bonds.
(iii) Lender shall have received executed copies of the Bond
Documents together with copies of written opinions of counsel
as to the tax exemption of the related Bonds and reliance
letters addressed to Lender, allowing Lender to rely on such
opinions.
(iv) Borrower shall have delivered to Lender such documents,
executed by Borrower, as Lender may reasonably require,
granting Lender a security interest in all property, personal
or real, financed with the proceeds of said Bonds, as well as
in any accounts established with respect thereto, together
with financing statements, an environmental indemnity
agreement, contract assignments, a lender's ALTA extended
coverage title insurance policy as to Lender's security
interest in any real property, and a project budget.
2.11 Issuance Procedure. By delivery to Lender of an Issuance Request
on or before 10:00 a.m. (Phoenix, Arizona time) three (3) Business Days prior to
the requested Issuance Date, and the execution of such applications and
agreements as Lender may reasonably request, Borrower may request the issuance
of a Letter of Credit in such form as Borrower may reasonably request. Each
Issuance Request shall include the form of the Letter of Credit, the amount and
other terms thereof. Subject to the terms and conditions of this Loan Agreement,
Lender will issue such Letter of Credit on the Issuance Date specified in the
Issuance Request submitted in connection therewith. Lender and Borrower agree
that all Letters of Credit issued pursuant to the terms of this Article shall be
subject to the terms and conditions and entitled to the benefits of this Loan
Agreement and the other Loan Documents.
2.12 Letter of Credit Fees. Borrower agrees to pay to Lender a
non-refundable Letter of Credit fee equal to the Fixed Rate Factor then in
effect per annum on the Stated Amount of each Letter of Credit, computed on a
daily basis, from and including the Issuance Date of such Letter of Credit to
the Stated Expiry Date ("Outstanding Period"), provided that the Outstanding
Period, if actually shorter, shall be deemed to be 90 days, payable in advance
on the Issuance Date (for the period from such date until the last day of the
calendar quarter during which the Letter of Credit is issued) and on the first
day of each calendar quarter thereafter (for such calendar quarter) until such
Letter of Credit's Stated Expiry Date. Borrower further agrees to pay to Lender
a charge for all reasonable administrative expenses of Lender in connection with
the issuance, amendment or modification (if any) and administration of the
Letters of Credit upon demand from time to time, which charge shall not exceed
$150.00 per draw, transfer or transaction.
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2.13 Disbursements. Lender will notify Borrower of the presentment for
payment of a Letter of Credit by any beneficiary thereto, together with notice
of the date (the "Disbursement Date") such payment shall be made. Subject to the
terms and provisions of the Letter of Credit, Lender shall make such payment (a
"Disbursement") to the beneficiary of the Letter of Credit. Each such
Disbursement shall be deemed to be an RLC Advance hereunder.
2.14 Reimbursement Obligations of Borrower. Borrower's obligation under
Section 2.13 to reimburse Lender with respect to each Disbursement (including
interest thereon) in respect of any Letter of Credit shall be absolute and
unconditional under any and all circumstances and irrespective of any setoff,
counterclaim, or defense to payment which Borrower may have or have had against
Lender or the beneficiary thereof, including any defense based upon the
occurrence of any Event of Default, any draft, demand or certificate or other
document presented under the Letter of Credit proving to be forged, fraudulent,
invalid or insufficient, the failure of any Disbursement to conform to the terms
of the Letter of Credit (if, in Lender's good faith opinion, such Disbursement
is determined to be appropriate) or any non-application or misapplication by the
beneficiary of the proceeds of such Disbursement, or the legality, validity,
form, regularity or enforceability of the Letter of Credit; provided, however,
that nothing herein shall adversely affect the right of Borrower to commence any
proceeding against Lender for any wrongful Disbursement made by Lender under the
Letter of Credit as a result of acts or omissions constituting gross negligence
or wilful misconduct on the part of Lender.
2.15 Nature of Reimbursement Obligations. Borrower shall assume all
risks of the acts, omissions or misuse of any Letter of Credit by the
beneficiary thereof. Lender (except to the extent of its own gross negligence or
wilful misconduct) shall not be responsible for:
(a) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any Letter of Credit or any document submitted by any party
in connection with the issuance of any Letter of Credit, even if such
document should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged;
(b) the form, validity, sufficiency, accuracy, genuineness or legal
effect of any instrument transferring or assigning or purporting to
transfer or assign any Letter of Credit;
(c) failure of any beneficiary of any Letter of Credit to comply fully
with conditions required in order to demand payment under a Letter of
Credit;
(d) errors, omissions, interruption or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or
otherwise; or
(e) any loss or delay in the transmission or otherwise of any document
or draft required by or from a beneficiary of a Letter of Credit in
order to make a Disbursement under a Letter of Credit or of the
proceeds thereof.
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None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted Lender hereunder. In furtherance and extension, and not
in limitation or derogation of any of the foregoing, any action taken or omitted
to be taken by Lender in good faith shall be binding upon the Borrower and shall
not put Lender under any resulting liability to Borrower.
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ARTICLE 2A
THE TERM LOAN
2A.1 Term Loan Commitment. Lender agrees that Borrower may elect once
to convert to the Term Loan some or all of the outstanding balance of the RLC,
such amount not to exceed the Term Loan Maximum Amount (the "Term Loan
Conversion"). To do so, Borrower shall so notify Lender in writing no later than
thirty (30) days prior to the date of such conversion (the "Conversion Date"),
such Conversion Date to be no later than the RLC Maturity Date. On the
Conversion Date, Borrower shall deliver to Lender a fully executed Term Note.
2A.2 Term Note. The Term Loan shall be evidenced by the Term Note, and
shall bear interest and be payable to Lender upon the terms and conditions
contained therein, which include the following provisions:
(a) Interest shall accrue:
(i) Except to the extent that a portion of the Term Loan bears
interest at the Fixed Rate pursuant to the Term Note, on the
unpaid principal of the Term Loan at the Variable Rate.
(ii) To the extent Borrower shall elect as provided in the
Term Note and to the extent not otherwise provided in the Term
Note, on the unpaid principal of the Term Loan at the Fixed
Rate.
(b) Principal shall be due and payable on the Payment Date in
consecutive monthly installments equal to the Principal Payment,
together with interest until the Term Maturity Date.
(c) The entire unpaid principal balance, all accrued and
unpaid interest, and all other amounts payable under the Term Note
shall be due and payable in full on the Term Maturity Date.
(d) All interest shall be computed on the basis of a 360-day
year and accrue on a daily basis for the actual number of days elapsed.
No Interest Period shall begin on any day other than a Payment Date.
(e) If Borrower desires that a Fixed Rate Term Portion
continue to bear interest at a Fixed Rate after the end of an existing
Interest Period, Borrower shall deliver to Lender a notice making such
election and specifying the new Interest Period. If Borrower does not
deliver such notice within such time, then after the existing Interest
Period the Fixed Rate Term Portion shall become a Variable Rate Term
Portion and shall bear interest at the Variable Rate.
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(f) Borrower may, upon written notice to and received by
Lender not later than 12:00 p.m. (Phoenix, Arizona local time) (i) on
the second Business Day, in the case of any conversion of a Variable
Rate Term Portion into a Fixed Rate Term Portion and (ii) on the first
Business Day in the case of any conversion of a Fixed Rate Term Portion
into a Variable Rate Term Portion, prior to the date of the proposed
conversion, convert any Term Portion of one type into a Term Portion of
the other type, provided, however, that any conversion of a Fixed Rate
Term Portion (A) shall only be made on the last day of the applicable
Interest Period except as otherwise provided herein, and (B) shall be
made only as to a Term Portion in a minimum amount of $2,000,000.00
with integral multiples of $1,000,000.00 in excess thereof. Each such
notice of a conversion shall specify the date of such conversion and
the Term Portion(s) to be converted.
(g) Notwithstanding any provision of the Loan Documents to the
contrary, Lender shall be entitled to fund and maintain its funding of
all or any part of the Term Loan in any manner it sees fit, provided,
however, that for the purposes of the Term Note, all determinations
hereunder shall be made as if Lender had actually funded and maintained
each Fixed Rate Term Portion during the Interest Period therefor
through the purchase of deposits having a maturity corresponding to the
last day of the Interest Period and bearing an interest rate equal to
the Fixed Rate for such Interest Period.
(h) If, due to any Regulatory Change, there shall be any
increase in the cost to Lender of agreeing to make or making, funding,
or maintaining Fixed Rate Term Portions (including, without limitation,
any increase in any applicable reserve requirement), then Borrower
shall from time to time, upon demand by Lender, pay to Lender such
amounts as Lender may reasonably determine to be necessary to
compensate Lender for any additional costs that Lender reasonably
determines are attributable to such Regulatory Change and Lender will
notify the Borrower of any Regulatory Change that will entitle Lender
to compensation pursuant to this paragraph as promptly as practicable,
but in any event within 90 days after Lender obtains knowledge thereof,
provided, however, that if Lender fails to give such notice within 90
days after it obtains knowledge of such a Regulatory Change, Lender
shall, with respect to compensation payable in respect of any costs
resulting from such Regulatory Change, only be entitled to payment for
costs incurred from and after the date that Lender does give such
notice. Lender will furnish to Borrower a certificate setting forth in
reasonable detail the basis for the amount of each request by Lender
for compensation under this paragraph. Determinations by Lender of the
amounts required to compensate Lender shall be conclusive, absent
manifest error. Lender shall be entitled to compensation in connection
with any Regulatory Change only for costs actually incurred by Lender.
(i) Notwithstanding any provision of the Loan Documents, if
Lender shall notify Borrower that as a result of a Regulatory Change it
is unlawful for
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Lender to make Fixed Rate Term Portions, or to fund or maintain Fixed
Rate Term Portions, (i) the obligations of Lender to make Fixed Rate
Term Portions and to convert Variable Rate Term Portions to the Fixed
Rate shall be suspended until Lender shall notify Borrower that the
circumstances causing such suspension no longer exist, and (ii) in the
event such Regulatory Change makes the maintenance of Fixed Rate Term
Portions unlawful, Borrower shall forthwith prepay in full all Fixed
Rate Term Portions then outstanding, together with interest accrued
thereon and all amounts in connection with such prepayment specified
hereinbelow, unless Borrower, within five (5) Business Days of notice
from Lender, converts all Fixed Rate Term Portions then outstanding
into Variable Rate Term Portions pursuant to the conversion procedures
in the Term Note and pays all amounts in connection with such
prepayments or conversions specified in the Term Note.
(j) Notwithstanding any other provision of the Loan Documents,
if prior to the commencement of any Interest Period, Lender shall
determine (i) that United States dollar deposits in the amount of any
Fixed Rate Term Portion to be outstanding during such Interest Period
are not readily available to Lender in the London interbank market, or
(ii) by reason of circumstances affecting the London interbank market,
adequate and reasonable means do not exist for ascertaining the Fixed
Rate for such Interest Period in the manner prescribed in the
definition of "Fixed Rate", then Lender shall promptly give notice
thereof to Borrower and the obligation of Lender to create, continue,
or effect by conversion any Fixed Rate Term Portion in such amount and
for such Interest Period shall terminate until United States dollar
deposits in such amount and for the Interest Period shall again be
readily available in the London interbank market and adequate and
reasonable means exist for ascertaining the Fixed Rate.
(k) After maturity, including maturity upon acceleration, the
unpaid principal balance, all accrued and unpaid interest and all other
amounts payable under the Term Note shall bear interest at the Default
Rate.
2A.3 Principal Prepayments. Borrower may, upon at least two (2)
Business Days' notice in the case of Fixed Rate Term Portions and one (1)
Business Day's notice in the case of Variable Rate Term Portions to Lender
stating the proposed date and aggregate principal amount of the prepayment, and
if such notice is given, shall prepay the outstanding principal balance hereof
in whole or in part at any time prior to the Term Maturity Date as stated in
such notice by Borrower. With any prepayment of a Fixed Rate Term Portion or
with any conversion of a Fixed Rate Term Portion to a Variable Rate Term
Portion, in either case other than on the last Business Day of the Interest
Period for such Fixed Rate Term Portion (the "Interest Period Termination Date")
(including any such prepayment made voluntarily or involuntarily as a result of
the acceleration of maturity upon a default or otherwise), Borrower shall also
pay (a) all accrued and unpaid interest on the principal being prepaid, (b) all
Other Amounts then due, and (c) a premium, if any, equal to the product of (i)
the Average Lost Monthly Interest Income and (ii) the number of months from the
date of prepayment or conversion to the Interest Period
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Termination Date (with any fraction of a month counted as a month), discounted
to present value at the Discount Rate over a period equal to one-half of the
number of months in (ii) above.
As used in the preceding paragraph:
"Average Lost Monthly Interest Income" means the amount determined by
dividing (i) the product of the Average Principal and the Lost Rate, by
(ii) 12, where:
"Average Principal" means the amount equal to either (i)
one-half the sum of (A) the amount of principal being prepaid
and (B) the amount of principal that is scheduled to be due on
the Interest Period Termination Date ("Balloon Amount"), or
(ii) the amount of principal being prepaid, if such amount is
less than the Balloon Amount; and
"Lost Rate" means the rate per annum equal to the percentage,
if any, by which (i) the yield to maturity of United States
Treasury debt obligations having a maturity date nearest to
the Interest Period Termination Date ("Treasury Obligations")
determined on the first day of the Interest Period exceeds
(ii) the yield to maturity of Treasury Obligations determined
on the date of prepayment.
"Discount Rate" means the rate per annum equal to the yield to maturity
of Treasury Obligations determined on the date of prepayment.
"Other Amounts" means all amounts payable by Borrower to Lender under
the Note and all other Loan Documents.
The maturity date and yield to maturity of Treasury Obligations shall be
determined by Lender, in its absolute and sole discretion, on the basis of
quotations published in The Wall Street Journal or other comparable sources.
2A.4 Method of Payment. All payments of principal of, and interest on,
the Term Note shall be made to Lender before 2:00 p.m. (Phoenix, Arizona time),
in immediately available funds. All payments made on the Term Note shall be
applied, to the extent of the amount thereof, in the order of priority to be
determined by Lender in its sole discretion (i) to the payment of costs, fees or
other charges incurred in connection with the Term Loan; (ii) to the payment of
accrued interest on the Term Loan; and/or (iii) to the reduction of the
principal balance of the Term Loan.
2A.5 Conditions. Lender shall have no obligation to make the Term Loan
Conversion unless and until all of the conditions and requirements of this Loan
Agreement are fully satisfied. However, Lender in its sole and absolute
discretion may elect to make the Term Loan Conversion prior to full satisfaction
of one or more such conditions and/or requirements. Notwithstanding that the
Term Loan Conversion is made, such unsatisfied conditions and/or
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requirements shall not be waived or released thereby. Borrower shall be and
continue to be obligated to fully satisfy such conditions and requirements.
2A.6 Assignment. Borrower shall have no right to the Term Loan
Conversion other than to have the same made by Lender in accordance with the
provisions contained in this Loan Agreement. Any assignment or transfer,
voluntary or involuntary, of this Loan Agreement or any right hereunder shall
not be binding upon or in any way affect Lender without its written consent;
Lender may make the Term Loan Conversion under the provisions herein,
notwithstanding any such assignment or transfer.
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ARTICLE 3
NON-USE FEE; RLC EXTENSION
3.1 Non-Use Fee. Borrower agrees to pay Lender a quarterly fee (the
"Non-Use Fee") in an annualized amount equal to three-eighths percent (.375%) of
the average daily undrawn balance of the RLC Commitment during the prior
calender quarterly period. For purposes of calculating the Non-Use Fee, the
Outstanding LC Balance on any date shall be deemed to have been drawn. The
Non-Use Fee shall initially accrue from the Closing Date and shall be due and
payable in arrears within three (3) Business Days after written notice of such
amount due by Lender to Borrower and shall be non-refundable.
3.2 Extension Upon written request by Borrower to Lender at least sixty
(60) days before each Anniversary Date, the RLC Maturity Date may be extended
each year by Lender by one year subject to Lender's prior review and approval in
its sole and absolute discretion.
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ARTICLE 4
SECURITY
4.1 1994 Security Documents.
(a) Borrower has previously delivered or caused to be delivered to
Lender the following documents pursuant to the 1994 Agreement (the
"1994 Security Documents") which documents, except as hereby modified,
shall remain in full force and effect pursuant to this Loan Agreement:
(i) Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of April 28, 1994 from Borrower as
Trustor to Lender as Beneficiary recorded on August 28, 1994
at Recorder's No. 940342849 in the records of Maricopa County,
Arizona (as amended from time to time, the "1994 Deed of
Trust");
(ii) Security Agreement dated as of April 28, 1994 from
Borrower in favor of Lender (as amended from time to time, the
"1994 Security Agreement"); and
(iii) Pledge and Irrevocable Proxy Security Agreement dated as
of April 28, 1994 from Borrower in favor of Lender (as amended
from time to time, the "1994 Pledge Agreement").
(b) The 1994 Security Documents are hereby amended as follows:
(i) The Deed of Trust pursuant to an amendment thereto to be
delivered contemporaneously herewith and recorded in the
records of Maricopa County, Arizona;
(ii) Section 2 of the 1994 Security Agreement to read as
follows:
2. OBLIGATION SECURED
The Security Interest shall secure, in such order of priority
as Secured Party may elect:
(a) Payment of the sum of Forty-Five Million and
No/100 Dollars ($45,000,000.00) according to the
terms of that Revolving Promissory Note dated July
25, 1997, made by Debtor, payable to the order of
Secured Party, evidencing a revolving line of credit,
all or any part of which may be advanced to Debtor,
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repaid by Debtor and readvanced to Debtor, from time
to time, subject to the terms and conditions thereof,
with interest thereon, extension and other fees, late
charges, prepayment premiums and attorneys' fees,
according to the terms thereof, and all extensions,
modifications, renewals or replacements thereof
(hereinafter called the "Note");
(b) Payment, performance and observance by Debtor of
each covenant, condition, provision and agreement
contained herein and of all monies expended or
advanced by Secured Party pursuant to the terms
hereof, or to preserve any right of Secured Party
hereunder, or to protect or preserve the Collateral
or any part thereof;
(c) Payment, performance and observance by Debtor of
each covenant, condition, provision and agreement
contained in that Loan Agreement dated July 25, 1997
by and between Debtor and Secured Party (hereinafter
called the "Loan Agreement") and in any other
document or instrument related to the indebtedness
described in subparagraph (a) above (collectively,
the "Loan Documents") and of all monies expended or
advanced by Secured Party pursuant to the terms
thereof or to preserve any right of Secured Party
thereunder;
(d) Payment and performance of any and all other
indebtedness, obligations and liabilities of Debtor
to Secured Party of every kind and character, direct
or indirect, absolute or contingent, due or to become
due, now existing or hereafter incurred, whether such
indebtedness is from time to time reduced and
thereafter increased or entirely extinguished and
thereafter reincurred; and
(e) The full and timely payment of all amounts now or
hereafter due and payable by Debtor to Secured Party
under any interest rate swap, cap, collar or similar
transaction, or any Master Agreement for such
transactions, now or hereafter in effect between
Debtor and Secured Party, whether such amounts are
due and payable on the date(s) scheduled therefor, on
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the occurrence of an Early Termination Date (as
defined in the Master Agreement), or otherwise.
All of the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the "Obligation."
(iii) Section 3 of the 1994 Pledge Agreement to read as follows:
3. OBLIGATION SECURED
This Agreement shall secure, in such order of priority as
Secured Party may elect:
(a) Payment of the sum of $45,000,000.00 with interest
thereon, extension and other fees, late charges, prepayment
premiums and attorneys' fees, according to the terms of any
promissory note, made by Pledgor to evidence the Term Loan,
payable to the order of Secured Party, and all extensions,
modifications, renewals or replacements thereof (hereinafter
called the "Note");
(b) Payment, performance and observance by Pledgor of each
covenant, condition, provision and agreement contained herein
and of all monies expended or advanced by Secured Party
pursuant to the terms hereof, or to preserve any right of
Secured Party hereunder, or to protect or preserve the Pledged
Securities or any part thereof;
(c) Payment, performance and observance by Pledgor of each
covenant, condition, provision and agreement contained in that
Loan Agreement dated July 25, 1997, by and between Pledgor and
Secured Party (hereinafter called the "Loan Agreement") and in
any other document or instrument related to the indebtedness
hereby secured and of all monies expended or advanced by
Secured Party pursuant to the terms thereof or to preserve any
right of Secured Party thereunder;
(d) Payment and performance of any and all other indebtedness,
obligations and liabilities of Pledgor to Secured Party of
every kind and character, direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter
incurred, whether such indebtedness is from time to time
reduced and thereafter increased or entirely extinguished and
thereafter reincurred; and
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(e) The full and timely payment of all amounts now or
hereafter due and payable by Pledgor to Secured Party under
any interest rate swap, cap, collar or similar transaction, or
any Master Agreement for such transactions, now or hereafter
in effect between Pledgor and Secured Party, whether such
amounts are due and payable on the date(s) scheduled therefor,
on the occurrence of an Early Termination Date (as defined in
the Master Agreement), or otherwise.
All of the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the "Obligation."
4.2 1996 Security Documents. Borrower has previously delivered to
Lender the Custody, Pledge and Security Agreement dated as of September 1, 1996
(the "1996 Pledged Bond Agreement") pursuant to the 1996 Modification, which
document shall remain in full force and effect pursuant to this Loan Agreement.
4.3 Deed of Trust. So long as the Loans are outstanding, Borrower shall
cause the Loans and Borrower's obligations under this Loan Agreement to be
secured by the following:
(a) The 1994 Deed of Trust constituting a first and prior lien on the
Real Property, subject to no prior Liens except for Permitted Liens;
(b) A valid and effectual assignment of rents and leases covering the
Real Property;
(c) A valid and effectual security agreement granting Lender a first
and prior security interest in all of the property described below in,
to, or under which Borrower now has or hereafter acquires any right,
title or interest, whether present, future, or contingent: all
equipment, inventory, accounts, general intangibles, instruments,
documents, and chattel paper, as those terms are defined in the Uniform
Commercial Code, and all other personal property of any kind (including
without limitation money and rights to the payment of money), whether
now existing or hereafter created, that are now or at any time
hereafter (i) in the possession or control of Lender in any capacity;
(ii) erected upon, attached to, or appurtenant to, the Real Property;
(iii) located or used on the Real Property or identified for use on the
Real Property (whether stored on the Real Property or elsewhere); or
(iv) used in connection with, arising from, related to, or associated
with the Real Property or any of the personal property described
herein, the construction of any improvements on the Real Property, the
ownership, development, maintenance, leasing, management, or operation
of the Real Property, the use or enjoyment of the Real Property, or the
operation of any business conducted on the Real Property; together with
all products and proceeds of all of the foregoing, in any form; and
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(d) Valid and effectual assignments of Borrower's interest in all
operating, management and supervision agreements, all other documents
relating to the ownership, maintenance, leasing, management and
operation of the Real Property.
4.4 Security Agreement. So long as the Loans are outstanding, Borrower
shall cause the Loans and Borrower's obligations under this Loan Agreement to be
secured at all times by a valid and effective security agreement (together with
the 1994 Security Agreement as amended, the "Security Agreement"), duly executed
and delivered by or on behalf of Borrower, granting Lender a valid and
enforceable security interest in all of the kinds and categories of personal
property described in the Security Agreement, including without limitation its
Accounts Receivable, inventory and Equipment, wherever located, in, to, or under
which Borrower now has or hereafter acquires any right, title, or interest,
whether present, future, or contingent, and in Borrower's expectancy to acquire
such property, subject to no prior Liens except for Permitted Liens.
4.5 Subsidiary Security Documents. Borrower (i) shall obtain and cause
to be delivered to Lender, and maintain in full force and effect so long as any
obligation of Borrower to Lender remains unpaid or unperformed, valid and
effective security agreements and deeds of trust in the form of the Security
Agreement and the Deed of Trust from any Subsidiaries as Lender may require in
its sole and absolute discretion, and/or (ii) shall cause any Subsidiary to
deliver to Lender a continuing guaranty (each a "Continuing Guaranty").
4.6 Pledge Agreements. So long as any obligation of Borrower to Lender
remains unpaid or unperformed, Borrower, upon the request of Lender, shall
deliver to Lender a pledge and irrevocable proxy security agreement (each a
"Pledge Agreement") together with the stock related thereto and any other
documents reasonably requested by Lender, granting Lender a valid and
enforceable security interest in the stock owned by Borrower of any Subsidiary.
4.7 Pledged Bond Agreement. So long as a Bond Letter of Credit is
outstanding, Borrower shall cause the Loans and Borrower's obligation under this
Loan Agreement to be secured by a Pledged Bond Agreement with respect to the
Bonds secured by the related Bond Letter of Credit and any funds held by the
Trustor on behalf of the Borrower.
4.8 Security Documents. All of the documents required by this Article 4
shall be in form satisfactory to Lender and Lender's counsel, and, together with
any UCC financing statements for filing and/or recording, the 1994 Security
Documents, the 1996 Pledged Bond Agreement and any other items required by
Lender to fully perfect and effectuate the liens and security interests of
Lender contemplated by the Security Agreement, the Deed of Trust, the Pledge
Agreement, and this Loan Agreement, may heretofore or hereinafter be referred to
as the "Security Documents."
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ARTICLE 5
CONDITIONS PRECEDENT
The obligation of Lender to make the Loans and to make the initial
Advance hereunder is subject to the full prior satisfaction of each of the
following conditions precedent and, as to each future Advance, to the full prior
satisfaction at each such time of each of the conditions precedent in Sections
5.2, 5.3 and 5.4 hereof:
5.1 Initial Advance. Prior to its making the initial Advance, Lender
shall have received the following, each in form and substance satisfactory to
Lender:
(a) This Loan Agreement. This Loan Agreement, duly executed and
delivered to Lender by Borrower.
(b) The RLC Note. The RLC Note, duly executed, drawn to the order of
Lender and otherwise as provided in Article 2 hereof.
(c) Officer's Certificate. A certificate signed by an Authorized
Officer of Borrower, stating that (to the best knowledge and belief of
Borrower, after reasonable inquiry and review of matters pertinent to
the subject matter of such certificate): (i) all of the representations
and warranties contained in Article 6 of this Loan Agreement and in the
other Loan Documents are, in all material respects, true and correct as
of the date hereof (other than those of such representations which by
their express terms speak to a date prior to such date, which
representations are, in all material respects, true and correct as of
such respective dates); (ii) no event has occurred and is continuing,
or would result from the advance of the proceeds of the Loans, which
would constitute an Event of Default, and (iii) no change or changes
having a Material Adverse Effect have occurred in the business or
financial condition of Borrower since the date of the last financial
statements of Borrower heretofore delivered to Lender.
(d) Organizational Documents and Resolutions. A copy of the current
organizational documents of Borrower and of each existing Subsidiary,
including all amendments thereto, certified as current and complete by
the appropriate authority of the state of said corporation's
incorporation, together with evidence of said corporation's good
standing in said corporation's state of incorporation and in every
other state in which it is doing business or the conduct of said
corporation's business requires such standing for the enforcement of
material contracts, and proper resolutions, authorizations and
certificates relating to the authority of any person executing
documents on behalf of such entity.
(e) Secretary Certificate. A certificate of the corporate secretary of
Borrower, signed by the duly appointed secretary thereof and issued as
of the Closing Date,
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certifying that (i) attached thereto is a true and complete copy of the
corporate by-laws of said corporation in effect on the date of passage
of the corporate resolutions described immediately below and at all
subsequent times to and including the date of the certificate, and (ii)
no change has been made to said corporation's charter documents other
than as reflected in the certified copies submitted in connection with
the delivery of this Loan Agreement or as approved in writing by
Lender.
(f) Deed of Trust. An amendment to the Deed of Trust, duly executed and
delivered to Lender by Borrower.
(g) Existing Subsidiaries. A Continuing Guaranty executed by each
existing Subsidiary for the benefit of Lender.
(h) Title Policy. A commitment from the title insurance company that
issued the lender's ALTA extended coverage title insurance policy in
connection with the 1994 Loans (the "Title Policy") to issue an
endorsement, in form satisfactory to Lender, to the Title Policy,
insuring that the Deed of Trust, as modified hereby, continues to be a
first lien upon the Real Property, as security for the Loans, subject
only to those exceptions contained in the Title Policy and to such
additional exceptions as Lender may specifically approve in writing.
(i) Lender's Costs. Payment of Lender's costs.
(j) Arbitration Resolution. An Arbitration Resolution executed by
Borrower and each Guarantor.
(k) Pledge Agreement. A Pledge Agreement as to each existing Subsidiary
executed by Borrower, together with the delivery to Lender of the stock
of such Subsidiary.
(l) Security Agreement. A Security Agreement and UCC-1 Financing
Statement executed by the Borrower and each existing Subsidiary, other
than the Barbados Subsidiary.
(m) Opinion of Counsel. An opinion of counsel to Borrower and each
Guarantor as to those matters reasonably required by Lender.
(n) 1995 Loans. The complete repayment of the outstanding balance of
the 1995 Loans except that the 1996 Letter of Credit shall be deemed to
have been issued under the RLC.
(o) Additional Information. Such other information and documents as may
reasonably be required by Lender or Lender's counsel.
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5.2 No Event of Default. No Event of Default known to Borrower shall
have occurred and be continuing, or result from Lender's making of the Loans.
5.3 No Material Adverse Change. Since the date of the most recent
financial statements provided to Lender by Borrower, no change shall have
occurred in the business or financial condition of Borrower that could have a
Material Adverse Effect.
5.4 Representations and Warranties. The representations and warranties
contained in Article 6 hereof shall be true and correct in all material
respects, with the same force and effect as though made on and as of the Closing
Date (other than those of such representations which by their express terms
speak to a date prior to that date, which representations shall, in all material
respects, be true and correct as of such respective date).
5.5 Landlord Lien Waivers. Within thirty (30) days of the Closing Date,
Borrower shall cause to be delivered to Lender a landlord lien waiver executed
by the landlord as to each leased location at which Collateral is located.
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ARTICLE 6
REPRESENTATIONS AND WARRANTIES
To induce Lender to make the Loans, Borrower represents and warrants to
Lender that:
6.1 Organization and Good Standing. It is duly organized in the State
of Delaware, validly existing and in good standing in the State of Arizona. It
has the legal power and authority to own its properties and assets and to
transact the business in which it is engaged and is or will be qualified in
those states wherein the nature of its proposed business and property will make
such qualifications necessary or appropriate in the future.
6.2 Authorization and Power. It has the corporate power and requisite
authority to execute, deliver and perform this Loan Agreement, the Notes and the
other Loan Documents to be executed by it; it is duly authorized to, and has
taken all action, corporate or otherwise, necessary to authorize it to, execute,
deliver and perform this Loan Agreement, the Notes and such other Loan Documents
and is and will continue to be duly authorized to perform this Loan Agreement,
the Notes and such other Loan Documents.
6.3 No Conflicts or Consents. Neither the execution and delivery of
this Loan Agreement, the Notes or the other Loan Documents to which it is a
party, nor the consummation of any of the transactions herein or therein
contemplated, nor compliance with the terms and provisions hereof or with the
terms and provisions thereof, (a) will materially contravene or conflict with:
(i) any provision of law, statute or regulation to which it is subject, (ii) any
judgment, license, order or permit applicable to it, (iii) any indenture, loan
agreement, mortgage, deed of trust, or other agreement or instrument to which it
is a party or by which it may be bound, or to which it may be subject, or (b)
will violate any provision of its Certificate of Incorporation. No consent,
approval, authorization or order of any court or Governmental Authority or other
Person is required in connection with the execution and delivery by it of the
Loan Documents or to consummate the transactions contemplated hereby or thereby,
or if required, such consent, approval, authorization or order shall have been
obtained.
6.4 Enforceable Obligations. This Loan Agreement, the Notes and the
other Loan Documents are the legal, valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, except
as limited by bankruptcy, insolvency or other laws or equitable principles of
general application relating to the enforcement of creditors' rights.
6.5 Financial Condition. Borrower has delivered to Lender copies of the
Borrower's audited consolidated financial statements as most recently filed with
the SEC. Such financial statements, in all material respects, fairly present the
financial position of Borrower as of such date and have been prepared in
accordance with GAAP. Since the date thereof, Borrower has not discovered any
obligations, liabilities or indebtedness (including contingent and indirect
liabilities and obligations or unusual forward or long-term commitments) which
in the aggregate
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are material and adverse to the financial position or business of Borrower that
should have been but were not reflected in such financial statements. No changes
having a Material Adverse Effect have occurred in the financial condition or
business of Borrower since its most recent filings with the SEC.
6.6 Full Disclosure. There is no material fact that it has not
disclosed to Lender that would have a Material Adverse Effect. No certificate or
statement delivered herewith or heretofore by it to Lender in connection with
negotiations of this Loan Agreement, contains any untrue statement of a material
fact or omits to state any material fact necessary to keep the statements
contained herein or therein from being misleading.
6.7 No Default. No event or condition has occurred and is continuing
that constitutes an Event of Default.
6.8 Significant Debt Agreements. It is not in default in any material
respect under any Significant Debt Agreement.
6.9 No Litigation. There are no actions, suits or legal, equitable,
arbitration or administrative proceedings pending, or to its actual knowledge
overtly threatened, against Borrower that would, if adversely determined, have a
Material Adverse Effect.
6.10 Taxes. It has filed or caused to be filed all returns and reports
which are required to be filed by any jurisdiction, and has paid or made
provision for the payment of all taxes, assessments, fees or other governmental
charges imposed upon its properties, income or franchises, as to which the
failure to file or pay would have a Material Adverse Effect, except such
assessments or taxes, if any, which are being contested in good faith by
appropriate proceedings.
6.11 ERISA. (a) No Reportable Event has occurred and is continuing with
respect to any Plan; (b) PBGC has not instituted proceedings to terminate any
Plan; (c) neither the Borrower, any member of the Controlled Group, nor any
duly-appointed administrator of a Plan (i) has incurred any liability to PBGC
with respect to any Plan other than for premiums not yet due or payable or (ii)
has instituted or intends to institute proceedings to terminate any Plan under
Section 4041 or 4041A of ERISA; and (d) each Plan of Borrower has been
maintained and funded in all material respects in accordance with its terms and
in all material respects in accordance with all provisions of ERISA applicable
thereto. Neither the Borrower nor any of its Subsidiaries participates in, or is
required to make contributions to, any Multi-employer Plan (as that term is
defined in Section 3(37) of ERISA).
6.12 Compliance with Law. It is in substantial compliance with all
laws, rules, regulations, orders and decrees that are applicable to it, or its
properties, noncompliance with which would have a Material Adverse Effect.
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6.13 Survival of Representations, Etc. All representations and
warranties by Borrower herein shall survive the making of the Loans and the
execution and delivery of the Notes; any investigation at any time made by or on
behalf of Lender shall not diminish Lender's right to rely on the
representations and warranties herein.
6.14 Recitals. The recitals and statements of intent appearing in this
Loan Agreement are true and correct.
6.15 No Stock Purchase. No part of the proceeds of any financial
accommodation made by Lender in connection with this Loan Agreement will be used
to purchase or carry "margin stock," as that term is defined in Regulation U, or
to extend credit to others for the purpose of purchasing or carrying such margin
stock.
6.16 Solvent. It (both before and after giving effect to the Loan
contemplated hereby) is solvent, has assets having a fair value in excess of the
amount required to pay its probable liabilities on its existing debts as they
become absolute and matured, and has, and will have, access to adequate capital
for the conduct of its business and the ability to pay its debts from time to
time incurred in connection therewith as such debts mature.
6.17 Advances. Each request for an Advance or for the extension of any
financial accommodation by Lender whatsoever shall constitute an affirmation
that the representations and warranties contained herein are, true and correct
as of the time of such request. All representations and warranties made herein
shall survive the execution of this Loan Agreement, all advances of proceeds of
the Loans and the execution and delivery of all other documents and instruments
in connection with the Loans and/or this Loan Agreement, so long as Lender has
any commitment to lend hereunder and until the Loans have been paid in full and
all of Borrower's obligations under this Loan Agreement, the Notes and all
Security Documents have been fully discharged.
6.18 Title to Collateral. It has good and marketable title to the
Collateral, free of any Liens except for Permitted Liens, if any.
6.19 Security Documents. The liens, security interests and assignments
created by the Security Documents will, when granted, be valid, effective and
enforceable liens, security interests and assignments, except to the extent (if
any) otherwise agreed in writing by Lender.
6.20 Subsidiaries. Except for Subsidiaries listed on Schedule 6.20,
Borrower has no existing Subsidiary that conducts any business or operations or
if it does, such Subsidiary has become a Guarantor and delivered the Security
Documents required under Section 4.5 hereof.
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ARTICLE 7
AFFIRMATIVE COVENANTS
Until payment in full of the Notes and the complete performance of the
Obligation, Borrower agrees that:
7.1 Financial Statements, Reports and Documents. Borrower shall
deliver, or cause to be delivered, to Lender each of the following:
(a) Consolidated Monthly Statements of Borrower. As soon as available,
and in any event within thirty (30) days after the end of each month of
Borrower, copies of the consolidated balance sheet of Borrower as of
the end of such month, and consolidated statements of income of
Borrower for that month and for the portion of the fiscal year ending
with such month, together with a certificate signed by an Authorized
Officer of the Borrower or other financial officer acceptable to Lender
as to the EBIDA Ratio, in each case setting forth in comparative form
the figures for the corresponding period of the preceding fiscal year,
all in reasonable detail and fairly stated and prepared in accordance
with GAAP.
(b) Consolidated Annual Statements of Borrower. As soon as available
and in any event within ninety (90) days after the close of each fiscal
year of Borrower, audited consolidated financial statements of
Borrower, including its consolidated balance sheet as of the close of
such fiscal year and consolidated statements of income of Borrower for
such fiscal year, in each case setting forth in comparative form the
figures for the preceding fiscal year, all in reasonable detail and
accompanied by an unqualified opinion thereon of independent public
accountants of recognized national standing selected by Borrower and
acceptable to Lender, to the effect that such financial statements have
been prepared in accordance with GAAP (except for changes in which such
accountants concur) and that the examination of such accounts in
connection with such financial statements has been made in accordance
with generally accepted auditing standards and, accordingly, includes
such tests of the accounting records and such other auditing procedures
as were considered necessary in the circumstances.
(c) Quarterly Certificate Respecting Financial Covenants. As soon as
available but in any event within thirty (30) days after the end of
each fiscal quarter of Borrower hereafter, a certificate signed by an
Authorized Officer of the Borrower, or other financial officer
acceptable to Lender, setting forth in such level of detail as Lender
shall reasonably require a calculation of the Financial Covenants as of
the end of that fiscal quarter.
(d) Compliance Certificate of Borrower. Within thirty (30) days after
the end of each month (except the last) and within ninety (90) days
after the end of each
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fiscal year of Borrower hereafter, a certificate signed by an
Authorized Officer of Borrower, stating that a review of the activities
of Borrower during such month or year has been made under his
supervision, that, as of such date, Borrower has observed, performed
and fulfilled each and every obligation and covenant contained herein
and no Event of Default exists under any of the same or, if any Event
of Default shall have occurred, specifying the nature and status
thereof, and stating that all financial statements of Borrower
delivered to Lender during the respective period pursuant to Section
7.1(a) and 7.1(b) hereof, to such officer's knowledge after due
inquiry, fairly present in all material respects the financial position
of the Borrower and the results of its operations at the dates and for
the periods indicated, and have been prepared in accordance with GAAP,
subject to year end audit and adjustments.
(e) Management Letters. With the audited fiscal year-end statements
submitted under Section 7.1(b) above, the management letter, if any, of
Borrower's certified public accountants issued in connection with such
audit.
(f) SEC Filings. Copies of each filing with the SEC made by Borrower,
including without limitation its annual 10-K and quarterly 10-Q
reports.
(g) Other Information. Such other information concerning the business,
properties or financial condition of Borrower as Lender shall
reasonably request.
7.2 Payment of Taxes and Other Indebtedness. Borrower will pay and
discharge (i) all income taxes and payroll taxes, (ii) all taxes, assessments,
fees and other governmental charges imposed upon it or upon its income or
profits, or upon any property belonging to it, before delinquent, which become
due and payable, (iii) all lawful claims (including claims for labor, materials
and supplies), which, if unpaid, might become a Lien upon any of its property
and (iv) all of its Indebtedness as it becomes due and payable, except as
prohibited hereunder; provided, however, that it shall not be required to pay
any such tax, assessment, charge, levy, claims or Indebtedness if and so long as
the amount, applicability or validity thereof shall currently be contested in
good faith by appropriate actions and appropriate accruals and reserves therefor
have been established in accordance with GAAP.
7.3 Maintenance of Existence and Rights; Conduct of Business. Borrower
will preserve and maintain its corporate existence and all of its rights,
privileges and franchises necessary or desirable in the normal conduct of its
business, and conduct its business in an orderly and efficient manner consistent
with good business practices.
7.4 Notice of Default. Borrower will furnish to Lender immediately upon
becoming actually aware of the existence of any event or condition that
constitutes an Event of Default, a written notice specifying the nature and
period of existence thereof and the action which it is taking or proposes to
take with respect thereto.
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7.5 Other Notices. Borrower will promptly notify Lender of (a) any
Material Adverse Effect, (b) any waiver, release or default under any
Significant Debt Agreement, (c) except as to any claim not covered as a result
of an insurance deductible provision, any claim not covered by insurance against
Borrower or any of Borrower's properties, and (d) the commencement of, and any
material determination in, any litigation with any third party or any proceeding
before any Governmental Authority affecting it, except litigation or proceedings
which, if adversely determined, would not have a Material Adverse Effect.
7.6 Compliance with Loan Documents. Borrower will comply with any and
all covenants and provisions of this Loan Agreement, the Notes and all other
Loan Documents.
7.7 Compliance with Significant Debt Agreements. Borrower will comply
in all material respects with all Significant Debt Agreements.
7.8 Operations and Properties. Borrower will keep in good working order
and condition, ordinary wear and tear excepted, all of its assets and properties
which are necessary to the conduct of its business.
7.9 Books and Records; Access. Borrower will give any authorized
representative of Lender access during normal business hours to, and permit such
representative to examine, copy or make excerpts from, any and all books,
records and documents in its possession of and relating to the Loan, and to
inspect any of its properties. It will maintain complete and accurate books and
records of its transactions in accordance with good accounting practices.
7.10 Compliance with Law. Borrower will comply with all applicable
laws, rules, regulations, and all final, nonappealable orders of any
Governmental Authority applicable to it or any of its property, business
operations or transactions, a breach of which could result in a Material Adverse
Effect.
7.11 Authorizations and Approvals. Borrower will promptly obtain, from
time to time at its own expense, all such governmental licenses, authorizations,
consents, permits and approvals as may be required to enable it to comply with
its obligations hereunder and under the other Loan Documents and to operate its
businesses as presently or hereafter duly conducted.
7.12 ERISA Compliance. With respect to its Plans, Borrower shall (a) at
all times comply with the minimum funding standards set forth in Section 302 of
ERISA and Section 412 of the Code or shall have duly obtained a formal waiver of
such compliance from the proper authority; (b) at Lender's request, within
thirty (30) days after the filing thereof, furnish to Lender copies of each
annual report/return (Form 5500 Series), as well as all schedules and
attachments required to be filed with the Department of Labor and/or the
Internal Revenue Service pursuant to ERISA, in connection with each of its Plans
for each year of the plan; (c) notify Lender within a reasonable time of any
fact, including, but not limited to, any Reportable Event arising in connection
with any of its Plans, which constitutes grounds for termination thereof by the
PBGC or for the appointment by the appropriate United States District Court of
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a trustee to administer such Plan, together with a statement, if requested by
Lender, as to the reason therefor and the action, if any, proposed to be taken
with respect thereto; and (d) furnish to Lender within a reasonable time, upon
Lender's request, such additional information concerning any of its Plans as may
be reasonably requested.
7.13 Further Assurances. Borrower will make, execute or endorse, and
acknowledge and deliver or file or cause the same to be done, all such notices,
certifications and additional agreements, undertakings or other assurances, and
take any and all such other action, as Lender may, from time to time, deem
reasonably necessary or proper to fully evidence the Loan.
7.14 News Releases. Borrower shall promptly forward to Lender copies of
all news releases made by it to the news media as to anything of material
significance with respect to its financial status.
7.15 Insurance. Borrower shall maintain in full force and effect at all
times all insurance coverages required under the terms of this Loan Agreement
and/or the Security Documents to which it is a party. In addition, it shall
maintain in full force and effect at all times:
(a) Policies of all risk coverage insurance covering (i) all real
property of every kind and description, and wherever located, in which
Lender has been granted or has obtained a lien to secure any portion of
the Obligation, in respective coverage amounts not less than, from time
to time, the full replacement value of all insurable improvements
situated thereon and (ii) all tangible personalty in which Lender has
been granted or obtained a security interest to secure the Obligation,
in respective coverage amounts not less than, from time to time, the
fair market value thereof.
(b) Policies of insurance evidencing personal liability and property
damage liability coverages in amounts not less than $2,000,000.00
(combined single limit for bodily injury and property damage), and an
umbrella excess liability coverage in an amount not less than
$20,000,000.00 shall be in effect with respect to Borrower.
(c) Policies of workers' compensation insurance in amounts and with
coverages as legally required.
Without limitation of the foregoing, it shall at all times maintain insurance
coverages in scope and amount not less than, and not less extensive than, the
scope and amount of insurance coverages customary in the trades or businesses in
which it is from time to time engaged. All of the aforesaid insurance coverages
shall be issued by insurers reasonably acceptable to Lender. Copies of all
policies of insurance evidencing such coverages in effect from time to time, or
certificates of such policies satisfactory to Lender, shall be delivered to
Lender prior to the initial Advance under this Loan Agreement and upon
reasonable notice upon issuance of new policies thereafter. From time to time,
promptly upon Lender's request, it shall provide evidence satisfactory to Lender
(i) that required coverage in required amounts is in effect, and
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<PAGE> 49
(ii) that Lender is shown as an additional loss payee with respect to all such
coverages, as Lender's interest may appear, by standard (non-attribution) loss
payable endorsement, additional insured endorsement, insurer's certificate or
other means acceptable to Lender in its reasonable discretion. At Lender's
option, it shall deliver to Lender certified copies of all such policies of
insurance in effect from time to time, to be retained by Lender so long as
Lender shall have any commitment to lend hereunder and/or any portion of the
Obligation shall be outstanding or unsatisfied. All such insurance policies
shall provide for at least thirty (30) days prior written notice of the
cancellation or modification thereof to Lender.
7.16 New Subsidiaries; Co-Borrower.
(a) Borrower shall promptly and diligently take all actions necessary
to cause any existing Subsidiary not a Guarantor and that subsequently
undertakes to conduct any business or operations, and any new
Subsidiary or Affiliate (each a "New Subsidiary") to become a Guarantor
and, in the event it possesses assets in the United States, a "Debtor"
under the Security Documents and any other security documents
reasonably required by Lender. Within thirty (30) days of being
acquired, or in the case of an existing Subsidiary within thirty (30)
days of undertaking to conduct any business or operations (the "Grace
Period"), such New Subsidiary shall deliver to Lender an executed
Continuing Guaranty, Security Agreement, UCC-1 Financing Statement and,
to the extent applicable, a Deed of Trust. The term "Debtor" shall have
the meaning set forth in the Security Agreement.
(b) As to each New Subsidiary, within the Grace Period, Borrower shall
deliver to Lender an executed Pledge Agreement.
(c) In the event any Subsidiary is to be the recipient of an Advance or
any Letter of Credit is to be issued for its account, such Subsidiary
shall first deliver to Lender an executed Assumption Agreement in the
form attached hereto as Exhibit "A" and such other documents as Lender
may reasonably request. The term "Co-Borrower" shall mean that such
Subsidiary shall be jointly liable, and each severally and
unconditionally liable, for the full payment and satisfaction of the
Loans and all other obligations of Borrower under this Loan Agreement.
7.17 Change in Control. Should there be a Change in Control as to
Borrower, the Loans shall be immediately due and payable.
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ARTICLE 8
NEGATIVE COVENANTS
Until payment in full of the Notes and the performance of the
Obligation, Borrower agrees that:
8.1 Amendments to Organizational Documents. Borrower will not amend its
organizational documents if the result thereof could result in the occurrence
directly or indirectly of a Material Adverse Effect.
8.2 Margin Stock. Borrower shall not use any proceeds of the Loans, or
any proceeds of any other or future financial accommodation from Lender for the
purpose, whether immediate, incidental or ultimate, of purchasing or carrying
any "margin stock" as that term is defined in Regulation U or to reduce or
retire any indebtedness undertaken for such purposes within the meaning of said
Regulation U, and will not use such proceeds in a manner that would involve
Borrower in a violation of Regulation U or of any other Regulation of the Board
of Governors of its Federal Reserve System, nor use such proceeds for any
purpose not permitted by Section 7 of the Securities Exchange Act of 1934, as
amended, or any of the rules or regulations respecting the extensions of credit
promulgated thereunder.
8.3 Fiscal Year. Except with prior notice to Lender, Borrower will not
change the times of commencement or termination of its fiscal year or other
accounting periods; or change its methods of accounting other than to conform to
GAAP applied on a consistent basis. After any such changes, its method of
accounting shall conform to GAAP.
8.4 Liens. On and after the date hereof, it will not create or suffer
to exist Liens upon the Collateral, except (i) Liens, if any, for the benefit of
Lender, and (ii) Permitted Liens.
8.5 Dividends. It will not declare or pay cash dividends.
8.6 Insider Loans. It will not make loans, receivables or investments,
on a consolidated basis, to officers of Borrower or any other companies of said
officers, except for normal advances for travel and entertainment.
8.7 Transfer Collateral. It will not assign, transfer or convey any of
its right, title and interest in the Collateral (whether real or personal)
encumbered by the Security Documents except that with respect to Collateral that
is Equipment:
(a) Borrower may replace any such Equipment so long as the following
conditions are satisfied:
(i) the book value and the market value of the replacement
Equipment equal or exceed that of the replaced Equipment;
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<PAGE> 51
(ii) the replacement Equipment is usable, and its primary use
is, in the business of Borrower;
(iii) the replacement Equipment is subject to a Lien for the
benefit of Lender and is free of any other security interest
or encumbrance; and
(iv) should the replacement Equipment be located outside the
State of Arizona, Borrower shall notify Lender in writing of
the location of the replacement Equipment.
(b) Borrower may sell and/or abandon any such Equipment so long as the
following conditions are satisfied:
(i) the aggregate of the book value of sold and/or abandoned
Equipment does not exceed $200,000 per year; and
(ii) the total book value and the fair market value of all
such Equipment after such sale or abandonment equals or
exceeds that as of twelve (12) months prior to the date of
sale.
8.8 Third Party Guaranties. It will not undertake any obligation,
whether in the form of a guaranty, mortgage, pledge, endorsement or
accommodation, of the Indebtedness of an unrelated Person without the prior
written consent of Lender.
8.9 Financial Covenants. It will not permit:
(a) Its Current Ratio to be less than 1.20 to 1.0 at the end of any
fiscal quarter.
(b) Its Tangible Equity Percentage to be less than forty percent
(40.0%) at the end of any fiscal quarter.
(c) Its EBIDA Ratio to be more than 3.5 to 1.0 at the end of any fiscal
quarter.
8.10 Amendments. It will not amend, modify or supplement, or agree to
any amendment or modification of, or supplement to, any of the Bond Documents.
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ARTICLE 9
EVENTS OF DEFAULT
9.1 Events of Default. An "Event of Default" shall exist if any one or
more of the following events (herein collectively called "Events of Default")
shall occur and be continuing:
(a) Borrower shall fail to pay any principal of, or interest on, either
Note when the same shall become due or payable and such failure
continues for five (5) days after notice thereof to Borrower;
(b) Any failure or neglect to perform or observe any of the covenants,
conditions, provisions or agreements of Borrower contained herein, or
in any of the other Loan Documents (other than a failure or neglect
described in one or more provisions of this Section 9.1) and such
failure or neglect continues unremedied for a period of thirty (30)
days after notice thereof to Borrower;
(c) Any material warranty, representation or statement contained in
this Loan Agreement or any of the other Loan Documents, or which is
contained in any certificate or statement furnished or made to Lender
pursuant hereto or in connection herewith or with the Loans, shall be
or shall prove to have been false when made or furnished;
(d) The occurrence of any material "event of default" or "default" by
Borrower under any agreement, now or hereafter existing, to which
Lender, or an Affiliate of Lender, and Borrower are a party, or the
occurrence and continuation of an event of default under the Bond
Documents, in each case after the expiration of any notice and cure
period;
(e) Borrower shall (i) fail to pay any Indebtedness of Borrower (other
than the Notes) due under any Significant Debt Agreement, or any
interest or premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) or within any
applicable grace period, (ii) fail to perform or observe any term,
covenant, or condition on its part to be performed or observed under
any agreement or instrument relating to such Indebtedness, within any
applicable grace period when required to be performed or observed, if
the effect of such failure to perform or observe is to accelerate the
maturity of such Indebtedness, or any such Indebtedness shall be
declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled prepayment), prior to the stated maturity
thereof, or (iii) allow the occurrence of any material event of default
with respect to such Indebtedness;
(f) Any one or more of the Loan Documents shall have been determined to
be invalid or unenforceable against Borrower executing the same in
accordance with the
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respective terms thereof, or shall in any way be terminated or become
or be declared ineffective or inoperative, so as to deny Lender the
substantial benefits contemplated by such Loan Document or Loan
Documents;
(g) Borrower shall (i) apply for or consent to the appointment of a
receiver, trustee, custodian, intervenor or liquidator of itself or of
all or a substantial part of its assets, (ii) file a voluntary petition
in bankruptcy or admit in writing that it is unable to pay its debts as
they become due, (iii) make a general assignment for the benefit of
creditors, (iv) file a petition or answer seeking reorganization of an
arrangement with creditors or to take advantage of any bankruptcy or
insolvency laws, (v) file an answer admitting the material allegations
of, or consent to, or default in answering, a petition filed against it
in any bankruptcy, reorganization or insolvency proceeding, or (vi)
take corporate action for the purpose of effecting any of the
foregoing;
(h) An involuntary petition or complaint shall be filed against
Borrower, seeking bankruptcy or reorganization of Borrower, or the
appointment of a receiver, custodian, trustee, intervenor or liquidator
of Borrower, or all or substantially all of its assets, and such
petition or complaint shall not have been dismissed within sixty (60)
days of the filing thereof; or an order, order for relief, judgment or
decree shall be entered by any court of competent jurisdiction or other
competent authority approving a petition or complaint seeking
reorganization of Borrower, appointing a receiver, custodian, trustee,
intervenor or liquidator of Borrower, or all or substantially all of
its assets, and such order, judgment or decree shall continue unstayed
and in effect for a period of sixty (60) days;
(i) Any final judgment(s) (excluding those the enforcement of which is
suspended pending appeal) for the payment of money in excess of the sum
of $50,000.00 in the aggregate (other than any judgment covered by
insurance where coverage has been acknowledged by the insurer) shall be
rendered against Borrower, and such judgment or judgments shall not be
satisfied, settled, bonded or discharged at least ten (10) days prior
to the date on which any of its assets could be lawfully sold to
satisfy such judgment;
(j) Either (i) proceedings shall have been instituted to terminate, or
a notice of termination shall have been filed with respect to, any
Plans (other than a Multi-Employer Pension Plan as that term is defined
in Section 4001(a)(3) of ERISA) by Borrower, any member of the
Controlled Group, PBGC or any representative of any thereof, or any
such Plan shall be terminated, in each case under Section 4041 or 4042
of ERISA, and such termination shall give rise to a liability of the
Borrower or the Controlled Group to the PBGC or the Plan under ERISA
having an effect in excess of $50,000.00 or (ii) a Reportable Event,
the occurrence of which would cause the imposition of a lien in excess
of $50,000.00 under Section 4062 of ERISA, shall have occurred with
respect to any Plan (other
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than a Multi-Employer Pension Plan as that term is defined in Section
4001(a)(3) of ERISA) and be continuing for a period of sixty (60) days;
(k) Any of the following events shall occur with respect to any Multi-
Employer Pension Plan (as that term is defined in Section 4001(a)(3) of
ERISA) to which Borrower contributes or contributed on behalf of its
employees and Lender determines in good faith that the aggregate
liability likely to be incurred by Borrower, as a result of any of the
events specified in Subsections (i), (ii) and (iii) below, will have an
effect in excess of $50,000.00; (i) Borrower incurs a withdrawal
liability under Section 4201 of ERISA; (ii) any such plan is "in
reorganization" as that term is defined in Section 4241 of ERISA; or
(iii) any such Plan is terminated under Section 4041A of ERISA;
(l) The occurrence of a Change in Control without the written consent
of Lender;
(m) The dissolution, liquidation, sale, transfer, lease or other
disposal of all or substantially all of the assets or business of
Borrower;
(n) Any attachment, garnishment, levy or execution upon, or judicial
seizure of, any property of Borrower that has a fair market value in
excess of $50,000.00 or any Collateral, that is not bonded or released
within thirty (30) days;
(o) Except to the extent permitted in the Loan Documents, the
abandonment of all or any part of the Collateral;
(p) The loss, theft or destruction of, or any substantial damage to,
any portion of the Collateral or any other collateral or security for
the Obligation, that is not adequately covered by insurance; or
(q) The institution of any legal action or proceedings to enforce a
lien or security interest in any portion of the Collateral;
(r) The occurrence of either any material adverse change in the
financial condition of Borrower or a material change in the management
of Borrower, in either case that results in a Material Adverse Effect,
or if Lender in good faith shall believe that the prospect of payment
or performance of the Loan is impaired.
9.2 Remedies Upon Event of Default. If an Event of Default shall have
occurred and be continuing, then Lender may, at its sole option, exercise any
one or more of the following rights and remedies, and any other remedies
provided in any of the Loan Documents, as Lender in its sole discretion may deem
necessary or appropriate, all of which remedies shall be deemed cumulative, and
not alternative:
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(i) Cease making Advances or extensions of financial
accommodations in any form to or for the benefit of Borrower
and declare the principal of, and all interest then accrued
on, the Notes and any other liabilities hereunder to be
forthwith due and payable, whereupon the same shall become
immediately due and payable without presentment, demand,
protest, notice of default, notice of acceleration or of
intention to accelerate or other notice of any kind all of
which Borrower hereby expressly waives, anything contained
herein or in the Notes to the contrary notwithstanding;
(ii) Reduce any claim to judgment;
(iii) Without notice of default or demand, pursue and enforce
any of Lender' rights and remedies under the Loan Documents,
or otherwise provided under or pursuant to any applicable law
or agreement;
(iv) Notify the respective Trustee of any Bonds for which a
Bond Letter of Credit is outstanding of such Event of Default
and direct such Trustee to take such action or actions as
permitted under the related Indenture; and/or
(v) Require the Borrower to deposit with Lender cash in an
amount equal to the Outstanding LC Balance;
provided, however, that if any Event of Default specified in Sections 9.1(g) and
9.1(h) shall occur, the principal of, and all interest on, the Notes and other
liabilities hereunder shall thereupon become due and payable concurrently
therewith, without any further action by Lender and without presentment, demand,
protest, notice of default, notice of acceleration or of intention to accelerate
or other notice of any kind, all of which Borrower hereby expressly waives.
Upon the occurrence and during the continuance of any Event of Default,
Lender is hereby authorized at any time and from time to time, without notice to
Borrower (any such notice being expressly waived by Borrower), to set off and
apply any and all moneys, securities or other property of Borrower and the
proceeds therefrom, now or hereafter held or received by or in transit to Lender
or its agents, from or for the account of Borrower, whether for safe keeping,
custody, pledge, transmission, collection or otherwise, and also, except for the
Officer Fund, upon any and all deposits (general or special) and credits of
Borrower, and any and all claims of Borrower against Lender at any time
existing. Lender agrees to notify Borrower promptly after any such setoff and
application, provided that the failure to give such notice shall not affect the
validity of such setoff and application. The rights of Lender under this Section
9.2 are in addition to other rights and remedies (including, without limitation,
other rights of setoff) which Lender may have.
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Upon the occurrence and during the continuance of any Event of Default,
Lender is also authorized to notify each Trustee of such Event of Default and
direct that each Trustee accelerate the maturity of all applicable Bonds then
outstanding and provide a copy of such notice to the Borrower and the Issuer
and/or request the Trustee to redeem the applicable Bonds in whole or in part or
to cause a mandatory tender thereof.
9.3 Performance by Lender. Should Borrower fail to perform any
covenant, duty or agreement with respect to the payment of taxes, obtaining
licenses or permits, or any other requirement contained herein or in any of the
Loan Documents within the period provided herein, if any, for correction of such
failure, Lender may, at its option, perform or attempt to perform such covenant,
duty or agreement on behalf of Borrower. In such event, Borrower shall, at the
request of Lender, promptly pay any amount expended by Lender in such
performance or attempted performance to Lender at its main office in Phoenix,
Arizona, together with interest thereon at the Default Rate, from the date of
such expenditure until paid. Notwithstanding the foregoing, it is expressly
understood that Lender does not assume any liability or responsibility for the
performance of any duties of Borrower hereunder or under any of the Loan
Documents or other control over the management and affairs of Borrower.
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ARTICLE 10
MISCELLANEOUS
10.1 Modification. All modifications, consents, amendments or waivers
of any provision of any Loan Document, or consent to any departure by Borrower
therefrom, shall be effective only if the same shall be in writing and accepted
by Lender.
10.2 Waiver. No failure to exercise, and no delay in exercising, on the
part of Lender, any right hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other further exercise
thereof or the exercise of any other right. The rights of Lender hereunder and
under the Loan Documents shall be in addition to all other rights provided by
law. No modification or waiver of any provision of this Loan Agreement, the
Notes or any Loan Documents, nor consent to departure therefrom, shall be
effective unless in writing and no such consent or waiver shall extend beyond
the particular case and purpose involved. No notice or demand given in any case
shall constitute a waiver of the right to take other action in the same, similar
or other instances without such notice or demand.
10.3 Payment of Expenses. Borrower shall pay all costs and expenses of
Lender (including, without limitation, the attorneys' fees of Lender's legal
counsel) incurred by Lender in connection with the documentation of the Loans,
and the preservation and enforcement of Lender's rights under this Loan
Agreement, the Notes, and/or the other Loan Documents, as well as the costs of
any Real Property appraisal and any updates thereof, the survey, the title
insurance policy, any environmental reports and any filing and recording fees;
provided, however, that notwithstanding the aforesaid, with respect to any legal
action between the parties hereto that is pursued to judgment the prevailing
party only shall be reimbursed by the other party for all costs and expenses
(including, without limitation, reasonable attorneys' fees and costs) incurred
in connection with the preservation and enforcement of its rights under this
Loan Agreement, the Notes and/or other Loan Documents; and provided further,
however, that Lender shall have the right to cause any or all Real Property to
be reappraised at Borrower's expense no more frequently than once each twelve
(12) month period, unless Lender shall be required to reappraise the Real
Property more frequently for regulatory reasons. In addition, Borrower shall pay
all costs and expenses of Lender in connection with the negotiation,
preparation, execution and delivery of any and all amendments, modifications and
supplements of or to this Loan Agreement, the Notes or any other Loan Document.
10.4 Notices. Except for telephonic notices permitted herein, any
notices or other communications required or permitted to be given by this Loan
Agreement or any other documents and instruments referred to herein must be (i)
given in writing and personally delivered or mailed by prepaid certified or
registered mail, or (ii) made by telefacsimile delivered or transmitted, to the
party to whom such notice or communication is directed, to the address of such
party as follows:
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Borrower: Continental Circuits Corp.
3502 East Roeser Road
Phoenix, Arizona 85040
Lender: Bank One, Arizona, NA
Post Office Box 71
Phoenix, Arizona 85001
Attention: Commercial Banking AZ1-1178
Any notice to be personally delivered may be delivered to the principal offices
(determined as of the date of such delivery) of the party to whom such notice is
directed. Any such notice or other communication shall be deemed to have been
given (whether actually received or not) on the day it is personally delivered
as aforesaid; or, if mailed, on the third day after it is mailed as aforesaid;
or, if transmitted by telefacsimile, on the day that such notice is transmitted
as aforesaid. Any party may change its address for purposes of this Loan
Agreement by giving notice of such change to the other parties pursuant to this
Section 10.4.
10.5 Governing Law. This Loan Agreement has been prepared, is being
executed and delivered, and is intended to be performed in the State of Arizona.
The substantive laws of the State of Arizona and the applicable federal laws of
the United States of America shall govern the validity, construction,
enforcement and interpretation of this Loan Agreement and all of the other Loan
Documents, without regard to Arizona conflicts of law rules.
10.6 Invalid Provisions. If any provision of any Loan Document is held
to be illegal, invalid or unenforceable under present or future laws during the
term of this Loan Agreement, such provision shall be fully severable; such Loan
Document shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part of such Loan Document; and
the remaining provisions of such Loan Document shall remain in full force and
effect and shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from such Loan Document. Furthermore, in lieu of
each such illegal, invalid or unenforceable provision there shall be added as
part of such Loan Document a provision mutually agreeable to Borrower and Lender
as similar in terms to such illegal, invalid or unenforceable provision as may
be possible and be legal, valid and enforceable.
10.7 Binding Effect. The Loan Documents shall be binding upon and inure
to the benefit of Borrower and Lender and their respective successors, assigns
and legal representatives; provided, however, that Borrower may not, without the
prior written consent of Lender, assign any rights, powers, duties or
obligations thereunder.
10.8 Entirety. The Loan Documents embody the entire agreement between
the parties and supersede all prior agreements and understandings, if any,
relating to the subject matter hereof and thereof.
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10.9 Headings. Section headings are for convenience of reference only
and shall in no way affect the interpretation of this Loan Agreement.
10.10 Survival. All representations and warranties made by Borrower
herein shall survive delivery of the Notes and the making of the Loans.
10.11 No Third Party Beneficiary. The parties do not intend the
benefits of this Loan Agreement to inure to any third party, nor shall this Loan
Agreement be construed to make or render Lender liable to any materialman,
supplier, contractor, subcontractor, purchaser or lessee of any property owned
by Borrower, or for debts or claims accruing to any such persons against
Borrower. Notwithstanding anything contained herein or in the Notes, or in any
other Loan Document, or any conduct or course of conduct by any or all of the
parties hereto, before or after signing this Loan Agreement or any of the other
Loan Documents, neither this Loan Agreement nor any other Loan Document shall be
construed as creating any right, claim or cause of action against Lender, or any
of its officers, directors, agents or employees, in favor of any materialman,
supplier, contractor, subcontractor, purchaser or lessee of any property owned
by Borrower, nor to any other person or entity other than Borrower.
10.12 Schedules and Exhibits Incorporated. All schedules and exhibits
attached hereto are hereby incorporated into this Loan Agreement by each
reference thereto as if fully set forth at each such reference.
10.13 Counterparts. This Loan Agreement may be executed in multiple
counterparts, each of which, when so executed, shall be deemed an original but
all such counterparts shall constitute but one and the same agreement.
IN WITNESS WHEREOF, the undersigned have executed this Loan Agreement
as of the day and year first above written.
CONTINENTAL CIRCUITS CORP., a
Delaware corporation
By/s/ Frederick G. McNamee, III
--------------------------------
Its President and
Chief Executive Officer
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BANK ONE, ARIZONA, NA, a national banking
association
By
---------------------------------
Its
-----------------------
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SCHEDULE 6.20
SUBSIDIARIES
1. Barbados Subsidiary.
2. CCIR of Texas Corp.
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EXHIBIT "A"
ASSUMPTION AGREEMENT
BY THIS ASSUMPTION AGREEMENT (the "Agreement") made and entered into as
of the _____ day of _________________, 19__, ___________________________________
_______________________________________________________________, whose address
is ________________________________________________________________ (hereinafter
called "Added Borrower"), in favor of BANK ONE, ARIZONA, NA, a national banking
association, whose address is Post Office Box 71, Phoenix, Arizona 85001, Attn:
Commercial Banking AZ1-1178 (hereinafter called "Lender"), in consideration of
the recitals herein contained and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, confirms and agrees as
follows:
SECTION 1. RECITALS.
1.1 Added Borrower is a Subsidiary and an Affiliate (as those terms are
defined in the Loan Agreement hereinafter defined) of Continental Circuits
Corp., a Delaware corporation (the "Company").
1.2 As such, Added Borrower is benefitted by the financial
accommodations (the "Loans") advanced by Lender to Company and its existing
Subsidiaries (collectively with Company, the "Borrower") pursuant to that Loan
Agreement dated July 25, 1997 between Lender and Company (the "Loan Agreement").
1.3 A condition for the continuation of the Loans specified in the Loan
Agreement is that any subsequently acquired or created Subsidiary of the Company
assume as a "Co-Borrower" within the meaning of Section 7.16 of the Loan
Agreement the obligations of the Borrower under the Loan Agreement, and agree to
be bound by all of the terms, conditions and provisions thereof, and agree to be
jointly liable with the Borrower for the full payment and satisfaction of the
Loan and all other obligations of the Borrower under the Loan Agreement.
1.4 Because of the benefits derived by the Added Borrower from said
financial accommodations, which consideration is acknowledged by Added Borrower
as sufficient for its agreements herein, Added Borrower desires to so agree.
SECTION 2. ASSUMPTION.
2.1 Added Borrower hereby assumes as a "Co-Borrower" and agrees to
perform as a "Co-Borrower" all of the duties, obligations and promises of
Borrower as set forth in or arising under the Loan Agreement, to be bound as a
Co-Borrower by all of the terms, conditions and provisions of the Loan Agreement
and to do as a Co-Borrower any and all acts and things required under the Loan
Agreement to be done by Borrower.
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SECTION 3. MISCELLANEOUS.
3.1 Added Borrower shall execute such additional documents and do such
other acts as may be reasonably necessary to fully implement the intent of this
Agreement.
3.2 This Agreement shall be governed by and construed according to the
laws of the State of Arizona.
3.3 This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their heirs, personal representatives,
successors and assigns.
IN WITNESS WHEREOF, these presents are executed as of the date
indicated above.
- ------------------------------------------
By
Its
ADDED BORROWER
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EXHIBIT "B"
PROMISSORY NOTE
$______________ Phoenix, Arizona
_____________, 1997
FOR VALUE RECEIVED, the undersigned (hereinafter called "Maker"), promises
to pay to the order of BANK ONE, ARIZONA, NA, a national banking association
(the "Payee") (Payee and each subsequent transferee and/or owner of this Note,
whether taking by endorsement or otherwise, are herein successively called
"Holder"), at Post Office Box 71, Phoenix, Arizona 85001, Attention: Commercial
Banking, Dept. AZ1-1178, or at such other place as Holder may from time to time
designate in writing, the principal sum of _____________________________ AND
NO/100 DOLLARS ($_____________) or so much thereof as Holder may advance
pursuant to a single Term Advance to or for the benefit of Maker plus interest
from the date hereof on the principal balance from time to time outstanding as
hereinafter provided, principal, interest and all other sums payable hereunder
to be paid in lawful money of the United States of America as follows:
A. Interest shall accrue:
(i) Except to the extent that a portion of the indebtedness
bears interest at the Fixed Rate pursuant to this Note, on the
unpaid principal of the indebtedness at the Variable Rate.
(ii) To the extent Maker shall elect as provided in this Note
and to the extent not otherwise provided in this Note, on the unpaid
principal of the indebtedness at the Fixed Rate.
B. Principal shall be due and payable on the Payment Date in
consecutive monthly installments equal to the Principal Payment together
with interest until the Term Maturity Date.
C. The entire unpaid principal balance, all accrued and unpaid
interest, and all other amounts payable hereunder shall be due and payable
in full on the Term Maturity Date.
D. All interest shall be computed on the basis of a 360-day year and
accrue on a daily basis for the actual number of days elapsed. No Interest
Period shall begin on any day other than a Payment Date.
<PAGE> 65
E. If Maker desires that a Fixed Rate Term Portion continue to bear
interest at a Fixed Rate after the end of an existing Interest Period,
Maker shall deliver to Holder a notice making such election and specifying
the new Interest Period. If Maker does not deliver such notice within such
time, then after the existing Interest Period the Fixed Rate Term Portion
shall become a Variable Rate Term Portion and shall bear interest at the
Variable Rate.
F. Maker may, upon written notice to and received by Holder not
later than 12:00 p.m. (Phoenix, Arizona local time) (i) on the second
Business Day, in the case of any conversion of a Variable Rate Term
Portion into a Fixed Rate Term Portion and (ii) on the first Business Day
in the case of any conversion of a Fixed Rate Term Portion into a Variable
Rate Term Portion, prior to the date of the proposed conversion, convert
any Term Portion of one type into a Term Portion of the other type,
provided, however, that any conversion of a Fixed Rate Term Portion (A)
shall only be made on the last day of the applicable Interest Period
except as otherwise provided herein, and (B) shall be made only as to a
Term Portion in a minimum amount of $2,000,000 with integral multiples of
$1,000,000 in excess thereof. Each such notice of a conversion shall
specify the date of such conversion and the Term Portion(s) to be
converted.
G. Notwithstanding any provision of the Loan Documents to the
contrary, Holder shall be entitled to fund and maintain its funding of all
or any part of the indebtedness in any manner it sees fit, provided,
however, that for the purposes of this Note, all determinations hereunder
shall be made as if Holder had actually funded and maintained each Fixed
Rate Term Portion during the Interest Period therefor through the purchase
of deposits having a maturity corresponding to the last day of the
Interest Period and bearing an interest rate equal to the Fixed Rate for
such Interest Period.
H. If, due to any Regulatory Change, there shall be any increase in
the cost to Holder of agreeing to make or making, funding, or maintaining
Fixed Rate Term Portions (including, without limitation, any increase in
any applicable reserve requirement), then Maker shall from time to time,
upon demand by Holder, pay to Holder such amounts as Holder may reasonably
determine to be necessary to compensate Holder for any additional costs
that Holder reasonably determines are attributable to such Regulatory
Change and Holder will notify the Maker of any Regulatory Change that will
entitle Holder to compensation pursuant to this paragraph as promptly as
practicable, but in any event within 90 days after Holder obtains
knowledge thereof, provided, however, that if Holder fails to give such
notice within 90 days after it obtains knowledge of such a Regulatory
Change, Holder shall, with respect to compensation payable in respect of
any costs resulting from such Regulatory Change, only be entitled to
payment for costs incurred from and after the date that Holder does give
such notice. Holder will furnish to Maker
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a certificate setting forth in reasonable detail the basis for the amount
of each request by Holder for compensation under this paragraph.
Determinations by Holder of the amounts required to compensate Holder
shall be conclusive, absent manifest error. Holder shall be entitled to
compensation in connection with any Regulatory Change only for costs
actually incurred by Holder.
I. Notwithstanding any provision of the Loan Documents, if Holder
shall notify Maker that as a result of a Regulatory Change it is unlawful
for Holder to make Fixed Rate Term Portions, or to fund or maintain Fixed
Rate Term Portions, (i) the obligations of Holder to make Fixed Rate Term
Portions and to convert Variable Rate Term Portions to the Fixed Rate
shall be suspended until Holder shall notify Maker that the circumstances
causing such suspension no longer exist, and (ii) in the event such
Regulatory Change makes the maintenance of Fixed Rate Term Portions
unlawful, Maker shall forthwith prepay in full all Fixed Rate Term
Portions then outstanding, together with interest accrued thereon and all
amounts in connection with such prepayment specified hereinbelow, unless
Maker, within five (5) Business Days of notice from Holder, converts all
Fixed Rate Term Portions then outstanding into Variable Rate Term Portions
pursuant to the conversion procedures in this Note and pays all amounts in
connection with such prepayments or conversions specified hereinbelow.
J. Notwithstanding any other provision of the Loan Documents, if
prior to the commencement of any Interest Period, Holder shall determine
(i) that United States dollar deposits in the amount of any Fixed Rate
Term Portion to be outstanding during such Interest Period are not readily
available to Holder in the London interbank market, or (ii) by reason of
circumstances affecting the London interbank market, adequate and
reasonable means do not exist for ascertaining the Fixed Rate for such
Interest Period in the manner prescribed in the definition of "Fixed
Rate", then Holder shall promptly give notice thereof to Maker and the
obligation of Holder to create, continue, or effect by conversion any
Fixed Rate Term Portion in such amount and for such Interest Period shall
terminate until United States dollar deposits in such amount and for the
Interest Period shall again be readily available in the London interbank
market and adequate and reasonable means exist for ascertaining the Fixed
Rate.
Maker agrees to an effective rate of interest that is the rate stated
above plus any additional rate of interest resulting from any other charges in
the nature of interest paid or to be paid by or on behalf of Maker, or any
benefit received or to be received by Holder, in connection with this Note.
All payments on this Note shall be applied in the order of priority to be
determined by Holder in its sole discretion (i) to the payment of any costs,
fees or other charges incurred in
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connection with the indebtedness evidenced hereby, (ii) to the payment of
accrued interest, and/or (iii) to the reduction of the principal balance.
This Note is issued pursuant to that Loan Agreement (the "Loan Agreement")
dated as of July 25, 1997 between Maker and Payee and is secured by, among other
things, a Deed of Trust, Assignment of Rents, Security Agreement and Fixture
Filing of even date herewith, executed by Maker, as trustor, in favor of Payee,
as beneficiary, encumbering property situate in Maricopa County, Arizona. Such
Deed of Trust and all other documents or instruments securing the indebtedness
evidenced by this Note or executed or delivered in connection with the
indebtedness evidenced by this Note are hereinafter called the "Security
Documents." The capitalized terms used and not otherwise defined herein shall
have the same meanings as defined in the Loan Agreement.
Time is of the essence of this Note. At the option of Holder, the entire
unpaid principal balance, all accrued and unpaid interest and all other amounts
payable hereunder shall become immediately due and payable without notice upon
the occurrence of any Event of Default. Should any payment date not be a
Business Day, then such payment date shall be the next succeeding Business Day.
Upon the occurrence of an Event of Default and during the continuation
thereof, and after maturity, including maturity upon acceleration, the unpaid
principal balance, all accrued and unpaid interest and all other amounts payable
hereunder shall bear interest at that rate that is four percent (4%) above the
rate that would otherwise be payable under the terms hereof. Maker shall pay all
costs and expenses, including reasonable attorneys' fees and court costs,
incurred in the collection or enforcement of all or any part of this Note. In
the event of any arbitration proceedings, arbitration costs and attorneys' fees
shall be set in accordance with the applicable rules of the American Arbitration
Association. In the event of any court proceedings, court costs and attorneys'
fees shall be set by the court and not by jury and shall be included in any
judgment obtained by Holder.
Maker may, upon at least two (2) Business Days' notice in the case of
Fixed Rate Term Portions and one (1) Business Day's notice in the case of
Variable Rate Term Portions to Holder stating the proposed date and aggregate
principal amount of the prepayment, and if such notice is given, shall prepay
the outstanding principal balance hereof in whole or in part at any time prior
to the Term Maturity Date as stated in such notice by Maker. With any prepayment
of a Fixed Rate Term Portion or with any conversion of a Fixed Rate Term Portion
to a Variable Rate Term Portion, in either case other than on the last Business
Day of the Interest Period for such Fixed Rate Term Portion (the "Interest
Period Termination Date") (including any such prepayment made voluntarily or
involuntarily as a result of the acceleration of maturity upon a default or
otherwise), Maker shall also pay (a) all accrued and unpaid interest on the
principal being prepaid, (b) all Other Amounts then due, and (c) a premium, if
any, equal to the product of (i) the Average Lost Monthly Interest Income and
(ii) the number of months from the date of prepayment or conversion to the
Interest Period Termination Date (with any fraction of a month counted as a
month),
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discounted to present value at the Discount Rate over a period equal to one-half
of the number of months in (ii) above.
As used in the preceding paragraph:
"Average Lost Monthly Interest Income" means the amount determined
by dividing (i) the product of the Average Principal and the Lost Rate, by
(ii) 12, where:
"Average Principal" means the amount equal to either (i)
one-half the sum of (A) the amount of principal being prepaid and
(B) the amount of principal that is scheduled to be due on the
Interest Period Termination Date ("Balloon Amount"), or (ii) the
amount of principal being prepaid, if such amount is less than the
Balloon Amount; and
"Lost Rate" means the rate per annum equal to the percentage,
if any, by which (i) the yield to maturity of United States Treasury
debt obligations having a maturity date nearest to the Interest
Period Termination Date ("Treasury Obligations") determined on the
first day of the Interest Period exceeds (ii) the yield to maturity
of Treasury Obligations determined on the date of prepayment.
"Discount Rate" means the rate per annum equal to the yield to
maturity of Treasury Obligations determined on the date of prepayment.
"Other Amounts" means all amounts payable by Maker to Holder under
the Note and all other Loan Documents.
The maturity date and yield to maturity of Treasury Obligations shall be
determined by Holder, in its absolute and sole discretion, on the basis of
quotations published in The Wall Street Journal or other comparable sources.
Failure of Holder to exercise any option hereunder shall not constitute a
waiver of the right to exercise the same in the event of any subsequent default
or in the event of continuance of any existing default after demand for strict
performance hereof.
All sureties, guarantors and/or endorsers hereof (or of any obligation
hereunder) and accommodation parties hereon (severally each hereinafter called a
"Surety") and Maker each: (a) agree that the liability under this Note of all
parties hereto is joint and several; (b) severally waive any and all formalities
in connection with this Note to the maximum extent allowed by law, including
(but not limited to) demand, diligence, presentment for payment, protest and
demand,
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<PAGE> 69
and notice of extension, dishonor, protest, demand and nonpayment of this Note;
(c) severally waive any and all formalities in connection with this Note to the
maximum extent allowed by law, including (but not limited to) demand, diligence,
presentment for payment, protest and demand, and notice of extension, dishonor,
protest, demand and nonpayment of this Note; and (d) consent that Holder may
extend the time of payment or otherwise modify the terms of payment of any part
or the whole of the debt evidenced by this Note, at the request of any other
person liable hereon, and such consent shall not alter nor diminish the
liability of any person hereon.
In addition, each Surety waives and agrees not to assert: (a) any right to
require Holder to proceed against Maker or any other Surety, to proceed against
or exhaust any security for the Note, to pursue any other remedy available to
Holder, or to pursue any remedy in any particular order or manner; (b) the
benefit of any statute of limitations affecting its liability hereunder or the
enforcement hereof; (c) the benefits of any legal or equitable doctrine or
principle of marshalling; (d) notice of the existence, creation or incurring of
new or additional indebtedness of Maker to Holder; (e) the benefits of any
statutory provision limiting the liability of a surety, including without
limitation the provisions of Sections 12-1641, et seq., of the Arizona Revised
Statutes; and (f) any defense arising by reason of any disability or other
defense of Maker or by reason of the cessation from any cause whatsoever (other
than payment in full) of the liability of Maker for payment of the Note. Until
payment in full of the Note, no Surety shall have any right of subrogation and
each hereby waives any right to enforce any remedy which Holder now has, or may
hereafter have, against Maker or any other Surety, and waives any benefit of,
and any right to participate in, any security now or hereafter held by Holder.
Maker agrees that to the extent Maker or any Surety makes any payment to
Holder in connection with the indebtedness evidenced by this Note, and all or
any part of such payment is subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be repaid by Holder or paid over to a
trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (any such payment is hereinafter referred to as a "Preferential
Payment"), then the indebtedness of Maker under this Note shall continue or
shall be reinstated, as the case may be, and, to the extent of such payment or
repayment by Holder, the indebtedness evidenced by this Note or part thereof
intended to be satisfied by such Preferential Payment shall be revived and
continued in full force and effect as if said Preferential Payment had not been
made.
Without limiting the right of Holder to bring any action or proceeding
against Maker or any Surety or against any property of Maker or any Surety (an
"Action") arising out of or relating to this Note or any indebtedness evidenced
hereby in the courts of other jurisdictions, Maker and each Surety hereby
irrevocably submit to the jurisdiction, process and venue of any Arizona State
or Federal court sitting in Phoenix, Arizona, and hereby irrevocably agree that
any Action may be heard and determined in such Arizona State court or in such
Federal court. Maker and all Sureties each hereby irrevocably waives, to the
fullest extent it may effectively do so, the defenses of lack of jurisdiction
over any person, inconvenient forum or improper venue, to the maintenance of any
Action in any Arizona State or Federal Court sitting in Phoenix, Arizona.
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This Note shall be binding upon Maker and its successors and assigns and
shall inure to the benefit of Payee, and any subsequent holders of this Note,
and their successors and assigns.
All notices required or permitted in connection with this Note shall be
given at the place and in the manner provided in the Loan Agreement for the
giving of notices.
This Note shall be governed by and construed according to the laws of the
State of Arizona.
IN WITNESS WHEREOF, these presents are executed as of the date first
written above.
CONTINENTAL CIRCUITS CORP., a Delaware
corporation
By:___________________________________
Its:__________________________________
MAKER
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EXHIBIT "C"
CUSTODY, PLEDGE AND SECURITY AGREEMENT
CUSTODY, PLEDGE AND SECURITY AGREEMENT, dated as of June 1, 1997 (the
"Pledge Agreement"), made by and among ________________________________________
_______________________ (the "Pledgor"),
_________________________________________ (the "Custodian"), and BANK ONE,
ARIZONA, NA, a national banking association (the "Bank"), pursuant to that Loan
Agreement, dated as of July 25, 1997, by and between CONTINENTAL CIRCUITS CORP.,
a Delaware corporation (together with the Pledgor and any Co-Borrower as defined
in said Loan Agreement, the "Borrower") and the Bank (hereinafter, as the same
may from time to time be amended or supplemented, called the "Reimbursement
Agreement");
W I T N E S S E T H:
WHEREAS, _________________________________________________ (the "Issuer")
has issued $____________________ of its _____________________________________
______________________________________ (the "Bonds") under an Indenture of
Trust, dated as of ____________________ ( the "Indenture"), between the Issuer
and ________________________________________________, as trustee (the
"Trustee"); and
WHEREAS, the Indenture requires the purchase of the Bonds from the holders
thereof under certain circumstances as set forth in the Indenture; and
WHEREAS, the Pledgor has requested the Bank to issue the Letter of Credit
under the Reimbursement Agreement which may be drawn upon, inter alia, to pay
the purchase price of the Bonds; and
WHEREAS, it is a condition precedent to the Bank's issuance of the Letter
of Credit that the Pledgor shall execute and deliver this Pledge Agreement to
the Bank;
NOW, THEREFORE, in consideration of the premises and in order to induce
the Bank to issue the Letter of Credit under the Reimbursement Agreement and for
other good and valuable consideration receipt of which is hereby acknowledged,
the parties hereto agree as follows:
1. Defined Terms. Unless otherwise defined herein, defined terms shall
have the meanings assigned to them in the Reimbursement Agreement, and the rules
of interpretation set forth in the Reimbursement Agreement shall apply to this
Pledge Agreement.
2. Pledge and Security Agreement. As collateral security for the prompt
and complete payment when due of all amounts due from the Borrower to the Bank
under the Reimbursement Agreement, the Pledgor pledges, hypothecates, assigns,
transfers and grants to the Bank a first
<PAGE> 72
priority lien on and a first perfected security interest in all its right, title
and interest to the following:
(a) Such Bonds as may be from time to time be purchased with money,
drawn by the Trustee under the Letter of Credit. Such Bonds are sometimes
hereinafter referred to as "Pledged Bonds." The Pledgor shall cause the
Trustee to deliver all certificated Pledged Bonds to the Custodian as soon
as practicable following purchase of such Bonds with the proceeds of a
drawing under the Letter of Credit and as to all other Pledged Bonds shall
note the pledge of such Bonds on its books and records and send a
confirmation of such book entry to the Bank.
(b) The Bond Funds together with all moneys and claims for moneys
due or to become due or payable thereon or with respect therefor, all
shares, deposits, investments and interest of every kind of the
undersigned evidenced by any of the foregoing, and all proceeds thereof
(collectively, the "Bond Monies"). The "Bond Funds" shall mean all funds,
accounts and subaccounts established under the Indenture in which monies
shall be held by the Trustee from time to time for the benefit of Pledgor,
including without limitation the Bond Fund, the Project Fund and
______________________.
3. Payments on the Bonds. If, while this Pledge Agreement is in effect,
the Pledgor shall become entitled to receive or shall receive any payment of
principal, premium, interest or proceeds of sale or remarketing in respect of
the Pledged Bonds, such payment shall be subject to this Pledge Agreement, and
the Pledgor hereby irrevocably directs the Trustee to make any such payments
directly to the Custodian and, in the event any such payments are received by
the Pledgor, the Pledgor agrees to accept the same as the Bank's agent and to
hold the same in trust on behalf of the Bank and to deliver the same promptly to
the Custodian. All sums of money so paid in respect of the Pledged Bonds which
are received by the Pledgor and paid to the Custodian and all such amounts which
shall be paid directly to the Custodian by the Trustee shall be paid by the
Custodian to the Bank and shall be credited against the corresponding
reimbursement obligation of the Pledgor under the Reimbursement Agreement.
4. Collateral. All property at any time pledged to the Bank hereunder and
all income therefrom and proceeds thereof are herein collectively sometimes
called the "Collateral."
5. Release of Pledged Bonds. If a payment is made by or on behalf of the
Pledgor in respect of its reimbursement obligation under the Reimbursement
Agreement and if the other conditions respecting payment of accrued interest as
set forth in the Reimbursement Agreement are met, the Bank agrees upon receipt
of such payment to release from the lien of this Pledge Agreement and cause the
Custodian to release to the Pledgor or the Trustee or to such other party as
shall make payment to the Bank, as the case may be, Pledged Bonds in the
principal amount so paid; provided, however, that if the payment is less than
the minimum denomination of Bonds then available under the Indenture, Pledged
Bonds shall be released only at such time as the cumulative amount of payments
made under the Reimbursement Agreement, and for which no Pledged Bonds
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have been released under this paragraph, equals the minimum denomination of
Bonds then available. Custodian agrees not to release any Pledged Bonds until
the Trustee and the Custodian shall have received from the Bank a Notice of
Reinstatement for Remarketed Pledged Bonds, which the Bank agrees to send in
accordance with the provisions of the Letter of Credit.
6. Rights of the Bank. The Bank shall not be liable for failure to collect
or realize upon the Collateral or any collateral security or guarantee therefor,
or any part thereof, or for any delay in so doing, nor shall it be under any
obligation to take any action whatsoever with regard thereto. If an Event of
Default has occurred and is continuing, the Bank may thereafter without notice,
exercise all rights, privileges or options pertaining to any Collateral as if it
were the holder and absolute owner thereof, upon such terms and conditions as it
may determine, all without liability except to account for property actually
received by it, but the Bank shall have no duty to exercise any of the aforesaid
rights, privileges or options and shall not be responsible for any failure to do
so or delay in so doing.
7. Remedies.
(a) In the event that any portion of any amounts due to the Bank
under the Reimbursement Agreement has been declared due and payable, the
Bank without demand of performance or other demand or advertisement to or
upon the Pledgor or any other person (all and each of which demands,
advertisements and/or notices are hereby expressly waived) may forthwith
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, assign, give an option or options to
purchase, contract to sell or otherwise dispose of and deliver said
Collateral, or any part thereof, in one or more parcels at public or
private sale or sales, at any exchange, broker's board or at any of the
Bank's offices or elsewhere upon such terms and conditions as it may deem
advisable and at such prices as it may deem best, for cash or on credit or
for future delivery without assumption of any credit risk, with the right
of the Bank upon any such sale or sales, public or private, to purchase
the whole or any part of said Collateral so sold, free of any right or
equity of redemption in the Pledgor, which right or equity is hereby
expressly waived or released. Bank agrees to notify Pledgor promptly as to
any such proposed action, provided that the failure to give such notice
shall not affect the validity of such action.
(b) The net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs
and expenses of every kind incurred therein or incidental to the care,
safekeeping or otherwise of any and all of the Collateral or in any way
relating to the rights of the Bank hereunder, including reasonable
attorneys' fees and legal expenses, shall be applied first to the
satisfaction of the Pledgor's obligations to the Bank under the
Reimbursement Agreement, the Pledgor remaining liable for any deficiency
remaining unpaid after such application, and only after so paying over
such net
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proceeds and after the payment by the Bank of any other amount required by
any provision of law, need the Bank account for the surplus, if any, to
the Pledgor.
(c) The Pledgor agrees that the Bank need not give more than ten
(10) days' notice of the time and place of any public sale or of the time
after which a private sale or other intended disposition is to take place
and that such notice is reasonable notification of such matters. No
notification need be given to the Pledgor if it has signed after default a
statement denouncing or modifying any right to notification of sale or
other intended disposition.
(d) In addition to the rights and remedies granted to them in this
Pledge Agreement and in any other instrument or agreement securing,
evidencing or relating to any of the Pledgor's obligations, the Bank shall
have all the rights and remedies of a secured party under the Uniform
Commercial Code of the State of Arizona. The Pledgor shall be liable for
the deficiency if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay all amounts to which the Bank is
entitled, and the fees of any attorneys employed by the Bank to collect
such deficiency.
8. Representations of the Pledgor. The Pledgor represents that:
(a) on the date of delivery to the Bank, or to the Tender Agent (as
defined in the Indenture) acting on behalf of the Bank, of any Pledged
Bonds, neither the Issuer, the Tender Agent nor the Trustee will have any
right, title or interest in and to the Bonds except pursuant to the
Indenture and the Loan Agreement;
(b) it has, and on the date of delivery to the Bank of any Pledged
Bonds will have, full power, authority and legal right to pledge all of
its right, title and interest in and to such Pledged Bonds pursuant to
this Pledge Agreement;
(c) this Pledge Agreement has been duly authorized, executed and
delivered by the Pledgor and constitutes a legal, valid and binding
obligation of the Pledgor enforceable in accordance with its terms except
as enforcement hereto may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditor's
rights generally or by general principles of equity;
(d) no consent of any other party (including, without limitation,
partners or creditors of the Pledgor) and, to the knowledge of the
Pledgor, no consent, license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration
with, any governmental authority, domestic or foreign, is required to be
obtained by the Pledgor in connection with the execution, delivery or
performance of this Pledge Agreement; and
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(e) the execution, delivery and performance of this Pledge Agreement
will not, to the knowledge of the Pledgor, violate any provision of any
applicable law or regulation or of any order, judgment, writ, award or
decree of any court, arbitrator or governmental authority, domestic or
foreign, or of the organizational documents of the Pledgor, or of any
securities issued by the Pledgor, or of any mortgage, indenture, lease,
contract or other agreement, instrument or undertaking to which the
Pledgor is a party or which purports to be binding upon the Pledgor or
upon any of its assets and will not result in the creation or imposition
of any lien, charge or encumbrance on or security interest in any of the
assets of the Pledgor except as contemplated by this Pledge Agreement.
9. Covenants of the Pledgor. The Pledgor covenants and agrees that:
(a) it will defend the Bank's right, title and security interest in
and to the Pledged Bonds and the proceeds thereof against the claims and
demands of all persons whomsoever;
(b) without the prior written consent of the Bank, it will not sell,
assign, transfer, exchange or otherwise dispose of, or grant any option
with respect to, the Collateral, nor will it create, incur or permit to
exist any pledge, lien, mortgage, hypothecation, security interest,
charge, option or any other encumbrance with respect to any of the
Collateral, or any interest therein, or any proceeds thereof, except for
the lien and security interest provided for by this Pledge Agreement; and
(c) it hereby irrevocably authorizes and empowers Bank at any time,
in its own name or in the name of Pledgor, to demand, apply for, withdraw,
receipt and give acquittance for any and all of the Bond Monies and to
exercise any and all rights and privileges and receive all benefits
accorded by said Bond Monies, and to execute any an all instruments
required therefor. Any obligor under the terms of said Bond Monies is
specifically authorized and directed, on demand of Bank to pay and deliver
all Bond Monies to said Bank.
10. Sale of Pledged Bonds.
(a) The Pledgor recognizes that the Bank has no obligation to effect
a public sale of any or all of the Pledged Bonds and by reason of certain
prohibitions contained in the Securities Act of 1933, as amended, and
applicable state securities laws, the Pledgor may be compelled to resort
to one or more private sales thereof to a restricted group of purchasers
who will be obliged to agree, among other things, to acquire such
securities for their own account for investment and not with a view to the
distribution or resale thereof. The Pledgor acknowledges and agrees that
any such private sale may result in prices and other terms less favorable
to the seller than if such sale were a public sale and, notwithstanding
such circumstances,
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agrees that any such private sale shall be deemed to have been made in a
commercially reasonable manner.
(b) The Pledgor further agrees to do or cause to be done all such
other acts and things as may be reasonably requested by the Bank to make
such sale or sales of any portion or all of the Pledged Bonds valid and
binding and in compliance with any and all applicable laws, regulations,
orders, writs, injunctions, decrees or awards of any and all courts,
arbitrators or governmental instrumentalities, domestic or foreign, having
jurisdiction over any such sale or sales, all at the Pledgor's expense.
11. Further Assurances. The Pledgor agrees that at any time and from time
to time upon the written request of the Bank, the Pledgor will execute and
deliver such further documents and do such further acts and things as the Bank
may reasonably request in order to effect the purposes of this Pledge Agreement.
12. Severability. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective 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.
13. No Waiver; Cumulative Remedies. The Bank shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder and no waiver shall be valid unless in writing, signed by the Bank,
and then only to the extent therein set forth. A waiver by the Bank of any right
or remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy which the Bank would otherwise have on any subsequent occasion.
No failure to exercise nor any delay in exercising on the part of the Bank, any
right, power or privilege hereunder, shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided are
cumulative and may be exercised singly or concurrently, and are not exclusive of
any rights or remedies provided by law.
14. Amendments; Applicable Law. None of the terms or provisions of this
Pledge Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by the Bank and the Pledgor. This Pledge
Agreement shall be governed by, and be construed and interpreted in accordance
with, the laws of the State of Arizona and applicable federal law.
15. Term. This Pledge Agreement shall remain in full force and effect for
so long as the Letter of Credit is in effect or any amount is owed to the Bank
under the Reimbursement Agreement.
-6-
<PAGE> 77
16. Expenses. The Pledgor shall pay to the Bank its reasonable expenses
(including reasonable fees and expenses of counsel) of, or incident to, any
actual or attempted sale or other disposition of, or any exchange, enforcement
(whether through negotiations, legal proceedings or otherwise), collection,
compromise or settlement of or with respect to all or any of the Collateral, by
litigation or otherwise. The Pledgor shall reimburse the Bank on demand for all
reasonable costs and expenses incurred in connection with the negotiation,
preparation, execution and administration of this Pledge Agreement, including,
without limitation, any reasonable fees or expenses (including reasonable fees
and expenses of counsel to the Custodian) paid by the Bank to the Custodian for
its services in connection with this Pledge Agreement.
17. Notices. All notices and other communications provided for hereunder
shall be in writing (including telegraphic communication) and mailed,
telecopied, telexed, telegraphed or delivered to the parties to the telex or
telecopier number or address (as the case may be) specified for the intended
recipient below, or to such other number or address as such recipient may have
last specified by notice to the other party. All such notices and communications
shall, when mailed, telecopied, telexed or telegraphed, be effective when
deposited in the mails or sent by telecopy or telex or delivered to the
telegraph company, respectively, addressed as follows:
Pledgor: __________________________
__________________________
__________________________
Custodian: __________________________
__________________________
__________________________
Bank: BANK ONE, ARIZONA, NA
Post Office Box 71
Phoenix, Arizona 85001
Attention: Commercial Banking AZ1-1178
18. Appointment of Custodian.
(a) The Bank hereby appoints the Custodian as its agent to hold any
Pledged Bonds which the Pledgor shall deliver or cause to be delivered to
the Custodian. The Custodian hereby accepts such appointment and agrees
that it will hold the Pledged Bonds until otherwise directed in writing by
the Bank.
(b) The Bank hereby appoints the Custodian as its agent to hold the
Bond Monies, if any. The Custodian hereby accepts such appointment and
agrees that it will hold the Bond Monies until otherwise directed in
writing by the Bank.
(c) The Custodian shall not have any liability for any matter
arising hereunder except to the extent that it may arise from the
Custodian's own willful misconduct or gross negligence. The Pledgor agrees
to indemnify the Custodian and hold it harmless against any loss,
liability or expense incurred without gross negligence or bad faith on its
part arising out of or in connection with any of its
-7-
<PAGE> 78
duties as Custodian hereunder, including the reasonable costs and expenses
of defending itself from any claim or liability in connection with the
exercise or performance of any of its powers or duties in such capacity.
The provisions of this paragraph shall survive the termination of this
Pledge Agreement.
19. Assignment.
(a) This Pledge Agreement shall be binding upon and inure to the
benefit of the Custodian, the Bank and the Pledgor and their respective
successors and assigns; provided, however, that the Pledgor may not assign
any of its rights or obligations under this Pledge Agreement without the
prior written consent of the Bank.
(b) If the Bank or the Custodian assigns or otherwise transfers any
of its rights and obligations hereunder, each reference in this Pledge
Agreement to the Bank or the Custodian, as the case may be, shall be
deemed to be a reference to the assignee or transferee of the Bank or the
Custodian, as the case may be, were assigned and transferred to the extent
of their respective interests.
20. Counterparts. This Pledge Agreement may be executed in counterparts,
and such counterparts taken together shall be deemed to constitute one and the
same agreement.
IN WITNESS WHEREOF, each of the undersigned has caused this Pledge
Agreement to be duly executed and delivered by its duly authorized officers on
the day and year first above written.
____________________________________
By:_______________________________________
Name:_____________________________________
Its:______________________________________
PLEDGOR
BANK ONE, ARIZONA, NA, a national banking
association
By:_______________________________________
Name:_____________________________________
Its:______________________________________
BANK
-8-
<PAGE> 79
____________________________________
By:_______________________________________
Its:___________________________________
CUSTODIAN
ACKNOWLEDGED AND AGREED UPON by the undersigned as to provisions of the
above Pledge Agreement relating to the undersigned in its capacity as Trustee
under the Indenture.
____________________________________
By:_______________________________________
Its:___________________________________
-9-
<PAGE> 1
Exhibit 10.2
REVOLVING PROMISSORY NOTE
$45,000,000.00 Phoenix, Arizona
July 25, 1997
FOR VALUE RECEIVED, the undersigned (hereinafter called "Maker"),
promises to pay to the order of BANK ONE, ARIZONA, NA, a national banking
association (the "Payee") (Payee and each subsequent transferee and/or owner of
this Note, whether taking by endorsement or otherwise, are herein successively
called "Holder"), at Post Office Box 71, Phoenix, Arizona 85001, Attention:
Commercial Banking, Dept. AZ1-1178, or at such other place as Holder may from
time to time designate in writing, the principal sum of FORTY-FIVE MILLION AND
NO/100 DOLLARS ($45,000,000.00) or so much thereof as Holder may advance to or
for the benefit of Maker plus interest from the date hereof on the principal
balance from time to time outstanding as hereinafter provided, principal,
interest and all other sums payable hereunder to be paid in lawful money of the
United States of America as follows:
A. Interest shall accrue:
(i) Except to the extent that an RLC Advance bears interest at
the Fixed Rate pursuant to this Note, on the unpaid principal
of each RLC Advance at the Variable Rate.
(ii) To the extent Maker shall elect as provided in this Note
and to the extent not otherwise provided in this Note, on the
unpaid principal of an RLC Advance at the Fixed Rate.
B. All interest shall be computed on the basis of a 360-day year and
accrue on a daily basis for the actual number of days elapsed. All
accrued interest shall be due and payable on the Payment Date.
C. The entire unpaid principal balance, all accrued and unpaid
interest, and all other amounts payable hereunder shall be due and
payable in full on the RLC Maturity Date.
D. Each request for an RLC Advance under the Loan Agreement shall, in
addition to complying with the other requirements in the Loan
Agreement, (i) specify the date and amount of the requested RLC
Advance, (ii) specify whether the RLC Advance shall be an RLC Advance
that bears interest at the Variable Rate or shall be
<PAGE> 2
an RLC Advance that bears interest at the Fixed Rate, and (iii), if the
RLC Advance is to bear interest at the Fixed Rate, (A) specify the
Interest Period, (B) be delivered to Holder at least two (2) Business
Days prior to the date of the requested RLC Advance, and (C) be in a
minimum amount of $2,000,000.00 with integral multiples of
$1,000,000.00 in excess thereof. Any RLC Advance not complying with the
foregoing requirements for an RLC Advance bearing interest at the Fixed
Rate shall bear interest at the Variable Rate.
E. If Maker desires that a Fixed Rate RLC Advance continue to bear
interest at the Fixed Rate after the end of an existing Interest
Period, Maker shall deliver to Holder a notice making such election and
specifying the new Interest Period. If Maker does not deliver such
notice within such time, then after the existing Interest Period the
Fixed Rate RLC Advance shall become a Variable Rate RLC Advance and
shall bear interest at the Variable Rate.
F. Maker may, upon written notice to and received by Holder not later
than 12:00 p.m. (Phoenix, Arizona local time) (i) on the second
Business Day, in the case of any conversion of a Variable Rate RLC
Advance into a Fixed Rate RLC Advance and (ii) on the first Business
Day in the case of any conversion of a Fixed Rate RLC Advance into a
Variable Rate RLC Advance, prior to the date of the proposed
conversion, convert any RLC Advance of one type into an RLC Advance of
the other type, provided, however, that any conversion of a Fixed Rate
RLC Advance (A) shall only be made on the last day of the applicable
Interest Period except as otherwise provided herein, and (B) shall be
made only as to an RLC Advance in a minimum amount of $2,000,000.00
with integral multiples of $1,000,000.00 in excess thereof. Each such
notice of a conversion shall specify the date of such conversion and
the RLC Advance(s) to be converted.
G. Notwithstanding any provision of the Loan Documents to the contrary,
Holder shall be entitled to fund and maintain its funding of all or any
part of any RLC Advance in any manner it sees fit, provided, however,
that for the purposes of this Note, all determinations hereunder shall
be made as if Holder had actually funded and maintained each Fixed Rate
RLC Advance during the Interest Period therefor through the purchase of
deposits having a maturity corresponding to the last day of the
Interest Period and bearing an interest rate equal to the Fixed Rate
for such Interest Period.
H. If, due to any Regulatory Change, there shall be any increase in the
cost to Holder of agreeing to make or making, funding, or maintaining
Fixed Rate RLC Advances (including, without limitation, any increase in
any applicable reserve requirement), then Maker shall from time to
time, upon demand by Holder, pay to Holder such amounts as Holder may
reasonably determine to be necessary to compensate Holder for any
additional costs that Holder reasonably determines are attributable to
such Regulatory Change and Holder will notify the Maker of any
2
<PAGE> 3
Regulatory Change that will entitle Holder to compensation pursuant to
this paragraph as promptly as practicable, but in any event within 90
days after Holder obtains knowledge thereof, provided, however, that if
Holder fails to give such notice within 90 days after it obtains
knowledge of such a Regulatory Change, Holder shall, with respect to
compensation payable in respect of any costs resulting from such
Regulatory Change, only be entitled to payment for costs incurred from
and after the date that Holder does give such notice. Holder will
furnish to Maker a certificate setting forth in reasonable detail the
basis for the amount of each request by Holder for compensation under
this paragraph. Determinations by Holder of the amounts required to
compensate Holder shall be conclusive, absent manifest error. Holder
shall be entitled to compensation in connection with any Regulatory
Change only for costs actually incurred by Holder.
I. Notwithstanding any provision of the Loan Documents, if Holder shall
notify Maker that as a result of a Regulatory Change it is unlawful for
Holder to make RLC Advances at the Fixed Rate, or to fund or maintain
Fixed Rate RLC Advances, (i) the obligations of Holder to make RLC
Advances at the Fixed Rate and to convert RLC Advances to the Fixed
Rate shall be suspended until Holder shall notify Maker that the
circumstances causing such suspension no longer exist, and (ii) in the
event such Regulatory Change makes the maintenance of RLC Advances at
the Fixed Rate unlawful, Maker shall forthwith prepay in full all Fixed
Rate RLC Advances then outstanding, together with interest accrued
thereon and all amounts in connection with such prepayment specified
hereinbelow, unless Maker, within five (5) Business Days of notice from
Holder, converts all Fixed Rate RLC Advances then outstanding into
Variable Rate RLC Advances pursuant to the conversion procedures in
this Note and pays all amounts in connection with such prepayments or
conversions specified hereinbelow.
J. Notwithstanding any other provision of the Loan Documents, if prior
to the commencement of any Interest Period, Holder shall determine (i)
that United States dollar deposits in the amount of any Fixed Rate RLC
Advance to be outstanding during such Interest Period are not readily
available to Holder in the London interbank market, or (ii) by reason
of circumstances affecting the London interbank market, adequate and
reasonable means do not exist for ascertaining the Fixed Rate for such
Interest Period in the manner prescribed in the definition of "Fixed
Rate," then Holder shall promptly give notice thereof to Maker and the
obligation of Holder to create, continue, or effect by conversion any
Fixed Rate RLC Advance in such amount and for such Interest Period
shall terminate until United States dollar deposits in such amount and
for the Interest Period shall again be readily available in the London
interbank market and adequate and reasonable means exist for
ascertaining the Fixed Rate.
3
<PAGE> 4
The principal balance of this Note represents a revolving credit all or
any part of which may be advanced to Maker, repaid by Maker, and re-advanced to
Maker from time to time, subject to the other terms hereof and the conditions,
if any, contained in the Loan Agreement, and provided that the principal balance
outstanding at any one time shall not exceed the face amount hereof.
Maker agrees to an effective rate of interest that is the rate stated
above plus any additional rate of interest resulting from any other charges in
the nature of interest paid or to be paid by or on behalf of Maker, or any
benefit received or to be received by Holder, in connection with this Note.
All payments on this Note shall be applied in the order of priority to
be determined by Holder in its sole discretion (i) to the payment of any costs,
fees or other charges incurred in connection with the indebtedness evidenced
hereby, (ii) to the payment of accrued interest, and/or (iii) to the reduction
of the principal balance.
This Note is issued pursuant to that Loan Agreement (the "Loan
Agreement") of even date herewith between Maker and Payee hereof and is secured
by, among other things, the Security Documents executed by Maker, as debtor, in
favor of Payee, as secured party. The capitalized terms used and not otherwise
defined herein shall have the same meanings as defined in the Loan Agreement.
Time is of the essence of this Note. At the option of Holder, the
entire unpaid principal balance, all accrued and unpaid interest and all other
amounts payable hereunder shall become immediately due and payable without
notice upon the occurrence of any Event of Default. Should any payment date not
be a Business Day, then such payment date shall be the next succeeding Business
Day.
Upon the occurrence of an Event of Default and during the continuation
thereof, and after maturity, including maturity upon acceleration, the unpaid
principal balance, all accrued and unpaid interest and all other amounts payable
hereunder shall bear interest at that rate that is four percent (4%) above the
rate that would otherwise be payable under the terms hereof. Maker shall pay all
costs and expenses, including reasonable attorneys' fees and court costs,
incurred in the collection or enforcement of all or any part of this Note. All
such costs and expenses shall be secured by the Security Documents. In the event
of any arbitration proceedings, arbitration costs and attorneys' fees shall be
set in accordance with the applicable rules of the American Arbitration
Association. In the event of any court proceedings, court costs and attorneys'
fees shall be set by the court and not by jury and shall be included in any
judgment obtained by Holder.
Maker may, upon at least two (2) Business Days' notice in the case of
Fixed Rate RLC Advances and one (1) Business Day's notice in the case of
Variable Rate RLC Advances to Holder stating the proposed date and aggregate
principal amount of the prepayment, and, if such notice is given, Maker shall
prepay the outstanding principal balance hereof in whole or in part at any
4
<PAGE> 5
time prior to the Maturity Date as stated in such notice by Maker. With any
prepayment of a Fixed Rate RLC Advance or with any conversion of a Fixed Rate
RLC Advance to a Variable Rate RLC Advance, in either case other than on the
last Business Day of the Interest Period for such Fixed Rate RLC Advance (the
"Interest Period Termination Date") (including any such prepayment made
voluntarily or involuntarily as a result of the acceleration of maturity upon a
default or otherwise), Maker shall also pay (a) all accrued and unpaid interest
on the principal being prepaid, (b) all Other Amounts then due, and (c) a
premium, if any, equal to the product of (i) the Average Lost Monthly Interest
Income and (ii) the number of months from the date of prepayment or conversion
to the Interest Period Termination Date (with any fraction of a month counted as
a month), discounted to present value at the Discount Rate over a period equal
to one-half of the number of months in (ii) above.
As used in the preceding paragraph:
"Average Lost Monthly Interest Income" means the amount determined by
dividing (i) the product of the Average Principal and the Lost Rate, by
(ii) 12, where:
"Average Principal" means the amount equal to either (i)
one-half the sum of (A) the amount of principal being prepaid
and (B) the amount of principal that is scheduled to be due on
the Interest Period Termination Date ("Balloon Amount"), or
(ii) the amount of principal being prepaid, if such amount is
less than the Balloon Amount; and
"Lost Rate" means the rate per annum equal to the percentage,
if any, by which (i) the yield to maturity of United States
Treasury debt obligations having a maturity date nearest to
the Interest Period Termination Date ("Treasury Obligations")
determined on the first day of the Interest Period exceeds
(ii) the yield to maturity of Treasury Obligations determined
on the date of prepayment.
"Discount Rate" means the rate per annum equal to the yield to maturity
of Treasury Obligations determined on the date of prepayment.
"Other Amounts" means all amounts payable by Maker to Holder under the
Note and all other Loan Documents.
The maturity date and yield to maturity of Treasury Obligations shall be
determined by Holder, in its absolute and sole discretion, on the basis of
quotations published in The Wall Street Journal or other comparable sources.
Failure of Holder to exercise any option hereunder shall not constitute
a waiver of the right to exercise the same in the event of any subsequent
default or in the event of continuance of any existing default after demand for
strict performance hereof.
5
<PAGE> 6
All sureties, guarantors and/or endorsers hereof (or of any obligation
hereunder) and accommodation parties hereon (severally each hereinafter called a
"Surety") and Maker each: (a) agree that the liability under this Note of all
parties hereto is joint and several; (b) severally waive any and all formalities
in connection with this Note to the maximum extent allowed by law, including
(but not limited to) demand, diligence, presentment for payment, protest and
demand, and notice of extension, dishonor, protest, demand and nonpayment of
this Note; and (c) consent that Holder may extend the time of payment or
otherwise modify the terms of payment of any part or the whole of the debt
evidenced by this Note, at the request of any other person liable hereon, and
such consent shall not alter nor diminish the liability of any person hereon.
In addition, each Surety waives and agrees not to assert: (a) any right
to require Holder to proceed against Maker or any other Surety, to proceed
against or exhaust any security for the Note, to pursue any other remedy
available to Holder, or to pursue any remedy in any particular order or manner;
(b) the benefit of any statute of limitations affecting its liability hereunder
or the enforcement hereof; (c) the benefits of any legal or equitable doctrine
or principle of marshalling; (d) notice of the existence, creation or incurring
of new or additional indebtedness of Maker to Holder; (e) the benefits of any
statutory provision limiting the liability of a surety, including without
limitation the provisions of Sections 12-1641, et seq., of the Arizona Revised
Statutes; and (f) any defense arising by reason of any disability or other
defense of Maker or by reason of the cessation from any cause whatsoever (other
than payment in full) of the liability of Maker for payment of the Note. Until
payment in full of the Note, no Surety shall have any right of subrogation and
each hereby waives any right to enforce any remedy which Holder now has, or may
hereafter have, against Maker or any other Surety, and waives any benefit of,
and any right to participate in, any security now or hereafter held by Holder.
Maker agrees that to the extent Maker or any Surety makes any payment
to Holder in connection with the indebtedness evidenced by this Note, and all or
any part of such payment is subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be repaid by Holder or paid over to a
trustee, receiver or any other entity, whether under any bankruptcy act or
otherwise (any such payment is hereinafter referred to as a "Preferential
Payment"), then the indebtedness of Maker under this Note shall continue or
shall be reinstated, as the case may be, and, to the extent of such payment or
repayment by Holder, the indebtedness evidenced by this Note or part thereof
intended to be satisfied by such Preferential Payment shall be revived and
continued in full force and effect as if said Preferential Payment had not been
made.
Without limiting the right of Holder to bring any action or proceeding
against Maker or any Surety or against any property of Maker or any Surety (an
"Action") arising out of or relating to this Note or any indebtedness evidenced
hereby in the courts of other jurisdictions, Maker and each Surety hereby
irrevocably submit to the jurisdiction, process and venue of any Arizona State
or Federal court sitting in Phoenix, Arizona, and hereby irrevocably agree that
any Action may be heard and determined in such Arizona State court or in such
Federal court. Maker and all Sureties each hereby irrevocably waives, to the
fullest extent it may effectively do so, the defenses
6
<PAGE> 7
of lack of jurisdiction over any person, inconvenient forum or improper venue,
to the maintenance of any Action in any Arizona State or Federal Court sitting
in Phoenix, Arizona.
This Note shall be binding upon Maker and its successors and assigns
and shall inure to the benefit of Payee, and any subsequent holders of this
Note, and their successors and assigns.
All notices required or permitted in connection with this Note shall be
given at the place and in the manner provided in the Loan Agreement for the
giving of notices.
This Note shall be governed by and construed according to the laws of
the State of Arizona.
IN WITNESS WHEREOF, these presents are executed as of the date first
written above.
CONTINENTAL CIRCUITS CORP., a Delaware
corporation
By:/s/ Frederick G. McNamee, III
--------------------------------------------------
Its: President and Chief Executive Officer
MAKER
7
<PAGE> 1
Exhibit 10.4
When recorded, return to:
STREICH LANG, P.A.
Renaissance One
Two North Central Avenue
Phoenix, Arizona 85004-2391
Attention: Henry A. Perras, Esq.
AMENDMENT TO
DEED OF TRUST, ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
This Amendment to Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing dated as of July 25, 1997 (the "Amendment") is by
and between CONTINENTAL CIRCUITS CORP., a Delaware corporation ("Trustor"),
whose address is 3502 East Roeser Road, Phoenix, Arizona 85040, and BANK ONE,
ARIZONA, NA, a national banking association ("Beneficiary"), whose address is
Post Office Box 71, Phoenix, Arizona 85001, Attention: Commercial Banking, Dept.
AZ1-1178. Terms used herein not otherwise defined herein shall have the meanings
set forth in the Deed of Trust (defined below).
RECITAL
WHEREAS, the Loan Agreement pursuant to which the promissory note
secured by the Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing dated as of April 28, 1994 (the "Deed of Trust"), by Trustor, as
Trustor, for the benefit of Beneficiary, as Beneficiary, recorded on April 28,
1994 as No. 940342849, records of Maricopa County, State of Arizona, has been
amended and restated by that certain Loan Agreement of even date herewith
between Trustor and Beneficiary.
NOW, THEREFORE, the parties hereto agree as follows:
AMENDMENTS
SECTION . Section 2 of the Deed of Trust is amended to read as follows:
SECTION 2. OBLIGATION SECURED
This Deed of Trust is given for the purpose of securing, in such order of
priority as Beneficiary may elect:
<PAGE> 2
2.1 Payment of the sum of FORTY-FIVE MILLION AND NO/100 DOLLARS
($45,000,000.00) according to the terms of that Revolving Promissory
Note dated as of July 25, 1997, made by Trustor, payable to the order
of Beneficiary, evidencing a revolving line of credit, all or any part
of which may be advanced to Trustor, repaid by Trustor and readvanced
to Trustor, from time to time, subject to the terms and conditions
thereof, provided that the principal balance outstanding at any time
shall not exceed the sum set forth above in this Paragraph 2.1, with
interest thereon, extension and other fees, late charges, prepayment
premiums and attorneys' fees, according to the terms thereof, and all
extensions, modifications, renewals or replacements thereof
(hereinafter called the Note). The Note may accrue interest at a
variable rate per annum, as such rate shall change from time to time;
2.2 Payment, performance and observance by Trustor of each covenant,
condition, provision and agreement contained herein and of all monies
expended or advanced by Beneficiary pursuant to the terms hereof, or to
preserve any right of Beneficiary hereunder, or to protect or preserve
the Trust Property or any part thereof;
2.3 Payment, performance and observance by Trustor of each covenant,
condition, provision and agreement contained in that Loan Agreement
dated as of July 25, 1997, by and between Trustor and Beneficiary
(hereinafter called the "Loan Agreement") and in any other Loan
Document (as defined in the Loan Agreement) and of all monies expended
or advanced by Beneficiary pursuant to the terms thereof or to preserve
any right of Beneficiary thereunder;
2.4 Payment of any and all additional loans and advances made by
Beneficiary to Trustor and/or to the then record owner or owners of the
Trust Property (excluding, however, any such loan to an individual for
personal, family or household purposes) with interest thereon, late
charges, extension and other fees, prepayment premiums and attorneys'
fees, according to the terms of the promissory note(s) and/or credit
agreement(s) evidencing such loans and advances, and all extensions,
modifications, renewals or replacements thereof; and
2.5 The full and timely payment of all amounts now or hereafter due and
payable by Trustor to Beneficiary under any interest rate swap, cap,
collar or similar transaction, or any Master Agreement for such
transactions, now or hereafter in effect between Trustor and
Beneficiary, whether such amounts are due and payable on the date(s)
scheduled therefor, on the occurrence of an Early Termination Date (as
defined in the Master Agreement), or otherwise.
All of the indebtedness and obligations secured by this Deed of Trust
are hereinafter collectively called the "Obligation."
2
<PAGE> 3
SECTION 2. Schedule A of the Deed of Trust is amended by the addition
of that real property the legal description of which is attached hereto as
Schedule A-1.
SECTION 3. Schedule B of the Deed of Trust is amended by the addition
of those Permitted Exceptions listed on Schedule B-1 attached hereto.
SECTION 4. All of the terms and provisions of the Deed of Trust are
hereby incorporated by reference in this Amendment to the same extent as if
fully set forth herein.
SECTION 5. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall for all
purposes be deemed to be an original, and all such counterparts together
constitute but one and the same Amendment.
SECTION 6. This Amendment shall be construed in accordance with the
laws of the State of Arizona.
IN WITNESS WHEREOF, the Trustor and the Beneficiary have caused this
Amendment to be duly executed as of the date first written above.
CONTINENTAL CIRCUITS CORP., a Delaware
corporation
By: /s/ Frederick G. McNamee, III
----------------------------------------------------
Its President and Chief Executive Officer
TRUSTOR
BANK ONE, ARIZONA, NA, a national banking
association
By: /s/ Steve Reinhart
----------------------------------------------------
Its Vice President
BENEFICIARY
3
<PAGE> 4
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 25th of July,
1997, by Frederick G. McNamee, III , the President /CSO of CONTINENTAL CIRCUITS
CORP., a Delaware corporation, on behalf of that corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
(Signature of Notary)
----------------------------------------
Notary Public
My commission expires:
(Seal of Notary)
- ------------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 25th day of
July, 1997, by Steve Reinhart, the Vice President of BANK ONE, ARIZONA, NA, a
national banking association, on behalf of that bank.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
(Signature of Notary)
----------------------------------------
Notary Public
My commission expires:
(Seal of Notary)
- ------------------------
4
<PAGE> 5
SCHEDULE "A-1"
All that real property situate in the County of Maricopa, State of Arizona, more
particularly described as follows:
PARCEL NO. 1:
Lot 15, EL DORADO INDUSTRIAL PLAZA UNIT THREE, according to Book 167 of
Maps, page 6, records of Maricopa County, Arizona;
EXCEPT the East 277.19 feet.
PARCEL NO. 2:
The North 274.00 feet of Lot 17, EL DORADO INDUSTRIAL PLAZA UNIT THREE, as
measured along the West boundary line, according to Book 167 of Maps, page
6, records of Maricopa County, Arizona.
PARCEL NO. 3:
That part of the South 226.65 feet, as measured at the West boundary
property line, of Lot 17, EL DORADO INDUSTRIAL PLAZA UNIT THREE, according
to Book 167 of Maps, page 6, records of Maricopa County, Arizona, more
particularly described as follows:
BEGINNING at the Northwest corner of the above described parcel of land;
Thence North 88 degrees 51 minutes 01 seconds East along the North line of
said parcel, a distance of 197.56 feet;
Thence South 01 degrees 08 minutes 59 seconds East, a distance of 20.00
feet;
Thence South 88 degrees 51 minutes 01 seconds West, 197.93 feet, to a
point on the West line of the above described parcel;
Thence North 00 degrees 05 minutes 27 seconds West, along said West line,
20.00 feet, to the POINT OF BEGINNING.
<PAGE> 6
SCHEDULE "B-1"
Permitted Exceptions
1. 1997 Taxes, a lien, not yet due and payable.
2. The Liabilities, Obligations and Burdens imposed upon said land by reason
of inclusion within the Salt River Project Agricultural Improvement and
Power District and Agricultural Improvement Districts.
(ALL ASSESSMENTS DUE AND PAYABLE HAVE BEEN PAID)
3. Reservations or exception in patents or in Acts authorizing the issuance
thereof.
4. Water Rights, claims or title to water, whether or not shown by the public
records.
5. Easements as shown on the recorded plat of said subdivision recorded in
Book 167, page 6, records of Maricopa County, Arizona..
6. Easement for roadway and public utilities, and rights incident thereto as
set forth in Docket 8595, page 98, records of Maricopa County, Arizona.
(PARCEL NO. 1)
7. Easement for roadway and public utilities, and rights incident thereto as
set forth in Docket 8595, page 103, records of Maricopa County, Arizona.
(PARCEL NO. 1)
8. Easement for underground power, and rights incident thereto as set forth
in Docket 11028, page 799, records of Maricopa County, Arizona.
(PARCEL NOS. 2 AND 3)
9. Easement for underground power, and rights incident thereto as set forth
in Docket 11028, page 800, records of Maricopa County, Arizona.
(PARCEL NOS. 2 AND 3)
<PAGE> 7
10. Restrictions, conditions, covenants and easements, recorded in Docket
10136, page 856; Amended in Docket 12934, page 1110; Amended in Docket
15029, page 355; Second Amendment recorded in Docket 15391, page 635;
Third Amendment recorded in Docket 15506, page 493; and Fourth Amendment
recorded in Docket 15592, page 373; and as shown on recorded plat of said
subdivision, but omitting any covenants or restrictions if any, based upon
race, color, religion, sex, handicap, familial status or national origin
unless and only to the extent that said covenant (a) is exempt under
Chapter 42, Section 3607 of the United States Code or (b) relates to
handicap but does not discriminate against handicapped persons.
11. Easement for underground power, and rights incident thereto as set forth
in Docket 14846, page 1011, records of Maricopa County, Arizona.
(PARCEL NOS. 2 AND 3)
12. Easement for underground electric lines, and rights incident thereto as
set forth in Docket 15350, page 145, records of Maricopa County, Arizona.
(PARCEL NO. 1)
13. Easement for underground power, and rights incident thereto as set forth
in Document No. 97-475905, records of Maricopa County, Arizona.
(PARCEL NOS. 2 AND 3)
<PAGE> 1
Exhibit 10.5
SECURITY AGREEMENT
(Continental)
THIS SECURITY AGREEMENT (the "Agreement") is made and entered into as
of the 25th day of July, 1997, by CONTINENTAL CIRCUITS CORP., a Delaware
corporation (hereinafter called "Debtor"), whose chief executive office is
located at 3502 East Roeser Road, Phoenix, Arizona 85040, in favor of BANK ONE,
ARIZONA, NA, and its successors and assigns (hereinafter called "Secured
Party"), whose address is Post Office Box 71, Phoenix, Arizona 85001, Attention:
Commercial Banking, Dept. AZ1-1178.
1. SECURITY INTEREST
Debtor hereby grants to Secured Party a security interest (hereinafter
called the "Security Interest") in all of Debtor's right, title and interest in
and to the personal property (the "Collateral") described on the Schedule "A"
attached hereto.
2. OBLIGATION SECURED
The Security Interest shall secure, in such order of priority as
Secured Party may elect:
(a) Payment of the sum of FORTY-FIVE MILLION AND NO/100 DOLLARS
($45,000,000.00) according to the terms of that Revolving Promissory
Note dated July 25, 1997, made by Debtor, payable to the order of
Secured Party, evidencing a revolving line of credit, all or any part
of which may be advanced to Debtor, repaid by Debtor and readvanced to
Debtor, from time to time, subject to the terms and conditions thereof,
with interest thereon, extension and other fees, late charges,
prepayment premiums and attorneys' fees, according to the terms
thereof, and all extensions, modifications, renewals or replacements
thereof (hereinafter called the "Note");
(b) Payment, performance and observance by Debtor of each covenant,
condition, provision and agreement contained herein and of all monies
expended or advanced by Secured Party pursuant to the terms hereof, or
to preserve any right of Secured Party hereunder, or to protect or
preserve the Collateral or any part thereof;
(c) Payment, performance and observance by Debtor of each covenant,
condition, provision and agreement contained in that Loan Agreement
dated July 25, 1997 by and between Debtor and Secured Party
(hereinafter called the "Loan Agreement") and in any other document or
instrument related to the indebtedness described in subparagraph (a)
above (collectively, the "Loan Documents") and of all
<PAGE> 2
monies expended or advanced by Secured Party pursuant to the terms
thereof or to preserve any right of Secured Party thereunder;
(d) Payment and performance of any and all other indebtedness,
obligations and liabilities of Debtor to Secured Party of every kind
and character, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, whether such
indebtedness is from time to time reduced and thereafter increased or
entirely extinguished and thereafter reincurred; and
(e) The full and timely payment of all amounts now or hereafter due and
payable by Debtor to Secured Party under any interest rate swap, cap,
collar or similar transaction, or any Master Agreement for such
transactions, now or hereafter in effect between Debtor and Secured
Party, whether such amounts are due and payable on the date (s)
scheduled therefor, on the occurrence of an Early Termination Date (as
defined in the Master Agreement), or otherwise.
All of the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the "Obligation."
3. USE; LOCATION; CONSTRUCTION
3.1 The Collateral is or will be used or produced primarily for
business purposes.
3.2 The Collateral will be kept at Debtor's address set forth at the
beginning of this Agreement and/or at the following locations: 3502 East Roeser
Road, 3502 East Atlanta Avenue, 3509 East Atlanta Avenue, 3510 East Atlanta
Avenue, 3530 East Atlanta Avenue, 4830 South 36th Street, and 5020 South 36th
Street, each Phoenix, Arizona 85040.
3.3 Debtor's records concerning the Collateral will be kept at Debtor's
address set forth at the beginning of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants that:
4.1 The execution, delivery and performance by Debtor of this Agreement
and all other documents and instruments relating to the Obligation will not
result in a Material Adverse Effect due to any breach of the terms and
conditions or due to a default under any agreement or instrument under which
Debtor is a party or is obligated. Debtor is not in default in the performance
or observance of any covenants, conditions or provisions of any such agreement
or instrument that would result in a Material Adverse Effect.
4.2 Except as otherwise consented to by Secured Party in writing and
except for any
2
<PAGE> 3
Permitted Liens, Debtor is the owner of the Collateral free of all security
interests or other encumbrances except the Security Interest and no financing
statement covering the Collateral is filed or recorded in any public office.
4.3 The Collateral is, and is intended to be, used, produced or
acquired by Debtor for use primarily for the purpose marked in Section 3 above.
The address of Debtor set forth at the beginning of this Agreement is the chief
executive office of Debtor.
4.4 Each account, chattel paper or general intangible included in the
Collateral is genuine and enforceable in accordance with its terms against the
party named therein who is obligated to pay the same (hereinafter called
"Obligor"), and the security interests that are part of each item of chattel
paper included in the Collateral are valid, first and prior perfected security
interests. To the best of Debtor's knowledge, each Obligor is solvent, and the
amount that Debtor has represented to Secured Party as owing by each Obligor is
the amount actually and unconditionally owing by that Obligor, without deduction
except for normal cash discounts where applicable; to the best of Debtor's
knowledge, no Obligor has any defense, setoff, claim or counterclaim against
Debtor that can be asserted against Secured Party whether in any proceeding to
enforce the Security Interest or otherwise. Each document, instrument and
chattel paper included in the Collateral is complete and regular on its face and
free from evidence of forgery or alteration. No default has occurred in
connection with any instrument, document or chattel paper included in the
Collateral, no payment in connection therewith is overdue and no presentment,
dishonor or protest has occurred in connection therewith.
5. COVENANTS OF DEBTOR
5.1 Except as otherwise permitted in the Loan Agreement, Debtor shall
not sell, transfer, assign or otherwise dispose of any Collateral or any
interest therein (except as permitted herein) without obtaining the prior
written consent of Secured Party and, except as otherwise consented to by
Secured Party in writing, shall keep the Collateral free of all security
interests or other encumbrances except the Security Interest. Although proceeds
of Collateral are covered by this Agreement, this shall not be construed to mean
that Secured Party consents to any sale of the Collateral.
5.2 Debtor shall keep and maintain the Collateral in good condition and
repair and shall not use the Collateral in violation of any provision of this
Agreement or any applicable statute, ordinance or regulation or any policy of
insurance insuring the Collateral.
5.3 Debtor shall provide and maintain insurance insuring the Collateral
against risks in accordance with the provisions of the Loan Agreement.
5.4 Debtor shall pay when due all taxes, assessments and other charges
which may be levied or assessed against the Collateral.
3
<PAGE> 4
5.5 With respect to Collateral not subject to the Deed of Trust (as
defined in the Loan Agreement), Debtor shall prevent any portion of the
Collateral that is not a fixture from being or becoming a fixture and shall
prevent any portion of the Collateral from being or becoming an accession to
other goods that are not part of the Collateral.
5.6 If the Collateral includes motor vehicles, Debtor shall not remove
or permit such motor vehicles to be removed from the State of Arizona without
the prior written consent of Secured Party, shall keep all titled vehicles
properly registered with and licensed by the State of Arizona, shall provide
Secured Party with the license numbers of all titled vehicles, and upon the
occurrence of an Event of Default and notice thereof to Debtor by Secured Party,
shall cause the Security Interest to be shown as a valid first lien on the
Certificate of Title for all titled vehicles and shall thereupon deliver lien
filing receipts to Secured Party as evidence thereof.
5.7 Debtor, upon demand, shall promptly deliver to Secured Party all
instruments, documents and chattel paper included in the Collateral and all
invoices, shipping or delivery records, purchase orders, contracts or other
items related to the Collateral. Debtor shall notify Secured Party immediately
of any default by any Obligor in the payment or performance of its obligations
with respect to any Collateral. Debtor, without Secured Party's prior written
consent, shall not make or agree to make any alteration, modification or
cancellation of, or substitution for, or credit, adjustment or allowance on, any
Collateral, except in the ordinary course of business.
5.8 Debtor shall give Secured Party immediate written notice of any
change in the location of: (i) Debtor's chief executive office; (ii) the
Collateral or any part thereof; or (iii) Debtor's records concerning the
Collateral.
5.9 Secured Party or its agents may inspect the Collateral at
reasonable times and may enter into any premises where the Collateral is or may
be located. Debtor shall keep records concerning the Collateral in accordance
with generally accepted accounting principles and, if required in writing by
Secured Party, shall mark its records and the Collateral to indicate the
Security Interest. Secured Party shall have free and complete access to Debtor's
records and shall have the right to make extracts therefrom or copies thereof.
Upon request of Secured Party from time to time, Debtor shall submit up-to-date
schedules of the items comprising the Collateral in such detail as Secured Party
may require and shall deliver to Secured Party confirming specific assignments
of all accounts, instruments, documents and chattel paper included in the
Collateral.
5.10 Except for Permitted Liens, Debtor, at its cost and expense, shall
protect and defend this Agreement, all of the rights of Secured Party hereunder,
and the Collateral against all claims and demands of other parties, including
without limitation defenses, setoffs, claims and counterclaims asserted by any
Obligor against Debtor and/or Secured Party. Except for Permitted Liens, Debtor
shall pay all claims and charges that in the reasonable opinion of Secured Party
might prejudice, imperil or otherwise affect the Collateral or the Security
Interest. Except for Permitted Liens, Debtor shall promptly notify Secured Party
of any levy, distraint or other seizure by legal process or otherwise of any
part of the Collateral and of any threatened or filed claims
4
<PAGE> 5
or proceedings that might in any way affect or impair the terms of this
Agreement.
5.11 The Security Interest, at all times, shall be perfected and shall
be prior to any other interests in the Collateral except for Permitted Liens.
Debtor shall act and perform as necessary and shall execute and file all
security agreements, financing statements, continuation statements and other
documents requested by Secured Party to establish, maintain and continue the
perfected Security Interest. Debtor, on demand, shall promptly pay all costs and
expenses of filing and recording, including the costs of any searches, deemed
reasonably necessary by Secured Party from time to time to establish and
determine the validity and the continuing priority of the Security Interest.
5.12 If Debtor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Collateral free from other security interests,
encumbrances or claims, to keep the Collateral in good condition and repair, to
procure and maintain insurance thereon, or to perform otherwise as required
herein, Secured Party may advance the monies necessary to pay the same, to
accomplish such repairs, to procure and maintain such insurance or to so
perform; Secured Party is hereby authorized to enter upon any property in the
possession or control of Debtor for such purposes.
5.13 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof and all
amounts paid, suffered or incurred by Secured Party in exercising any authority
granted herein, including reasonable attorneys' fees, shall be added to the
Obligation, shall be secured by the Security Interest, shall bear interest at
the highest rate payable on any of the Obligation until paid, and shall be due
and payable by Debtor to Secured Party immediately without demand.
6. NOTIFICATION AND PAYMENTS; COLLECTION OF COLLATERAL; USE OF
COLLATERAL BY DEBTOR
6.1 Secured Party, after the occurrence of any Event of Default,
defined below, may notify any or all Obligors of the existence of the Security
Interest and may direct the Obligors to make all payments on the Collateral to
Secured Party. Secured Party agrees to notify Debtor promptly after any such
action, provided that the failure to give such notice shall not affect the
validity of such action. Until Secured Party has notified the Obligors to remit
payments directly to it, Debtor, at Debtor's own cost and expense, shall collect
or cause to be collected the accounts and monies due under the accounts,
documents, instruments and general intangibles or pursuant to the terms of the
chattel paper. Secured Party shall not be liable or responsible for any
embezzlement, conversion, negligence or default by Debtor or Debtor's agents
with respect to
5
<PAGE> 6
such collections; all agents used in such collections shall be agents of Debtor
and not agents of Secured Party. Unless Secured Party notifies Debtor in writing
that it waives one or more of the requirements set forth in this sentence, any
payments or other proceeds of Collateral received by Debtor, before or after
notification to Obligors, shall be held by Debtor in trust for Secured Party in
the same form in which received, shall not be commingled with any assets of
Debtor and shall be turned over to Secured Party not later than the next
business day following the day of receipt. All payments and other proceeds of
Collateral received by Secured Party directly or from Debtor shall be applied to
the Obligation in such order and manner and at such time as Secured Party, in
its sole discretion, shall determine. In addition, Debtor shall promptly notify
Secured Party of the return to or possession by Debtor of goods underlying any
Collateral; Debtor shall hold the same in trust for Secured Party and shall
dispose of the same as Secured Party directs.
6.2 Secured Party, after the occurrence of an Event of Default may
demand, collect and sue on the Collateral (either in Debtor's or Secured Party's
name), enforce, compromise, settle or discharge the Collateral and endorse
Debtor's name on any instruments, documents, or chattel paper included in or
pertaining to the Collateral; Secured Party agrees to notify Debtor promptly
after any such action, provided that the failure to give such notice shall not
affect the validity of such action. Debtor hereby irrevocably appoints Secured
Party its attorney in fact for all such purposes.
6.3 Until the occurrence of an Event of Default, Debtor may: (i) use,
consume and sell any inventory included in the Collateral in any lawful manner
in the ordinary course of Debtor's business provided that all sales shall be at
commercially reasonable prices; and (ii) subject to Paragraphs 6.1 and 6.2
above, retain possession of any other Collateral and use it in any lawful manner
consistent with this Agreement.
7. COLLATERAL IN THE POSSESSION OF SECURED PARTY
7.1 Secured Party shall use such reasonable care in handling,
preserving and protecting the Collateral in its possession as it uses in
handling similar property for its own account. Secured Party, however, shall
have no liability for the loss, destruction or disappearance of any Collateral
unless there is affirmative proof of a lack of due care; the lack of due care
shall not be implied solely by virtue of any loss, destruction or disappearance.
7.2 Debtor shall be solely responsible for taking any and all actions
to preserve rights against all Obligors; Secured Party shall not be obligated to
take any such actions whether or not the Collateral is in Secured Party's
possession. Debtor waives presentment and protest with respect to any instrument
included in the Collateral on which Debtor is in any way liable and waives
notice of any action taken by Secured Party with respect to any instrument,
document or chattel paper included in any Collateral that is in the possession
of Secured Party.
6
<PAGE> 7
8. EVENTS OF DEFAULT; REMEDIES
8.1 The occurrence of any Event of Default under the Loan Agreement shall
constitute and is hereby defined to be an "Event of Default".
8.2 Upon the occurrence of any Event of Default and at any time while such
Event of Default is continuing, Secured Party shall have the following rights
and remedies and may do one or more of the following:
(a) Declare all or any part of the Obligation to be immediately due and
payable, and the same, with all costs and charges, shall be collectible
thereupon by action at law.
(b) Without further notice or demand and without legal process, take
possession of the Collateral wherever found and, for this purpose, enter
upon any property occupied by or in the control of Debtor. Debtor, upon
demand by Secured Party, shall assemble the Collateral and deliver it to
Secured Party or to a place designated by Secured Party that is reasonably
convenient to both parties.
(c) Operate the business of Debtor as a going concern, including, without
limitation, extend sales or services to new customers and advance funds for
such operation. Secured Party shall not be liable for any depreciation,
loss, damage or injury to the Collateral or other property of Debtor as a
result of such action. Debtor hereby waives any claim of trespass or
replevin arising as a result of such action.
(d) Pursue any legal or equitable remedy available to collect the
Obligation, to enforce its title in and right to possession of the
Collateral and to enforce any and all other rights or remedies available to
it.
(e) Upon obtaining possession of the Collateral or any part thereof, after
notice to Debtor as provided in Paragraph 8.4 herein, sell such Collateral
at public or private sale either with or without having such Collateral at
the place of sale. The proceeds of such sale, after deducting therefrom all
expenses of Secured Party in taking, storing, repairing and selling the
Collateral (including reasonable attorneys' fees) shall be applied to the
payment of the Obligation, and any surplus thereafter remaining shall be
paid to Debtor or any other person that may be legally entitled thereto. In
the event of a deficiency between such net proceeds from the sale of the
Collateral and the total amount of the Obligation, Debtor, upon demand,
shall promptly pay the amount of such deficiency to Secured Party.
7
<PAGE> 8
8.3 Secured Party, so far as may be lawful, may purchase all or any part
of the Collateral offered at any public or private sale made in the enforcement
of Secured Party's rights and remedies hereunder.
8.4 Any demand or notice of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the Uniform Commercial
Code or otherwise, shall be deemed to be commercially reasonable and effective
if such demand or notice is given to Debtor at least fifteen (15) days prior to
such sale, disposition or other intended action, in the manner provided herein
for the giving of notices.
8.5 Debtor shall pay all costs and expenses, including without limitation
costs of Uniform Commercial Code searches, court costs and reasonable attorneys'
fees, incurred by Secured Party in enforcing payment and performance of the
Obligation or in exercising the rights and remedies of Secured Party hereunder.
All such costs and expenses shall be secured by this Agreement and by all deeds
of trust and other lien and security documents securing the Obligation. In the
event of any court proceedings, court costs and attorneys' fees shall be set by
the court and not by jury and shall be included in any judgment obtained by
Secured Party.
8.6 In addition to any remedies provided herein for an Event of Default,
Secured Party shall have all the rights and remedies afforded a secured party
under the Uniform Commercial Code and all other legal and equitable remedies
allowed under applicable law. No failure on the part of Secured Party to
exercise any of its rights hereunder arising upon any Event of Default shall be
construed to prejudice its rights upon the occurrence of any other or subsequent
Event of Default. No delay on the part of Secured Party in exercising any such
rights shall be construed to preclude it from the exercise thereof at any time
while that Event of Default is continuing. Secured Party may enforce any one or
more rights or remedies hereunder successively or concurrently. By accepting
payment or performance of any of the Obligation after its due date, Secured
Party shall not thereby waive the agreement contained herein that time is of the
essence, nor shall Secured Party waive either its right to require prompt
payment or performance when due of the remainder of the Obligation or its right
to consider the failure to so pay or perform an Event of Default.
9. MISCELLANEOUS PROVISIONS
9.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the Security Interest; Secured Party
may resort, for the payment or performance of the Obligation, to its several
securities therefor in such order and manner as it may determine.
8
<PAGE> 9
9.2 Without notice or demand, without affecting the obligations of Debtor
hereunder or the personal liability of any person for payment or performance of
the Obligation, and without affecting the Security Interest or the priority
thereof, Secured Party, from time to time, may: (i) extend the time for payment
of all or any part of the Obligation, accept a renewal note therefor, reduce the
payments thereon, release any person liable for all or any part thereof, or
otherwise change the terms of all or any part of the Obligation; (ii) take and
hold other security for the payment or performance of the Obligation and
enforce, exchange, substitute, subordinate, waive or release any such security;
(iii) join in any extension or subordination agreement; or (iv) release any part
of the Collateral from the Security Interest.
9.3 Except as otherwise provided in the Loan Documents, Debtor waives and
agrees not to assert: (i) any right to require Secured Party to proceed against
any guarantor, to proceed against or exhaust any other security for the
Obligation, to pursue any other remedy available to Secured Party, or to pursue
any remedy in any particular order or manner; (ii) the benefits of any legal or
equitable doctrine or principle of marshalling; (iii) the benefits of any
statute of limitations affecting the enforcement hereof; (iv) demand, diligence,
presentment for payment, protest and demand, and notice of extension, dishonor,
protest, demand and nonpayment, relating to the Obligation; and (v) any benefit
of, and any right to participate in, any other security now or hereafter held by
Secured Party.
9.4 The terms herein shall have the meanings in and be construed under the
Uniform Commercial Code. Undefined capitalized terms used herein shall have the
meaning given them in the Loan Agreement. This Agreement shall be governed by
and construed according to the laws of the State of Arizona. 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 void
or invalid, the same shall not affect the remainder hereof which shall be
effective as though the void or invalid provision had not been contained herein.
9.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Debtor and a duly authorized officer of Secured Party.
9.6 This is a continuing Agreement which shall remain in full force and
effect until actual receipt by Secured Party of written notice of its revocation
as to future transactions and shall remain in full force and effect thereafter
until all of the Obligation incurred before the receipt of such notice, and all
of the Obligation incurred thereafter under commitments extended by Secured
Party before the receipt of such notice, shall have been paid and performed in
full.
9.7 No setoff or claim that Debtor now has or may in the future have
against Secured Party shall relieve Debtor from paying or performing the
Obligation.
9.8 Time is of the essence hereof. If more than one Debtor is named
herein, the word "Debtor" shall mean all and any one or more of them, severally
and collectively. All liability
9
<PAGE> 10
hereunder shall be joint and several. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their heirs, personal
representatives, successors and assigns. The term "Secured Party" shall include
not only the original Secured Party hereunder but also any future owner and
holder, including pledgees, of note or notes evidencing the Obligation. The
provisions hereof shall apply to the parties according to the context thereof
and without regard to the number or gender of words or expressions used.
9.9 Except for telephonic notices permitted herein, any notices or other
communications required or permitted to be given hereunder must be (i) given in
writing and personally delivered or mailed by prepaid certified or registered
mail, or (ii) made by telefacsimile delivered or transmitted, to the party to
whom such notice or communication is directed. Any notice to be personally
delivered may be delivered to the principal offices (determined as of the date
of such delivery) of the party to whom such notice is directed. Any such notice
or other communication shall be deemed to have been given (whether actually
received or not) on the day it is personally delivered as aforesaid; or, if
mailed, on the third day after it is mailed as aforesaid; or, if transmitted by
telefacsimile, on the day that such notice is transmitted as aforesaid. The
designated address of a party shall be the address of that party shown at the
beginning of this Agreement or such other address as that party, from time to
time, may specify by notice to the other parties.
9.10 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
10
<PAGE> 11
IN WITNESS WHEREOF, these presents are executed as of the date indicated
above.
CONTINENTAL CIRCUITS CORP., a Delaware
corporation
Witnessed by:
(other than notary)
By: /s/ Frederick G. McNamee, III
-------------------------------------------
Its President and Chief Executive Officer
(Signature of witness)
DEBTOR
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 25th day of July,
1997, by Frederick G. McNamee, III, the President and Chief Executive Officer of
CONTINENTAL CIRCUITS CORP., a Delaware corporation, on behalf of that
corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
(Signature of Notary)
-----------------------
Notary Public
My commission expires:
(Official Seal)
- -----------------------
11
<PAGE> 12
SCHEDULE "A"
Collateral
12
<PAGE> 1
Exhibit 10.6
SECURITY AGREEMENT
(Texas)
THIS SECURITY AGREEMENT (the "Agreement") is made and entered into as of
the 25th day of July, 1997, by CCIR OF TEXAS CORP., a Texas corporation
(hereinafter called "Debtor"), whose chief executive office is located at 3502
East Roeser Road, Phoenix, Arizona 85040, in favor of BANK ONE, ARIZONA, NA, and
its successors and assigns (hereinafter called "Secured Party"), whose address
is Post Office Box 71, Phoenix, Arizona 85001, Attention: Commercial Banking,
Dept. AZ1-1178.
1. SECURITY INTEREST
Debtor hereby grants to Secured Party a security interest (hereinafter
called the "Security Interest") in all of Debtor's right, title and interest in
and to the personal property (the "Collateral") described on the Schedule "A"
attached hereto.
2. OBLIGATION SECURED
The Security Interest shall secure, in such order of priority as Secured
Party may elect:
(a) Payment of the sum of FORTY-FIVE MILLION AND NO/100 DOLLARS
($45,000,000.00) according to the terms of that Revolving Promissory Note
dated July 25, 1997, made by Continental Circuits Corp., a Delaware
corporation ("Borrower"), payable to the order of Secured Party, evidencing
a revolving line of credit, all or any part of which may be advanced to
Borrower, repaid by Borrower and readvanced to Borrower, from time to time,
subject to the terms and conditions thereof, with interest thereon,
extension and other fees, late charges, prepayment premiums and attorneys'
fees, according to the terms thereof, and all extensions, modifications,
renewals or replacements thereof (hereinafter called the "Note");
(b) Payment, performance and observance by Debtor of each covenant,
condition, provision and agreement contained herein and of all monies
expended or advanced by Secured Party pursuant to the terms hereof, or to
preserve any right of Secured Party hereunder, or to protect or preserve
the Collateral or any part thereof;
(c) Payment, performance and observance by Borrower of each covenant,
condition, provision and agreement contained in that Loan Agreement dated
July 25, 1997 by and between Borrower and Secured Party (hereinafter called
the "Loan Agreement") and in any other document or instrument related to
the indebtedness described in subparagraph (a) above (collectively, the
"Loan Documents") and of all
<PAGE> 2
monies expended or advanced by Secured Party pursuant to the terms
thereof or to preserve any right of Secured Party thereunder;
(d) Payment and performance of any and all other indebtedness,
obligations and liabilities of Debtor to Secured Party of every kind
and character, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, whether such
indebtedness is from time to time reduced and thereafter increased or
entirely extinguished and thereafter reincurred; and
(e) The full and timely payment of all amounts now or hereafter due and
payable by Borrower to Secured Party under any interest rate swap, cap,
collar or similar transaction, or any Master Agreement for such
transactions, now or hereafter in effect between Borrower and Secured
Party, whether such amounts are due and payable on the date (s)
scheduled therefor, on the occurrence of an Early Termination Date (as
defined in the Master Agreement), or otherwise.
All of the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the "Obligation."
3. USE; LOCATION; CONSTRUCTION
3.1 The Collateral is or will be used or produced primarily for business
purposes.
3.2 The Collateral will be kept at Debtor's address set forth at the
beginning of this Agreement and/or at the following location(s): 15508 Bratton
Lane, Austin, Texas 78728.
3.3 Debtor's records concerning the Collateral will be kept at Debtor's
address set forth at the beginning of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF DEBTOR
Debtor hereby represents and warrants that:
4.1 The execution, delivery and performance by Debtor of this Agreement
and all other documents and instruments relating to the Obligation will not
result in a Material Adverse Effect due to any breach of the terms and
conditions or due to a default under any agreement or instrument under which
Debtor is a party or is obligated. Debtor is not in default in the performance
or observance of any covenants, conditions or provisions of any such agreement
or instrument that would result in a Material Adverse Effect.
4.2 Except as otherwise consented to by Secured Party in writing and
except for any Permitted Liens, Debtor is the owner of the Collateral free of
all security interests or other encumbrances except the Security Interest and no
financing statement covering the Collateral is
2
<PAGE> 3
filed or recorded in any public office.
4.3 The Collateral is, and is intended to be, used, produced or acquired
by Debtor for use primarily for the purpose marked in Section 3 above. The
address of Debtor set forth at the beginning of this Agreement is the chief
executive office of Debtor.
4.4 Each account, chattel paper or general intangible included in the
Collateral is genuine and enforceable in accordance with its terms against the
party named therein who is obligated to pay the same (hereinafter called
"Obligor"), and the security interests that are part of each item of chattel
paper included in the Collateral are valid, first and prior perfected security
interests. To the best of Debtor's knowledge, each Obligor is solvent, and the
amount that Debtor has represented to Secured Party as owing by each Obligor is
the amount actually and unconditionally owing by that Obligor, without deduction
except for normal cash discounts where applicable; to the best of Debtor's
knowledge, no Obligor has any defense, setoff, claim or counterclaim against
Debtor that can be asserted against Secured Party whether in any proceeding to
enforce the Security Interest or otherwise. Each document, instrument and
chattel paper included in the Collateral is complete and regular on its face and
free from evidence of forgery or alteration. No default has occurred in
connection with any instrument, document or chattel paper included in the
Collateral, no payment in connection therewith is overdue and no presentment,
dishonor or protest has occurred in connection therewith.
5. COVENANTS OF DEBTOR
5.1 Except as otherwise permitted in the Loan Agreement, Debtor shall not
sell, transfer, assign or otherwise dispose of any Collateral or any interest
therein (except as permitted herein) without obtaining the prior written consent
of Secured Party and, except as otherwise consented to by Secured Party in
writing, shall keep the Collateral free of all security interests or other
encumbrances except the Security Interest. Although proceeds of Collateral are
covered by this Agreement, this shall not be construed to mean that Secured
Party consents to any sale of the Collateral.
5.2 Debtor shall keep and maintain the Collateral in good condition and
repair and shall not use the Collateral in violation of any provision of this
Agreement or any applicable statute, ordinance or regulation or any policy of
insurance insuring the Collateral.
5.3 Debtor shall provide and maintain insurance insuring the Collateral
against risks in accordance with the provisions of the Loan Agreement.
5.4 Debtor shall pay when due all taxes, assessments and other charges
which may be levied or assessed against the Collateral.
5.5 With respect to Collateral not subject to the Deed of Trust (as
defined in the Loan Agreement), Debtor shall prevent any portion of the
Collateral that is not a fixture from being or
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<PAGE> 4
becoming a fixture and shall prevent any portion of the Collateral from being or
becoming an accession to other goods that are not part of the Collateral.
5.6 If the Collateral includes motor vehicles, Debtor shall not remove or
permit such motor vehicles to be removed from the State of Arizona without the
prior written consent of Secured Party, shall keep all titled vehicles properly
registered with and licensed by the State of Arizona, shall provide Secured
Party with the license numbers of all titled vehicles, and upon the occurrence
of an Event of Default and notice thereof to Debtor by Secured Party, shall
cause the Security Interest to be shown as a valid first lien on the Certificate
of Title for all titled vehicles and shall thereupon deliver lien filing
receipts to Secured Party as evidence thereof.
5.7 Debtor, upon demand, shall promptly deliver to Secured Party all
instruments, documents and chattel paper included in the Collateral and all
invoices, shipping or delivery records, purchase orders, contracts or other
items related to the Collateral. Debtor shall notify Secured Party immediately
of any default by any Obligor in the payment or performance of its obligations
with respect to any Collateral. Debtor, without Secured Party's prior written
consent, shall not make or agree to make any alteration, modification or
cancellation of, or substitution for, or credit, adjustment or allowance on, any
Collateral, except in the ordinary course of business.
5.8 Debtor shall give Secured Party immediate written notice of any change
in the location of: (i) Debtor's chief executive office; (ii) the Collateral or
any part thereof; or (iii) Debtor's records concerning the Collateral.
5.9 Secured Party or its agents may inspect the Collateral at reasonable
times and may enter into any premises where the Collateral is or may be located.
Debtor shall keep records concerning the Collateral in accordance with generally
accepted accounting principles and, if required in writing by Secured Party,
shall mark its records and the Collateral to indicate the Security Interest.
Secured Party shall have free and complete access to Debtor's records and shall
have the right to make extracts therefrom or copies thereof. Upon request of
Secured Party from time to time, Debtor shall submit up-to-date schedules of the
items comprising the Collateral in such detail as Secured Party may require and
shall deliver to Secured Party confirming specific assignments of all accounts,
instruments, documents and chattel paper included in the Collateral.
5.10 Except for Permitted Liens, Debtor, at its cost and expense, shall
protect and defend this Agreement, all of the rights of Secured Party hereunder,
and the Collateral against all claims and demands of other parties, including
without limitation defenses, setoffs, claims and counterclaims asserted by any
Obligor against Debtor and/or Secured Party. Except for Permitted Liens, Debtor
shall pay all claims and charges that in the reasonable opinion of Secured Party
might prejudice, imperil or otherwise affect the Collateral or the Security
Interest. Except for Permitted Liens, Debtor shall promptly notify Secured Party
of any levy, distraint or other seizure by legal process or otherwise of any
part of the Collateral and of any threatened or filed claims or proceedings that
might in any way affect or impair the terms of this Agreement.
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<PAGE> 5
5.11 The Security Interest, at all times, shall be perfected and shall be
prior to any other interests in the Collateral except for Permitted Liens.
Debtor shall act and perform as necessary and shall execute and file all
security agreements, financing statements, continuation statements and other
documents requested by Secured Party to establish, maintain and continue the
perfected Security Interest. Debtor, on demand, shall promptly pay all costs and
expenses of filing and recording, including the costs of any searches, deemed
reasonably necessary by Secured Party from time to time to establish and
determine the validity and the continuing priority of the Security Interest.
5.12 If Debtor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Collateral free from other security interests,
encumbrances or claims, to keep the Collateral in good condition and repair, to
procure and maintain insurance thereon, or to perform otherwise as required
herein, Secured Party may advance the monies necessary to pay the same, to
accomplish such repairs, to procure and maintain such insurance or to so
perform; Secured Party is hereby authorized to enter upon any property in the
possession or control of Debtor for such purposes.
5.13 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof and all
amounts paid, suffered or incurred by Secured Party in exercising any authority
granted herein, including reasonable attorneys' fees, shall be added to the
Obligation, shall be secured by the Security Interest, shall bear interest at
the highest rate payable on any of the Obligation until paid, and shall be due
and payable by Debtor to Secured Party immediately without demand.
6. NOTIFICATION AND PAYMENTS; COLLECTION OF COLLATERAL; USE OF
COLLATERAL BY DEBTOR
6.1 Secured Party, after the occurrence of any Event of Default, defined
below, may notify any or all Obligors of the existence of the Security Interest
and may direct the Obligors to make all payments on the Collateral to Secured
Party. Secured Party agrees to notify Debtor promptly after any such action,
provided that the failure to give such notice shall not affect the validity of
such action. Until Secured Party has notified the Obligors to remit payments
directly to it, Debtor, at Debtor's own cost and expense, shall collect or cause
to be collected the accounts and monies due under the accounts, documents,
instruments and general intangibles or pursuant to the terms of the chattel
paper. Secured Party shall not be liable or responsible for any embezzlement,
conversion, negligence or default by Debtor or Debtor's agents with respect to
such collections; all agents used in such collections shall be agents of Debtor
and not agents of Secured Party. Unless Secured Party notifies Debtor in writing
that it waives one or more of the
5
<PAGE> 6
requirements set forth in this sentence, any payments or other proceeds of
Collateral received by Debtor, before or after notification to Obligors, shall
be held by Debtor in trust for Secured Party in the same form in which received,
shall not be commingled with any assets of Debtor and shall be turned over to
Secured Party not later than the next business day following the day of receipt.
All payments and other proceeds of Collateral received by Secured Party directly
or from Debtor shall be applied to the Obligation in such order and manner and
at such time as Secured Party, in its sole discretion, shall determine. In
addition, Debtor shall promptly notify Secured Party of the return to or
possession by Debtor of goods underlying any Collateral; Debtor shall hold the
same in trust for Secured Party and shall dispose of the same as Secured Party
directs.
6.2 Secured Party, after the occurrence of an Event of Default may demand,
collect and sue on the Collateral (either in Debtor's or Secured Party's name),
enforce, compromise, settle or discharge the Collateral and endorse Debtor's
name on any instruments, documents, or chattel paper included in or pertaining
to the Collateral; Secured Party agrees to notify Debtor promptly after any such
action, provided that the failure to give such notice shall not affect the
validity of such action. Debtor hereby irrevocably appoints Secured Party its
attorney in fact for all such purposes.
6.3 Until the occurrence of an Event of Default, Debtor may: (i) use,
consume and sell any inventory included in the Collateral in any lawful manner
in the ordinary course of Debtor's business provided that all sales shall be at
commercially reasonable prices; and (ii) subject to Paragraphs 6.1 and 6.2
above, retain possession of any other Collateral and use it in any lawful manner
consistent with this Agreement.
7. COLLATERAL IN THE POSSESSION OF SECURED PARTY
7.1 Secured Party shall use such reasonable care in handling, preserving
and protecting the Collateral in its possession as it uses in handling similar
property for its own account. Secured Party, however, shall have no liability
for the loss, destruction or disappearance of any Collateral unless there is
affirmative proof of a lack of due care; the lack of due care shall not be
implied solely by virtue of any loss, destruction or disappearance.
7.2 Debtor shall be solely responsible for taking any and all actions to
preserve rights against all Obligors; Secured Party shall not be obligated to
take any such actions whether or not the Collateral is in Secured Party's
possession. Debtor waives presentment and protest with respect to any instrument
included in the Collateral on which Debtor is in any way liable and waives
notice of any action taken by Secured Party with respect to any instrument,
document or chattel paper included in any Collateral that is in the possession
of Secured Party.
6
<PAGE> 7
8. EVENTS OF DEFAULT; REMEDIES
8.1 The occurrence of any Event of Default under the Loan Agreement shall
constitute and is hereby defined to be an "Event of Default".
8.2 Upon the occurrence of any Event of Default and at any time while such
Event of Default is continuing, Secured Party shall have the following rights
and remedies and may do one or more of the following:
(a) Declare all or any part of the Obligation to be immediately due and
payable, and the same, with all costs and charges, shall be collectible
thereupon by action at law.
(b) Without further notice or demand and without legal process, take
possession of the Collateral wherever found and, for this purpose, enter
upon any property occupied by or in the control of Debtor. Debtor, upon
demand by Secured Party, shall assemble the Collateral and deliver it to
Secured Party or to a place designated by Secured Party that is reasonably
convenient to both parties.
(c) Operate the business of Debtor as a going concern, including, without
limitation, extend sales or services to new customers and advance funds for
such operation. Secured Party shall not be liable for any depreciation,
loss, damage or injury to the Collateral or other property of Debtor as a
result of such action. Debtor hereby waives any claim of trespass or
replevin arising as a result of such action.
(d) Pursue any legal or equitable remedy available to collect the
Obligation, to enforce its title in and right to possession of the
Collateral and to enforce any and all other rights or remedies available to
it.
(e) Upon obtaining possession of the Collateral or any part thereof, after
notice to Debtor as provided in Paragraph 8.4 herein, sell such Collateral
at public or private sale either with or without having such Collateral at
the place of sale. The proceeds of such sale, after deducting therefrom all
expenses of Secured Party in taking, storing, repairing and selling the
Collateral (including reasonable attorneys' fees) shall be applied to the
payment of the Obligation, and any surplus thereafter remaining shall be
paid to Debtor or any other person that may be legally entitled thereto. In
the event of a deficiency between such net proceeds from the sale of the
Collateral and the total amount of the Obligation, Debtor, upon demand,
shall promptly pay the amount of such deficiency to Secured Party.
8.3 Secured Party, so far as may be lawful, may purchase all or any part
of the Collateral offered at any public or private sale made in the enforcement
of Secured Party's rights and remedies hereunder.
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<PAGE> 8
8.4 Any demand or notice of sale, disposition or other intended action
hereunder or in connection herewith, whether required by the Uniform Commercial
Code or otherwise, shall be deemed to be commercially reasonable and effective
if such demand or notice is given to Debtor at least fifteen (15) days prior to
such sale, disposition or other intended action, in the manner provided herein
for the giving of notices.
8.5 Debtor shall pay all costs and expenses, including without limitation
costs of Uniform Commercial Code searches, court costs and reasonable attorneys'
fees, incurred by Secured Party in enforcing payment and performance of the
Obligation or in exercising the rights and remedies of Secured Party hereunder.
All such costs and expenses shall be secured by this Agreement and by all deeds
of trust and other lien and security documents securing the Obligation. In the
event of any court proceedings, court costs and attorneys' fees shall be set by
the court and not by jury and shall be included in any judgment obtained by
Secured Party.
8.6 In addition to any remedies provided herein for an Event of Default,
Secured Party shall have all the rights and remedies afforded a secured party
under the Uniform Commercial Code and all other legal and equitable remedies
allowed under applicable law. No failure on the part of Secured Party to
exercise any of its rights hereunder arising upon any Event of Default shall be
construed to prejudice its rights upon the occurrence of any other or subsequent
Event of Default. No delay on the part of Secured Party in exercising any such
rights shall be construed to preclude it from the exercise thereof at any time
while that Event of Default is continuing. Secured Party may enforce any one or
more rights or remedies hereunder successively or concurrently. By accepting
payment or performance of any of the Obligation after its due date, Secured
Party shall not thereby waive the agreement contained herein that time is of the
essence, nor shall Secured Party waive either its right to require prompt
payment or performance when due of the remainder of the Obligation or its right
to consider the failure to so pay or perform an Event of Default.
9. MISCELLANEOUS PROVISIONS
9.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the Security Interest; Secured Party
may resort, for the payment or performance of the Obligation, to its several
securities therefor in such order and manner as it may determine.
9.2 Without notice or demand, without affecting the obligations of Debtor
hereunder or the personal liability of any person for payment or performance of
the Obligation, and without affecting the Security Interest or the priority
thereof, Secured Party, from time to time, may: (i) extend the time for payment
of all or any part of the Obligation, accept a renewal note therefor, reduce the
payments thereon, release any person liable for all or any part thereof, or
otherwise
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<PAGE> 9
change the terms of all or any part of the Obligation; (ii) take and hold other
security for the payment or performance of the Obligation and enforce, exchange,
substitute, subordinate, waive or release any such security; (iii) join in any
extension or subordination agreement; or (iv) release any part of the Collateral
from the Security Interest.
9.3 Except as otherwise provided in the Loan Documents, Debtor waives and
agrees not to assert: (i) any right to require Secured Party to proceed against
any guarantor, to proceed against or exhaust any other security for the
Obligation, to pursue any other remedy available to Secured Party, or to pursue
any remedy in any particular order or manner; (ii) the benefits of any legal or
equitable doctrine or principle of marshalling; (iii) the benefits of any
statute of limitations affecting the enforcement hereof; (iv) demand, diligence,
presentment for payment, protest and demand, and notice of extension, dishonor,
protest, demand and nonpayment, relating to the Obligation; and (v) any benefit
of, and any right to participate in, any other security now or hereafter held by
Secured Party.
9.4 The terms herein shall have the meanings in and be construed under the
Uniform Commercial Code. Undefined capitalized terms used herein shall have the
meaning given them in the Loan Agreement. This Agreement shall be governed by
and construed according to the laws of the State of Arizona. 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 void
or invalid, the same shall not affect the remainder hereof which shall be
effective as though the void or invalid provision had not been contained herein.
9.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Debtor and a duly authorized officer of Secured Party.
9.6 This is a continuing Agreement which shall remain in full force and
effect until actual receipt by Secured Party of written notice of its revocation
as to future transactions and shall remain in full force and effect thereafter
until all of the Obligation incurred before the receipt of such notice, and all
of the Obligation incurred thereafter under commitments extended by Secured
Party before the receipt of such notice, shall have been paid and performed in
full.
9.7 No setoff or claim that Debtor now has or may in the future have
against Secured Party shall relieve Debtor from paying or performing the
Obligation.
9.8 Time is of the essence hereof. If more than one Debtor is named
herein, the word "Debtor" shall mean all and any one or more of them, severally
and collectively. All liability hereunder shall be joint and several. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their heirs, personal representatives, successors and assigns. The
term "Secured Party" shall include not only the original Secured Party hereunder
but also any future owner and holder, including pledgees, of note or notes
evidencing the Obligation. The provisions hereof shall apply to the parties
according to the context thereof and without regard to
9
<PAGE> 10
the number or gender of words or expressions used.
9.9 Except for telephonic notices permitted herein, any notices or other
communications required or permitted to be given hereunder must be (i) given in
writing and personally delivered or mailed by prepaid certified or registered
mail, or (ii) made by telefacsimile delivered or transmitted, to the party to
whom such notice or communication is directed. Any notice to be personally
delivered may be delivered to the principal offices (determined as of the date
of such delivery) of the party to whom such notice is directed. Any such notice
or other communication shall be deemed to have been given (whether actually
received or not) on the day it is personally delivered as aforesaid; or, if
mailed, on the third day after it is mailed as aforesaid; or, if transmitted by
telefacsimile, on the day that such notice is transmitted as aforesaid. The
designated address of a party shall be the address of that party shown at the
beginning of this Agreement or such other address as that party, from time to
time, may specify by notice to the other parties.
9.10 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
10. DEBTOR PROVISIONS
10.1 Debtor is executing this Agreement solely for the purpose of
encumbering its interest in the Collateral to secure payment and performance of
the Obligation. Debtor shall not be personally liable for the payment or
performance of the Obligation; the liability of Debtor for the payment and
performance of the Obligation and for any breach or default hereunder shall be
limited to its interest in the Collateral. Secured Party shall accept any
payment or performance of the Obligation by Debtor to the same effect as if made
by Borrower.
10.2 All advances of principal under the Note shall be made to Borrower
subject to and in accordance with the terms thereof. If Borrower is a
corporation or partnership, it is not necessary for Secured Party to inquire
into the powers of Borrower or the officers, directors, partners or agents
acting or purporting to act on its behalf. Debtor is and shall continue to be
fully informed as to all aspects of the business affairs of Borrower that it
deems relevant to the risks it is assuming and hereby waives and fully
discharges Secured Party from any and all obligations to communicate to Debtor
any facts of any nature whatsoever regarding Borrower and Borrower's business
affairs.
10.3 Debtor authorizes Secured Party, without notice or demand, without
affecting the obligations of Debtor hereunder or the personal liability of any
person for payment or performance of the Obligation and without affecting the
lien or the priority of the Security Interest, from time to time, at the request
of any person primarily obligated therefor, to renew, compromise, extend,
accelerate or otherwise change the time for payment or performance of, or
otherwise change the terms of, all or any part of the Obligation, including
increase or decrease any rate of interest thereon. Debtor waives and agrees not
to assert: (i) any right to require Secured Party to proceed against Borrower;
(ii) the benefits of any statutory provision limiting the liability
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of a surety, including without limitation the benefit of Section 12-1641, et
seq., of the Arizona Revised Statutes; and (iii) any defense arising by reason
of any disability or other defense of Borrower or by reason of the cessation
from any cause whatsoever of the liability of Borrower. Debtor shall have no
right of subrogation and hereby waives any right to enforce any remedy which
Secured Party now has, or may hereafter have, against Borrower.
10.4 Nothing contained herein shall affect or limit the right of Secured
Party to proceed against any person or entity, including Debtor or any partner
in Debtor, with respect to the enforcement of any guarantee or other similar
rights.
IN WITNESS WHEREOF, these presents are executed as of the date indicated
above.
CCIR OF TEXAS CORP., a Texas corporation
Witnessed by:
(other than notary)
By:/s/ Frederick G. McNamee, III
---------------------------------
(Signatures of witness) It: President
DEBTOR
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 25th day of July,
1997, by Frederick G. McNamee, the President of CCIR OF TEXAS CORP., a Texas
corporation, on behalf of that corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
Signature of Notary
-------------------
Notary Public
My commission expires:
(Seal of Notary)
11
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SCHEDULE "A"
COLLATERAL
12
<PAGE> 1
Exhibit 10.7
PLEDGE AND IRREVOCABLE PROXY SECURITY AGREEMENT
(Barbados)
THIS PLEDGE AND IRREVOCABLE PROXY SECURITY AGREEMENT (the
"Agreement") is made and entered into as of the 25th day of July, 1997, by
CONTINENTAL CIRCUITS CORP., a Delaware corporation (hereinafter called
"Pledgor"), whose chief executive office is located at 3502 East Roeser Road,
Phoenix, Arizona 85040, in favor of BANK ONE, ARIZONA, NA, a national banking
association, and its successors and assigns (hereinafter called "Secured
Party"), whose address is Post Office Box 71, Phoenix, Arizona 85001, Attention:
Commercial Banking, Dept. AZ1-1178.
1. RECITALS
1.1 Secured Party has agreed to make certain financial accommodations to
Pledgor.
1.2 Secured Party's agreement to make financial accommodations to Pledgor
is conditioned upon Secured Party's receiving a pledge and security interest in
all shares and securities issued by the Company (as defined on Schedule "A"
attached hereto) now owned or hereafter acquired by Pledgor.
1.3 Pledgor is the owner of the number of shares of the Company as shown
on Schedule A attached hereto that Pledgor desires to pledge to Secured Party in
connection with Secured Party's financial accommodations to Pledgor.
2. PLEDGE OF SHARES
2.1 Pledgor hereby assigns, transfers, pledges and delivers to Secured
Party and grants Secured Party a security interest in all issued and outstanding
shares in the Company now owned or hereafter acquired by Pledgor, including
without limitation the shares described on Schedule "A" attached hereto and by
this reference made a part hereof, together with all earnings thereon, all
additions thereto, all proceeds thereof from sale or otherwise, all
substitutions therefor, and all securities issued with respect thereto as a
result of any stock dividend, stock split, warrants or other rights,
reclassification, readjustment or other change in the capital structure of the
Company, and the securities of any corporation or other properties received upon
the conversion or exchange thereof pursuant to any merger, consolidation,
reorganization, sale of assets or other agreement or received upon any
liquidation of the Company or such other corporation (all hereinafter called the
"Pledged Securities").
2.2 Upon the execution of this Agreement, Pledgor shall deliver to Secured
Party certificates for the Pledged Securities, together with appropriate shares
transfer powers therefor duly executed by Pledgor in blank. Immediately upon
receipt, Pledgor shall deliver to Secured
<PAGE> 2
Party all certificates and other evidences of the Pledged Securities that come
into the possession, custody or control of Pledgor, together with appropriate
shares transfer powers therefor duly executed by Pledgor in blank, and any other
property constituting part of the Pledged Securities, free and clear of any
prior lien, claim, charge or encumbrance.
2.3 Secured Party may receive, hold and/or dispose of the Pledged
Securities subject and pursuant to all the terms, conditions and provisions
hereof and of the Loan Agreement (defined below) until the Obligation (defined
below) has been discharged in full. Secured Party is hereby authorized and
empowered to take any and all action with respect to such property as authorized
hereunder. In its discretion, Secured Party may take any one or more of the
following actions, without liability except to account for property actually
received by it:
(a) transfer to or register in its name or the name of its nominee
any of the Pledged Securities, with or without indication of the security
interest herein created, and whether or not so transferred or registered,
receive the income, dividends and other distributions thereon and hold
them or apply them to the Obligation in any order of priority;
(b) exercise or cause to be exercised all voting and corporate
powers with respect to any of the Pledged Securities so registered or
transferred, including all rights of conversion, exchange, subscription or
any other rights, privileges or options pertaining to such Pledged
Securities, as if the absolute owner thereof;
(c) insure any of the Pledged Securities;
(d) exchange any of the Pledged Securities for other property upon a
reorganization, recapitalization or other readjustment and, in connection
therewith, deposit any of the Pledged Securities with any committee or
depositary upon such terms as the Secured Party may determine;
(e) in its name, or in the name of Pledgor, demand, sue for, collect
or receive any money or property at any time payable or receivable on
account of, or in exchange for, any of the Pledged Securities and, in
connection therewith, endorse notes, checks, drafts, money orders,
documents of title or other evidences of payment, shipment or storage in
the name of Pledgor;
(f) make any compromise or settlement deemed advisable with respect
to any of the Pledged Securities;
provided however that the actions specified in subparagraphs (a), (b), (d), (e)
and (f) of this Paragraph 2.3 may not be taken so long as there is no Event of
Default hereunder. Secured Party agrees to notify Pledgor promptly after any
such action, provided that the failure to give such notice shall not affect the
validity of such action. Secured Party shall be under no duty to exercise,
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<PAGE> 3
or to withhold the exercise of, any of the rights, powers, privileges and
options expressly or implicitly granted to Secured Party in this Agreement, and
shall not be responsible for any failure to do so or delay in so doing.
3. OBLIGATION SECURED
This Agreement shall secure, in such order of priority as Secured Party
may elect:
(a) Payment of the sum of $45,000,000.00 according to the terms of
that Revolving Promissory Note dated July 25, 1997, made by Pledgor,
payable to the order of Secured Party, evidencing a revolving line of
credit, all or any part of which may be advanced to Pledgor, repaid by
Pledgor and readvanced to Pledgor, from time to time, subject to the terms
and conditions thereof, with interest thereon, extension and other fees,
late charges, prepayment premiums and attorneys' fees, according to the
terms thereof, and all extensions, modifications, renewals or replacements
thereof (hereinafter called the "Note");
(b) Payment, performance and observance by Pledgor of each covenant,
condition, provision and agreement contained herein and of all monies
expended or advanced by Secured Party pursuant to the terms hereof, or to
preserve any right of Secured Party hereunder, or to protect or preserve
the Pledged Securities or any part thereof;
(c) Payment, performance and observance by Pledgor of each covenant,
condition, provision and agreement contained in that Loan Agreement dated
July 25, 1997, by and between Pledgor and Secured Party (hereinafter
called the "Loan Agreement") and in any other document or instrument
related to the indebtedness hereby secured and of all monies expended or
advanced by Secured Party pursuant to the terms thereof or to preserve any
right of Secured Party thereunder;
(d) Payment and performance of any and all other indebtedness,
obligations and liabilities of Pledgor to Secured Party of every kind and
character, direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter incurred, whether such indebtedness is from
time to time reduced and thereafter increased or entirely extinguished and
thereafter reincurred; and
(e) The full and timely payment of all amounts now or hereafter due
and payable by Pledgor to Secured Party under any interest rate swap, cap,
collar or similar transaction, or any Master Agreement for such
transactions, now or hereafter in effect between Pledgor and Secured
Party, whether such amounts are due and payable on the date(s) scheduled
therefor, on the occurrence of an Early Termination Date (as defined in
the Master Agreement), or otherwise.
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<PAGE> 4
All of the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the "Obligation."
4. REPRESENTATIONS AND WARRANTIES OF PLEDGOR
Pledgor hereby represents and warrants that:
4.1 The execution, delivery and performance by Pledgor of this Agreement
and all other documents and instruments relating to the Obligation will not
result in any breach of the terms and conditions of, nor constitute a default
under, any agreement or instrument under which Pledgor is a party or is
obligated. Pledgor is not in default in the performance or observance of any
covenants, conditions or provisions of any such agreement or instrument.
4.2 The address of Pledgor set forth at the beginning of this Agreement is
the chief executive office of Pledgor.
4.3 The Pledged Securities are and shall be duly and validly issued and
pledged in accordance with applicable law, and this Agreement shall not
contravene any law, agreement or commitment binding Pledgor or the Company, and
Pledgor shall defend the right, title, lien and security interest of Secured
Party in and to the Pledged Securities against the claims and demands of all
persons and other entities whatsoever.
4.4 Pledgor has the right, power and authority to convey good and
marketable title to the Pledged Securities; and the Pledged Securities and the
proceeds thereof are and shall be free and clear of all claims, mortgages,
pledges, liens, encumbrances and security interest of every nature whatsoever
other than as imposed hereby or as set forth, if at all, on Schedule "A"
attached hereto.
5. IRREVOCABLE PROXY
5.1 Pledgor irrevocably constitutes and appoints Secured Party, whether or
not the Pledged Securities have been transferred into the name of Secured Party
or its nominee, as Pledgor's proxy with full power, in the same manner, to the
same extent and with the same effect as if Pledgor were to do the same, in the
sole discretion of Secured Party:
(a) To call a meeting of the shareholders of the Company and to vote
the Pledged Securities, to seek the consent of such shareholders, to
remove the directors of the Company, or any of them, and to elect new
directors of the Company, who thereafter shall manage the affairs of the
Company, operate its properties and carry on its business, and otherwise
take any action with respect to the business, properties and affairs of
the Company that such new directors shall deem necessary or appropriate,
including, but not limited to, the maintenance, repair, renewal or
alteration of any or all of the properties of the Company, the
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<PAGE> 5
leasing, subleasing, sale or other disposition of any or all of such
properties, the borrowing of money on the credit of the Company (whether
from Secured Party or others) that in the judgment of such new directors
shall be necessary to preserve any of such properties or to discharge the
obligations of the Company, and the employment of any or all agents,
attorneys, counsel, or other employees as deemed by such new directors to
be necessary for the proper operation or conduct of the business,
properties and affairs of the Company;
(b) To consent to any and all actions by or with respect to the
Company for which consent of the shareholders of the Company is or may be
necessary or appropriate; and
(c) Without limitation, to do all things that Pledgor can do or
could do as stockholder of the Company, giving Secured Party full power of
substitution and revocation;
provided, however, that (i) the foregoing irrevocable proxy shall not be
exercisable by Secured Party, and Pledgor alone shall have the foregoing powers,
so long as there is no Event of Default hereunder, and (ii) this irrevocable
proxy shall terminate at such time as this Agreement is no longer in full force
and effect. The foregoing proxy is coupled with an interest sufficient in law to
support an irrevocable power and shall be irrevocable and shall survive the
death or incapacity of Pledgor. Pledgor hereby revokes any proxy or proxies
heretofore given to any person or persons and agrees not to give any other
proxies in derogation hereof until such time as this Agreement is no longer in
full force and effect.
6. COVENANTS OF PLEDGOR
6.1 Pledgor shall not sell, transfer, assign or otherwise dispose of any
of the Pledged Securities or any interest therein without obtaining the prior
written consent of Secured Party and shall keep the Pledged Securities free of
all security interests or other encumbrances except the lien and security
interests granted herein.
6.2 Pledgor shall pay when due all taxes, assessments, expenses and other
charges which may be levied or assessed against the Pledged Securities.
6.3 Pledgor shall give Secured Party immediate written notice of any
change in Pledgor's name as set forth above and of any change in the location of
Pledgor's chief executive office.
6.4 Pledgor, at its cost and expense, shall protect and defend the Pledged
Securities, this Agreement and all of the rights of Secured Party hereunder
against all claims and demands of other parties. Pledgor shall pay all claims
and charges that in the opinion of Secured Party might prejudice, imperil or
otherwise affect the Pledged Securities. Pledgor shall promptly notify
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<PAGE> 6
Secured Party of any levy, distraint or other seizure, by legal process or
otherwise, of all or any part of the Pledged Securities and of any threatened or
filed claims or proceedings that might in any way affect or impair the terms of
this Agreement.
6.5 If Pledgor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Pledged Securities free from other security
interests, encumbrances or claims, or to perform otherwise as required herein,
Secured Party may advance the monies necessary to pay the same or to so perform.
6.6 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if, under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof, all
amounts paid, suffered or incurred by Secured Party under the terms hereof and
all amounts paid, suffered or incurred by Secured Party in exercising any
authority granted herein, including reasonable attorneys' fees, shall be added
to the Obligation, shall be secured hereby, shall bear interest at the highest
rate payable on any of the Obligation until paid, and shall be due and payable
by Pledgor to Secured Party immediately without demand.
6.7 Secured Party shall use such reasonable care in handling, preserving
and protecting the Pledged Securities in its possession as it uses in handling
similar property for its own account. Secured Party, however, shall have no
liability for the loss, destruction or disappearance of any Pledged Securities
unless there is affirmative proof of a lack of due care; the lack of due care
shall not be implied solely by virtue of any loss, destruction or disappearance.
Secured Party shall not be required to take any steps necessary to preserve any
rights in the Pledged Securities against prior parties or to protect, perfect,
preserve or maintain any security interest given to secure the Pledged
Securities.
6.8 Immediately upon demand by Secured Party, Pledgor shall execute and
deliver to Secured Party such other and additional applications, acceptances,
stock powers, authorizations, irrevocable proxies, dividend and other orders,
chattel paper, instruments or other evidences of payment and such other
documents as Secured Party may reasonably request to secure to Secured Party the
rights, powers and authorities intended to be conferred upon Secured Party by
this Agreement. All assignments and endorsements by Pledgor shall be in such
form and substance as may be satisfactory to Secured Party.
7. EVENTS OF DEFAULT; REMEDIES
7.1 The occurrence of any Event of Default under the Loan Agreement shall
constitute and is hereby defined to be an "Event of Default."
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<PAGE> 7
7.2 Upon the occurrence of any Event of Default and at any time while such
Event of Default is continuing, Secured Party shall have the following rights
and remedies and may do one or more of the following:
(a) Declare all or any part of the Obligation to be immediately due
and payable, and the same, with all costs and charges, shall be
collectible thereupon by action at law;
(b) Transfer the Pledged Securities or any part thereof into its own
name or that of its nominee so that Secured Party or its nominee may
appear of record as the sole owner thereof;
(c) Vote any or all of the Pledged Securities and give all consents,
waivers and ratifications in respect thereof and otherwise acting with
respect thereto as though it were the absolute owner thereof;
(d) Exercise any and all rights of conversion, exchange,
subscription, or any other rights, privileges or options pertaining to any
of the Pledged Securities including, but not limited to, the right to
exchange, at its discretion, any or all of the Pledged Securities upon the
merger, consolidation, reorganization, recapitalization or other
readjustment of the Company or upon the exercise by Pledgor or Secured
Party of any right, privilege or option pertaining to any of the shares of
the Pledged Securities, and in connection therewith to deposit and deliver
such shares of Pledged Securities with any committee, depository, transfer
agent, registrar or any other agency upon such terms as Secured Party may
determine without liability except to account for the property actually
received by it;
(e) Receive and retain any dividend or other distribution on account
of the Pledged Securities; and
(f) Sell any or all of the Pledged Securities in accordance with the
provisions hereof;
but Secured Party shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure to do so or
delay in so doing. Pledgor waives all rights to be advised or to receive any
notices, statements or communications received by Secured Party or its nominee
as the record owner of all or any of the Pledged Securities. Any cash received
and retained by Secured Party as additional collateral hereunder may be applied
to payment in the manner provided in Subparagraph 7.3(c) below.
7.3 In connection with Secured Party's right to sell any or all of the
Pledged Securities, upon the occurrence of any Event of Default and at any time
while such Event of Default is continuing:
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<PAGE> 8
(a) (i) Secured Party shall have the right at any time and from time
to time to sell, resell, assign and deliver, in its discretion, all
or any part of the Pledged Securities in one or more units, at the
same or different times, and all right, title and interest, claim
and demand therein, and right of redemption thereof, at private
sale, or at public sale to the highest bidder for cash, upon credit
or for future delivery, Pledgor hereby waiving and releasing to the
fullest extent permitted by law any and all equity or right of
redemption. If any of the Pledged Securities are sold by Secured
Party upon credit or for future delivery, Secured Party shall not be
liable for the failure of the purchaser to purchase or pay for same,
and, in the event of any such failure, Secured Party may resell such
Pledged Securities. In no event shall Pledgor be credited with any
part of the proceeds of the sale of any Pledged Securities until
cash payment thereof has actually been received by Secured Party.
(ii) No demand, advertisement or notice, all of which are
hereby expressly waived, shall be required in connection with any
sale or other disposition of all or any part of the Pledged
Securities that threatens to decline speedily in value or that is of
a type customarily sold on a recognized market; otherwise Secured
Party shall give Pledgor at least five (5) days' prior notice of the
time and place of any public sale or of the time after which any
private sale or other dispositions are to be made, which Pledgor
agrees is reasonable, all other demands, advertisements and notices
being hereby waived. Upon any sale, whether under this Agreement or
by virtue of judicial proceedings, Secured Party may bid for and
purchase any or all of the Pledged Securities and, upon compliance
with the terms of the sale, may hold, retain, possess and dispose of
such items in its own absolute right without further accountability,
and as purchaser at such sale, in paying the purchase price, may
turn in any note or notes held by Secured Party in lieu of cash up
to the amount that would, upon distribution of the net proceeds of
such sale in accordance with Subparagraph 7.3(c) hereof, be payable
to Secured Party. In case the amount so payable thereon shall be
less than the amount due thereon, the note or notes turned in (in
lieu of cash) shall be returned to the holder thereof after being
properly stamped to show the partial payment effected by such
purchase.
(b) Pledgor recognizes that Secured Party may be unable to effect a
sale to the public of all or a part of the Pledged Securities by reason of
prohibitions contained in applicable securities laws, but may be compelled
to resort to one or more sales to a restricted group of purchasers who
will be obliged to agree, among
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<PAGE> 9
other things, to acquire such Pledged Securities for their own account,
for investment and not with a view to the distribution or resale thereof.
Pledgor agrees that sales so made may be at prices and other terms less
favorable to the seller than if such Pledged Securities were sold to the
public, and that Secured Party has no obligation to delay sale of any such
Pledged Securities for the period of time necessary to permit the issuer
of such Pledged Securities to register the same for sale to the public
under applicable securities laws. Pledgor agrees that negotiated sales
made under the foregoing circumstances shall be deemed to have been made
in a commercially reasonable manner.
(c) In all sales of Pledged Securities, public or private, Secured
Party shall apply the proceeds of sale as follows:
(i) First, to the payment of all costs and expenses incurred
hereunder or for the sale, transfer, or delivery, including broker's
and attorneys' fees;
(ii) Next to the payment of the Obligation; and
(iii) The balance, if any, to Pledgor or to the person or
persons entitled thereto upon proper demand.
7.4 Secured Party shall have the right, for and in the name, place and
stead of Pledgor, to execute endorsements, assignments or other instruments of
conveyance or transfer with respect to all or any of the Pledged Securities and
any instruments, documents and statements that Pledgor is obligated to furnish
or execute hereunder. Pledgor shall execute and deliver such additional
documents as may be necessary to enable Secured Party to implement such right.
7.5 Pledgor shall pay all costs and expenses, including without limitation
court costs and reasonable attorneys' fees, incurred by Secured Party in
enforcing payment and performance of the Obligation or in exercising the rights
and remedies of Secured Party hereunder. All such costs and expenses shall be
secured by this Agreement and by all other lien and security documents securing
the Obligation. In the event of any court proceedings, court costs and
attorneys' fees shall be set by the court and not by jury and shall be included
in any judgment obtained by Secured Party.
7.6 In addition to any remedies provided herein for an Event of Default,
Secured Party shall have all the rights and remedies afforded a secured party
under the Uniform Commercial Code and all other legal and equitable remedies
allowed under applicable law. No failure on the part of Secured Party to
exercise any of its rights hereunder arising upon any Event of Default shall be
construed to prejudice its rights upon the occurrence of any other or subsequent
Event of Default. No delay on the part of Secured Party in exercising any such
rights shall be construed to preclude it from the exercise thereof at any time
while that Event of Default is continuing.
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<PAGE> 10
Secured Party may enforce any one or more rights or remedies hereunder
successively or concurrently. By accepting payment or performance of any of the
Obligation after its due date, Secured Party shall not thereby waive the
agreement contained herein that time is of the essence, nor shall Secured Party
waive either its right to require prompt payment or performance when due of the
remainder of the Obligation or its right to consider the failure to so pay or
perform an Event of Default.
8. MISCELLANEOUS PROVISIONS
8.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the right and interest granted
herein; Secured Party may resort, for the payment or performance of the
Obligation, to its several securities therefor in such order and manner as it
may determine.
8.2 Without notice or demand, without the necessity for any additional
endorsements, without affecting the obligations of Pledgor hereunder or the
personal liability of any person for payment or performance of the Obligation,
and without affecting the rights and interests granted herein, Secured Party,
from time to time, may: (i) extend the time for payment of all or any part of
the Obligation, accept a renewal note therefor, reduce the payments thereon,
release any person liable for all or any part thereof, or otherwise change the
terms of all or any part of the Obligation; (ii) take and hold other security
for the payment or performance of the Obligation and enforce, exchange,
substitute, subordinate, waive or release any such security; (iii) join in any
extension or subordination agreement; or (iv) release any part of the Pledged
Securities from this Agreement.
8.3 Pledgor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any statute of limitations affecting the enforcement hereof;
(iii) the benefits of any legal or equitable doctrine or principle of
marshalling; (iv) demand, diligence, presentment for payment, protest and
demand, and notice of extension, dishonor, protest, demand and nonpayment,
relating to the Obligation; and (v) any benefit of, and any right to participate
in, any other security now or hereafter held by Secured Party.
8.4 The terms herein shall have the meanings in and be construed under the
Uniform Commercial Code. This Agreement shall be governed by and construed
according to the internal laws of the State of Arizona. 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 void or
invalid, the same shall not affect the remainder hereof which shall be effective
as though the void or invalid provision had not been contained herein.
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<PAGE> 11
8.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Pledgor and a duly authorized officer of Secured Party.
8.6 This is a continuing agreement, which shall remain in full force and
effect until actual receipt by Secured Party of written notice of its revocation
as to future transactions and shall remain in full force and effect thereafter
until all of the Obligation incurred before the receipt of such notice, and all
of the Obligation incurred thereafter under commitments extended by Secured
Party before the receipt of such notice, shall have been paid and performed in
full.
8.7 No setoff or claim that Pledgor now has or may in the future have
against Secured Party shall relieve Pledgor from paying or performing its
obligations hereunder.
8.8 Time is of the essence hereof. All liability hereunder shall be joint
and several. This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their heirs, personal representatives,
successors and assigns. The term "Secured Party" shall include not only the
original Secured Party hereunder but also any future owner and holder, including
pledgees, of the note or notes evidencing the Obligation. The provisions hereof
shall apply to the parties according to the context thereof and without regard
to the number or gender of words or expressions used.
8.9 All notices required or permitted to be given hereunder shall be in
writing and may be given as permitted in the Loan Agreement.
8.10 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
IN WITNESS WHEREOF, these presents are executed as of the date indicated
above.
CONTINENTAL CIRCUITS CORP., a Delaware
Witnessed by: corporation
(other than notary)
(Signature of Witness) By: /s/ Frederick G. McNamee III
- ------------------------------ --------------------------------------
Its: President and CEO
PLEDGOR
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<PAGE> 12
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 25th day of July,
1997, by Frederick G. McNamee III, the President/CEO of CONTINENTAL CIRCUITS
CORP., a Delaware corporation, on behalf of that corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
(Signature of Notary)
--------------------------------
Notary Public
My commission expires:
(Seal of Notary)
- ----------------------
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<PAGE> 13
SCHEDULE "A"
All issued and outstanding shares of Continental Circuits International
Inc., a Barbados corporation (the "Company"), now or hereafter owned by Pledgor,
which as of the date hereof consists of 1000 shares.
<PAGE> 1
Exhibit 10.8
PLEDGE AND IRREVOCABLE PROXY SECURITY AGREEMENT
(Texas)
THIS PLEDGE AND IRREVOCABLE PROXY SECURITY AGREEMENT (the
"Agreement") is made and entered into as of the 25th day of July, 1997, by
CONTINENTAL CIRCUITS CORP., a Delaware corporation (hereinafter called
"Pledgor"), whose chief executive office is located at 3502 East Roeser Road,
Phoenix, Arizona 85040, in favor of BANK ONE, ARIZONA, NA, a national banking
association, and its successors and assigns (hereinafter called "Secured
Party"), whose address is Post Office Box 71, Phoenix, Arizona 85001, Attention:
Commercial Banking, Dept. AZ1-1178.
1. RECITALS
1.1 Secured Party has agreed to make certain financial accommodations to
Pledgor.
1.2 Secured Party's agreement to make financial accommodations to Pledgor
is conditioned upon Secured Party's receiving a pledge and security interest in
all shares and securities issued by the Company (as defined on Schedule "A"
attached hereto) now owned or hereafter acquired by Pledgor.
1.3 Pledgor is the owner of the number of shares of the Company as shown
on Schedule A attached hereto that Pledgor desires to pledge to Secured Party in
connection with Secured Party's financial accommodations to Pledgor.
2. PLEDGE OF SHARES
2.1 Pledgor hereby assigns, transfers, pledges and delivers to Secured
Party and grants Secured Party a security interest in all issued and outstanding
shares in the Company now owned or hereafter acquired by Pledgor, including
without limitation the shares described on Schedule "A" attached hereto and by
this reference made a part hereof, together with all earnings thereon, all
additions thereto, all proceeds thereof from sale or otherwise, all
substitutions therefor, and all securities issued with respect thereto as a
result of any stock dividend, stock split, warrants or other rights,
reclassification, readjustment or other change in the capital structure of the
Company, and the securities of any corporation or other properties received upon
the conversion or exchange thereof pursuant to any merger, consolidation,
reorganization, sale of assets or other agreement or received upon any
liquidation of the Company or such other corporation (all hereinafter called the
"Pledged Securities").
2.2 Upon the execution of this Agreement, Pledgor shall deliver to Secured
Party certificates for the Pledged Securities, together with appropriate shares
transfer powers therefor
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<PAGE> 2
duly executed by Pledgor in blank. Immediately upon receipt, Pledgor shall
deliver to Secured Party all certificates and other evidences of the Pledged
Securities that come into the possession, custody or control of Pledgor,
together with appropriate shares transfer powers therefor duly executed by
Pledgor in blank, and any other property constituting part of the Pledged
Securities, free and clear of any prior lien, claim, charge or encumbrance.
2.3 Secured Party may receive, hold and/or dispose of the Pledged
Securities subject and pursuant to all the terms, conditions and provisions
hereof and of the Loan Agreement (defined below) until the Obligation (defined
below) has been discharged in full. Secured Party is hereby authorized and
empowered to take any and all action with respect to such property as authorized
hereunder. In its discretion, Secured Party may take any one or more of the
following actions, without liability except to account for property actually
received by it:
(a) transfer to or register in its name or the name of its nominee any
of the Pledged Securities, with or without indication of the security
interest herein created, and whether or not so transferred or
registered, receive the income, dividends and other distributions
thereon and hold them or apply them to the Obligation in any order of
priority;
(b) exercise or cause to be exercised all voting and corporate powers
with respect to any of the Pledged Securities so registered or
transferred, including all rights of conversion, exchange, subscription
or any other rights, privileges or options pertaining to such Pledged
Securities, as if the absolute owner thereof;
(c) insure any of the Pledged Securities;
(d) exchange any of the Pledged Securities for other property upon a
reorganization, recapitalization or other readjustment and, in
connection therewith, deposit any of the Pledged Securities with any
committee or depositary upon such terms as the Secured Party may
determine;
(e) in its name, or in the name of Pledgor, demand, sue for, collect or
receive any money or property at any time payable or receivable on
account of, or in exchange for, any of the Pledged Securities and, in
connection therewith, endorse notes, checks, drafts, money orders,
documents of title or other evidences of payment, shipment or storage
in the name of Pledgor;
(f) make any compromise or settlement deemed advisable with respect
to any of the Pledged Securities;
provided however that the actions specified in subparagraphs (a), (b), (d), (e)
and (f) of this Paragraph 2.3 may not be taken so long as there is no Event of
Default hereunder. Secured Party agrees to notify Pledgor promptly after any
such action, provided that the failure to give
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<PAGE> 3
such notice shall not affect the validity of such action. Secured Party shall be
under no duty to exercise, or to withhold the exercise of, any of the rights,
powers, privileges and options expressly or implicitly granted to Secured Party
in this Agreement, and shall not be responsible for any failure to do so or
delay in so doing.
3. OBLIGATION SECURED
This Agreement shall secure, in such order of priority as Secured Party
may elect:
(a) Payment of the sum of $45,000,000.00 according to the terms of that
Revolving Promissory Note dated July 25, 1997, made by Pledgor, payable
to the order of Secured Party, evidencing a revolving line of credit,
all or any part of which may be advanced to Pledgor, repaid by Pledgor
and readvanced to Pledgor, from time to time, subject to the terms and
conditions thereof, with interest thereon, extension and other fees,
late charges, prepayment premiums and attorneys' fees, according to the
terms thereof, and all extensions, modifications, renewals or
replacements thereof (hereinafter called the "Note");
(b) Payment, performance and observance by Pledgor of each covenant,
condition, provision and agreement contained herein and of all monies
expended or advanced by Secured Party pursuant to the terms hereof, or
to preserve any right of Secured Party hereunder, or to protect or
preserve the Pledged Securities or any part thereof;
(c) Payment, performance and observance by Pledgor of each covenant,
condition, provision and agreement contained in that Loan Agreement
dated July 25, 1997, by and between Pledgor and Secured Party
(hereinafter called the "Loan Agreement") and in any other document or
instrument related to the indebtedness hereby secured and of all monies
expended or advanced by Secured Party pursuant to the terms thereof or
to preserve any right of Secured Party thereunder;
(d) Payment and performance of any and all other indebtedness,
obligations and liabilities of Pledgor to Secured Party of every kind
and character, direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter incurred, whether such
indebtedness is from time to time reduced and thereafter increased or
entirely extinguished and thereafter reincurred; and
(e) The full and timely payment of all amounts now or hereafter due and
payable by Pledgor to Secured Party under any interest rate swap, cap,
collar or similar transaction, or any Master Agreement for such
transactions, now or hereafter in effect between Pledgor and Secured
Party, whether such amounts are due and payable on the date(s)
scheduled therefor, on the occurrence of an Early Termination Date (as
defined in the Master Agreement), or otherwise.
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<PAGE> 4
All of the indebtedness and obligations secured by this Agreement are
hereinafter collectively called the "Obligation."
4. REPRESENTATIONS AND WARRANTIES OF PLEDGOR
Pledgor hereby represents and warrants that:
4.1 The execution, delivery and performance by Pledgor of this Agreement
and all other documents and instruments relating to the Obligation will not
result in any breach of the terms and conditions of, nor constitute a default
under, any agreement or instrument under which Pledgor is a party or is
obligated. Pledgor is not in default in the performance or observance of any
covenants, conditions or provisions of any such agreement or instrument.
4.2 The address of Pledgor set forth at the beginning of this Agreement is
the chief executive office of Pledgor.
4.3 The Pledged Securities are and shall be duly and validly issued and
pledged in accordance with applicable law, and this Agreement shall not
contravene any law, agreement or commitment binding Pledgor or the Company, and
Pledgor shall defend the right, title, lien and security interest of Secured
Party in and to the Pledged Securities against the claims and demands of all
persons and other entities whatsoever.
4.4 Pledgor has the right, power and authority to convey good and
marketable title to the Pledged Securities; and the Pledged Securities and the
proceeds thereof are and shall be free and clear of all claims, mortgages,
pledges, liens, encumbrances and security interest of every nature whatsoever
other than as imposed hereby or as set forth, if at all, on Schedule "A"
attached hereto.
5. IRREVOCABLE PROXY
5.1 Pledgor irrevocably constitutes and appoints Secured Party, whether or
not the Pledged Securities have been transferred into the name of Secured Party
or its nominee, as Pledgor's proxy with full power, in the same manner, to the
same extent and with the same effect as if Pledgor were to do the same, in the
sole discretion of Secured Party:
(a) To call a meeting of the shareholders of the Company and to vote
the Pledged Securities, to seek the consent of such shareholders, to
remove the directors of the Company, or any of them, and to elect new
directors of the Company, who thereafter shall manage the affairs of
the Company, operate its properties and carry on its business, and
otherwise take any action with respect to the business, properties and
affairs of the Company that such new directors shall deem necessary or
appropriate, including, but not limited to, the maintenance, repair,
renewal or alteration of any or all of the properties of the Company,
the leasing, subleasing,
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<PAGE> 5
sale or other disposition of any or all of such properties, the borrowing
of money on the credit of the Company (whether from Secured Party or
others) that in the judgment of such new directors shall be necessary to
preserve any of such properties or to discharge the obligations of the
Company, and the employment of any or all agents, attorneys, counsel, or
other employees as deemed by such new directors to be necessary for the
proper operation or conduct of the business, properties and affairs of the
Company;
(b) To consent to any and all actions by or with respect to the Company
for which consent of the shareholders of the Company is or may be
necessary or appropriate; and
(c) Without limitation, to do all things that Pledgor can do or could do
as stockholder of the Company, giving Secured Party full power of
substitution and revocation;
provided, however, that (i) the foregoing irrevocable proxy shall not be
exercisable by Secured Party, and Pledgor alone shall have the foregoing powers,
so long as there is no Event of Default hereunder, and (ii) this irrevocable
proxy shall terminate at such time as this Agreement is no longer in full force
and effect. The foregoing proxy is coupled with an interest sufficient in law to
support an irrevocable power and shall be irrevocable and shall survive the
death or incapacity of Pledgor. Pledgor hereby revokes any proxy or proxies
heretofore given to any person or persons and agrees not to give any other
proxies in derogation hereof until such time as this Agreement is no longer in
full force and effect.
6. COVENANTS OF PLEDGOR
6.1 Pledgor shall not sell, transfer, assign or otherwise dispose of any
of the Pledged Securities or any interest therein without obtaining the prior
written consent of Secured Party and shall keep the Pledged Securities free of
all security interests or other encumbrances except the lien and security
interests granted herein.
6.2 Pledgor shall pay when due all taxes, assessments, expenses and other
charges which may be levied or assessed against the Pledged Securities.
6.3 Pledgor shall give Secured Party immediate written notice of any
change in Pledgor's name as set forth above and of any change in the location of
Pledgor's chief executive office.
6.4 Pledgor, at its cost and expense, shall protect and defend the Pledged
Securities, this Agreement and all of the rights of Secured Party hereunder
against all claims and demands of other parties. Pledgor shall pay all claims
and charges that in the opinion of Secured Party might prejudice, imperil or
otherwise affect the Pledged Securities. Pledgor shall promptly
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<PAGE> 6
notify Secured Party of any levy, distraint or other seizure, by legal process
or otherwise, of all or any part of the Pledged Securities and of any threatened
or filed claims or proceedings that might in any way affect or impair the terms
of this Agreement.
6.5 If Pledgor shall fail to pay any taxes, assessments, expenses or
charges, to keep all of the Pledged Securities free from other security
interests, encumbrances or claims, or to perform otherwise as required herein,
Secured Party may advance the monies necessary to pay the same or to so perform.
6.6 All rights, powers and remedies granted Secured Party herein, or
otherwise available to Secured Party, are for the sole benefit and protection of
Secured Party, and Secured Party may exercise any such right, power or remedy at
its option and in its sole and absolute discretion without any obligation to do
so. In addition, if, under the terms hereof, Secured Party is given two or more
alternative courses of action, Secured Party may elect any alternative or
combination of alternatives at its option and in its sole and absolute
discretion. All monies advanced by Secured Party under the terms hereof, all
amounts paid, suffered or incurred by Secured Party under the terms hereof and
all amounts paid, suffered or incurred by Secured Party in exercising any
authority granted herein, including reasonable attorneys' fees, shall be added
to the Obligation, shall be secured hereby, shall bear interest at the highest
rate payable on any of the Obligation until paid, and shall be due and payable
by Pledgor to Secured Party immediately without demand.
6.7 Secured Party shall use such reasonable care in handling, preserving
and protecting the Pledged Securities in its possession as it uses in handling
similar property for its own account. Secured Party, however, shall have no
liability for the loss, destruction or disappearance of any Pledged Securities
unless there is affirmative proof of a lack of due care; the lack of due care
shall not be implied solely by virtue of any loss, destruction or disappearance.
Secured Party shall not be required to take any steps necessary to preserve any
rights in the Pledged Securities against prior parties or to protect, perfect,
preserve or maintain any security interest given to secure the Pledged
Securities.
6.8 Immediately upon demand by Secured Party, Pledgor shall execute and
deliver to Secured Party such other and additional applications, acceptances,
stock powers, authorizations, irrevocable proxies, dividend and other orders,
chattel paper, instruments or other evidences of payment and such other
documents as Secured Party may reasonably request to secure to Secured Party the
rights, powers and authorities intended to be conferred upon Secured Party by
this Agreement. All assignments and endorsements by Pledgor shall be in such
form and substance as may be satisfactory to Secured Party.
7. EVENTS OF DEFAULT; REMEDIES
7.1 The occurrence of any Event of Default under the Loan Agreement shall
constitute and is hereby defined to be an "Event of Default."
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<PAGE> 7
7.2 Upon the occurrence of any Event of Default and at any time while such
Event of Default is continuing, Secured Party shall have the following rights
and remedies and may do one or more of the following:
(a) Declare all or any part of the Obligation to be immediately due and
payable, and the same, with all costs and charges, shall be collectible
thereupon by action at law;
(b) Transfer the Pledged Securities or any part thereof into its own
name or that of its nominee so that Secured Party or its nominee may
appear of record as the sole owner thereof;
(c) Vote any or all of the Pledged Securities and give all consents,
waivers and ratifications in respect thereof and otherwise acting with
respect thereto as though it were the absolute owner thereof;
(d) Exercise any and all rights of conversion, exchange, subscription,
or any other rights, privileges or options pertaining to any of the
Pledged Securities including, but not limited to, the right to
exchange, at its discretion, any or all of the Pledged Securities upon
the merger, consolidation, reorganization, recapitalization or other
readjustment of the Company or upon the exercise by Pledgor or Secured
Party of any right, privilege or option pertaining to any of the shares
of the Pledged Securities, and in connection therewith to deposit and
deliver such shares of Pledged Securities with any committee,
depository, transfer agent, registrar or any other agency upon such
terms as Secured Party may determine without liability except to
account for the property actually received by it;
(e) Receive and retain any dividend or other distribution on account of
the Pledged Securities; and
(f) Sell any or all of the Pledged Securities in accordance with the
provisions hereof;
but Secured Party shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure to do so or
delay in so doing. Pledgor waives all rights to be advised or to receive any
notices, statements or communications received by Secured Party or its nominee
as the record owner of all or any of the Pledged Securities. Any cash received
and retained by Secured Party as additional collateral hereunder may be applied
to payment in the manner provided in Subparagraph 7.3(c) below.
7.3 In connection with Secured Party's right to sell any or all of the
Pledged Securities, upon the occurrence of any Event of Default and at any time
while such Event of Default is continuing:
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<PAGE> 8
(a) (i) Secured Party shall have the right at any time and from time to
time to sell, resell, assign and deliver, in its discretion, all or any
part of the Pledged Securities in one or more units, at the same or
different times, and all right, title and interest, claim and demand
therein, and right of redemption thereof, at private sale, or at public
sale to the highest bidder for cash, upon credit or for future delivery,
Pledgor hereby waiving and releasing to the fullest extent permitted by
law any and all equity or right of redemption. If any of the Pledged
Securities are sold by Secured Party upon credit or for future delivery,
Secured Party shall not be liable for the failure of the purchaser to
purchase or pay for same, and, in the event of any such failure, Secured
Party may resell such Pledged Securities. In no event shall Pledgor be
credited with any part of the proceeds of the sale of any Pledged
Securities until cash payment thereof has actually been received by
Secured Party.
(ii) No demand, advertisement or notice, all of which are hereby expressly
waived, shall be required in connection with any sale or other disposition
of all or any part of the Pledged Securities that threatens to decline
speedily in value or that is of a type customarily sold on a recognized
market; otherwise Secured Party shall give Pledgor at least five (5) days'
prior notice of the time and place of any public sale or of the time after
which any private sale or other dispositions are to be made, which Pledgor
agrees is reasonable, all other demands, advertisements and notices being
hereby waived. Upon any sale, whether under this Agreement or by virtue of
judicial proceedings, Secured Party may bid for and purchase any or all of
the Pledged Securities and, upon compliance with the terms of the sale,
may hold, retain, possess and dispose of such items in its own absolute
right without further accountability, and as purchaser at such sale, in
paying the purchase price, may turn in any note or notes held by Secured
Party in lieu of cash up to the amount that would, upon distribution of
the net proceeds of such sale in accordance with Subparagraph 7.3(c)
hereof, be payable to Secured Party. In case the amount so payable thereon
shall be less than the amount due thereon, the note or notes turned in (in
lieu of cash) shall be returned to the holder thereof after being properly
stamped to show the partial payment effected by such purchase.
(b) Pledgor recognizes that Secured Party may be unable to effect a sale to
the public of all or a part of the Pledged Securities by reason of prohibitions
contained in applicable securities laws, but may be compelled to resort to one
or more sales to a restricted group of purchasers who will be obliged to agree,
among other things,
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<PAGE> 9
to acquire such Pledged Securities for their own account, for investment
and not with a view to the distribution or resale thereof. Pledgor agrees
that sales so made may be at prices and other terms less favorable to the
seller than if such Pledged Securities were sold to the public, and that
Secured Party has no obligation to delay sale of any such Pledged
Securities for the period of time necessary to permit the issuer of such
Pledged Securities to register the same for sale to the public under
applicable securities laws. Pledgor agrees that negotiated sales made
under the foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner.
(c) In all sales of Pledged Securities, public or private, Secured Party
shall apply the proceeds of sale as follows:
(i) First, to the payment of all costs and expenses incurred
hereunder or for the sale, transfer, or delivery, including broker's
and attorneys' fees;
(ii) Next to the payment of the Obligation; and
(iii) The balance, if any, to Pledgor or to the person or persons
entitled thereto upon proper demand.
7.4 Secured Party shall have the right, for and in the name, place and
stead of Pledgor, to execute endorsements, assignments or other instruments of
conveyance or transfer with respect to all or any of the Pledged Securities and
any instruments, documents and statements that Pledgor is obligated to furnish
or execute hereunder. Pledgor shall execute and deliver such additional
documents as may be necessary to enable Secured Party to implement such right.
7.5 Pledgor shall pay all costs and expenses, including without limitation
court costs and reasonable attorneys' fees, incurred by Secured Party in
enforcing payment and performance of the Obligation or in exercising the rights
and remedies of Secured Party hereunder. All such costs and expenses shall be
secured by this Agreement and by all other lien and security documents securing
the Obligation. In the event of any court proceedings, court costs and
attorneys' fees shall be set by the court and not by jury and shall be included
in any judgment obtained by Secured Party.
7.6 In addition to any remedies provided herein for an Event of Default,
Secured Party shall have all the rights and remedies afforded a secured party
under the Uniform Commercial Code and all other legal and equitable remedies
allowed under applicable law. No failure on the part of Secured Party to
exercise any of its rights hereunder arising upon any Event of Default shall be
construed to prejudice its rights upon the occurrence of any other or subsequent
Event of Default. No delay on the part of Secured Party in exercising any such
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<PAGE> 10
rights shall be construed to preclude it from the exercise thereof at any time
while that Event of Default is continuing. Secured Party may enforce any one or
more rights or remedies hereunder successively or concurrently. By accepting
payment or performance of any of the Obligation after its due date, Secured
Party shall not thereby waive the agreement contained herein that time is of the
essence, nor shall Secured Party waive either its right to require prompt
payment or performance when due of the remainder of the Obligation or its right
to consider the failure to so pay or perform an Event of Default.
8. MISCELLANEOUS PROVISIONS
8.1 The acceptance of this Agreement by Secured Party shall not be
considered a waiver of or in any way to affect or impair any other security that
Secured Party may have, acquire simultaneously herewith, or hereafter acquire
for the payment or performance of the Obligation, nor shall the taking by
Secured Party at any time of any such additional security be construed as a
waiver of or in any way to affect or impair the right and interest granted
herein; Secured Party may resort, for the payment or performance of the
Obligation, to its several securities therefor in such order and manner as it
may determine.
8.2 Without notice or demand, without the necessity for any additional
endorsements, without affecting the obligations of Pledgor hereunder or the
personal liability of any person for payment or performance of the Obligation,
and without affecting the rights and interests granted herein, Secured Party,
from time to time, may: (i) extend the time for payment of all or any part of
the Obligation, accept a renewal note therefor, reduce the payments thereon,
release any person liable for all or any part thereof, or otherwise change the
terms of all or any part of the Obligation; (ii) take and hold other security
for the payment or performance of the Obligation and enforce, exchange,
substitute, subordinate, waive or release any such security; (iii) join in any
extension or subordination agreement; or (iv) release any part of the Pledged
Securities from this Agreement.
8.3 Pledgor waives and agrees not to assert: (i) any right to require
Secured Party to proceed against any guarantor, to proceed against or exhaust
any other security for the Obligation, to pursue any other remedy available to
Secured Party, or to pursue any remedy in any particular order or manner; (ii)
the benefits of any statute of limitations affecting the enforcement hereof;
(iii) the benefits of any legal or equitable doctrine or principle of
marshalling; (iv) demand, diligence, presentment for payment, protest and
demand, and notice of extension, dishonor, protest, demand and nonpayment,
relating to the Obligation; and (v) any benefit of, and any right to participate
in, any other security now or hereafter held by Secured Party.
8.4 The terms herein shall have the meanings in and be construed under the
Uniform Commercial Code. This Agreement shall be governed by and construed
according to the internal laws of the State of Arizona. 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
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<PAGE> 11
is held to be void or invalid, the same shall not affect the remainder hereof
which shall be effective as though the void or invalid provision had not been
contained herein.
8.5 No modification, rescission, waiver, release or amendment of any
provision of this Agreement shall be made except by a written agreement executed
by Pledgor and a duly authorized officer of Secured Party.
8.6 This is a continuing agreement, which shall remain in full force and
effect until actual receipt by Secured Party of written notice of its revocation
as to future transactions and shall remain in full force and effect thereafter
until all of the Obligation incurred before the receipt of such notice, and all
of the Obligation incurred thereafter under commitments extended by Secured
Party before the receipt of such notice, shall have been paid and performed in
full.
8.7 No setoff or claim that Pledgor now has or may in the future have
against Secured Party shall relieve Pledgor from paying or performing its
obligations hereunder.
8.8 Time is of the essence hereof. All liability hereunder shall be joint
and several. This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their heirs, personal representatives,
successors and assigns. The term "Secured Party" shall include not only the
original Secured Party hereunder but also any future owner and holder, including
pledgees, of the note or notes evidencing the Obligation. The provisions hereof
shall apply to the parties according to the context thereof and without regard
to the number or gender of words or expressions used.
8.9 All notices required or permitted to be given hereunder shall be in
writing and may be given as permitted in the Loan Agreement.
8.10 A carbon, photographic or other reproduced copy of this Agreement
and/or any financing statement relating hereto shall be sufficient for filing
and/or recording as a financing statement.
IN WITNESS WHEREOF, these presents are executed as of the date indicated
above.
CONTINENTAL CIRCUITS CORP., a Delaware
Witnessed by: corporation
(other than notary)
(Signatures of witness) By: /s/ Frederick G. McNamee, III
-------------------------------------------
Its: President and Chief Executive Officer
PLEDGOR
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<PAGE> 12
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 25th day of July,
1997, by Frederick G. McNamee, III, the President of CONTINENTAL CIRCUITS CORP,
a Delaware corporation, on behalf of that corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
(Signature of Notary)
----------------------
Notary Public
My commission expires:
(Seal of Notary)
- ----------------
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<PAGE> 13
SCHEDULE "A"
All issued and outstanding shares of CCIR of Texas Corp., a Texas
corporation (the "Company"), now or hereafter owned by Pledgor, which as of the
date hereof consists of 100 shares.
<PAGE> 14
SCHEDULE "A" TO SECURITY AGREEMENTS
All of Debtor's right, title and interest in and to the following
described personal property:
(a) All accounts, general intangibles, instruments, documents and
chattel paper, as those terms are defined in the Uniform Commercial Code
(including all accounts receivable, notes, drafts, lease agreements and
security agreements), and all goods, if any, represented thereby, whether
now existing or hereafter acquired or created from time to time in the
course of Debtor's business;
(b) All inventory now owned or hereafter acquired, including all
goods held for sale or lease in Debtor's business, as now or hereafter
conducted, and all materials, work in process and finished goods used or
to be consumed in Debtor's business (whether or not the inventory is
represented by warehouse receipts or bills of lading or has been or may be
placed in transit or delivered to a public warehouse);
(c) All equipment now owned or hereafter acquired, including all
furniture, fixtures, furnishings, vehicles (whether titled or non-titled),
machinery, materials and supplies, wherever located, hereof, together with
all parts, accessories, attachments, additions thereto or replacements
therefor;
(d) All instruments, documents, stock certificates and chattel paper
now held by or hereafter delivered to Secured Party, together with all
property rights and security interests evidenced thereby, all increases
thereof (including, without limitation, stock dividends), all profits
therefrom and all transformations thereof, including but not limited to
such items described on the collateral schedule (if any) attached hereto
and by this reference made a part hereof;
(e) All other personal property of any kind, including without
limitation all such property more particularly described as follows:
(i) Materials, supplies, fixtures, machinery, furniture and
furnishings;
(ii) Income, receipts, revenues, rents, issues and profits;
(iii) Claims and causes of action, legal and equitable, in any
form whether arising in contract or in tort, and awards, payments
and proceeds due or to become due;
(iv) Sales agreements, escrow agreements, deposit receipts,
and other documents and agreements for the sale or other
<PAGE> 15
disposition of all or any of the personal property described herein,
and deposits, proceeds and benefits arising from the sale or other
disposition of all or any of the personal property described herein;
(v) Policies or certificates of insurance, contracts,
agreements or rights of indemnification, guaranty or surety, and
awards, loss payments, proceeds, and premium refunds that may be
payable with respect to such policies, certificates, contracts,
agreements or rights;
(vi) Contracts, agreements, permits, licenses, authorizations
and certificates;
(vii) Trade names, trademarks, and service marks (subject to
any franchise or license agreements relating thereto);
(viii)Replacements and substitutions for, modifications of,
and supplements, accessions, addenda and additions to, all of the
personal property described herein;
(ix) Books, records, correspondence, files and electronic
media, and all information stored therein;
together with (i) all policies or certificates of insurance covering any of the
foregoing property, and all awards, loss payments, proceeds and premium refunds
that may become payable with respect to such policies; (ii) all property of
Debtor that is now or may hereafter be in the possession or control of Secured
Party in any capacity, including without limitation all monies owed or that
become owed by Secured Party to Debtor and (iii) all proceeds of any of the
foregoing property, whether due or to become due from any sale, exchange or
other disposition thereof, whether cash or non-cash in nature, and whether
represented by checks, drafts, notes or other instruments for the payment of
money, including, without limitation, all property, whether cash or non-cash in
nature, derived from tort, contractual or other claims arising in connection
with any of the foregoing property.
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<PAGE> 1
Exhibit 10.9
CONTINUING GUARANTY
(Texas)
TO: BANK ONE, ARIZONA, NA, a national banking association
1. For valuable consideration, the undersigned ("Guarantors"), jointly and
severally, absolutely and unconditionally guarantee and promise to pay to BANK
ONE, ARIZONA, NA ("Bank"), or order, on demand, in lawful money of the United
States, any and all indebtedness of CONTINENTAL CIRCUITS CORP., a Delaware
corporation ("Borrower"), to Bank. The word "Indebtedness" includes any and all
loans, debts, obligations, and liabilities of whatever nature of Borrower owed
to Bank whenever and however made, incurred or created, whether recovery upon
such Indebtedness may be barred by any statute of limitations, whether such
Indebtedness may be otherwise unenforceable, and whether Borrower is liable
individually or jointly with others.
2. The liability of Guarantors shall not exceed at any one time the total
of (i) the principal sum of $45,000,000.00 plus (ii) all interest owed thereon
plus (iii) all costs, attorneys' fees, losses and expenses which may be incurred
by Bank by reason of Borrower's default in the payment of the Indebtedness.
3. This Guaranty shall bind and obligate the undersigned and their
successors and assigns with Borrower, jointly and severally, for the payment of
the Indebtedness. A separate action may be commenced against Guarantors whether
action is brought against Borrower or whether Borrower may be joined in any such
action. Guarantors waive any defenses Borrower may now or hereafter have to
payment of the Indebtedness.
4. Guarantors authorize Bank, without notice or demand and without
affecting Guarantors' liability hereunder, to, from time to time: (a) renew,
compromise, extend, review, accelerate, or otherwise change the time for payment
of, or otherwise change the terms of, the Indebtedness or any part thereof
(including the rate of interest thereon); (b) take security for the payment of
this Guaranty or the Indebtedness, and exchange, enforce, waive, or release any
such security, or take additional security; (c) apply any proceeds from such
security, or take additional security; (c) apply any proceeds from such security
and direct the order or manner of sale of such security as Bank, in its
discretion, may determine; and (d) release or substitute any one or more of the
Guarantors or additional guarantors.
5. The obligation of the Guarantors shall remain in full force and effect
until the entire Indebtedness shall have been paid, and shall not be affected
upon the happening of any event, including without limitation, any of the
following: (a) the Bank's failure to give notice to the Guarantors of the
occurrence of any event of default in the payment of the Indebtedness or
performance of the Borrower; (b) the Bank's waiver of the payment, performance
or observance
<PAGE> 2
by the Borrower of any obligations, covenants or agreements related in any way
to the Indebtedness; (c) the Bank's impairment, modification, release or
amendment of any obligation, covenant or term of any agreement related to the
Indebtedness; (d) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of any of the Borrower's assets or any insolvency, bankruptcy,
reorganization or other similar proceedings affecting Borrower; or (e) any event
or action that would, in the absence of this clause, result as a matter of law
in the release or discharge of the Guarantors from the performance or observance
of any obligation, covenant or agreement contained herein other than payment in
full of the Indebtedness.
6. Guarantors waive any right to require Bank to (a) proceed against
Borrower, Guarantors, or other guarantors; (b) proceed against or exhaust any
security held from Guarantor or Borrower; or (c) pursue any other remedy in
Bank's power whatsoever. Guarantors agree that if the Indebtedness is secured in
whole or in part by a deed of trust on real property, Bank may proceed to
foreclose any other collateral first or may proceed against Guarantors, Borrower
or any obligor without waiving its right to exercise its remedies and foreclose
its lien under such deed of trust at a later time. Bank may, without notice,
assign this Guaranty in whole or in part.
7. Until one year after the Indebtedness has been fully satisfied,
Guarantors shall have no right of indemnity, reimbursement, contribution or
subrogation as to Borrower unless Bank, at its option, so elects. Guarantors
hereby waive any right to enforce any remedy which Bank now has, or may
hereafter have, against Borrower, and hereby waive any benefit of, any right to
participate in, any security now or hereafter held by Bank. Guarantors
acknowledge that Borrower may owe other sums and obligations to Bank. Guarantors
agree that any payments received by Bank, other than from Guarantors under this
Guaranty, whether from the Borrower or from the proceeds of any collateral or
otherwise, may be applied by Bank upon any amounts owed to Bank in such order
and manner as Bank may determine in its sole discretion. Guarantors waive all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance of this
Guaranty and of the existence, creation, or incurring of new or additional
Indebtedness. Guarantors waive the benefits of Arizona Revised Statute Sections
12-1641 and 12-1642.
8. Guarantors agree to pay reasonable attorneys' fees and all other costs
and expenses which may be incurred by Bank in the enforcement of this Guaranty.
Guarantors hereby indemnify Bank against all costs or repayments incurred by
Bank or required of Bank as a result of payment hereunder being challenged as a
preference.
9. Bank shall have a lien upon, and a right of set-off against, all
monies, securities and other property of Guarantors now or hereafter in the
possession of or on deposit with Bank, whether held in a general or special
account, or for safekeeping or otherwise; and every such lien and right of
set-off may be exercised without demand upon, Guarantors until the Indebtedness
is paid in full. Bank agrees to notify Guarantors promptly after any such
action, provided that the failure to give such notice shall not affect the
validity of such action.
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<PAGE> 3
10. This Guaranty is cumulative as to amounts and does not revoke or alter
any guaranty previously delivered to Bank or any guaranty subsequently delivered
to Bank. This Guaranty does not in any manner limit the amount of any borrowing
or other financing arrangement between Bank and Borrower.
11. Guarantors acknowledge that the execution of this Guaranty shall not
entitle Guarantors to rely on the Bank to preserve or maintain any collateral or
other security that Bank may now have or hereafter acquire in connection with
the Indebtedness. Guarantors hereby release Bank from any obligation to inspect,
preserve or maintain any collateral or other security that Bank may now have or
hereafter acquire in connection with the Indebtedness, and any obligation to
monitor, control or see to the use of any monies advanced to the Borrower.
Guarantors further waive any and all rights to receive reports or other
information Bank may have relating to Borrower.
12. If Guarantor is a corporation or a partnership, Guarantor represents
and warrants that: (a) it has the necessary power under law and its governing
documents to make the agreements on its part herein contained; (b) the execution
of this Guaranty has been authorized by all necessary and proper actions; (c)
the execution and delivery of this Guaranty, the consummation of the
transactions contemplated hereby, and the fulfillment of or compliance with the
terms and conditions of this Guaranty do not conflict with or result in a breach
of any of the terms, conditions or provisions of any agreement or instrument to
which it is a party or by which it is bound; and (d) Guarantor agrees that
during the term of this Guaranty it will maintain its separate existence, and
will not dissolve, terminate, merge or consolidate unless all of its assets are
transferred to Borrower.
13. Guarantor agrees that to the extent Borrower or Guarantor makes any
payment to Bank in connection with the Indebtedness, and all or any part of such
payment is subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid by Bank or paid over to a trustee, receiver
or any other entity, whether under any bankruptcy act or otherwise (any such
payment is hereinafter referred to as a "Preferential Payment"), then this
Guaranty shall continue to be effective or shall be reinstated, as the case may
be, and, to the extent of such payment or repayment by Bank, the Indebtedness or
part thereof intended to be satisfied by such Preferential Payment shall be
revived and continued in full force and effect as if said Preferential Payment
had not been made.
14. Guarantors agree that during the term of this Guaranty they will not
transfer or dispose of any material part of their assets except in the ordinary
course of business for a full and fair consideration or unless all of its assets
are transferred to Borrower. Guarantors agree that during the term of this
Guaranty they will furnish Bank annually, within 90 days after the close of each
fiscal year, as the case may be, a financial statement consisting of a balance
sheet and such other financial information as Bank may reasonably request.
15. This Guaranty applies to, is binding upon, and inures to the benefit
of all parties hereto, and their successors and assigns.
-3-
<PAGE> 4
16. If any part or parts of this Guaranty shall at any time be held to be
invalid or unenforceable by binding arbitration or by a court of competent
jurisdiction, the remaining part or parts of the Guaranty shall be and remain in
full force and effect. Notwithstanding anything else herein to the contrary, if
the Guarantor's obligations hereunder are subject to avoidance by a trustee or
debtor-in-possession in any bankruptcy proceedings under the United States
Bankruptcy Code or any comparable provisions or subject to avoidance by any
creditor under applicable state fraudulent transfer acts then, in such event,
the Guarantor's obligations hereunder shall be reduced to the maximum amount
which would not be subject to such avoidance.
17. This Guaranty shall be construed in accordance with the laws of the
State of Arizona.
18. Guarantors acknowledge the Bank would not have allowed the
Indebtedness to exist except for the consideration received from Guarantor's
promise to pay pursuant to this Guaranty.
19. All words used herein in the plural shall be deemed to have been used
in the singular where the context and construction so requires; and when there
is more than one Borrower named herein, the word "Borrower" shall mean all of
them.
Dated: July 25, 1997.
CCIR OF TEXAS CORP., a Texas corporation
By: /s/ Frederick G. McNamee III
----------------------------------
Its President
Address: 15508 Bratton Lane
Austin, Texas 78728
Mailing Address: 3502 E. Roeser Road
Phoenix, Arizona 85040
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<PAGE> 1
Exhibit 10.10
CONTINUING GUARANTY
(Barbados)
TO: BANK ONE, ARIZONA, NA, a national banking association
1. For valuable consideration, the undersigned ("Guarantors"), jointly and
severally, absolutely and unconditionally guarantee and promise to pay to BANK
ONE, ARIZONA, NA ("Bank"), or order, on demand, in lawful money of the United
States, any and all indebtedness of CONTINENTAL CIRCUITS CORP., a Delaware
corporation ("Borrower"), to Bank. The word "Indebtedness" includes any and all
loans, debts, obligations, and liabilities of whatever nature of Borrower owed
to Bank whenever and however made, incurred or created, whether recovery upon
such Indebtedness may be barred by any statute of limitations, whether such
Indebtedness may be otherwise unenforceable, and whether Borrower is liable
individually or jointly with others.
2. The liability of Guarantors shall not exceed at any one time the total
of (i) the principal sum of $45,000,000.00 plus (ii) all interest owed thereon
plus (iii) all costs, attorneys' fees, losses and expenses which may be incurred
by Bank by reason of Borrower's default in the payment of the Indebtedness.
3. This Guaranty shall bind and obligate the undersigned and their
successors and assigns with Borrower, jointly and severally, for the payment of
the Indebtedness. A separate action may be commenced against Guarantors whether
action is brought against Borrower or whether Borrower may be joined in any such
action. Guarantors waive any defenses Borrower may now or hereafter have to
payment of the Indebtedness.
4. Guarantors authorize Bank, without notice or demand and without
affecting Guarantors' liability hereunder, to, from time to time: (a) renew,
compromise, extend, review, accelerate, or otherwise change the time for payment
of, or otherwise change the terms of, the Indebtedness or any part thereof
(including the rate of interest thereon); (b) take security for the payment of
this Guaranty or the Indebtedness, and exchange, enforce, waive, or release any
such security, or take additional security; (c) apply any proceeds from such
security, or take additional security; (c) apply any proceeds from such security
and direct the order or manner of sale of such security as Bank, in its
discretion, may determine; and (d) release or substitute any one or more of the
Guarantors or additional guarantors.
5. The obligation of the Guarantors shall remain in full force and effect
until the entire Indebtedness shall have been paid, and shall not be affected
upon the happening of any event, including without limitation, any of the
following: (a) the Bank's failure to give notice to the Guarantors of the
occurrence of any event of default in the payment of the Indebtedness or
performance of the Borrower; (b) the Bank's waiver of the payment, performance
or observance
<PAGE> 2
by the Borrower of any obligations, covenants or agreements related in any way
to the Indebtedness; (c) the Bank's impairment, modification, release or
amendment of any obligation, covenant or term of any agreement related to the
Indebtedness; (d) the voluntary or involuntary liquidation, dissolution, sale or
other disposition of any of the Borrower's assets or any insolvency, bankruptcy,
reorganization or other similar proceedings affecting Borrower; or (e) any event
or action that would, in the absence of this clause, result as a matter of law
in the release or discharge of the Guarantors from the performance or observance
of any obligation, covenant or agreement contained herein other than payment in
full of the Indebtedness.
6. Guarantors waive any right to require Bank to (a) proceed against
Borrower, Guarantors, or other guarantors; (b) proceed against or exhaust any
security held from Guarantor or Borrower; or (c) pursue any other remedy in
Bank's power whatsoever. Guarantors agree that if the Indebtedness is secured in
whole or in part by a deed of trust on real property, Bank may proceed to
foreclose any other collateral first or may proceed against Guarantors, Borrower
or any obligor without waiving its right to exercise its remedies and foreclose
its lien under such deed of trust at a later time. Bank may, without notice,
assign this Guaranty in whole or in part.
7. Until one year after the Indebtedness has been fully satisfied,
Guarantors shall have no right of indemnity, reimbursement, contribution or
subrogation as to Borrower unless Bank, at its option, so elects. Guarantors
hereby waive any right to enforce any remedy which Bank now has, or may
hereafter have, against Borrower, and hereby waive any benefit of, any right to
participate in, any security now or hereafter held by Bank. Guarantors
acknowledge that Borrower may owe other sums and obligations to Bank. Guarantors
agree that any payments received by Bank, other than from Guarantors under this
Guaranty, whether from the Borrower or from the proceeds of any collateral or
otherwise, may be applied by Bank upon any amounts owed to Bank in such order
and manner as Bank may determine in its sole discretion. Guarantors waive all
presentments, demands for performance, notices of nonperformance, protests,
notices of protest, notices of dishonor and notices of acceptance of this
Guaranty and of the existence, creation, or incurring of new or additional
Indebtedness. Guarantors waive the benefits of Arizona Revised Statute Sections
12-1641 and 12-1642.
8. Guarantors agree to pay reasonable attorneys' fees and all other costs
and expenses which may be incurred by Bank in the enforcement of this Guaranty.
Guarantors hereby indemnify Bank against all costs or repayments incurred by
Bank or required of Bank as a result of payment hereunder being challenged as a
preference.
9. Bank shall have a lien upon, and a right of set-off against, all
monies, securities and other property of Guarantors now or hereafter in the
possession of or on deposit with Bank, whether held in a general or special
account, or for safekeeping or otherwise; and every such lien and right of
set-off may be exercised without demand upon, Guarantors until the Indebtedness
is paid in full. Bank agrees to notify Guarantors promptly after any such
action, provided that the failure to give such notice shall not affect the
validity of such action.
-2-
<PAGE> 3
10. This Guaranty is cumulative as to amounts and does not revoke or alter
any guaranty previously delivered to Bank or any guaranty subsequently delivered
to Bank. This Guaranty does not in any manner limit the amount of any borrowing
or other financing arrangement between Bank and Borrower.
11. Guarantors acknowledge that the execution of this Guaranty shall not
entitle Guarantors to rely on the Bank to preserve or maintain any collateral or
other security that Bank may now have or hereafter acquire in connection with
the Indebtedness. Guarantors hereby release Bank from any obligation to inspect,
preserve or maintain any collateral or other security that Bank may now have or
hereafter acquire in connection with the Indebtedness, and any obligation to
monitor, control or see to the use of any monies advanced to the Borrower.
Guarantors further waive any and all rights to receive reports or other
information Bank may have relating to Borrower.
12. If Guarantor is a corporation or a partnership, Guarantor represents
and warrants that: (a) it has the necessary power under law and its governing
documents to make the agreements on its part herein contained; (b) the execution
of this Guaranty has been authorized by all necessary and proper actions; (c)
the execution and delivery of this Guaranty, the consummation of the
transactions contemplated hereby, and the fulfillment of or compliance with the
terms and conditions of this Guaranty do not conflict with or result in a breach
of any of the terms, conditions or provisions of any agreement or instrument to
which it is a party or by which it is bound; and (d) Guarantor agrees that
during the term of this Guaranty it will maintain its separate existence, and
will not dissolve, terminate, merge or consolidate unless all of its assets are
transferred to Borrower.
13. Guarantor agrees that to the extent Borrower or Guarantor makes any
payment to Bank in connection with the Indebtedness, and all or any part of such
payment is subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid by Bank or paid over to a trustee, receiver
or any other entity, whether under any bankruptcy act or otherwise (any such
payment is hereinafter referred to as a "Preferential Payment"), then this
Guaranty shall continue to be effective or shall be reinstated, as the case may
be, and, to the extent of such payment or repayment by Bank, the Indebtedness or
part thereof intended to be satisfied by such Preferential Payment shall be
revived and continued in full force and effect as if said Preferential Payment
had not been made.
14. Guarantors agree that during the term of this Guaranty they will not
transfer or dispose of any material part of their assets except in the ordinary
course of business for a full and fair consideration or unless all of its assets
are transferred to Borrower. Guarantors agree that during the term of this
Guaranty they will furnish Bank annually, within 90 days after the close of each
fiscal year, as the case may be, a financial statement consisting of a balance
sheet and such other financial information as Bank may reasonably request.
15. This Guaranty applies to, is binding upon, and inures to the benefit
of all parties hereto, and their successors and assigns.
-3-
<PAGE> 4
16. If any part or parts of this Guaranty shall at any time be held to be
invalid or unenforceable by binding arbitration or by a court of competent
jurisdiction, the remaining part or parts of the Guaranty shall be and remain in
full force and effect. Notwithstanding anything else herein to the contrary, if
the Guarantor's obligations hereunder are subject to avoidance by a trustee or
debtor-in-possession in any bankruptcy proceedings under the United States
Bankruptcy Code or any comparable provisions or subject to avoidance by any
creditor under applicable state fraudulent transfer acts then, in such event,
the Guarantor's obligations hereunder shall be reduced to the maximum amount
which would not be subject to such avoidance.
17. This Guaranty shall be construed in accordance with the laws of the
State of Arizona.
18. Guarantors acknowledge the Bank would not have allowed the
Indebtedness to exist except for the consideration received from Guarantor's
promise to pay pursuant to this Guaranty.
19. All words used herein in the plural shall be deemed to have been used
in the singular where the context and construction so requires; and when there
is more than one Borrower named herein, the word "Borrower" shall mean all of
them.
Dated: July 25, 1997.
CONTINENTAL CIRCUITS INTERNATIONAL,
INC., a Barbados corporation
By: /s/ Frederick G. McNamee III
-------------------------------------
Its President
Address: c/o Ernest & Young Services, Ltd.
P.O. Box 261
Bay Street
Bridgetown, Barbados
Mailing Address: 3502 East Roeser Road
Phoenix, Arizona 85040
-4-
<PAGE> 1
Exhibit 10.11
ENVIRONMENTAL INDEMNITY AGREEMENT
BY THIS AGREEMENT, executed as of the 25th day of July, 1997, in
connection with and as partial consideration for financial accommodations by
BANK ONE, ARIZONA, NA, a national banking association ("Lender"), to CONTINENTAL
CIRCUITS CORP., a Delaware corporation ("Borrower"), guaranteed by Continental
Circuits International, Inc., a Barbados corporation and CCIR OF TEXAS CORP., a
Texas corporation ("Guarantors") (Borrower and Guarantors are hereinafter
severally and collectively called "Indemnitor") in the amount of FORTY-FIVE
MILLION AND NO/100 DOLLARS ($45,000,000.00) (the "Loan"), evidenced by the
promissory note of even date herewith (the "Note"), secured or to be secured in
part by one or more deeds of trust (severally and collectively, the "Deed of
Trust") on the property described on Schedule "A" attached hereto and by this
reference incorporated herein (the "Property"), Indemnitor hereby certifies,
represents, and warrants to Lender, and agrees as follows:
1. As used herein, the following terms shall have the meanings specified
below:
DEFINITIONS
1.1 The term "Agreement" shall mean this Environmental Indemnity
Agreement and all modifications, supplements, and amendments thereto.
1.2 The term "De Minimis Amounts" shall mean any Hazardous Substance
either (1) being transported on or from the Property or being stored for use by
Borrower or its tenant on the Property within a year from original arrival on
the Property in connection with Borrower's current operations or (2) being
currently used by Borrower or its tenant on Property, in both instances in a
manner that both (a) does not constitute a violation or threatened violation of
any Environmental Law or require any reporting or disclosure under any
Environmental Law and (b) is consistent with customary business practice for
such operations in the state where the Property is located.
1.3 The term "Environmental Claim" shall mean any and all actual or
threatened liabilities, claims, actions, causes of action, judgments, orders,
inquiries, investigations, studies or notices relating to any Hazardous
Substance or any Environmental Law.
1.4 The term "Environmental Law" shall mean any federal, state or
local law, whether common law, statute, ordinance, rule, regulation, or judicial
or administrative decision or policy or guideline, pertaining to Hazardous
Substances, health, industrial hygiene, environmental conditions, or the
regulation or protection of the environment, and all amendments thereto as of
this date and to be added in the future and any successor statute or rule or
regulation promulgated thereto.
<PAGE> 2
1.5 The term "Hazardous Substance" shall mean all of the following:
(a) Any substance, material, or waste that is included within the
definitions of "hazardous substances," "hazardous materials," "hazardous waste,"
"toxic substances," "toxic materials," "toxic waste," or words of similar import
in any Environmental Law;
(b) Those substances listed as hazardous substances by the United States
Department of Transportation (or any successor agency) (49 C.F.R. 172.101 and
amendments thereto) or by the Environmental Protection Agency (or any successor
agency) (40 C.F.R. Part 302 and amendments thereto); and
(c) Any substance, material, or waste that is petroleum,
petroleum-related, or a petroleum by-product, asbestos or asbestos-containing
material, polychlorinated biphenyls, flammable, explosive, radioactive, freon
gas, radon, or a pesticide, herbicide, or any other agricultural chemical.
1.6 The term "Indemnified Parties" shall mean and includes Lender,
any parent, subsidiary, or affiliated company of Lender, any assignee or
successor in interest of all or part of Lender's interest in the Loan or the
Loan Documents, any owner of a participation interest in the Loan or the Loan
Documents, any purchaser who acquires all or part of the Property from Lender,
its parent, or any of its subsidiaries or affiliates, any recipient of a deed or
assignment in lieu of foreclosure of all or part of the Property, any court
appointed receiver, and the officers, directors, employees and agents of each of
them.
1.7 The term "Loan Documents" shall mean the Note, the Deed of Trust
and any other documents evidencing, securing or otherwise relating to the Loan,
specifically excluding, however, this Agreement. Notwithstanding anything
contained in the Loan Documents to the contrary, the obligations of Indemnitor
under this Agreement shall not be secured by the Deed of Trust, and in the event
of any conflict between this paragraph and the terms and conditions of the Loan
Documents, this paragraph shall control.
1.8 The term "Note Rate" shall mean at any given time, (a) the rate
of interest then applicable to the balance outstanding under the Note, or, (b)
if the Note is in default, the default rate of interest under the Note. If the
Note has been paid in full, the Note Rate shall mean the rate of interest that
would have been applicable under the Note, if it had not been paid in full and
there was a balance outstanding.
1.9 The term "Property" shall mean all property that is or was at
any time affected by the Deed of Trust, which may later include any and all
property previously released from the Deed of Trust.
-2 -
<PAGE> 3
1.10 The term "Release" shall mean any releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, migrating, disposing, or dumping of any substance into the
environment.
2. Except as disclosed in writing by Borrower to Lender or in an
environmental questionnaire, Borrower represents and warrants to the Indemnified
Parties that neither the Property nor Borrower nor, to Borrower's knowledge, any
tenant are in violation of any Environmental Law applicable to the Property, and
neither the Property nor Borrower nor, to Borrower's knowledge, any tenant are
subject to any existing, pending or threatened investigation pertaining to the
Property by any federal, state or local governmental authority or are subject to
any remedial obligation or lien under or in connection with any Environmental
Law.
3. Except as disclosed in writing by Borrower to Lender or in an
environmental questionnaire, Borrower represents and warrants to the Indemnified
Parties that (a) neither Borrower nor, to Borrower's knowledge, any tenant has
obtained, or is not required by any Environmental Law to obtain, any permit,
approval, or license or file any registration to construct or use any
improvements, fixtures or equipment that are or are intended to be part of, or
are located on, the Property or to operate any business that is being conducted
or intended to be conducted on the Property, and (b) there are no factors or
circumstances related to Hazardous Substances or any environmental conditions
known to Borrower that would materially impair the ability of Borrower or its
tenant to obtain any permit, approval, registration, or license necessary for
the future development of the Property or to otherwise continue the contemplated
development of the Property.
4. Borrower has undertaken an appropriate inquiry into the previous
ownership and uses of the Property consistent with good commercial practice. If
any environmental questionnaire is executed by Borrower and delivered to Lender,
Borrower represents and warrants to the Indemnified Parties that, to Borrower's
knowledge, the information disclosed in any such environmental questionnaire is
true, complete and correct. Based on Borrower's reasonable inquiry, Borrower
represents and warrants to the Indemnified Parties that Borrower, including,
without limitation, any officer, director, employee, agent, affiliate, tenant,
partner or joint venturer of Borrower, has no actual knowledge or notice of the
actual, alleged or threatened presence or release of Hazardous Substances in,
on, around or potentially affecting any part of the Property or the soil,
groundwater or soil vapor on or under the Property, or the migration of any
Hazardous Substance, from or to any other property adjacent to or in the
vicinity of the Property, provided that the foregoing representation and
warranty does not apply to De Minimis Amounts. Borrower's intended future use of
Property will not result in the Release of any Hazardous Substance other than De
Minimis Amounts, in, on, around or potentially affecting any part of the
Property or in the soil, groundwater or soil vapor on or under the Property, or
the migration of any Hazardous Substance from or to any other property adjacent
to or in the vicinity of the Property. Indemnitor shall promptly notify Lender
in writing if Indemnitor, including, without limitation, any officer, director,
employee, agent, affiliate, partner, or joint venturer, of
-3 -
<PAGE> 4
Indemnitor, has any actual knowledge or notice that any statement in this
Paragraph 4 is no longer accurate.
5. Borrower shall neither use nor permit any third party to use, generate,
manufacture, produce, store, or Release, on, under or about the Property, or
transfer to or from the Property, any Hazardous Substance except in compliance
with all applicable Environmental Laws, provided that if any third party, by act
or omission or by intent or accident, allows any foregoing action to occur,
Indemnitor shall promptly remedy such condition, at its sole expense and
responsibility, in accordance with Paragraph 8 below. Furthermore, Indemnitor
shall not permit any environmental liens to be placed on any portion of the
Property.
6. Borrower has complied, and shall comply and require all occupants of
the Property, regardless of length of occupancy, to comply, at Borrower's sole
expense and responsibility, with all Environmental Laws governing or applicable
to Hazardous Substances, including those requiring disclosures to prospective
and actual buyers of all or any portion of the Property.
7. Borrower shall give prompt written notice to Lender at the address set
forth in the Loan Documents executed in connection with the Loan if any of the
following occur:
(a) Borrower knows, suspects or believes there may be any Hazardous
Substance, except in De Minimis Amounts, in, on, around or potentially
affecting the Property or the soil, groundwater or soil vapor on or
under the Property, or that Borrower or the Property may be subject to
any threatened or pending investigation by any governmental agency
under any law, regulation or ordinance pertaining to any Hazardous
Substance;
(b) Any proceeding, including lawsuit, investigation or settlement by
or with any federal, state or local governmental authority (including,
without limitation, the U.S. Environmental Protection Agency or any
other federal, state or local governmental agency) with respect to the
presence of any Hazardous Substance on the Property or the migration
thereof from or to any other property adjacent to, or in the vicinity
of, the Property;
(c) All claims made or threatened by any third party against Borrower
or the Property relating to any loss or injury resulting from any
Hazardous Substance;
(d) Borrower's discovery of any occurrence or condition on any property
adjoining or in the vicinity of the Property that could cause the
Property or any part thereof to be subject to any restrictions on its
ownership, occupancy, transferability or use under any Environmental
Law;
-4 -
<PAGE> 5
(e) Borrower's discovery of a violation of any Environmental Law that
Borrower is legally required to report to any federal, state or local
governmental authority or the discovery of a Release of a Hazardous
Substance in sufficient quantities to be reportable under any
Environmental Law to any federal, state or local governmental
authority;
(f) Borrower's discovery, receipt, or notice that an environmental lien
has been or will be placed on the Property; and
(g) Borrower knows, suspects or believes that an Environmental Claim
has been or will be asserted against either Borrower or the Property.
8. Indemnitor has complied and shall comply, to Lender's satisfaction,
with the reasonable recommendations of any qualified environmental engineer or
other expert, who shall be acceptable to Lender, which apply or pertain to the
Property. Indemnitor shall conduct and complete, to Lender's satisfaction, all
investigations, studies, sampling, and testing as may be (i) recommended by any
qualified environmental engineer or other expert, who shall be acceptable to
Lender and (ii) required by Lender. Indemnitor shall provide to Lender copies of
all results and reports relating to such investigations, studies, sampling and
testing. Indemnitor shall conduct and complete, to Lender's satisfaction, all
remedial, removal, and other actions necessary to clean up and remove Hazardous
Substances in, on, or materially affecting the Property:
(a) In accordance with all applicable Environmental Laws; and
(b) In accordance with all applicable orders and directives of all
governmental authorities.
Indemnitor shall provide to Lender copies of all results and reports relating to
such remedial, removal, and other actions.
9. Indemnitor shall, within thirty (30) days after demand by Lender,
provide Lender with a bond, letter of credit, or similar financial assurance
evidencing to Lender's satisfaction that sufficient funds are available to pay
the cost of complying with the requirements of Paragraph 8 above.
10. Indemnitor's obligations under this Agreement shall not be diminished
or affected in any respect as a result of any notice, disclosure or knowledge,
if any, to or by any of the Indemnified Parties of the release, presence,
existence or threatened release of Hazardous Substances in, on, around, or
potentially affecting the Property or the soil, groundwater or soil vapor on or
under the Property, or of any matter covered by Indemnitor's obligations
hereunder. No Indemnified Party shall be deemed to have permitted, caused,
contributed to or acquiesced in any such release, presence, existence or
threatened release of Hazardous Substances or any other
-5 -
<PAGE> 6
matter covered by Indemnitor's obligations hereunder solely because Lender or
any other Indemnified Party had notice, disclosure or knowledge thereof, whether
at the time this Agreement is delivered or at any other time.
11. If at any time any Indemnified Party reasonably believes that there
exists on the Property any condition that could result in any material (in the
sole judgment of Lender) liability, cost, or expense to the owner, occupier, or
operator of the Property arising under any Environmental Law, then the
Indemnified Parties and their contractors, agents and representatives
(hereinafter, "Site Reviewers") shall have the right at any time and from time
to time to enter upon and visit the Property for the purposes of observing the
Property, taking and removing soil or groundwater samples, and conducting tests
and/or site assessments on any part of the Property (collectively, "Site
Assessments") for the purpose of determining whether there exists on the
Property any such condition. The Indemnified Parties have no duty, however, to
conduct any Site Assessment, and no Site Assessment shall impose any liability
on any Indemnified Party. In no event shall the completion of any Site
Assessment be a representation that Hazardous Substances are or are not present
in, on, under or around the Property, or that there has been or shall be
compliance with any Environmental Law or any other law or governmental
regulatory or liability pronouncement. The Indemnified Parties owe no duty of
care to protect Indemnitor or any other party against, or to inform Indemnitor
(except as provided herein) or any other party of, any Hazardous Substances or
any other adverse condition affecting the Property. The Indemnified Party shall
make reasonable efforts to avoid interfering with Borrower's use of the Property
in exercising any rights provided in this Section. The Site Reviewers are hereby
authorized to enter upon the Property for the purpose of conducting Site
Assessments. The Site Reviewers are further authorized to perform both above and
below the ground testing for environmental conditions or the presence of
Hazardous Substances on the Property and such other tests on the Property as may
be necessary to conduct the Site Assessments in the reasonable opinion of the
Site Reviewers. Indemnitor will supply to the Site Reviewers such historical and
operational information regarding the Property as may be reasonably requested by
the Site Reviewers to facilitate the Site Assessments and will make available
for meetings with the Site Reviewers appropriate personnel having knowledge of
such matters. The cost of performing such Site Assessments shall be paid by
Indemnitor upon demand of Lender. On request, Lender shall make the results of
such Site Assessments fully available to Indemnitor provided (i) that Indemnitor
has fully reimbursed Lender for the cost of such Site Assessments, and (ii)
neither Indemnitor nor any other party is entitled to rely on any Site
Assessment conducted by or on behalf of any Indemnified Party, which Site
Assessment shall be for the sole benefit and use of the Indemnified Party.
12. Lender shall have the right, but not the obligation, without in any
way limiting Lender's other rights and remedies under the Loan Documents, to
enter onto the Property or to take such other actions as it deems necessary or
advisable to clean up, remove, resolve, or minimize the impact of, or otherwise
deal with, any Hazardous Substances on or affecting the Property following
receipt of any notice from any person or entity asserting the existence or
possible existence of any Hazardous Substances pertaining to the Property or any
part thereof that,
-6 -
<PAGE> 7
if true, could result in an Environmental Claim, order, notice, suit, imposition
of a lien on the Property, or other action and/or that, in Lender's sole
opinion, could jeopardize Lender's security under the Loan Documents. All
reasonable costs and expenses paid or incurred by Lender in the exercise of any
such rights shall be secured by the Loan Documents and shall be payable by
Indemnitor upon demand.
13. Lender shall have the right at any time to appear in and to
participate in, as a party if it elects, and be represented by counsel of its
own choice in, any action or proceeding in connection with any Environmental Law
that affects the Property. Upon demand by any Indemnified Party, Indemnitor
shall defend any investigation, action or proceeding involving any matter
covered by Indemnitor's obligations hereunder which is brought or commenced
against any Indemnified Party, whether alone or together with Borrower or any
other person, all at Indemnitor's own cost and by counsel to be approved by the
Indemnified Party in the exercise of its reasonable judgment. In the
alternative, any Indemnified Party may elect to conduct its own defense at the
expense of Indemnitor.
14. Indemnitor shall indemnify and hold the Indemnified Parties harmless
from, for and against any and all Environmental Claims, liabilities, damages
(including foreseeable and unforeseeable consequential damages), losses, fines,
penalties, judgments, awards, settlements, and costs and expenses (including,
without limitation, reasonable attorneys' fees, experts', engineers' and
consultants' fees, and costs and expenses of investigation, testing, remediation
and dispute resolution) that directly or indirectly arise out of or relate in
any way to:
(a) Any investigation, cleanup, remediation, removal, or restoration work
of site conditions of the Property relating to Hazardous Substances (whether
on the Property or any other property);
(b) Any resulting damages, harm, or injuries to the person or property of
any third parties or to any natural resources involving Hazardous Substances
relating to the Property;
(c) Any actual or alleged past or present disposal, generation,
manufacture, presence, processing, production, Release, storage,
transportation, treatment, or use of any Hazardous Substance on, under, or
about the Property;
(d) Any actual or alleged presence of any Hazardous Substance on the
Property;
(e) Any actual or alleged past or present violation of any Environmental
Law relating to the Property;
(f) Any actual or alleged past or present migration of any Hazardous
Substance from the Property to any other property, whether adjoining, in the
vicinity, or
-7 -
<PAGE> 8
otherwise, or migration of any Hazardous Substance onto the Property from any
other property, whether adjoining, in the vicinity, or otherwise;
(g) Any lien on any part of the Property under any Environmental Law;
(h) Any Environmental Claim by any federal, state, or local governmental
agency and any claim that any Indemnified Party is liable for any such
asserted Environmental Claim allegedly because it is an "owner" or "operator"
of the Property under any Environmental Law;
(i) Any Environmental Claim asserted against any Indemnified Party by any
person other than a governmental agency, including any person who may purchase
or lease all or any portion of the Property from Borrower, from any
Indemnified Party, or from any other purchaser or lessee; any person who may
at any time have any interest in all or any portion of the Property; any
person who may at any time be responsible for any cleanup costs or other
Environmental Claims relating to the Property; and any person claiming to have
been injured in any way as a result of exposure to any Hazardous Substance
relating to the Property;
(j) Any Environmental Claim which any Indemnified Party reasonably
believes at any time may be incurred to comply with any law, judgment, order,
regulation, or regulatory directive relating to Hazardous Substances and the
Property, or which any Indemnified Party reasonably believes at any time may
be incurred to protect the public health or safety;
(k) Any Environmental Claim resulting from currently existing conditions
in, on, around, or materially affecting the Property, whether known or unknown
by Borrower or the Indemnified Parties at the time this Agreement is executed,
and any such Environmental Claim resulting from the activities of Borrower,
Borrower's tenants, or any other person, in, on, around, or materially
affecting the Property; or
(l) Breach of any representation or warranty by or covenant of Indemnitor
in this Agreement.
Notwithstanding anything contained herein to the contrary, the foregoing
indemnity shall not apply to (i) matters resulting from the gross negligence or
willful misconduct of any Indemnified Party, or (ii) matters resulting solely
from the actions of Indemnified Parties taken after such parties have taken
title to, or exclusive possession of the Property, provided that, in both cases,
such matters shall not arise from or be accumulated with any condition of the
Property, which condition was not caused by an Indemnified Party.
-8 -
<PAGE> 9
15. All rights of the Indemnified Parties and all obligations of
Indemnitor under this Agreement shall survive the following: (a) the payment and
performance of the obligations created by the Loan Documents; (b) the surrender
of the Note and reconveyance of the Deed of Trust; (c) the foreclosure of the
Deed of Trust; (d) the extinguishment of the Deed of Trust by any means,
including deed or assignment in lieu of foreclosure; (e) the acquisition of the
Property or any portion of it by any of the Indemnified Parties; and (f) the
transfer of all of Lender's rights in the Loan Documents.
16. Nothing in this Agreement shall be construed to limit any claim or
right which any Indemnified Party may otherwise have at any time against
Indemnitor or any other person arising from any source other than this
Agreement, including any claim for fraud, misrepresentation, waste, or breach of
contract other than this Agreement, and any rights of contribution or indemnity
under federal, state or local environmental law or other applicable law,
regulation or ordinance.
17. If any Indemnified Party delays or fails to exercise any right or
remedy against Indemnitor, that alone shall not be construed as a waiver of that
right or remedy. All remedies of any Indemnified Party against Indemnitor are
cumulative.
18. This Agreement shall be binding upon Indemnitor and its successors and
assigns and shall inure to the benefit of the Indemnified Parties.
19. Upon full satisfaction of all of the conditions precedent set forth in
this Paragraph 19, the indemnity obligations of Indemnitor pursuant to Paragraph
14 and all other obligations of Indemnitor hereunder shall terminate. Such
conditions precedent are as follows:
(a) The Loan shall have been repaid in full and in accordance with its
terms rather than through the exercise of any rights and remedies (including,
without limitation, foreclosure, trustee's sale or actions on promissory
notes, guaranties or other obligations);
(b) Two (2) years have elapsed from the date which is the later of (i) the
date the Loan has been so repaid in full and (ii) the date Indemnitor has been
fully released of all of its obligations under the Loan Documents (the date
when said two (2) years have elapsed is hereinafter referred to as the
"Termination Date");
(c) Lender has not received notice of any Environmental Claim that has not
been fully satisfied or settled to Lender's satisfaction; and
(d) Within sixty (60) days before the Termination Date, Indemnitor shall
have delivered to Lender a current environmental report, prepared by a
qualified environmental engineer or other expert acceptable to Lender,
stating, to Lender's satisfaction, that there is not any Hazardous Substance,
except De Minimis Amounts,
-9 -
<PAGE> 10
in, on, around or potentially affecting the Property or the soil,
groundwater or soil vapor on or under the Property.
20. The indemnity contained herein shall not be subject to any nonrecourse
or other limitation of liability provisions contained in any document or
instrument executed and delivered in connection with the Loan and the liability
of Indemnitor hereunder shall not be limited by any such nonrecourse or similar
limitation of liability provisions.
21. If any material warranty, representation or statement contained herein
shall be or shall prove to have been false when made or if Indemnitor shall fail
or neglect to perform or observe any of the terms, provisions or covenants
contained herein, the same shall constitute an Event of Default (as defined in
the Loan Documents) under the Loan Documents.
22. Any notice required or permitted in connection herewith shall be given
in the manner provided in any Loan Document.
23. Indemnitor acknowledges that Lender has and will rely upon the
representations, warranties and agreements herein set forth in closing and
funding (or modifying as the case may be) the Loan and that the execution and
delivery of this Agreement is an essential condition but for which Lender would
not close or fund (or modify) the Loan.
24. Indemnitor waives any right or claim of right to cause a marshaling of
the assets of Indemnitor or to cause Lender to proceed against any of the
security for the Loan before proceeding under this Agreement against Indemnitor;
Indemnitor agrees that any payments required to be made hereunder shall become
due on demand; Indemnitor expressly waives and relinquishes all rights and
remedies accorded by applicable law to sureties, indemnitors or guarantors,
except any rights of subrogation that Indemnitor may have, provided that the
indemnity provided for hereunder shall neither be contingent upon the existence
of any such rights of subrogation nor subject to any claims or defenses
whatsoever that may be asserted in connection with the enforcement or attempted
enforcement of such subrogation rights, including, without limitation, any claim
that such subrogation rights were abrogated by any acts or omissions of Lender.
25. Notwithstanding any law to the contrary, the parties expressly agree
that a separate right of action hereunder shall arise each time Lender acquires
knowledge of any matter indemnified by Indemnitor under this Agreement. Separate
and successive actions may be brought hereunder to enforce any of the provisions
hereof at any time and from time to time. No action hereunder shall preclude any
subsequent action, and Indemnitor hereby waives and covenants not to assert any
defense in the nature of splitting of causes of action or merger of judgments.
26. In this Agreement, the word "person" includes any individual, company,
trust or other legal entity of any kind. If this Agreement is executed by more
than one person, the words
-10 -
<PAGE> 11
"Indemnitor," "Guarantor" and "Borrower" include all such persons. The word
"include(s)" means "include(s), without limitation," and the word "including"
means "including, but not limited to." When the context and construction so
require, all words used in the singular shall be deemed to have been used in the
plural and vice versa. All headings appearing in this Agreement are for
convenience only and shall be disregarded in construing this Agreement.
27. Every provision of this Agreement is intended to be severable. If any
term, provision, section or subsection of this Agreement is declared to be
illegal or invalid, for any reason whatsoever, by a court of competent
jurisdiction, such illegality or invalidity shall not affect the other terms,
provisions, sections or subsections of this Agreement, which shall remain
binding and enforceable.
28. On demand, Indemnitor agrees to pay all of the Indemnified Parties'
costs and expenses, including attorneys' fees, which may be incurred in any
effort to enforce any term of this Agreement, including all such costs and
expenses which may be incurred by any Indemnified Party in any legal action,
reference, mediation or arbitration proceeding. From the time(s) incurred until
paid in full to the Indemnified Party, those sums shall bear interest at the
Note Rate.
29. Time is of the essence of this Agreement, and of each and every
provision hereof. The waiver by Indemnified Party of any breach or breaches
hereof shall not be deemed, nor shall the same constitute, a waiver of any
subsequent breach of breaches.
30. This Agreement and the transaction contemplated hereunder shall be
governed by and construed in accordance with the laws of the State of Arizona,
without giving effect to conflict of laws principles.
31. This Agreement may be executed in any number of counterparts each of
which shall be deemed an original, but all such counterparts together shall
constitute but one Agreement.
32. Each party executing this Agreement as an Indemnitor shall be jointly
and severally liable for all obligations of Indemnitor hereunder.
-11 -
<PAGE> 12
IN WITNESS WHEREOF, Indemnitor has executed this Agreement as of the date
first indicated above.
CONTINENTAL CIRCUITS CORP., a
Delaware corporation
By: /s/ Frederick G. McNamee, III
-----------------------------
Name: Frederick G. McNamee, III
Title: President and CEO
BORROWER
CONTINENTAL CIRCUITS INTERNATIONAL,
INC., a Barbados corporation
By: /s/ Frederick G. McNamee, III
-----------------------------
Name: Frederick G. McNamee, III
Title: President and CEO
CCIR OF TEXAS CORP., a Texas corporation
By: /s/ Frederick G. McNamee, III
-----------------------------
Name: Frederick G. McNamee, III
Title: President and CEO
GUARANTORS
-12 -
<PAGE> 13
SCHEDULE "A"
TO
ENVIRONMENTAL INDEMNITY AGREEMENT
All that real property situate in the County of Maricopa, State of
Arizona, more particularly described as follows:
Legal Description:
PARCEL NO. 1:
Lot 18, EL DORADO INDUSTRIAL PLAZA, UNIT THREE, according to Book 167 of
Maps, Page 6, records of Maricopa County, Arizona.
PARCEL NO. 2:
The South 226.65 feet of Lot 17, EL DORADO INDUSTRIAL PLAZA UNIT THREE, as
measured at the West boundary property line, Lot 17, EL DORADO INDUSTRIAL
PLAZA UNIT THREE, according to Book 167 of Maps, page 6, records of
Maricopa County, Arizona;
EXCEPTING therefrom that part of the South 226.65 feet, as measured at the
West boundary property line of Lot 17, EL DORADO INDUSTRIAL PLAZA UNIT
THREE, according to Book 167 of Maps, page 6, records of Maricopa County,
more particularly described as follows:
BEGINNING at the Northwest corner of the above described parcel of land;
thence North 88 degrees 51 minutes 01 seconds East, along the North line
of said parcel, 197.56 feet;
thence South 01 degrees 08 minutes 59 seconds East 20.00 feet;
thence South 88 degrees 51 minutes 01 seconds West, 197.93 feet, to a
point on the West line of the above described parcel;
thence North 00 degrees 05 minutes 27 seconds West, along said West line,
20.00 feet to the POINT OF BEGINNING.
PARCEL NO. 3:
Lot 19, EL DORADO INDUSTRIAL PLAZA UNIT THREE, according to Book 167 of
Maps, page 6, records of Maricopa County, Arizona.
<PAGE> 14
PARCEL NO. 4:
Lot 1, CONTINENTAL CIRCUITS LOT 1, according to Book 329 of Maps, Page 12,
records of Maricopa County, Arizona.
PARCEL NO. 5:
Lot 15, EL DORADO INDUSTRIAL PLAZA UNIT THREE, according to Book 167 of
Maps, page 6, records of Maricopa County, Arizona;
EXCEPT the East 277.19 feet.
PARCEL NO. 6:
The North 274.00 feet of Lot 17, EL DORADO INDUSTRIAL PLAZA UNIT THREE, as
measured along the West boundary line, according to Book 167 of Maps, page
6, records of Maricopa County, Arizona.
PARCEL NO. 7:
That part of the South 226.65 feet, as measured at the West boundary
property line, of Lot 17, EL DORADO INDUSTRIAL PLAZA UNIT THREE, according
to Book 167 of Maps, page 6, records of Maricopa County, Arizona, more
particularly described as follows:
BEGINNING at the Northwest corner of the above described parcel of land;
Thence North 88 degrees 51 minutes 01 seconds East along the North line of
said parcel, a distance of 197.56 feet;
Thence South 01 degrees 08 minutes 59 seconds East, a distance of 20.00
feet;
Thence South 88 degrees 51 minutes 01 seconds West, 197.93 feet, to a
point on the West line of the above described parcel;
Thence North 00 degrees 05 minutes 27 seconds West, along said West line,
20.00 feet, to the POINT OF BEGINNING.
-2-
<PAGE> 1
Exhibit 10.12
ARBITRATION RESOLUTION
(a) Binding Arbitration.
The undersigned hereby agree that all controversies and claims of any
nature arising directly or indirectly out of any and all loan transactions
between them and any related agreements, instruments or documents, shall
at the written request of any party be arbitrated pursuant to the
applicable rules of the American Arbitration Association. The arbitration
shall occur in the State of Arizona. Judgment upon any award rendered by
the arbitrator(s) may be entered in any court having jurisdiction. The
Federal Arbitration Act shall apply to the construction and interpretation
of this arbitration agreement.
(b) Arbitration Panel.
A single arbitrator shall have the power to render a maximum award of one
hundred thousand dollars. When any party files a claim in excess of this
amount, the arbitration decision shall be made by the majority vote of
three arbitrators. No arbitrator shall have the power to restrain any act
of any party.
(c) Provisional Remedies, Self-Help, and Foreclosure.
No provision of subparagraph (a) shall limit the right of any party to
exercise self-help remedies, to foreclose against any real or personal
property collateral, or to obtain any provisional or ancillary remedies
(including but not limited to injunctive relief or the appointment of a
receiver) from a court of competent jurisdiction. At Lender's option, it
may enforce its rights under a mortgage by judicial foreclosure, and under
a deed of trust either by exercise of power of sale or by judicial
foreclosure. The institution and maintenance of any remedy permitted above
shall not constitute a waiver of the right to submit any controversy or
claim to arbitration. The statute of limitations, estoppel, waiver,
laches, and similar doctrines which would otherwise be applicable in an
action brought by a party shall be applicable in any arbitration
proceeding.
(d) Counterparts.
This Arbitration Resolution may be executed in counterparts, all of which
executed counterparts shall together constitute a single document.
Signature pages may be detached
<PAGE> 2
from the counterparts and attached to a single copy of this Arbitration
Resolution to physically form one document.
Agreed to this 25th day of July, 1997.
BANK ONE, ARIZONA, NA, a national banking
association
By: /s/ Steve Reinhart
-----------------------------------------
Name: Steve Reinhart
Title: Vice President
LENDER
CONTINENTAL CIRCUITS CORP., a Delaware
corporation
By: /s/ Frederick G. McNamee III
-----------------------------------------
Name: Frederick G. McNamee III
Title: President and CEO
BORROWER
CONTINENTAL CIRCUITS INTERNATIONAL
INC., a Barbados corporation
By: /s/ Frederick G. McNamee III
-----------------------------------------
Name: Frederick G. McNamee III
Title: President
-2-
<PAGE> 3
CCIR OF TEXAS CORP., a Texas corporation
By: /s/ Frederick G. McNamee III
-----------------------------------------
Name: Frederick G. McNamee III
Title: President
GUARANTORS
-3-
<PAGE> 1
Exhibit 10.13
When recorded, return to:
STREICH LANG, P.A.
Renaissance One
Two North Central Avenue
Phoenix, Arizona 85004-2391
Attention: Henry Perras, Esq.
LANDLORD'S WAIVER AND AGREEMENT
WHEREAS, HB AUSTIN LIMITED PARTNERSHIP, a Kansas limited partnership
(hereinafter "Landlord") is the landlord and CCIR OF TEXAS CORP., a Texas
corporation (hereinafter "Tenant"), is the tenant in a lease dated April 7, 1997
(hereinafter "Lease") covering a portion or all of the real property owned by
Landlord and located at 15508 Bratton Lane, Austin, Texas 78728, as more
particularly described in Schedule "B" hereto (hereinafter "Property"); and
WHEREAS, BANK ONE, ARIZONA, NA, a national banking association
(hereinafter "Lender"), has made certain loans to Tenant in the aggregate amount
of $45,000,000.00 (the "Loan") subject to and secured by a security interest in
the personal property or equipment described in Schedule "A" hereto (hereinafter
"Collateral").
NOW, THEREFORE, so long as the aforementioned Lease exists on the Property
and the Loan secured by Lender's security interest in the Collateral remains
outstanding and in consideration of the mutual covenants and agreements herein
contained, Landlord, Tenant and Lender hereby covenant and agree as follows:
1. Except as limited in this Waiver and Agreement, Landlord waives its
interest in the Collateral and agrees that the Collateral shall not become part
of the Property regardless of the manner in which the Collateral may be attached
or affixed to the Property provided that the Property is not materially damaged
or altered thereby. This Waiver and Agreement shall be effective only to the
extent of the Loan owed to the Lender. To the extent the Loan is less than the
fair market value of the Collateral, this Waiver and Agreement shall be void and
ineffective and Landlord's lien or other interest in or to the Property shall
control with respect to such excess. Furthermore, full payment of the Loan shall
render this Waiver and Agreement void and ineffective and not subject to renewal
without a written agreement of the parties hereto, provided, however, that, so
long as there is no material impact on the rights of the Landlord under the
Lease, Lender may extend and modify the time of payment of the Loan or the
performance of any of the terms and conditions related thereto without the
consent of or notice to Landlord.
-1 -
<PAGE> 2
2. Landlord agrees it will not prevent Lender or its designee from
entering upon the Property at all reasonable times to inspect or remove the
Collateral and Lender agrees to promptly and fully repair any resulting damage
to the Property. Upon written request and notification by Landlord of the
termination of the Lease or the exercise of its rights to possession of the
Property by virtue thereof, Lender agrees to cause the Collateral to be removed
from the Property to the extent it has title to and/or possession of the
Collateral and any resulting damage to the Property to be promptly repaired.
Within thirty (30) days after written request and notice to Lender, if the
Collateral has not been removed and Lender is not prohibited from removing it
because of bankruptcy or other legal proceedings, Landlord may remove the
Collateral wholly without liability to Lender for any damage to the Collateral
or any impairment of Lender's security interest.
3. All requests, notices or service provided for or permitted to be given
or made pursuant to this Waiver and Agreement shall be deemed to have been
properly given or made by depositing the same in the United States Mail, postage
prepaid and registered or certified return receipt requested and addressed to
the addresses set forth below, or to such other addresses as may from time to
time be specified in writing by either party to the other:
If to Landlord: HB Austin Limited Partnership
c/o Kessinger/Hunter & Co., Inc.
2600 Grand Boulevard, Suite 700
Kansas City, Missouri 64108
If to Lender: Bank One, Arizona, NA
Post Office Box 71
Phoenix, Arizona 85001
Attn: Commercial Banking AZ1-1178
If to Tenant: CCIR of Texas Corp.
3502 East Roeser Road
Phoenix, Arizona 85040
4. This Waiver and Agreement is binding upon and inures to the benefit of
Landlord and Lender and their respective successors and assigns, and to no other
person or entities, and shall become effective on the date it is fully executed
and acknowledged by Landlord, Tenant and Lender, and Landlord has been served
with a fully executed and acknowledged copy.
-2 -
<PAGE> 3
IN WITNESS WHEREOF, these presents are executed as of July 25, 1997.
LENDER: LANDLORD:
BANK ONE, ARIZONA, NA, a national HB AUSTIN LIMITED PARTNERSHIP, a
banking association Kansas limited partnership
By: /s/ Steven Reinhart By: /s/ John Dehardt
------------------- ------------------
Name: Steven Reinhart Name: John Dehardt
Its: Vice President Its: General Partner
TENANT:
CCIR OF TEXAS CORP., a Texas corporation
By: /s/ Frederick G. McNamee, III
-----------------------------
Name: Frederick G. McNamee, III
Its: President
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 25th day of July,
1997, by STEVEN REINHART, the Vice President of BANK ONE, ARIZONA, NA, a
national banking association, on behalf of that association.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
(Signature of Notary)
------------------------
Notary Public
My commission expires:
(Seal of Notary)
- -------------------------
-3 -
<PAGE> 4
STATE OF MISSOURI )
) ss.
County of Jackson )
The foregoing instrument was acknowledged before me this 23rd day of July,
1997, by John Dehart, the General Partner of HB AUSTIN LIMITED PARTNERSHIP, a
Kansas limited partnership, on behalf of that partnership.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
(Signature of Notary)
-------------------------
Notary Public
My commission expires:
(Seal of Notary)
- ------------------------------
STATE OF ARIZONA )
) ss.
County of Maricopa )
The foregoing instrument was acknowledged before me this 25th day of July,
1997, by Frederick G. McNamee, III, the President of CCIR OF TEXAS CORP., a
Texas corporation, on behalf of that corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
(Signature of Notary)
------------------------
Notary Public
My commission expires:
(Seal of Notary)
- -----------------------------
-4 -
<PAGE> 5
SCHEDULE "A"
All of Tenant's right, title and interest in and to the following
described personal property:
-5 -
<PAGE> 6
SCHEDULE "B"
PROPERTY
Lot 1, BRATTON-GRAND SUBDIVISION, a subdivision in Travis County, Texas,
according to the map or plat of record in Volume 88, Pages 174-175, of the Plat
Records of Travis County, Texas
-6 -
<PAGE> 1
Exhibit 10.21
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") dated as of August 1, 1997 is
by and between Continental Circuits Corp., a Delaware corporation
("Continental"), and Frederick G. McNamee, III, an individual ("Employee").
A. Continental is engaged in the business of manufacturing complex
multilayer circuit boards.
B. Employee is presently employed by Continental and both parties wish to
continue and redefine the nature of the employment relationship.
C. The parties wish to set forth in this Agreement the terms and
conditions of such employment.
In consideration of the recitals and mutual agreements hereinafter set
forth, the parties agree as follows:
1. Employment and Duties. Continental agrees to employ Employee on a
full-time basis, subject to the terms and conditions provided herein, and
Employee agrees to accept such full-time employment upon said terms and
conditions. Employee's initial title shall be Chairman of the Board, President
and Chief Executive Officer of Continental, in which capacity Employee shall
have general responsibility for the activities and operations of Continental,
subject to the direction and control of Continental's Board of Directors (the
"Board"). Although Employee understands that his duties will include a
substantial amount of business travel, during the entire term of employment, he
shall be based in the Phoenix, Arizona, Area. A transfer of Employee's primary
office assignment outside the Phoenix Area (a "Reassignment") shall constitute a
termination without cause for purposes of Section 6(b). Employee shall have
responsibility for serving as the Company's principal spokesperson to the
financial community and shareholders, and shall report directly to the Board.
Without limiting the generality of the foregoing, Employee initially shall, in
part, have the following responsibilities:
a. Develop the Company's annual budget during the fourth quarter of
each year.
b. Assemble and motivate an appropriate management team.
c. Hire, fire and control all Company relations with all other
Company employees.
<PAGE> 2
d. Establish annual goals for each member of the management team;
manage each member for optimum performance; and recommend compensation
adjustments for each member annually, for action by the Compensation Committee
of the Board (the "Compensation Committee").
e. Ensure compliance with all applicable laws and governmental
rules, regulations and orders.
f. Report all material events to the Board on a timely basis.
g. Without Board approval, execute contracts (i) with exposure to
the Company of up to $500,000 and (ii) for purchases of product in the ordinary
course of business and consistent with the annual budget approved by the board
of directors.
h. Provide to the Board a comprehensive report and any other reports
as requested by the Board from time to time.
2. Term. The term of employment under this Agreement shall commence on
August 1, 1997 (the "Effective Date") and shall continue for a period of two
years, unless earlier terminated as set forth in Section 6 below. Thereafter,
this Agreement shall automatically renew for additional one-year terms unless
either party gives the other notice of non-renewal at least 30 days prior to the
expiration of the initial term or any renewal term.
3. Compensation.
a. Base Salary. Continental agrees to pay Employee a base salary,
before deducting all applicable withholdings, at the annual rate of $235,000
(the "Base Salary"), which shall be payable in accordance with Continental's
standard executive payroll policies as they may be revised from time to time.
Continental's Compensation Committee shall consider increases in the annual rate
of pay to be effective on August 1 of each year, commencing on August 1, 1998.
b. Incentive Bonus. Continental's Compensation Committee shall
design and present to the Board for review, adjustment and adoption, an
incentive compensation program for key employees, which will include cash and
stock option incentives, and will provide for participation by Employee.
c. Stock Options. Continental shall grant to Employee options to
purchase 150,000 shares of Continental's common stock, with an exercise price
equal to the fair market value of the stock on the day this Agreement is
executed. 2,500 of such options shall vest on August 31, 1997, and so long as
Employee is still employed by Continental, an additional 2,500 options shall
vest on the last day of each calendar month thereafter.
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<PAGE> 3
4. Benefits.
a. While Employee is employed hereunder, Continental shall pay for
and provide Employee and his dependents with the same amount and type of health,
medical, dental and life insurance as is provided from time to time to senior
executive officers of Continental during the term of this Agreement. The manner
of implementation of such benefits with respect to such items as procedures and
amounts is discretionary with the Company but shall be commensurate with
Employee's executive status
b. During his employment, Continental will also provide Employee
with a reasonable automobile expense allowance (including lease, parking, fuel,
maintenance and insurance payments) in an amount consistent with that furnished
from time to time to other executive officers of Continental.
c. During the term of Employee's employment, the Company shall
provide and pay for the following insurance plans (i) A short-term disability
policy that pays at the rate of 80% of Employee's base salary for a period of up
to the 91st through 180th day of disability; (ii) A long-term disability policy
that pays at the rate of 60% of Employee's base salary for an indefinite period
beginning on the 181st day of disability; provided that Employee shall be
entitled to purchase and pay for reasonable additional long-term coverage at
group rates; (iii) Term life insurance in the face amount of $1 million, payable
to beneficiaries designated by Employee; and (iv) Accidental death and
dismemberment insurance in a face amount of $500,000 for loss of life, payable
to Employee or beneficiaries designated by Employee.
d. Continental shall, upon receipt of appropriate documentation,
reimburse Employee each month for his reasonable travel, lodging and other
ordinary and necessary business expenses consistent with Continental's policies
as in effect from time to time.
5. Vacation. Employee shall be entitled to four weeks of vacation, with
pay, per year. In addition, Employee shall be entitled to such holidays as
Continental may approve for its executive personnel.
6. Termination. The Board may terminate Employee's employment by
Continental prior to the expiration of the initial term of employment or any
extension thereof, in the manner provided in either Section 6(a), Section 6(b)
or Section 6(c). Additionally, if notice of non-renewal is given pursuant to
Section 2, the term of employment shall expire at the end of the then current
term and Employee shall be entitled to compensation as provided in Section 6(e).
Employee may terminate his employment with Continental upon delivery of
reasonable written notice.
3
<PAGE> 4
a. For Cause. Continental may terminate this Agreement for cause
upon written notice to the Employee stating the facts constituting such cause,
provided that Employee shall have 60 days following such notice to cure any
conduct or act, if curable, alleged to provide grounds for termination for cause
hereunder. In the event of termination for cause, Continental shall be obligated
to pay the Base Salary at the current rate through a period of one year from the
date of termination. Cause shall include material neglect of duties, willful
failure to abide by ethical and good faith instructions or policies from or set
by the Board, commission of a felony or serious misdemeanor offense or pleading
guilty or nolo contendere to same, the commission by Employee of an act of
dishonesty or moral turpitude involving Continental, Employee's material breach
of this Agreement, the filing of bankruptcy proceedings by or against Employee,
or breach by Employee of any other material obligation to Continental.
b. Without Cause. Continental may terminate this Agreement at any
time immediately, without cause, by giving written notice to Employee. Upon a
termination without cause or upon a Reassignment, Continental shall (i) pay to
Employee the Base Salary through the date of termination plus an amount equal to
two years Base Salary or the remaining term of the Agreement, whichever is
longer, less applicable withholdings; and (ii) within 90 days after the end of
the fiscal year in which termination pursuant to this Section 6(b) occurs,
Employee shall be entitled to receive a bonus payment (calculated and payable in
the manner described in Section 3[b]), if any, based upon Continental's
financial performance for such fiscal year or the average of the bonuses earned
by Employee in previous years, whichever is higher, which shall be prorated to
the extent that Employee's employment during such fiscal year was for a period
of less than the full year.
c. Disability. If during the term of this Agreement, Employee fails
to perform his duties hereunder because of illness or other incapacity for a
period of three consecutive months, Continental shall have the right to
terminate this Agreement without further obligation hereunder except for any
bonus amount payable in accordance with this Section 6(c) and any amounts
payable pursuant to disability plans generally applicable to executive
employees. Within 90 days after the end of the fiscal year in which termination
pursuant to this Section 6(c) occurs, Employee shall be entitled to receive a
bonus payment as set forth in Section 6(b).
d. Death. If the Employee dies during the term of this Agreement,
this Agreement shall terminate immediately, and the Employee's legal
representatives shall be entitled to receive the Base Salary due the Employee
for 60 days following death, and any other death benefits generally applicable
to executive employees. In addition, within 90 days after the end of the fiscal
year in which Employee's death occurs, Employee's legal representative shall be
entitled to receive a bonus payment as set forth in Section 6(b).
e. Non-Renewal. If Employee's term of employment is not renewed by
Continental as contemplated by Section 2 at the end of the initial term or any
subsequent term, Continental shall, (i) pay to Employee the Base Salary through
the end of the term plus an amount equal to two years Base Salary, less
applicable withholdings; and (ii) within 90 days after the end
4
<PAGE> 5
of the fiscal year in which the termination of employment pursuant to this
Section occurs, Employee shall be entitled to receive a bonus payment as set
forth in Section 6(b).
f. Resignation. Employee shall give Continental at least 90 days
notice before the effective date of any resignation of his employment.
7. Non-competition; Non-solicitation.
a. Confidential Information. Employee acknowledges that Employee may
receive, or contribute to the production of, Confidential Information. For
purposes of this Agreement, Employee agrees that "Confidential Information"
shall mean information or material proprietary to Continental or designated as
Confidential Information by Continental and not generally known by
non-Continental personnel, which Employee develops or of or to which Employee
may obtain knowledge or access through or as a result of Employee's relationship
with Continental (including information conceived, originated, discovered or
developed in whole or in part by Employee). Confidential Information includes,
but is not limited to, the following types of information and other information
of a similar nature (whether or not reduced to writing) related to Continental's
business: Discoveries, inventions, ideas, concepts, research, development,
processes, procedures, "know-how", formulae, marketing techniques and materials,
marketing and development plans, business plans, customer names and other
information related to customers, price lists, pricing policies, methods of
operation, financial information, employee compensation, and computer programs
and systems. Confidential Information also includes any information described
above which Continental obtains from another party and which Continental treats
as proprietary or designates as Confidential Information, whether or not owned
by or developed by Continental. Employee acknowledges that the Confidential
Information derives independent economic value, actual or potential, from not
being generally known to, and not being readily ascertainable by proper means
by, other persons who can obtain economic value from its disclosure or use.
Information publicly known without breach of this Agreement that is generally
employed by the trade at or after the time Employee first learns of such
information, or generic information or knowledge which Employee would have
learned in the course of similar employment or work elsewhere in the trade,
shall not be deemed part of the Confidential Information. Employee further
agrees:
(1) To furnish Continental on demand, at any time during or
after employment, a complete list of the names and addresses of all present,
former and potential suppliers, customers and other contacts gained while an
employee of Continental in Employee's possession, whether or not in the
possession or within the knowledge of Continental.
(2) That all notes, memoranda, electronic storage,
documentation and records in any way incorporating or reflecting any
Confidential Information shall belong exclusively to Continental, and Employee
agrees to turn over all copies of such materials in
5
<PAGE> 6
Employee's control to Continental upon request or upon termination of Employee's
employment with Continental.
(3) That while employed by Continental and thereafter Employee
will hold in confidence and not directly or indirectly reveal, report, publish,
disclose or transfer any of the Confidential Information to any person or
entity, or utilize any of the Confidential Information for any purpose, except
in the course of Employee's work for Continental.
(4) That any idea in whole or in part conceived of or made by
Employee during the term of his employment, consulting, or similar relationship
with Continental which relates directly or indirectly to Continental's current
or planned lines of business and is made through the use of any of the
Confidential Information of Continental or any of Continental's equipment,
facilities, trade secrets or time, or which results from any work performed by
Employee for Continental, shall belong exclusively to Continental and shall be
deemed a part of the Confidential Information for purposes of this Agreement.
Employee hereby assigns and agrees to assign to Continental all rights in and to
such Confidential Information whether for purposes of obtaining patent or
copyright protection or otherwise. Employee shall acknowledge and deliver to
Continental, without charge to Continental (but at its expense) such written
instruments and do such other acts, including giving testimony in support of
Employee's authorship or inventorship, as the case may be, necessary in the
opinion of Continental to obtain patents or copyrights or to otherwise protect
or vest in Continental the entire right and title in and to the Confidential
Information.
b. Non-solicitation. During the term of Employee's employment by
Continental and for a period of one year thereafter, Employee agrees that he
shall not (for the purpose of or which results in competition with Continental
or any of its affiliates or subsidiaries) either solicit any past or existing
customers, clients, suppliers, or business patronage of Continental or any of
its predecessors, affiliates or subsidiaries or use any Confidential Information
(as defined in Section 7[a]); nor will he solicit for any purpose the employment
of any employees of Continental or any of its affiliates or subsidiaries.
c. Injunctions. It is agreed that the restrictions contained in this
Section 7 are reasonable, but it is recognized that damages in the event of the
breach of any of the restrictions will be difficult or impossible to ascertain;
and, therefore, Employee agrees that, in addition to and without limiting any
other right or remedy Continental may have, Continental shall have the right to
an injunction against Employee issued by a court of competent jurisdiction
enjoining any such breach without showing or proving any actual damage to
Continental.
d. Part of Consideration. Employee also agrees, acknowledges,
covenants, represents and warrants that he is fully and completely aware that,
and further understands that, the foregoing restrictive covenants are an
essential part of the consideration for Continental entering into this Agreement
and that Continental is entering into this Agreement in full reliance on these
acknowledgments, covenants, representations and warranties.
6
<PAGE> 7
e. Time and Territory Reduction. If the period of time and/or
territory described above are held to be in any respect an unreasonable
restriction, it is agreed that the court so holding may reduce the territory to
which the restriction pertains or the period of time in which it operates or may
reduce both such territory and such period, to the minimum extent necessary to
render such provision enforceable.
f. Survival. The obligations described in this Section 7 shall
survive any termination of this Agreement or any termination of the employment
relationship created hereunder.
8. Governing Law and Venue. Arizona law shall govern the construction and
enforcement of this Agreement and the parties agree that any litigation
pertaining to this Agreement shall be in courts located in Maricopa County,
Arizona.
9. Construction. The language in all parts of this Agreement shall in all
cases be construed as a whole according to its fair meaning and not strictly for
nor against any party. The Section headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. All terms used in one number or gender shall
be construed to include any other number or gender as the context may require.
The parties agree that each party has reviewed this Agreement and has had the
opportunity to have counsel review the same and that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not apply in the interpretation of this Agreement or any amendment or any
exhibits thereof.
10. Nondelegability of Employee's Rights and Continental Assignment
Rights. The obligations, rights and benefits of Employee hereunder are personal
and may not be delegated, assigned or transferred in any manner whatsoever, nor
are such obligations, rights or benefits subject to involuntary alienation,
assignment or transfer. Upon reasonable notice to Employee, Continental may
transfer Employee to an affiliate of Continental, which affiliate shall assume
the obligations of Continental under this Agreement. This Agreement shall be
assigned automatically to any entity merging with or acquiring Continental or
its business.
11. Severability. If any term or provision of this Agreement is declared
by a court of competent jurisdiction to be invalid or unenforceable for any
reason, this Agreement shall remain in full force and effect, and either (a) the
invalid or unenforceable provision shall be modified to the minimum extent
necessary to make it valid and enforceable or (b) if such a modification is not
possible, this Agreement shall be interpreted as if such invalid or
unenforceable provision were not a part hereof.
12. Attorneys' Fees. Except as otherwise provided herein, if any party
hereto institutes an action or other proceeding to enforce any rights arising
out of this Agreement, the party prevailing in such action or other proceeding
shall be paid all reasonable costs and attorneys' fees
7
<PAGE> 8
by the non-prevailing party, such fees to be set by the court and not by a jury
and to be included in any judgment entered in such proceeding.
13. Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed duly given, upon receipt, if either personally
delivered, sent by certified mail, return receipt requested, or sent by a
nationally-recognized overnight courier service, addressed to the parties as
follows:
If to Continental: Continental Circuits Corp.
Attention: Board of Directors
3502 East Roeser Road
Phoenix, AZ 85040
With a copy to: Quarles & Brady
Attention: P. Robert Moya
One East Camelback Road, Suite 400
Phoenix, AZ 85012
If to Employee: Frederick G. McNamee, III
Continental Circuits Corp.
3502 East Roeser Road
Phoenix, AZ 85040
or to such other address as either party may provide to the other in accordance
with this Section.
14. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof (i.e., Employee's
employment by Continental) and supersedes all prior or contemporaneous
employment agreements and understandings or agreements in regard to Employee's
employment by the Company; provided, however, that (except as specifically set
forth herein) this Agreement shall not affect or supersede any rights of
Continental or Employee under or relating to the Company's Stock Option Plans or
under or relating to the Transition Compensation Plan dated as of July 1, 1997.
No modification or addition to this Agreement shall be valid unless in writing,
specifically referring to this Agreement and signed by all parties hereto. No
waiver of any rights under this Agreement shall be valid unless in writing and
signed by the party to be charged with such waiver. No waiver of any term or
condition contained in this Agreement shall be deemed or construed as a further
or continuing waiver of such term or condition, unless the waiver specifically
provides otherwise.
8
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement as of
August 1, 1997.
CONTINENTAL: EMPLOYEE:
CONTINENTAL CIRCUITS CORP.
a Delaware corporation /s/ Frederick G. McNamee, III
-----------------------------
Frederick G. McNamee, III
By: /s/ Joseph G. Andersen
-------------------------------
Its: Vice President and Chief Financial Officer
------------------------------------------
9
<PAGE> 1
Exhibit 10.25
July 21, 1997
Mr. Jim Buchanan
Dear Jim:
I am very pleased to offer you the position of VP of Marketing and Sales. Your
annual base salary will be $170,000.00. In addition, you will be eligible for
the following:
1. Monthly car allowance of $650.00.
2. 100,000 Stock Options at the market value price as of Monday, July 28,
1997.
3. Signing bonus equal to one time Hadco staying bonus on 1/1/98 of $133K.
Half will be paid January 1998 and half will be paid February 1998
(2Q98/3Q98).
4. Per our 1998 Business Plan, which will be approved 7/31/97, total
incentive bonus for 1998 will be $50K divided between Volume Revenue
Attainment, Quick Turn Revenue Attainment, and Gross Margin Attainment.
5. Four (4) weeks vacation.
6. 401K Plan at 50% match.
7. Medical dental, and life insurance coverage for you and your eligible
dependents as of your first day of employment.
If, during the first 12 months of employment should you be terminated, for any
reason except causes related to criminal activity or ethical misconduct, you
will receive twenty-four (24) months of base salary from the date of
termination.
I believe you would be a great asset to C3 and I look forward to working with
you in the near future. Feel free to call me with any questions, I can be
reached at 232-9175.
Sincerely,
/s/ Rick McNamee
Rick McNamee
President and CEO
/s/ Jim Buchanan 7/28/97
Jim Buchanan Date
<PAGE> 1
Exhibit 10.26
CONTINENTAL CIRCUITS CORP.
3502 East Roeser Road
Phoenix, Arizona 85040
May 8, 1997
Dear Rick:
Continental Circuits Corp. (the "Company") considers it essential to the
best interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many corporations, the
possibility of a change in control may exist and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the
Company, its stockholders and its customers.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of the Company's
management, including yourself, to their assigned duties without distraction in
the face of Potentially disturbing circumstances arising from the possibility of
a change in control of the Company.
In order to induce you to remain in its employ, the Company, agrees that
you shall receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with the Company is terminated under
the circumstances described below subsequent to a "Change in Control" of the
Company (as defined in Section 2).
1. Term of the Agreement.
(a) The term of this Agreement (the "Term") shall commence on April 1,
1997 and shall continue in effect through December 31, 1998 unless extended as
hereinafter provided. The Term shall be automatically extended for additional
one-year periods thereafter, unless at least six months prior to the beginning
on any calendar year, the Board shall have taken affirmative action so that the
Term will not be further extended; provided that, if a Change in Control of the
Company (as defined in Section 2) shall have occurred during the original or
extended term of this Agreement, this Agreement shall continue in effect for a
period of not less than twenty-four (24) months beyond the month in
<PAGE> 2
which such Change in Control occurred.
2. Change in Control
(a) No benefits shall be payable under Section 4 of this Agreement unless
there has been a Change in Control of the Company during the Term.
(b) For purposes of this Agreement, a "Change in Control of the Company
shall occur or be deemed to have occurred only if (i) any "person," as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Company, any or other fiduciary
holding securities under an employee benefit plan of the Company, or any
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of stock of the Company) is
or become the "beneficial-owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing forty
percent (40%) or more of the combined voting power of the Company's then
outstanding securities; (ii) during any period of two Consecutive years ending
during the Term (not including any period prior to the Term), the following
individuals shall cease for any reason to constitute a majority of the Board:
(a) individuals who at the beginning of such period constituted the Board, and
(b) any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect any transaction described
in clause (i), (iii) or (iv) of this Section 2(b) whose election by the Board of
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were either
directors at the beginning of the period or whose election or whose nomination
for election was previously so approved; (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than (A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than forty percent (40%)of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the Company (of
similar transaction) in which no "Person" as hereinabove defined) acquires more
than forty percent 40% of the combined voting power of the Company's then
outstanding Securities; or (iv) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets.
<PAGE> 3
3. Employment Status; Termination Following Change in
Control.
(a) This Agreement does not constitute a contract of employment or impose
on the Company any obligation to retain you as an employee. This Agreement does
not prevent you from terminating your employment at any time. If your employment
is terminated for any reason and subsequently a Change in Control shall have
occurred, you shall not be entitled to any benefits hereunder. Any termination
by the Company or by you following a Change in Control of the Company during the
Term shall be communicated by written notice of termination ("Notice of
Termination) to the other party hereto in accordance with Section 6. The "Date
of Termination" shall mean the effective date of such termination as specified
in the Notice of Termination.
(b) Notwithstanding anything to the contrary herein, you shall be entitled
to the benefits provided in Section 4 only if any of the events constituting a
Change in Control of the Company shall have occurred during the Term and your
employment with the Company is terminated within twenty-four (24) months after
such a Change in Control of the Company, unless such termination is (A) because
of your death, (B) by the Company for Disability (as defined in Section 3(b)(i))
or Cause (as defined in Section 3(b)(ii)), or (c) by you other than for Good
Reason (as defined in Section 3(b)(iii)).
(i) Disability. "Disability" shall mean if, as a result of incapacity due
to physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six (6) consecutive months and,
within thirty (30) days after written notice of termination is given to you, you
shall not have returned to the full-time performance of your duties.
Notwithstanding any other provision of this Agreement, you shall not be
considered a terminated employee within the meaning of the Company's long term
disability plan and your rights thereunder shall not be affected by this
Agreement.
(ii) Cause. Termination by the Company of your employment for "Cause",
shall mean termination upon (A) your willful and continued failure to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness or any such
actual or anticipated Failure after the issuance of a Notice of Termination by
you for Good Reason as defined in Section 3(b)(iii)), after a written demand for
substantial -performance is delivered to you by the Company, which demand
specifically identifies the manner in which the Company believes that you have
not substantially performed your duties, or (B)(x) you shall have been guilty of
any act or acts of dishonesty constituting a felony, or (y) you shall have
violated any provision of any confidentiality, nondisclosure, assignment of
invention,
<PAGE> 4
noncompetition or similar agreement entered into by-you in connection with your
employment by the Company. For purposes of this subsection, no act or failure to
act on your part shall be deemed "willful,, unless done or omitted to be done by
you not in good faith and without reasonably belief that your action or omission
was in the best interest of the Company.
(iii) Good Reason. You may terminate your employment upon 15 days prior
written notice to the Company for any reason and with or without cause, but you
shall be entitled to the benefits provided in Section 4 only if you do so for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without
your consent, the occurrence after a Change in Control of the Company of any of
the following circumstances unless, in the case of paragraphs (A), (C), (F) or
(G), such circumstances are Fully corrected prior to the Date of Termination (as
defined in Section 3(a)) specified in the Notice of Termination (as defined in
Section 3(a)) given in respect thereof:
(A) any significant diminution, without your prior written consent in your
position, duties, responsibilities, power, title or office as in effect
immediately prior to a Change in Control of the Company.
(B) any reduction in your annual base salary as in effect on the date
hereof or as the same may be increased during the Term;
(C) the failure by the Company to continue in effect, at a coverage or
benefit level of at least 90% of that in effect immediately prior to a Change in
Control of the Company, any benefit or compensation plan, investment or
retirement plan, life insurance plan, health-and-accident plan or disability
plan applicable to you at the time of a Change in Control of the Company (or
plans providing you with substantially similar benefits), the taking of any
action by the Company which would adversely affect your participation in or
which would materially reduce your benefits under any of such plans or deprive
you of any material fringe benefit you enjoyed at the time of the Change in
Control, or the failure by the Company to provide you with the number of paid
vacation days to which you are then entitled in accordance with the Company's
normal vacation policy in effect immediately prior to the Change in Control of
the Company;
(D) any requirement by the Company or of any person in control of the
Company that the location at which you perform your principal duties for the
Company be outside a radius of 30 miles from the location at which you performed
such duties immediately prior to a Change in Control of the Company;
(E) any requirement by the Company or of any person in control of the
Company that you travel on an overnight basis to
<PAGE> 5
an extent not substantially consistent with your business travel obligations
immediately prior to a Change in Control of the Company;
(F) the failure of the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 5;
(G) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of Section 6
below (and, if applicable, the requirements of Section 3(b)(ii)); or
(H) if you are an employee of a subsidiary of' the Company, a sale of all
or substantially all of the capita-stock or assets of such subsidiary.
4. Compensation Upon Termination. If (i) any of the events constituting a
Change in Control of the Company shall have occurred during the Term and (ii)
your employment with the Company is terminated within twenty-four (24) months
after such Change in Control of the Company, you shall he entitled to the
benefits set forth in this Section 4:
(a) During any period that you fail to perform your full-time duties with
the Company as a result of incapacity due to physical or mental illness, you
shall continue to receive base salary and all other earned or accrued
compensation at the rate in effect at the commencement of any such period
(offset by all compensation payable to you under the Company's disability plan
or program or other similar plan during such period) until your employment is
terminated pursuant to Section 3(b)(i) hereof. Thereafter, or in the event your
employment is terminated by reason of death, your benefits shall be determined
under the Company's long-term disability, retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs.
(b) If your employment shall be terminated by the Company for Cause or by
you other than for Good Reason, the Company shall pay you your full base salary
and all other earned or accrued compensation through the Date of Termination at
the rate in effect at the time the Notice of Termination is given, plus all
other amounts to which you are entitled under any compensation plan of the
Company at the time such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(c) If your employment by the Company should be terminated by the Company
other than for Cause or Disability or you should terminate your employment for
Good Reason, then you shall be entitled to the benefits below:
<PAGE> 6
(i) The Company shall pay you your full base salary and all other earned
or accrued compensation through the Date of Termination at the rate in effect at
the time the Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company at the time such
payments are due and, in lieu of further salary payments for periods subsequent
to the Date of Termination, the Company will pay you a lump sum cash payment as
severance pay (together with the payments provided in subsections (ii) and (iv)
below the "Severance Payments") in an amount equal to the sum of (A) the Months
Remaining (as defined below) multiplied by the higher of (1) your Monthly
Compensation (as defined below) in effect on the Date of Termination or (2) your
Monthly Compensation in effect immediately prior to the Change in Control, plus
(B) the Months Remaining multiplied by one-twelfth of the aggregate cash bonuses
paid or awarded to you in respect of the one fiscal year of the Company, out of
the five fiscal years of the Company immediately Preceding the Date Of
Termination, as to which your aggregate cash bonuses -paid or awarded were the
largest. As used-herein, "Months Remaining" shall mean the number of full
calendar months remaining after the Date of Termination in the twenty-four (24)
month period that commenced with the date of the Change in Control; provided,
however, that, for the purposes hereof, in the event such number of full
calendar months is less than 12, it shall nonetheless be deemed to be 12 full
calendar months. As used herein, "Monthly Compensation" shall mean one-twelfth
of your annual base salary.
(ii) All shares of capital stock of the Company purchased by you, and all
options to purchase shares of capital stock of the Company granted to you,
under any benefit plan or arrangement, shall immediately vest and for its
exercisability shall be accelerated, as the case may be, and all such shares
shall no longer be subject to repurchase by the Company and all such options
shall thereupon become immediately exercisable in full by you without any right
of repurchase in favor of the Company.
The payments provided for in subsection (ii above shall he made not later
than the tenth day following the Date of Termination, provided, however, that,
if the amounts of such payments cannot be finally determined on or before such
day, the Company shall pay to you on such day an estimate, as determined in good
faith by the Company, of the minimum amount o-@ such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
Section 1274(b)(2)(3) of the Internal Revenue Code of 1986, as amended (the
"Code") as soon as the amount thereof can be determined but in no event later
than the thirtieth day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to you,
payable on the fifth day after demand d by the Company (together with interest
<PAGE> 7
at the rate provided in Section 1274(b)(2)(B) of the Code).
(iv) For a 24-month period after the Date of Termination, the Company
shall arrange to provide you with life, disability, accident and health
insurance benefits substantially similar to those which you received immediately
prior to the Date of Termination and at the same cost to you (if any) as in
effect immediately prior to the Date of Termination. Notwithstanding the
foregoing, the Company shall not provide any benefit otherwise receivable by you
pursuant to this Section 4(c)(iv) if an equivalent benefit is actually received
by you from another employer during the 24-month period after the Date of
Termination and any such benefit actually received by you shall be reported to
the Company.
(v) The Company shall pay to you all legal fees and expenses incurred by
you in seeking to obtain or enforce any right or benefit provided by this
Agreement.
(vi) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor,
except as provided in the second sentence of Section 4(c)(iv) hereof, shall the
amount of any payment or benefit provided for in this Section 4 be reduced by
any compensation earned by you as a result of employment by another employer, by
retirement benefits or by offset against any amount claimed to he owed by you to
the Company or otherwise.
(d) Notwithstanding anything in this Agreement, if the payments provided
for in this Agreement, together with any other payments or benefits which you
have the right to receive from the Company (or its affiliates and subsidiaries),
would constitute an "excess parachute payment" (as defined in Section 28OG o-F
the Code), the payments under this Agreement shall be reduced. The reduction
shall be in an amount so that the present value of the total amount paid by the
Company or its affiliates and subsidiaries will be 2.99 times your "base amount"
(as defined in Section 28OG of the Code) and so that no portion of the amounts
paid to you shall be subject to the excise tax imposed by Section 4999 of the
Code. The determination as to whether any reduction in payments is necessary
shall be made by the Company in good faith and such determination shall be
conclusive and binding. If through error or otherwise you should receive
payments, together with other payments the employee has the right to receive
from the Corporation (or its affiliates and subsidiaries) in excess of 2.99
times your base amount, you agree to immediately repay the excess to the Company
upon notification that an overpayment has been made.
S. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct
<PAGE> 8
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company expressly to assume
and agree to perform this Agreement to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain an assumption of this Agreement prior to the effectiveness of
any succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled hereunder if you had terminated your employment for Good
Reason immediately after a Change in Control of the Company, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as defined above and any successor
to its business of assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law or otherwise
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to have, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.
6. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
duly given then delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
President of the Company, and to you at the address shown above or to such other
address as either the Company or you may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
7. Miscellaneous.
(a) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Arizona.
(c) No waiver by you at any time of any breach of, or compliance with, any
provision of this Agreement to be performed by the Company shall be deemed a
waiver of that or any other
<PAGE> 9
provision at any subsequent time.
(d) This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.
(e) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(f) This Agreement sets forth the entire agreement of the parties hereto
in respect of the subject matter contained herein and supersedes all prior
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto, and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and canceled.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreement on this subject.
Sincerely,
CONTINENTAL CIRCUITS CORP.
By: /s/ Joseph G. Andersen
------------------------------
Name: Joseph G. Andersen
Title: VP of Finance and CFO
Agreed to as of the 8th day
of May, 1997
By: /s/ Frederick G. McNamee III
----------------------------
Frederick G. McNamee III
<PAGE> 1
Exhibit 10.27
CONTINENTAL CIRCUITS CORP.
3502 East Roeser Road
Phoenix, Arizona 85040
May 8, 1997
Dear Mark:
Continental Circuits Corp. (the "Company") considers it essential to the
best interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many corporations, the
possibility of a change in control may exist and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the
Company, its stockholders and its customers.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of the Company's
management, including yourself, to their assigned duties without distraction in
the face of Potentially disturbing circumstances arising from the possibility of
a change in control of the Company.
In order to induce you to remain in its employ, the Company, agrees that
you shall receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with the Company is terminated under
the circumstances described below subsequent to a "Change in Control" of the
Company (as defined in Section 2).
1. Term of the Agreement.
(a) The term of this Agreement (the "Term") shall commence on April 1,
1997 and shall continue in effect through December 31, 1998 unless extended as
hereinafter provided. The Term shall be automatically extended for additional
one-year periods thereafter, unless at least six months prior to the beginning
on any calendar year, the Board shall have taken affirmative action so that the
Term will not be further extended; provided that, if a Change in Control of the
Company (as defined in Section 2) shall have occurred during the original or
extended term of this Agreement, this Agreement shall continue in effect for a
period of not less than twelve (12) months beyond the month in which
<PAGE> 2
such Change in Control occurred.
2. Change in Control
(a) No benefits shall be payable under Section 4 of this Agreement unless
there has been a Change in Control of the Company during the Term.
(b) For purposes of this Agreement, a "Change in Control of the Company
shall occur or be deemed to have occurred only if (i) any "person," as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Company, any or other fiduciary
holding securities under an employee benefit plan of the Company, or any
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of stock of the Company) is
or become the "beneficial-owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing forty
percent (40%) or more of the combined voting power of the Company's then
outstanding securities; (ii) during any period of two Consecutive years ending
during the Term (not including any period prior to the Term), the following
individuals shall cease for any reason to constitute a majority of the Board:
(a) individuals who at the beginning of such period constituted the Board, and
(b) any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect any transaction described
in clause (i), (iii) or (iv) of this Section 2(b) whose election by the Board of
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were either
directors at the beginning of the period or whose election or whose nomination
for election was previously so approved; (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than (A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than forty percent (40%)of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the Company (of
similar transaction) in which no "Person" as hereinabove defined) acquires more
than forty percent 40% of the combined voting power of the Company's then
outstanding Securities; or (iv) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets.
<PAGE> 3
3. Employment Status; Termination Following Change in Control.
(a) This Agreement does not constitute a contract of employment or impose
on the Company any obligation to retain you as an employee. This Agreement does
not prevent you from terminating your employment at any time. If your employment
is terminated for any reason and subsequently a Change in Control shall have
occurred, you shall not be entitled to any benefits hereunder. Any termination
by the Company or by you following a Change in Control of the Company during the
Term shall be communicated by written notice of termination ("Notice of
Termination) to the other party hereto in accordance with Section 6. The "Date
of Termination" shall mean the effective date of such termination as specified
in the Notice of Termination.
(b) Notwithstanding anything to the contrary herein, you shall be entitled
to the benefits provided in Section 4 only if any of the events constituting a
Change in Control of the Company shall have occurred during the Term and your
employment with the Company is terminated within twelve (12) months after such a
Change in Control of the Company, unless such termination is (A) because of your
death, (B) by the Company for Disability (as defined in Section 3(b)(i)) or
Cause (as defined in Section 3(b)(ii)), or (c) by you other than for Good Reason
(as defined in Section 3(b)(iii)).
(i) Disability. "Disability" shall mean if, as a result of incapacity due
to physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six (6) consecutive months and,
within thirty (30) days after written notice of termination is given to you, you
shall not have returned to the full-time performance of your duties.
Notwithstanding any other provision of this Agreement, you shall not be
considered a terminated employee within the meaning of the Company's long term
disability plan and your rights thereunder shall not be affected by this
Agreement.
(ii) Cause. Termination by the Company of your employment for "Cause",
shall mean termination upon (A) your willful and continued failure to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness or any such
actual or anticipated Failure after the issuance of a Notice of Termination by
you for Good Reason as defined in Section 3(b)(iii)), after a written demand for
substantial -performance is delivered to you by the Company, which demand
specifically identifies the manner in which the Company believes that you have
not substantially performed your duties, or (B)(x) you shall have been guilty of
any act or acts of dishonesty constituting a felony, or (y) you shall have
violated any provision of any confidentiality, nondisclosure, assignment of
invention,
<PAGE> 4
noncompetition or similar agreement entered into by you in connection with your
employment by the Company. For purposes of this subsection, no act or failure to
act on your part shall be deemed "willful,, unless done or omitted to be done by
you not in good faith and without reasonably belief that your action or omission
was in the best interest of the Company.
(iii) Good Reason. You may terminate your employment upon 15 days prior
written notice to the Company for any reason and with or without cause, but you
shall be entitled to the benefits provided in Section 4 only if you do so for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without
your consent, the occurrence after a Change in Control of the Company of any of
the following circumstances unless, in the case of paragraphs (A), (C), (F) or
(G), such circumstances are Fully corrected prior to the Date of Termination (as
defined in Section 3(a)) specified in the Notice of Termination (as defined in
Section 3(a)) given in respect thereof:
(A) any significant diminution, without your prior written consent in your
position, duties, responsibilities, power, title or office as in effect
immediately prior to a Change in Control of the Company.
(B) any reduction in your annual base salary as in effect on the date
hereof or as the same may be increased during the Term;
(C) the failure by the Company to continue in effect, at a coverage or
benefit level of at least 90% of that in effect immediately prior to a Change in
Control of the Company, any benefit or compensation plan, investment or
retirement plan, life insurance plan, health-and-accident plan or disability
plan applicable to you at the time of a Change in Control of the Company (or
plans providing you with substantially similar benefits), the taking of any
action by the Company which would adversely affect your participation in or
which would materially reduce your benefits under any of such plans or deprive
you of any material fringe benefit you enjoyed at the time of the Change in
Control, or the failure by the Company to provide you with the number of paid
vacation days to which you are then entitled in accordance with the Company's
normal vacation policy in effect immediately prior to the Change in Control of
the Company;
(D) any requirement by the Company or of any person in control of the
Company that the location at which you perform your principal duties for the
Company be outside a radius of 30 miles from the location at which you performed
such duties immediately prior to a Change in Control of the Company;
(E) any requirement by the Company or of any person in control of the
Company that you travel on an overnight basis to
<PAGE> 5
an extent not substantially consistent with your business travel obligations
immediately prior to a Change in Control of the Company;
(F) the failure of the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 5;
(G) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of Section 6
below (and, if applicable, the requirements of Section 3(b)(ii)); or
(H) if you are an employee of a subsidiary of' the Company, a sale of all
or substantially all of the capita-stock or assets of such subsidiary.
4. Compensation Upon Termination. If (i) any of the events constituting a
Change in Control of the Company shall have occurred during the Term and (ii)
your employment with the Company is terminated within twelve (12) months after
such Change in Control of the Company, you shall he entitled to the benefits set
forth in this Section 4:
(a) During any period that you fail to perform your full-time duties with
the Company as a result of incapacity due to physical or mental illness, you
shall continue to receive base salary and all other earned or accrued
compensation at the rate in effect at the commencement of any such period
(offset by all compensation payable to you under the Company's disability plan
or program or other similar plan during such period) until your employment is
terminated pursuant to Section 3(b)(i) hereof. Thereafter, or in the event your
employment is terminated by reason of death, your benefits shall be determined
under the Company's long-term disability, retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs.
(b) If your employment shall be terminated by the Company for Cause or by
you other than for Good Reason, the Company shall pay you your full base salary
and all other earned or accrued compensation through the Date of Termination at
the rate in effect at the time the Notice of Termination is given, plus all
other amounts to which you are entitled under any compensation plan of the
Company at the time such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(c) If your employment by the Company should be terminated by the Company
other than for Cause or Disability or you should terminate your employment for
Good Reason, then you shall be entitled to the benefits below:
<PAGE> 6
(i) The Company shall pay you your full base salary and all other earned
or accrued compensation through the Date of Termination at the rate in effect at
the time the Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company at the time such
payments are due and, in lieu of further salary payments for periods subsequent
to the Date of Termination, the Company will pay you a lump sum cash payment as
severance pay (together with the payments provided in subsections (ii) and (iv)
below the "Severance Payments") in an amount equal to the sum of (A) the Months
Remaining (as defined below) multiplied by the higher of (1) your Monthly
Compensation (as defined below) in effect on the Date of Termination or (2) your
Monthly Compensation in effect immediately prior to the Change in Control, plus
(B) the Months Remaining multiplied by one-twelfth of the aggregate cash bonuses
paid or awarded to you in respect of the one fiscal year of the Company, out of
the five fiscal years of the Company immediately Preceding the Date Of
Termination, as to which your aggregate cash bonuses -paid or awarded were the
largest. As used-herein, "Months Remaining" shall mean the number of full
calendar months remaining after the Date of Termination in the twelve (12) month
period that commenced with the date of the Change in Control; provided, however,
that, for the purposes hereof, in the event such number of full calendar months
is less than 12, it shall nonetheless be deemed to be 12 full calendar months.
As used herein, "Monthly Compensation" shall mean one-twelfth of your annual
base salary.
(ii) All shares of capital stock of the Company purchased by you, and all
options to purchase shares of capital stock of the Company granted to you,
under any benefit plan or arrangement, shall immediately vest and for its
exercisability shall be accelerated, as the case may be, and all such shares
shall no longer be subject to repurchase by the Company and all such options
shall thereupon become immediately exercisable in full by you without any right
of repurchase in favor of the Company.
The payments provided for in subsection (ii above shall he made not later
than the tenth day following the Date of Termination, provided, however, that,
if the amounts of such payments cannot be finally determined on or before such
day, the Company shall pay to you on such day an estimate, as determined in good
faith by the Company, of the minimum amount o-@ such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
Section 1274(b)(2)(3) of the Internal Revenue Code of 1986, as amended (the
"Code") as soon as the amount thereof can be determined but in no event later
than the thirtieth day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to you,
payable on the fifth day after demand d by the Company (together with interest
<PAGE> 7
at the rate provided in Section 1274(b)(2)(B) of the Code).
(iv) For a 12-month period after the Date of Termination, the Company
shall arrange to provide you with life, disability, accident and health
insurance benefits substantially similar to those which you received immediately
prior to the Date of Termination and at the same cost to you (if any) as in
effect immediately prior to the Date of Termination. Notwithstanding the
foregoing, the Company shall not provide any benefit otherwise receivable by you
pursuant to this Section 4(c)(iv) if an equivalent benefit is actually received
by you from another employer during the 12-month period after the Date of
Termination and any such benefit actually received by you shall be reported to
the Company.
(v) The Company shall pay to you all legal fees and expenses incurred by
you in seeking to obtain or enforce any right or benefit provided by this
Agreement.
(vi) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor,
except as provided in the second sentence of Section 4(c)(iv) hereof, shall the
amount of any payment or benefit provided for in this Section 4 be reduced by
any compensation earned by you as a result of employment by another employer, by
retirement benefits or by offset against any amount claimed to he owed by you to
the Company or otherwise.
(d) Notwithstanding anything in this Agreement, if the payments provided
for in this Agreement, together with any other payments or benefits which you
have the right to receive from the Company (or its affiliates and subsidiaries),
would constitute an "excess parachute payment" (as defined in Section 28OG o-F
the Code), the payments under this Agreement shall be reduced. The reduction
shall be in an amount so that the present value of the total amount paid by the
Company or its affiliates and subsidiaries will be 2.99 times your "base amount"
(as defined in Section 28OG of the Code) and so that no portion of the amounts
paid to you shall be subject to the excise tax imposed by Section 4999 of the
Code. The determination as to whether any reduction in payments is necessary
shall be made by the Company in good faith and such determination shall be
conclusive and binding. If through error or otherwise you should receive
payments, together with other payments the employee has the right to receive
from the Corporation (or its affiliates and subsidiaries) in excess of 2.99
times your base amount, you agree to immediately repay the excess to the Company
upon notification that an overpayment has been made.
S. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct
<PAGE> 8
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company expressly to assume
and agree to perform this Agreement to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain an assumption of this Agreement prior to the effectiveness of
any succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled hereunder if you had terminated your employment for Good
Reason immediately after a Change in Control of the Company, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as defined above and any successor
to its business of assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law or otherwise
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to have, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.
6. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
duly given then delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
President of the Company, and to you at the address shown above or to such other
address as either the Company or you may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
7. Miscellaneous.
(a) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Arizona.
(c) No waiver by you at any time of any breach of, or compliance with, any
provision of this Agreement to be performed by the Company shall be deemed a
waiver of that or any other
<PAGE> 9
provision at any subsequent time.
(d) This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.
(e) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(f) This Agreement sets forth the entire agreement of the parties hereto
in respect of the subject matter contained herein and supersedes all prior
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto, and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and canceled.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreement on this subject.
Sincerely,
CONTINENTAL CIRCUITS CORP.
By: /s/ Joseph G. Andersen
-----------------------------
Name: Joseph G. Andersen
Title: VP of Finance and CFO
Agreed to as of the 2nd day of June, 1997.
By: /s/ Mark Hollinger
--------------------
Mark Hollinger
<PAGE> 1
Exhibit 10.28
CONTINENTAL CIRCUITS CORP.
3502 East Roeser Road
Phoenix, Arizona 85040
May 8, 1997
Dear Joe:
Continental Circuits Corp. (the "Company") considers it essential to the
best interests of its stockholders to foster the continuous employment of key
management personnel. In this connection, the Board of Directors of the Company
(the "Board") recognizes that, as is the case with many corporations, the
possibility of a change in control may exist and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the
Company, its stockholders and its customers.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of the Company's
management, including yourself, to their assigned duties without distraction in
the face of Potentially disturbing circumstances arising from the possibility of
a change in control of the Company.
In order to induce you to remain in its employ, the Company, agrees that
you shall receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with the Company is terminated under
the circumstances described below subsequent to a "Change in Control" of the
Company (as defined in Section 2).
1. Term of the Agreement.
(a) The term of this Agreement (the "Term") shall commence on April 1,
1997 and shall continue in effect through December 31, 1998 unless extended as
hereinafter provided. The Term shall be automatically extended for additional
one-year periods thereafter, unless at least six months prior to the beginning
on any calendar year, the Board shall have taken affirmative action so that the
Term will not be further extended; provided that, if a Change in Control of the
Company (as defined in Section 2) shall have occurred during the original or
extended term of this Agreement, this Agreement shall continue in effect for a
period of not less than eighteen (18) months beyond the month in which
1
<PAGE> 2
such Change in Control occurred.
2. Change in Control
(a) No benefits shall be payable under Section 4 of this Agreement unless
there has been a Change in Control of the Company during the Term.
(b) For purposes of this Agreement, a "Change in Control" of the Company
shall occur or be deemed to have occurred only if (i) any "person," as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (other than the Company, any or other fiduciary
holding securities under an employee benefit plan of the Company, or any
corporation owned directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of stock of the Company) is
or become the "beneficial-owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing forty
percent (40%) or more of the combined voting power of the Company's then
outstanding securities; (ii) during any period of two Consecutive years ending
during the Term (not including any period prior to the Term), the following
individuals shall cease for any reason to constitute a majority of the Board:
(a) individuals who at the beginning of such period constituted the Board, and
(b) any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect any transaction described
in clause (i), (iii) or (iv) of this Section 2(b) whose election by the Board of
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who were either
directors at the beginning of the period or whose election or whose nomination
for election was previously so approved; (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than (A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than forty percent (40%)of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of the Company (of
similar transaction) in which no "Person" as hereinabove defined) acquires more
than forty percent 40% of the combined voting power of the Company's then
outstanding Securities; or (iv) the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets.
2
<PAGE> 3
3. Employment Status; Termination Following Change in Control.
(a) This Agreement does not constitute a contract of employment or impose
on the Company any obligation to retain you as an employee. This Agreement does
not prevent you from terminating your employment at any time. If your employment
is terminated for any reason and subsequently a Change in Control shall have
occurred, you shall not be entitled to any benefits hereunder. Any termination
by the Company or by you following a Change in Control of the Company during the
Term shall be communicated by written notice of termination ("Notice of
Termination") to the other party hereto in accordance with Section 6. The "Date
of Termination" shall mean the effective date of such termination as specified
in the Notice of Termination.
(b) Notwithstanding anything to the contrary herein, you shall be entitled
to the benefits provided in Section 4 only if any of the events constituting a
Change in Control of the Company shall have occurred during the Term and your
employment with the Company is terminated within eighteen (18) months after such
a Change in Control of the Company, unless such termination is (A) because of
your death, (B) by the Company for Disability (as defined in Section 3(b)(i)) or
Cause (as defined in Section 3(b)(ii)), or (c) by you other than for Good Reason
(as defined in Section 3(b)(iii)).
(i) Disability. "Disability" shall mean if, as a result of incapacity due
to physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six (6) consecutive months and,
within thirty (30) days after written notice of termination is given to you, you
shall not have returned to the full-time performance of your duties.
Notwithstanding any other provision of this Agreement, you shall not be
considered a terminated employee within the meaning of the Company's long term
disability plan and your rights thereunder shall not be affected by this
Agreement.
(ii) Cause. Termination by the Company of your employment for "Cause",
shall mean termination upon (A) your willful and continued failure to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness or any such
actual or anticipated Failure after the issuance of a Notice of Termination by
you for Good Reason as defined in Section 3(b)(iii)), after a written demand for
substantial performance is delivered to you by the Company, which demand
specifically identifies the manner in which the Company believes that you have
not substantially performed your duties, or (B)(x) you shall have been guilty of
any act or acts of dishonesty constituting a felony, or (y) you shall have
violated any provision of any confidentiality, nondisclosure, assignment of
invention,
3
<PAGE> 4
noncompetition or similar agreement entered into by-you in connection with your
employment by the Company. For purposes of this subsection, no act or failure to
act on your part shall be deemed "willful, unless done or omitted to be done by
you not in good faith and without reasonably belief that your action or omission
was in the best interest of the Company.
(iii) Good Reason. You may terminate your employment upon 15 days prior
written notice to the Company for any reason and with or without cause, but you
shall be entitled to the benefits provided in Section 4 only if you do so for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without
your consent, the occurrence after a Change in Control of the Company of any of
the following circumstances unless, in the case of paragraphs (A), (C), (F) or
(G), such circumstances are Fully corrected prior to the Date of Termination (as
defined in Section 3(a)) specified in the Notice of Termination (as defined in
Section 3(a)) given in respect thereof:
(A) any significant diminution, without your prior written consent in your
position, duties, responsibilities, power, title or office as in effect
immediately prior to a Change in Control of the Company.
(B) any reduction in your annual base salary as in effect on the date
hereof or as the same may be increased during the Term;
(C) the failure by the Company to continue in effect, at a coverage or
benefit level of at least 90% of that in effect immediately prior to a Change in
Control of the Company, any benefit or compensation plan, investment or
retirement plan, life insurance plan, health-and-accident plan or disability
plan applicable to you at the time of a Change in Control of the Company (or
plans providing you with substantially similar benefits), the taking of any
action by the Company which would adversely affect your participation in or
which would materially reduce your benefits under any of such plans or deprive
you of any material fringe benefit you enjoyed at the time of the Change in
Control, or the failure by the Company to provide you with the number of paid
vacation days to which you are then entitled in accordance with the Company's
normal vacation policy in effect immediately prior to the Change in Control of
the Company;
(D) any requirement by the Company or of any person in control of the
Company that the location at which you perform your principal duties for the
Company be outside a radius of 30 miles from the location at which you performed
such duties immediately prior to a Change in Control of the Company;
(E) any requirement by the Company or of any person in control of the
Company that you travel on an overnight basis to
4
<PAGE> 5
an extent not substantially consistent with your business travel obligations
immediately prior to a Change in Control of the Company;
(F) the failure of the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 5;
(G) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of Section 6
below (and, if applicable, the requirements of Section 3(b)(ii)); or
(H) if you are an employee of a subsidiary of the Company, a sale of all
or substantially all of the capital-stock or assets of such subsidiary.
4. Compensation Upon Termination. If (i) any of the events constituting a
Change in Control of the Company shall have occurred during the Term and (ii)
your employment with the Company is terminated within eighteen (18) months after
such Change in Control of the Company, you shall he entitled to the benefits set
forth in this Section 4:
(a) During any period that you fail to perform your full-time duties with
the Company as a result of incapacity due to physical or mental illness, you
shall continue to receive base salary and all other earned or accrued
compensation at the rate in effect at the commencement of any such period
(offset by all compensation payable to you under the Company's disability plan
or program or other similar plan during such period) until your employment is
terminated pursuant to Section 3(b)(i) hereof. Thereafter, or in the event your
employment is terminated by reason of death, your benefits shall be determined
under the Company's long-term disability, retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs.
(b) If your employment shall be terminated by the Company for Cause or by
you other than for Good Reason, the Company shall pay you your full base salary
and all other earned or accrued compensation through the Date of Termination at
the rate in effect at the time the Notice of Termination is given, plus all
other amounts to which you are entitled under any compensation plan of the
Company at the time such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(c) If your employment by the Company should be terminated by the Company
other than for Cause or Disability or you should terminate your employment for
Good Reason, then you shall be entitled to the benefits below:
5
<PAGE> 6
(i) The Company shall pay you your full base salary and all other earned
or accrued compensation through the Date of Termination at the rate in effect at
the time the Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Company at the time such
payments are due and, in lieu of further salary payments for periods subsequent
to the Date of Termination, the Company will pay you a lump sum cash payment as
severance pay (together with the payments provided in subsections (ii) and (iv)
below the "Severance Payments") in an amount equal to the sum of (A) the Months
Remaining (as defined below) multiplied by the higher of (1) your Monthly
Compensation (as defined below) in effect on the Date of Termination or (2) your
Monthly Compensation in effect immediately prior to the Change in Control, plus
(B) the Months Remaining multiplied by one-twelfth of the aggregate cash bonuses
paid or awarded to you in respect of the one fiscal year of the Company, out of
the five fiscal years of the Company immediately Preceding the Date Of
Termination, as to which your aggregate cash bonuses -paid or awarded were the
largest. As used-herein, "Months Remaining" shall mean the number of full
calendar months remaining after the Date of Termination in the eighteen (18)
month period that commenced with the date of the Change in Control; provided,
however, that, for the purposes hereof, in the event such number of full
calendar months is less than 12, it shall nonetheless be deemed to be 12 full
calendar months. As used herein, "Monthly Compensation" shall mean one-twelfth
of your annual base salary.
(ii) All shares of capital stock of the Company purchased by you, and all
options to purchase shares of capital stock of the Company granted to you,
under any benefit plan or arrangement, shall immediately vest and for its
exercisability shall be accelerated, as the case may be, and all such shares
shall no longer be subject to repurchase by the Company and all such options
shall thereupon become immediately exercisable in full by you without any right
of repurchase in favor of the Company.
The payments provided for in subsection (ii above shall he made not later
than the tenth day following the Date of Termination, provided, however, that,
if the amounts of such payments cannot be finally determined on or before such
day, the Company shall pay to you on such day an estimate, as determined in good
faith by the Company, of the minimum amount o-@ such payments and shall pay the
remainder of such payments (together with interest at the rate provided in
Section 1274(b)(2)(3) of the Internal Revenue Code of 1986, as amended (the
"Code") as soon as the amount thereof can be determined but in no event later
than the thirtieth day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to you,
payable on the fifth day after demand d by the Company (together with interest
6
<PAGE> 7
at the rate provided in Section 1274(b)(2)(B) of the Code).
(iv) For a 18-month period after the Date of Termination, the Company
shall arrange to provide you with life, disability, accident and health
insurance benefits substantially similar to those which you received immediately
prior to the Date of Termination and at the same cost to you (if any) as in
effect immediately prior to the Date of Termination. Notwithstanding the
foregoing, the Company shall not provide any benefit otherwise receivable by you
pursuant to this Section 4(c)(iv) if an equivalent benefit is actually received
by you from another employer during the 18-month period after the Date of
Termination and any such benefit actually received by you shall be reported to
the Company.
(v) The Company shall pay to you all legal fees and expenses incurred by
you in seeking to obtain or enforce any right or benefit provided by this
Agreement.
(vi) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise, nor,
except as provided in the second sentence of Section 4(c)(iv) hereof, shall the
amount of any payment or benefit provided for in this Section 4 be reduced by
any compensation earned by you as a result of employment by another employer, by
retirement benefits or by offset against any amount claimed to he owed by you to
the Company or otherwise.
(d) Notwithstanding anything in this Agreement, if the payments provided
for in this Agreement, together with any other payments or benefits which you
have the right to receive from the Company (or its affiliates and subsidiaries),
would constitute an "excess parachute payment" (as defined in Section 28OG o-F
the Code), the payments under this Agreement shall be reduced. The reduction
shall be in an amount so that the present value of the total amount paid by the
Company or its affiliates and subsidiaries will be 2.99 times your "base amount"
(as defined in Section 28OG of the Code) and so that no portion of the amounts
paid to you shall be subject to the excise tax imposed by Section 4999 of the
Code. The determination as to whether any reduction in payments is necessary
shall be made by the Company in good faith and such determination shall be
conclusive and binding. If through error or otherwise you should receive
payments, together with other payments the employee has the right to receive
from the Corporation (or its affiliates and subsidiaries) in excess of 2.99
times your base amount, you agree to immediately repay the excess to the Company
upon notification that an overpayment has been made.
S. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct
7
<PAGE> 8
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company expressly to assume
and agree to perform this Agreement to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain an assumption of this Agreement prior to the effectiveness of
any succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled hereunder if you had terminated your employment for Good
Reason immediately after a Change in Control of the Company, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as defined above and any successor
to its business of assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law or otherwise
(b) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives executors, administrators, successors,
heirs, distributees, devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued to have, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.
6. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
duly given then delivered or when mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
President of the Company, and to you at the address shown above or to such other
address as either the Company or you may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
7. Miscellaneous.
(a) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Arizona.
(c) No waiver by you at any time of any breach of, or compliance with, any
provision of this Agreement to be performed by the Company shall be deemed a
waiver of that or any other
8
<PAGE> 9
provision at any subsequent time.
(d) This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.
(e) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(f) This Agreement sets forth the entire agreement of the parties hereto
in respect of the subject matter contained herein and supersedes all prior
agreements, promises, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto, and any prior agreement of the parties
hereto in respect of the subject matter contained herein is hereby terminated
and canceled.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter, which
will then constitute our agreement on this subject.
Sincerely,
CONTINENTAL CIRCUITS CORP.
By: /s/ Frederick G. McNamee III
----------------------------
Name: Frederick G. McNamee III
Title: President and CEO
Agreed to as of the 25th day
of May, 1997
By: /s/ Joseph G. Andersen
----------------------
Joseph G. Andersen
9
<PAGE> 1
Exhibit 11.1
STATEMENT RE: COMPUTATION OF NET INCOME PER SHARE
CONTINENTAL CIRCUITS CORP.
<TABLE>
<CAPTION>
YEAR ENDED JULY 31,
--------------------------
1997 1996 1995
------ ------ ------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Primary:
Average shares outstanding 7,237 7,152 6,504
Net effect of dilutive stock options--based on the treasury
stock method using average market price 195 278 243
------ ------ ------
Totals 7,432 7,430 6,747
====== ====== ======
Net income $8,022 $6,283 $6,654
====== ====== ======
Per share amount $ 1.08 $ 0.85 $ 0.99
====== ====== ======
Fully diluted:
Average shares outstanding 7,237 7,152 6,504
Net effect of dilutive stock options--based on the treasury
stock method using the year-end market price if higher than
the average market price 295 278 292
------ ------ ------
Totals 7,532 7,430 6,796
====== ====== ======
Net income $8,022 $6,283 $6,654
====== ====== ======
Per share amount $ 1.07 $ 0.85 $ 0.98
====== ====== ======
</TABLE>
<PAGE> 1
Exhibit 13.1
Financial Highlights
<TABLE>
For Years Ended July 31, 1997 1996 1995 1994 1993
________________________________________________________________________________
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Income Data
Net sales $120,752 $108,362 $95,372 $80,218 $77,177
Income from operations 13,567 10,869 11,817 6,320 6,809
Net income 8,022 6,283 6,654 3,059 2,322
Net income per share 1.08 0.85 0.99 0.48 0.37
Balance Sheet Data
Working capital $ 14,016 $14,729 $ 8,695 $ 9,464 $ 2,982
Total assets 82,859 59,586 54,482 47,648 44,226
Long-term debt,
less current portion 10,312 3,333 1,357 12,500 10,511
Shareholder's equity 52,244 44,032 37,736 21,635 18,373
</TABLE>
3
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Continental Circuits Corp. is a leading manufacturer of complex multilayer,
surface mount circuit boards used in sophisticated electronic equipment in the
computer, communications, instrumentation and industrial controls industries.
The Company's circuit boards are used principally in workstations, desktop and
notebook computers, computer networking products, storage devices, medical
equipment, cellular telephones and pagers. The Company utilizes its advanced
manufacturing and engineering capability to assist OEMs in the early phases of
new product development, which allows Continental to maintain technological
leadership and provide prototype and volume manufacturing opportunities. Most of
the segments of the electronics industry served by the Company are characterized
by high growth rates, rapid technological advances and short product development
and market introduction times. The Company is committed to assisting its
customers in achieving the shortest possible time-to-market and time-to-volume
for new products.
The electronics industry, including the segments served by the Company, is
subject to economic cycles and from time to time experiences recessionary
periods. During past recessionary periods, the competitive pressures on merchant
manufacturers were intensified by OEMs with captive operations which could
substantially reduce outsourcing in favor of maintaining adequate volume at
their captive manufacturers. This effect has been diminished significantly by a
continuing decrease in the overall captive manufacturing capacity and the fact
that there are fewer manufacturers capable of producing complex multilayer,
surface mount circuit boards. The Company believes that these factors contribute
to firmer price levels over time, although there is no assurance that price
levels will not fluctuate materially in the future.
The Company is focusing on increasing manufacturing efficiency to achieve
continued improvement in profitability. This focus includes making capital
improvements, optimizing workflow and managing product mix in order to maximize
process yield and throughput.
Set forth below is a table showing the portions of the Company's total net
sales attributable to the indicated markets for fiscal years 1995 through 1997.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JULY 31, 1997 1996 1995
- -----------------------------------------------------------------
<S> <C> <C> <C>
MARKETS
Computers 48% 49% 37%
Memory and storage devices 8 14 29
Communications 24 21 14
Instrumentation and industrial controls 12 13 11
Peripherals 8 3 9
- -----------------------------------------------------------------
Totals 100% 100% 100%
</TABLE>
RESULTS OF OPERATIONS
The following table sets forth operating results expressed as a percentage of
net sales for the periods indicated and the percentage change in such operating
results between periods. Results for any one or more periods are not necessarily
indicative of continuing trends.
9
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
<TABLE>
<CAPTION>
PERIOD TO PERIOD
INCREASE (DECREASE)
---------------------
1997 1996
PERCENTAGE OF NET SALES COMPARED COMPARED
FISCAL YEAR ENDED JULY 31, 1997 1996 1995 TO 1996 TO 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 11.4% 13.6%
Cost of products sold 81.8 82.6 79.9 10.3 17.5
----------------------
Gross profit 18.2 17.4 20.1 16.9 (1.8)
Selling, general and
administrative expenses 7.0 7.4 7.7 6.2 8.3
----------------------
Income from operations 11.2 10.0 12.4 24.8 (8.0)
Interest expense 0.3 0.4 0.9 (24.7) (46.5)
Other expense 0.3 0.1 0.0 NM NM
----------------------
Income before income taxes 10.6 9.5 11.5 25.0 (5.8)
Income taxes 4.0 3.7 4.5 20.9 (6.3)
- -----------------------------------------------------------------------
Net income 6.6% 5.8% 7.0% 27.7% (5.6%)
</TABLE>
COMPARISON OF FISCAL YEARS ENDED JULY 31, 1997 AND 1996
Net sales increased 11.4% to $120.8 million in fiscal 1997 from $108.4
million in fiscal 1996. This increase was the result of a 19% increase in
volume, primarily for products supporting the peripherals and communications
markets and $0.9 million in net sales from the purchase of a division of Radian
International, LLC. in Austin, Texas. Average prices declined from 1996 to 1997
due to competitive pressures. However, the market continued to shift to more
complex, higher technology products.
Gross profit as a percent of net sales increased to 18.2% in fiscal 1997 from
17.4% in fiscal 1996. This increase was driven primarily by volume growth
throughout 1997 and the favorable impact of lower fixed costs per unit of
production and productivity gains realized through equipment additions and
training efforts with the larger production workforce.
Selling, general and administrative expenses increased 6.2% to $8.5 million
in fiscal 1997 from $8.0 million in fiscal 1996. This growth was driven
primarily by training for an expanded workforce, freight costs for increased
shipment volumes and technical costs to strengthen the Company's information
services.
Income from operations of $13.6 million for fiscal 1997 increased to 11.2% of
net sales from $10.9 million, or 10.0% of net sales in fiscal 1996 as a result
of the above factors.
Interest expense decreased 24.7% to $0.4 million in fiscal 1997 from $0.5
million in fiscal 1996 due to lower average indebtedness and favorable interest
rates.
During 1997, income before income taxes was unfavorably impacted by an other
expense increase of $300,000 as a result of a one-time charge of legal and other
professional costs associated with the abandoned acquisition of Sigma Circuits,
Inc.
Income taxes of $4.8 million in fiscal 1997 increased from $4.0 million in
fiscal 1996, consistent with the increase in pretax earnings. The 1997 effective
tax rate was reduced by 1.3 percentage points from 1996 to approximately 38% as
benefits associated with the Company's foreign sales corporation were realized.
COMPARISON OF FISCAL YEARS ENDED JULY 31, 1996 AND 1995
Net sales increased 13.6% to $108.4 million in fiscal 1996 from $95.4 million
in fiscal 1995. This increase was the result of a 13% increase in volume,
primarily for products supporting the computer and communications markets, two
of the areas of focus of the marketing effort. Also, average prices increased
from 1995 to 1996. Product mix continued to shift toward more complex, higher
technology products.
10
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Gross profit as a percent of net sales decreased to 17.4% in fiscal 1996 from
20.1% in fiscal 1995. The decrease was driven primarily by a slowdown in the
second half of 1996 throughout the industry and the impact of fixed costs in
place to support higher sales being spread over a lower manufacturing volume.
Selling, general and administrative expenses increased 8.3% to $8.0 million
in fiscal 1996 from $7.4 million in fiscal 1995. The growth was driven primarily
by increased marketing expenses and a provision for doubtful accounts for a
single customer that represented less than 1% of sales.
Income from operations of $10.9 million for fiscal 1996 declined to 10.0% of
sales from $11.8 million, or 12.4% of sales in fiscal 1995 because of the above
factors.
Interest expense decreased 46.5% to $0.5 million in fiscal 1996 from $0.9
million in fiscal 1995 as all of fiscal 1996 benefited from the prepayment of
approximately $9 million of long-term debt from the proceeds of the Company's
March 1995 initial public offering of Common Stock.
Income taxes of $4.0 million in fiscal 1996 decreased from $4.3 million in
fiscal 1995, consistent with the reduced pretax earnings. The effective tax rate
was essentially unchanged at 39% for both periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations primarily through cash
generated from operations, although such funds have been supplemented by
borrowings under a line of credit and term notes as needed. The Company's
principal uses of cash historically have been to pay operating expenses, make
capital expenditures and service debt.
Cash generated from operations totaled $13.2 million and $9.5 million in
fiscal years 1997 and 1996 respectively. Major cash uses in fiscal 1997 include
growth in accounts receivable and inventory of $6.3 million and $4.0 million
respectively. Cash was provided by increases in accounts payable of $7.5 million
and $1.1 million in accrued expenses. Both cash used and cash provided were
primarily a result of increasing sales levels. Additionally, $1.1 million was
provided by an increase in deferred taxes.
Capital expenditures totaled $23.2 million and $8.7 million in fiscal years
1997 and 1996 respectively. The capital expenditures during fiscal 1997 include
the purchase of a division of Radian International, LLC. in Austin, Texas for
$2.6 million, expansion of manufacturing capacity in Phoenix and routine
replacements. Capital expenditures during 1996 completed the Company's $12
million 1995 manufacturing expansion program and routine replacements. These
capital expenditures were financed through cash generated from operations and
the Company's borrowing facility.
On July 25, 1997, the Company completed the renegotiation of both the
outstanding $5 million long-term note payable and the $10 million long-term line
of credit agreement. The new long-term line of credit agreement expires October
31, 2000 and provides for maximum borrowings of $45 million. The line of credit
bears interest at LIBOR (London Interbank Offered Rate) plus a fixed rate
factor, as defined, and/or prime. Up to $25 million can be converted to a term
note at the Company's request. As of July 31, 1997, there was $9.3 million
outstanding under the line. The long-term debt agreement is collateralized by
substantially all available assets of the Company.
The Company's borrowing agreement contains covenants which place various
restrictions on financial ratios, status and ownership of capital assets,
transactions with related parties, and the payment of dividends. In addition,
the borrowing agreement contains an event of default provision whereby all
outstanding amounts would be due and payable should there be any change in
control of the Company.
The Company believes that funds generated from operations and borrowing
availability under the renegotiated line of credit agreement will be sufficient
to satisfy the Company's operating expenses and capital expenditures through
fiscal 1998.
11
<PAGE> 5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SEASONALITY
Historically, the Company's sales have not been subject to significant
seasonal fluctuations.
INFLATION
The impact of inflation on the Company's operating results has been moderate
in recent years, reflecting generally lower rates of inflation in the economy
and relative stability in the Company's cost of sales. While inflation has not
had, and the Company does not expect that it will have, a material impact upon
operating results, there is no assurance that the Company's business will not be
affected by inflation in the future.
The previous discussion should be read in conjunction with, and is qualified
in its entirety by, the Company's Financial Statements and the Notes thereto
included elsewhere herein. Historical results are not necessarily indicative of
trends in operation results for any future period.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share", which is required to be adopted by the Company in
the second quarter of fiscal year 1998. At that time, the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under the new requirements for calculating basic
earnings per share, the dilutive effect of stock options will be excluded. The
impact is expected to result in an increase in basic earnings per share for the
year ended July 31, 1997 of $0.03 to $1.11. The impact for the year ended July
31, 1996, is expected to increase $0.03 to $0.88 per share. The impact of
Statement No. 128 on the calculation of diluted earnings per share for the years
ended July 31, 1997 and 1996, is not expected to be material.
FORWARD-LOOKING STATEMENTS
This Annual Report contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, and the Company
intends that such forward-looking statements be subject to the safe harbors
created thereby. These forward-looking statements relate to sufficiency of
funds, stability of prices, and the plans and objectives of management for
future operations of the Company, including improving productivity and enhancing
profitability.
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. These
forward-looking statements are based on assumptions regarding the market in
which the Company operates, the cost and amount of equipment required for
replacements and growth, and the success of productivity programs. Assumptions
relating to the foregoing involve judgments with respect to, among other things,
future economic, competitive and market conditions, and future business
decisions, all of which are difficult or impossible to predict accurately and
many of which are beyond the control of the Company. Although the Company
believes that the assumptions underlying the forward-looking statements, many of
which are beyond the control of the Company, are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in forward-looking information will be realized.
Important factors which may cause actual results to differ materially from those
contemplated or implied by such forward-looking statements are discussed in more
detail in the Company's Form 10-K for the 1997 fiscal year. In light of the
significant uncertainties inherent in the forward-looking information included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives or plans
of the Company will be achieved.
12
<PAGE> 6
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 31 1997 1996
- ------------------------------------------------------------------------------------------------
(In thousands, except share data)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 85 $ 3,851
Accounts receivable, less allowance of $152 in 1997 and $167 in 1996 21,431 15,114
Inventories 8,805 4,796
Refundable income taxes 420 240
Deferred income taxes 125 714
Prepaid expenses and other 946 259
----------------------------------------------------------------------------------------------
Total current assets 31,812 24,974
Property, plant, and equipment:
Land 3,586 2,899
Buildings and improvements 22,760 18,353
Machinery and equipment 69,123 53,065
Construction in progress 1,917 --
----- ------
97,386 74,317
Accumulated depreciation 46,422 40,200
------ ------
50,964 34,117
Other assets 83 495
- ------------------------------------------------------------------------------------------------
Total assets $82,859 $59,586
- ------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $14,665 $ 7,193
Accrued vacation expense 688 720
Other accrued expenses 2,443 1,332
Current portion of long-term debt -- 1,000
------- ------
Total current liabilities 17,796 10,245
Long-term debt, less current portion 10,312 3,333
Deferred income taxes 2,507 1,976
Commitments and contingency
Shareholders' equity:
Preferred stock, $.01 par value:
Authorized shares -- 1,000,000
Issued and outstanding shares -- none
Common stock, $.01 par value:
Authorized shares -- 20,000,000
Issued and outstanding shares -- 7,252,000
in 1997 and 7,194,000 in 1996 73 72
Additional paid-in capital 10,266 10,077
Retained earnings 41,905 33,883
------ ------
Total shareholders' equity 52,244 44,032
- ------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $82,859 $59,586
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes.
13
<PAGE> 7
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED JULY 31 1997 1996 1995
- ------------------------------------------------------------------------------------------
(In thousands except earnings per share)
<S> <C> <C> <C>
Net sales $120,752 $108,362 $95,372
Cost of products sold 98,698 89,502 76,174
----------------------------------
Gross profit 22,054 18,860 19,198
Selling, general and administrative expenses 8,487 7,991 7,381
----------------------------------
Income from operations 13,567 10,869 11,817
Other expense:
Interest 354 470 878
Other 365 123 25
----------------------------------
Income before income taxes 12,848 10,276 10,914
Income taxes 4,826 3,993 4,260
- ---------------------------------------------------------------------------------------------
Net income $ 8,022 $ 6,283 $ 6,654
Earnings per share $ 1.08 $ .85 $ .99
- ---------------------------------------------------------------------------------------------
Weighted average common
and equivalent shares outstanding 7,432 7,430 6,747
</TABLE>
See accompanying notes.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
- --------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at July 31, 1994 6,133 $ 61 $ 581 $20,993 $ 21,635
Cash proceeds from issuance
of common stock, net of
share issuance costs 1,000 10 9,396 -- 9,406
Shares issued in connection
with options exercised 10 -- 98 -- 98
Shares repurchased and canceled (13) -- (10) (47) (57)
Net income -- -- -- 6,654 6,654
----------------------------------------------------------
Balance at July 31, 1995 7,130 71 10,065 27,600 37,736
Shares issued in connection
with options exercised 64 1 199 -- 200
Share issuance costs -- -- (187) -- (187)
Net income -- -- -- 6,283 6,283
----------------------------------------------------------
Balance at July 31, 1996 7,194 72 10,077 33,883 44,032
Shares issued in connection
with options exercised and
for employee stock purchase plan 58 1 189 -- 190
Net income -- -- -- 8,022 8,022
-------------------------------------------------------------------------------------------------------
Balance at July 31, 1997 7,252 $ 73 $10,266 $41,905 $ 52,244
</TABLE>
See accompanying notes.
14
<PAGE> 8
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JULY 31 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 8,022 $ 6,283 $ 6,654
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 6,292 6,572 5,612
Loss on sale of property, plant, and equipment 6 139 70
Deferred income taxes 1,120 (418) 101
Provision (recovery) for doubtful accounts (15) 424 24
Changes in operating assets and liabilities:
Accounts receivable (6,302) (1,040) (1,327)
Inventories (4,009) 320 (1,129)
Refundable income taxes (180) (240)
Prepaid expenses and other (687) 365 (417)
Other assets 412 (801) 77
Accounts payable 7,472 (1,513) 1,135
Accrued expenses 1,079 (158) 418
Income taxes -- (386) 164
----------------------------------------------------------
Net cash provided by operating activities 13,210 9,547 11,382
INVESTING ACTIVITIES
Purchases of property, plant, and equipment (20,562) (8,682) (11,676)
Proceeds from disposal of property, plant, and equipment 17 102 31
Acquisition of a division of Radian International LLC (2,600) -- --
----------------------------------------------------------
Net cash used in investing activities (23,145) (8,580) (11,645)
FINANCING ACTIVITIES
Borrowings under line of credit agreement 9,312 -- --
Principal payments on long-term debt (4,333) (4,167) (11,143)
Borrowings under long-term debt 1,000 5,000 --
Proceeds from issuance of common stock,
net of issuance cost 190 13 9,504
Payments to repurchase common stock -- -- (57)
----------------------------------------------------------
Net cash provided by (used in) financing activities 6,169 846 (1,696)
----------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (3,766) 1,813 (1,959)
Cash and cash equivalents at beginning of year 3,851 2,038 3,997
- --------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 85 $ 3,851 $ 2,038
</TABLE>
See accompanying notes.
15
<PAGE> 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The Company is in one line of business as a manufacturer of complex
multilayer, surface mount circuit boards used in sophisticated electronic
equipment in the computer, communications, instrumentation and industrial
controls industries. The Company sells its products primarily to leading
original equipment manufacturers and to contract assemblers in the United States
and abroad.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries, which are wholly owned. Significant intercompany accounts and
transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists of checking accounts and funds invested in
overnight repurchase agreements and is stated at cost, which approximates market
value. The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
INVENTORIES
Inventories are carried at the lower of cost or market using the first-in,
first-out (FIFO) method.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is stated at cost. Depreciation is computed
using the double declining balance and the straight-line methods based on the
estimated useful lives of the related assets ranging from three to forty years.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments", requires that the Company disclose estimated
fair values of financial instruments. Cash and cash equivalents, accounts
receivable, accounts payable and accrued liabilities are carried at amounts that
reasonably approximate their fair values. The carrying amounts of the Company's
borrowings under its line of credit arrangement approximates its fair value
based on the variable nature of its interest rates.
REVENUE RECOGNITION
Sales are recorded at the time individual items are shipped.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense for the years
ended July 31, 1997, 1996, and 1995 were $47,000, $54,000 and $55,000,
respectively.
INCOME TAXES
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes".
16
<PAGE> 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
EARNINGS PER SHARE AND SUPPLEMENTAL EARNINGS PER SHARE
Earnings per share is computed using the weighted average number of shares of
common stock and common stock equivalents outstanding during the year. Dilutive
common equivalent shares are computed using the treasury stock method. Fully
diluted earnings per share are not presented since such amounts would not have a
material dilutive effect.
Supplemental earnings per share, assuming the proceeds from the issuance of
922,000 common shares at the public offering of $10.50, net of issuance costs,
were used to repay $9.0 million of the Company's indebtedness as of August 1,
1994, would have reduced earnings per share from $0.99 to $0.94 in 1995.
STOCK BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants to employees in accordance
with APB Opinion No. 25, "Accounting for Stock Issued to Employees", (APB 25)
and, accordingly, recognizes no compensation expense for the stock option
grants.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share", which is required to be adopted by the Company in
the second quarter of fiscal year 1998. At that time, the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under the new requirements for calculating basic
earnings per share, the dilutive effect of stock options will be excluded. The
impact is expected to result in an increase in basic earnings per share for the
year ended July 31, 1997 of $0.03 to $1.11. The impact for the year ended July
31, 1996, is expected to increase $0.03 to $0.88 per share. The impact of
Statement No. 128 on the calculation of diluted earnings per share for the years
ended July 31, 1997 and 1996, is not expected to be material.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
2. ACQUISITION
In April 1997, the Company acquired the assets and assumed certain
liabilities of a division of Radian International LLC (Radian) for $2,600,000.
The acquisition was accounted for as a purchase, and accordingly, the results of
its operations have been included in the consolidated results of operations
since the transaction date. The purchase price has been allocated to the assets
and liabilities acquired based on fair values at acquisition. The results of
operations of Radian were not significant in relation to the Company for periods
prior to the acquisition.
17
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JULY 31 1997 1996
- ---------------------------------------------------------------
(In thousands)
<S> <C> <C>
Raw materials $2,117 $ 649
Work-in-process 4,878 2,487
Finished goods 1,810 1,660
- ---------------------------------------------------------------
$8,805 $4,796
</TABLE>
4. LONG-TERM DEBT
On July 25, 1997, the Company entered into a $45,000,000 long-term line of
credit agreement with a bank. Up to $25,000,000 of the line of credit agreement
can be converted into a long-term note payable. At July 31, 1997 there were no
amounts converted to a long-term note. The line of credit bears interest at
LIBOR plus a fixed rate factor, as defined, and/or the prime rate, payable
monthly, and the interest rate can be converted by the Company to a fixed rate
when the Company draws above $2,000,000. The line of credit expires on October
31, 2000 and provides for maximum borrowings of the lessor of $45,000,000 less
any converted long-term note payable amounts. At July 31, 1997, amounts
available under the line of credit were approximately $34,700,000. The weighted
average interest rate under the line of credit was 8.5 percent in 1997. The
above long-term debt agreements are collateralized by substantially all
available assets of the Company.
The line of credit agreement contains covenants which place various
restrictions on financial ratios, transactions with related parties, and
prohibits the payment of dividends. In addition, the line of credit agreement
contains an event of default provision whereby all outstanding amounts would be
due and payable should there be a change in ownership control.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
JULY 31 1997 1996
- -------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C>
$45,000,000 long-term line of credit agreement with a bank, interest payable
monthly at LIBOR plus a fixed rate factor, as defined, and/or the prime rate,
maturing October 31, 2000. $ 9,312 $ --
$1,000,000 long-term adjustable rate industrial development revenue bond,
interest payable monthly at a variable rate until September 1, 2011 when all
outstanding interest and principal is due and payable; secured by $1,000,000
irrevocable letter of credit; bond is subject to certain optional and
mandatory redemption, as defined. 1,000 --
$5,000,000 long-term note payable to a bank, paid in full during 1997. -- 4,333
--------------------
10,312 4,333
Less current portion -- 1,000
- -------------------------------------------------------------------------------------------------------
$10,312 $3,333
</TABLE>
Maturities of long-term debt for the five years succeeding July 31, 1997 are
as follows: July 31, 1998 $0, 1999 $0, 2000 $0, 2001 $9,312,000, 2002 $0, and
thereafter $1,000,000. Interest payments approximated interest expense during
the years ended July 31, 1997, 1996, and 1995.
18
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. STOCK OPTIONS
The Company has elected to follow APB 25 and related Interpretations in
accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation" (Statement 123), requires use of
option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation is recognized.
During 1987, the Company's stockholders adopted a stock option plan (the 1987
Plan) that provides for the granting of options to employees (including
officers) and non-employee directors at fair value at the date of the grant. The
1987 Plan provides for the issuance of options at fair value to purchase a
maximum of 750,000 shares of common stock. All options under the 1987 Plan are
exercisable cumulatively, beginning on the third anniversary of the date of
grant. Generally, after three years from the date of grant, the optionee may
purchase 40 percent of the shares granted; an additional 20 percent after four
years; an additional 20 percent after five years; and the final 20 percent after
six years. However, with respect to 200,000 options granted on August 25, 1994,
the options become exercisable at the rate of 15 percent a year. All options
expire between seven and ten years after the date of grant. The options granted
under the 1987 Plan become fully exercisable if the Company is dissolved,
liquidated, merged, consolidated, or undergoes a change in control as defined in
the Plan document.
During 1996, the Company's stockholders adopted a second stock option plan
(the 1996 Plan) that provides for the granting of options to employees
(including officers) and non-employee directors at fair value at the date of the
grant. The 1996 plan provides for the issuance of options at fair value at the
date of the grant. The 1996 plan provides for the issuance of options at fair
value to purchase a maximum of 1,000,000 shares of common stock. All options
under the 1996 plan are exercisable cumulatively, beginning on the first
anniversary of the date of grant. Generally, after one year from the date of
grant, the optionee may purchase 20 percent of the shares granted; an additional
20 after two years; an additional 20 percent after three years; an additional 20
percent after four years; and the final 20 percent after five years. All options
expire ten years after the date of grant. The options granted under the 1996
Plan become fully exercisable if the Company is dissolved, liquidated, merged,
consolidated, or undergoes a change in control as defined in the Plan document.
Pro forma information regarding net income and earnings per share is required
by Statement 123, and has been determined as if the Company had accounted for
its employee stock options under the fair value method of that Statement. The
fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1997 and 1996: risk-free interest rate of 5.5 percent, dividend
yield of zero percent, volatility factor of the expected market price of the
Company's common stock of .46, and a weighted-average expected life of the
option of 6.26 years and seven years, respectively.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
19
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Because Statement No. 123 is applicable to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until
approximately 2003. For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the option's vesting period.
The Company's pro forma information follows (in thousands except for earnings
per share information):
<TABLE>
<CAPTION>
JULY 31, 1997 1996
- ------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C>
Net income, as reported $8,022 $6,283
Pro forma compensation expense for stock options 142 74
- ------------------------------------------------------------------------
Pro forma net income $7,880 $6,209
Earnings per share, as reported $ 1.08 $ 0.85
Earnings per share, pro forma $ 1.06 $ 0.84
</TABLE>
Information regarding stock options outstanding under the Plans are as
follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
- -------------------------------------------------------------------------
<S> <C> <C>
Outstanding at July 31, 1994 186,000 $3.11
Granted 225,000 3.27
Exercised (9,600) 6.72
Forfeited (canceled) (25,000) 3.10
------------------------
Outstanding at July 31, 1995 376,400 3.11
Granted 110,000 15.00
Exercised (64,040) 3.12
Forfeited (canceled) (24,000) 12.50
------------------------
Outstanding at July 31, 1996 398,360 5.69
Granted 432,000 14.03
Exercised (40,960) 2.50
Forfeited (canceled) (26,750) 12.85
------------------------
Outstanding at July 31, 1997 762,650 $10.48
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------------------------- -------------------------------
WEIGHTED-AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
EXERCISE PRICE OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2.50 - $3.25 258,900 6.83 years $3.14 15,100 $2.50
$4.00 5,000 7.29 years $4.00 -- --
$10.63 - $15 368,750 9.24 years $12.85 -- --
$18.00 130,000 9.99 years $18 -- --
</TABLE>
Exercise prices for options outstanding at July 31, 1997, range from $2.50 to
$18.00. The weighted-average fair value of options granted during 1997 and 1996
was $7.43 and $8.36, respectively.
20
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
JULY 31 1997 1996
- -------------------------------------------------------
(In thousands)
<S> <C> <C>
Deferred tax liabilities:
Tax over book depreciation $2,499 $1,970
Receivables adjustments 493 --
Other, net 52 52
------------------
Total deferred tax liabilities 3,044 2,022
------------------
Deferred tax assets:
Receivables allowances 61 227
Inventory allowances 136 116
Accrued vacation 220 227
Accrued expenses 87 80
Unicap and other 158 110
------------------
Total deferred tax assets 662 760
- ------------------------------------------------------
Net deferred taxes $2,382 $1,262
</TABLE>
Significant components of the federal and state income tax expense are:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31 1997 1996 1995
- ------------------------------------------------------
(In thousands)
Current:
<S> <C> <C> <C>
Federal $3,053 $ 3,486 $3,287
State 653 925 872
--------------------------------
Total current 3,706 4,411 4,159
Deferred:
Federal 929 (347) 84
State 191 (71) 17
--------------------------------
Total deferred 1,120 (418) 101
--------------------------------
$4,826 $ 3,993 $4,260
- -------------------------------------------------------
</TABLE>
Total income tax payments, net of any refunds received, during the years
ended July 31, 1997, 1996, and 1995, were approximately $3,997,000, $5,037,000
and $3,962,000, respectively.
A reconciliation of the Company's effective income tax rate to the federal
statutory rate follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31 1997 1996 1995
- ---------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate 34% 34% 34%
State tax net of federal benefit 7 7 7
Other (3) (2) (2)
- ---------------------------------------------------------------
38% 39% 39%
</TABLE>
21
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. SIGNIFICANT CUSTOMERS AND EXPORT SALES
The percentages of total sales to significant customers were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31 1997 1996 1995
- -----------------------------------------------------------------
<S> <C> <C> <C>
Customer A 15% 5% 0%
Customer B 7 11 15
Customer C 20 21 15
</TABLE>
The amount of total export sales by geographic area was as follows:
<TABLE>
<CAPTION>
YEAR ENDED JULY 31 1997 1996 1995
- -----------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Canada $ 2,700 $ 3,800 $ 3,500
Singapore 5,800 6,900 10,800
United Kingdom and others 15,600 9,600 10,100
- -----------------------------------------------------------------
Total export sales $ 24,100 $20,300 $24,400
</TABLE>
The Company performs ongoing credit risk evaluations of its customers'
financial conditions and generally does not require collateral. The Company's
significant customers are major, well-known businesses in the electronic
equipment industry. Credit losses have been provided for in the financial
statements and have been within management's expectations.
8. COMMITMENTS AND CONTINGENCY
The Company leases certain equipment and buildings under noncancelable
operating leases that expire in various years through 2004. Total rental expense
for all operating leases was approximately $397,000, $357,000 and $122,000
during the years ended July 31, 1997, 1996 and 1995, respectively. Future
minimum payments under noncancelable operating leases with initial terms of one
year or more consisted of the following at July 31, 1997:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
(In thousands)
<S> <C>
1998 $ 672,115
1999 636,480
2000 636,480
2001 636,480
2002 636,480
Thereafter 1,092,624
- -------------------------------------------------------------------------
$4,310,659
</TABLE>
The Company is a party to certain litigation in the normal course of
business. Management does not anticipate any material adverse impact from the
resolution of such matters.
22
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. BENEFIT PLANS
The Company has a 401(k) Retirement Plan (Plan) covering all employees who
reside in the United States, have completed six months of service, and have
attained age 21. Under the terms of the Plan, employees may contribute up to 15
percent of their annual compensation, subject to Internal Revenue Service
limitations. The Company matched 25 percent of employee contributions up to 6
percent of the employee's annual compensation. Additional contributions to the
Plan can be made at the discretion of the Board of Directors. Company
contributions to the Plan during the years ended July 31, 1997, 1996, and 1995,
were approximately $212,000, $198,000 and $164,000, respectively.
During 1996, the Company adopted the Continental Circuits Corp. Employee
Stock Purchase Plan. All employees who are regularly scheduled to work at least
20 hours per week and have completed at least six (6) months of continuous
service with the Company are eligible to participate in the plan. Eligible
employees are entitled to purchase shares of common stock through payroll
deductions of up to 10 percent of their compensation. The price paid for the
common stock is equal to 85 percent of the fair market value of the Company's
common stock on the last business day of the quarterly investment period. At the
Company's option, common stock can either be purchased on the open market or
through new shares issued. Total shares reserved for issuance are 200,000, with
17,937 purchased through July 1997 at a market price ranging from $10.75 to
$13.88 per share.
10. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
A summary of the quarterly results of operations for the years ended July 31,
1997 and 1996 follows:
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
- ------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
1997:
<S> <C> <C> <C> <C>
Net sales $27,123 $29,562 $31,862 $32,205
Gross margin $4,463 $5,170 $6,148 $6,273
Net income $1,433 $1,817 $2,379 $2,393
Earnings per share $ .19 $ .24 $ .32 $ .32
Weighted average common
and equivalent shares outstanding 7,424 7,432 7,457 7,497
</TABLE>
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
- ------------------------------------------------------------------------------------------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
1996:
Net sales $28,508 $28,860 $26,464 $24,530
Gross margin $5,733 $6,215 $4,406 $2,506
Net income $2,248 $2,305 $1,380 $ 350
Earnings per share $ .30 $ .31 $ .19 $ .05
Weighted average common
and equivalent shares outstanding 7,430 7,431 7,413 7,420
</TABLE>
The 1997 quarterly results for net earnings per share, when totaled, do not
equal the net earnings per share for the year ended July 31, 1997 due to
rounding.
23
<PAGE> 17
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
CONTINENTAL CIRCUITS CORP.
We have audited the accompanying consolidated balance sheets of Continental
Circuits Corp. and subsidiaries as of July 31, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended July 31, 1997. 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 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Continental
Circuits Corp. and subsidiaries at July 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended July 31, 1997 in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Phoenix, Arizona
August 22, 1997
24
<PAGE> 18
CORPORATE INFORMATION
BOARD OF DIRECTORS
Frederick G. McNamee, III
Chairman of the Board, President and Chief Executive Officer
Angelo A. DeCaro (4)
President, Chief Executive Officer, and Director,
XeTel Corporation
Michael O. Flatt (3)
President, Michael O. Flatt, Ltd
Albert A. Irato (2)
President and Chief Executive Officer Hypercom, Inc.
Michael F. Jarko (1)
Retired; Former Principal
of Jarko Associates
John Nance (4)
Retired; former manager of Large Systems Business Planning for Bull-HN Worldwide
David C. Wetmore (2)
Managing Director,
The Updata Group
1. Chairman of the Compensation Committee
2. Member of the Compensation Committee
3. Chairman of the Audit Committee
4. Member of the Audit Committee
Annual Meeting of Shareholders
Friday, December 12, 1997 8:00 a.m.
Phoenix Airport Hilton
2435 S. 47th St.
Phoenix, AZ 85034
FORM 10-K
A COPY OF CONTINENTAL CIRCUITS CORP.'S FORM 10-K ON FILE WITH THE SECURITIES AND
EXCHANGE COMMISSION (EXCLUDING EXHIBITS) WILL BE FURNISHED WITHOUT CHARGE UPON
WRITTEN REQUEST TO:
Joseph G. Andersen
Vice President of Finance and
Chief Financial Officer
Continental Circuits Corp.
3502 East Roeser Road
Phoenix, AZ 85040
Visit Continental Circuits' web site at: http://www.contcirc.com
OFFICERS
Frederick G. McNamee, III
Chairman of the Board,
President and Chief
Executive Officer
Joseph G. Andersen
Vice President of Finance, Chief
Financial Officer, Secretary and
Treasurer
John W. Maddux
Vice President-Quality and
Engineering
Steven N. Lach
Vice President-
Manufacturing Operations
James Buchanan
Vice President-Sales and Marketing
Robert A. Kosciusko
Vice President-Human Resources
CORPORATE DATA
Corporate Offices
Continental Circuits Corp.
3502 East Roeser Road
Phoenix, AZ 85040
602.268.3461
LEGAL COUNSEL
Quarles & Brady
Phoenix, Arizona
INDEPENDENT AUDITORS
Ernst & Young LLP
Phoenix, Arizona
STOCK REGISTRAR & TRANSFER AGENT
Harris Trust and Savings Bank
Attn: Shareholder Services
P.O. Box 755
Chicago, IL 60690
312.461.2288
INVESTOR RELATIONS
Silverman Heller Associates
1100 Glendon Avenue, Suite 1801
Los Angeles, CA 90024
310.208.2550
SECURITIES INFORMATION
Continental Circuits Corp.'s common stock has traded on The Nasdaq National
Market under the symbol CCIR since the Company's initial public offering on
March 15, 1995. The high and low transaction prices for the Company's stock, as
reported on The Nasdaq National Market, for the quarters indicated are set forth
in the following table.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
FISCAL 1996 HIGH LOW
- ---------------------------------------------------------------
<S> <C> <C>
First Quarter (August 1-October 31) $17 1/4 $13
Second Quarter (November 1-January 31) $17 1/2 $13 3/16
Third Quarter (February 1-April 30) $16 1/4 $10 1/4
Fourth Quarter (May 1-July 31) $14 1/8 $ 9
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
FISCAL 1997 HIGH LOW
- ---------------------------------------------------------------
<S> <C> <C>
First Quarter (August 1-November 2) $13 1/8 $10 1/4
Second Quarter (November 3-February 2) $14 1/4 $10
Third Quarter (February 3-May 3) $14 1/2 $11 1/2
Fourth Quarter (May 4-July 31) $19 3/4 $11 7/8
</TABLE>
As of September 30, 1997 there were approximately 94 shareholders of record
for Continental Circuits' common stock.
The Company cannot currently pay a cash dividend on its common stock and
intends to retain earnings, if any, for use in the operation and expansion of
its business.
25
<PAGE> 1
Exhibit 21.1
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
Name Under Which
Name of Subsidiary Jurisdiction of Organization Subsidiary Does Business
- ------------------ ---------------------------- ------------------------
<S> <C> <C>
Continental Circuits Barbados Continental Circuits
International, Inc. International, Inc.
CCIR of Texas Corp. Texas CCIR of Texas Corp.
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Continental Circuits Corp. of our report dated August 22, 1997, included in
the 1997 Annual Report to Shareholders of Continental Circuits Corp.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-96658) pertaining to the Continental Circuits Corp. 1987 Stock
Option Plan, in the Registration Statement (Form S-8 No. 33-81023) pertaining to
the Continental Circuits Corp. Employee Stock Purchase Plan and in the
Registration Statement (Form S-8 No. 333-33289) pertaining to the Continental
Circuits Corp. 1996 Stock Option Plan of our report dated August 22, 1997, with
respect to the consolidated financial statements incorporated herein by
reference.
/s/ ERNST & YOUNG LLP
Phoenix, Arizona
October 29, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED JULY 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH ANNUAL REPORT.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 85
<SECURITIES> 0
<RECEIVABLES> 21,583
<ALLOWANCES> 152
<INVENTORY> 8,805
<CURRENT-ASSETS> 31,812
<PP&E> 97,386
<DEPRECIATION> 46,422
<TOTAL-ASSETS> 82,859
<CURRENT-LIABILITIES> 17,796
<BONDS> 10,312
0
0
<COMMON> 73
<OTHER-SE> 52,171
<TOTAL-LIABILITY-AND-EQUITY> 82,859
<SALES> 120,752
<TOTAL-REVENUES> 120,752
<CGS> 98,698
<TOTAL-COSTS> 98,698
<OTHER-EXPENSES> 8,487
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 354
<INCOME-PRETAX> 12,848
<INCOME-TAX> 4,826
<INCOME-CONTINUING> 8,022
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,022
<EPS-PRIMARY> 1.08
<EPS-DILUTED> 1.08
</TABLE>
