<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended January 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND 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
No Change
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities 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___
The number of shares outstanding of each of the issuer's classes of common
stock was 7,292,158 shares common stock, par value $.01, as of March 2, 1998.
<PAGE> 2
FORM 10-Q
CONTINENTAL CIRCUITS CORP.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONTINENTAL CIRCUITS CORP.
CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six months ended
January 31, February 2, January 31, February 2,
----------- ----------- ----------- -----------
1998 1997 1998 1997
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales $ 35,344 $29,562 $ 69,650 $56,685
Cost of products sold 30,379 24,392 58,763 47,052
-------- ------- -------- -------
Gross profit 4,965 5,170 10,887 9,633
Selling, general and administrative
expenses 2,552 1,809 4,616 3,839
In process R&D write-off 4,300 4,300
-------- ------- -------- -------
Income (loss) from operations (1,887) 3,361 1,971 5,794
Other expense:
Interest expense 612 59 734 123
Other 3 321 15 325
-------- ------- -------- -------
Income (loss) before income taxes (2,502) 2,981 1,222 5,346
Income taxes 136 1,164 1,546 2,096
======== ======= ======== =======
Net income (loss) $ (2,638) $ 1,817 $ (324) $ 3,250
======== ======= ======== =======
Net income (loss) per share - basic $ (0.36) $ 0.25 $ (0.04) $ 0.45
======== ======= ======== =======
Net income (loss) per share - diluted $ (0.36) $ 0.24 $ (0.04) $ 0.44
======== ======= ======== =======
Number of shares used in computing:
net income (loss) per share - basic 7,267 7,206 7,262 7,200
======== ======= ======== =======
net income (loss) per share - diluted 7,450 7,432 7,500 7,428
======== ======= ======== =======
</TABLE>
See notes to condensed financial statements.
<PAGE> 3
FORM 10-Q
CONTINENTAL CIRCUITS CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six months ended
January 31, February 2,
----------- -----------
1998 1997
-------- -------
<S> <C> <C>
Operating activities
Net income (loss) $ (324) $ 3,250
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 4,351 2,838
In process research and development writeoff 4,300
Provision for doubtful accounts (credit) 16 (133)
Changes in operating assets and liabilities:
Accounts receivable 2,136 (2,971)
Inventories (3,881) (1,919)
Prepaid expenses, income taxes and other (163) 154
Other assets (1,870) 291
Accounts payable 535 3,748
Accrued expenses (1,064) (72)
Income taxes payable -- 692
-------- -------
Net cash provided by operating activities 4,036 5,878
Investing activities
Purchases of property, plant, and equipment (16,361) (7,589)
Acquisition of Flexible Circuits Technology dba
Dynaflex Technology (6,891)
-------- -------
Net cash used by investing activities (23,252) (7,589)
Financing activities
Principal payments on long-term debt -- (500)
Borrowings under long-term debt and line of credit 19,063 1,000
Proceeds from issuance of common stock, net
of issuance costs 174 135
Change in value of available-for-sale-securities 74
-------- -------
Net cash provided by financing activities 19,311 635
-------- -------
Net increase (decrease) in cash and cash equivalents 95 (1,076)
Cash and cash equivalents at beginning of period 85 3,851
-------- -------
Cash and cash equivalents at end of period $ 180 $ 2,775
======== =======
</TABLE>
See notes to condensed financial statements
<PAGE> 4
CONTINENTAL CIRCUITS CORP.
CONDENSED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
January 31, July 31,
1998 1997
-------- -------
Assets (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 180 $ 85
Accounts receivable, less allowance of $168 at
January 31, 1998 and $152 at July 31, 1997 20,150 21,431
Inventories 13,081 8,805
Prepaid expenses, income taxes and other 1,529 1,366
Deferred income taxes 125 125
-------- -------
Total current assets 35,065 31,812
Property, plant, and equipment: 114,652 97,386
Land 3,586 3,586
Buildings and improvements 30,733 24,677
Machinery & equipment 80,333 69,123
-------- -------
114,652 97,386
Accumulated depreciation 50,774 46,422
-------- -------
63,878 50,964
Other assets 3,340 83
======== =======
Total assets $102,283 $82,859
======== =======
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 15,774 $14,665
Other accrued expenses 2,462 3,131
-------- -------
Total current liabilities 18,236 17,796
Long-term debt, less current portion 29,375 10,312
Deferred income taxes 2,507 2,507
Commitments and contingencies
Total shareholders' equity 52,165 52,244
-------- -------
Total liabilities and shareholders' equity $102,283 $82,859
======== =======
</TABLE>
See notes to condensed financial statements.
<PAGE> 5
FORM 10-Q
CONTINENTAL CIRCUITS CORP.
Notes to Condensed Financial Statements
(Unaudited)
January 31, 1998
Note 1. Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the six month period ended January 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ended July 31, 1998.
Note 2. Inventories
The components of inventory consist of the following:
<TABLE>
<CAPTION>
January 31, July 31,
1998 1997
------- ------
(In thousands)
<S> <C> <C>
Raw material $ 2,943 $2,117
Work in process 8,344 4,878
Finished goods 1,794 1,810
------- ------
$13,081 $8,805
======= ======
</TABLE>
Note 3. Earnings per Share
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share," ("SFAS 128"). SFAS 128 replaced the previously reported
primary and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants, and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. All earnings per share amounts for all periods have been
presented, and where necessary, restated to conform to the SFAS 128 requirements
and have been computed by using the weighted average number of shares. The
impact of SFAS 128 on the calculation of earnings per share for previously
reported quarters is not expected to be material.
Note 4. Acquisitions
On November 17, 1997, the Company completed the purchase of substantially all of
the assets and business of Flexible Circuits Technology dba Dynaflex Technology
of San Jose, California for approximately $6.9 million in cash. This acquisition
was for the addition of flexible circuit manufacturing capability. The
acquisition was completed through CCIR of California Corp., a newly formed,
wholly owned subsidiary of the Company. The acquisition was not significant to
the Company under the definition of the Securities and Exchange Commission and
was accounted for under the purchase method of accounting.
<PAGE> 6
FORM 10-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This quarterly 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 management's
anticipation of sufficiency of funds, effective tax rate adjustments, and
capacity availability.
The forward-looking statements included herein are based on current
expectations that involve a number of risks and uncertainties. Management's
anticipation is based upon assumptions regarding the market in which the Company
operates, the cost and amount of equipment required for replacements and growth,
the availability and qualification for credit, tax credits status and continuity
of tax legislation and equipment and labor availability. 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 are reasonable, any of
these assumptions could prove inaccurate, and, therefore, there can be no
assurance that the results contemplated in the 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.
RESULTS OF OPERATIONS
Comparison of Three Months ended January 31, 1998 and February 2, 1997
Net sales increased 19.6 % to $35.3 million for the three months ended
January 31, 1998 from $29.6 million for the three months ended February 2, 1997.
This increase was driven by the continued mix shift toward higher layer count,
more complex products and $2.2 million of additional sales from recent corporate
acquisitions in Texas and California. The Company's principal customers are OEM
manufacturers and contract manufacturers of electronic devices that are subject
to rapid technological change, product obsolescence and economic cycles.
Gross profit as a percent of net sales decreased to 14.0 % for the
three months ended January 31, 1998 from 17.5% for the three months ended
February 2, 1997. Gross profit was negatively impacted by higher scrap rates and
unexpectedly higher startup costs and reduced new hire productivity associated
with the new innerlayer facility.
Selling, general and administrative expenses increased 41.1 % to $2.6
million for the three months ended January 31, 1998 from $1.8 million for the
three months ended February 2, 1997. This increase was the result of
professional fees incurred in connection with corporate acquisitions and tax
consulting, employee recruiting and staffing.
Income from operations before a one time in process research and
development write-off of $4.3 million decreased 28.2 % to $2.4 million, or 6.8 %
of net sales, for the three months ended January 31, 1998 from $3.4 million, or
11.4 % of net sales, for the three months ended February 2, 1997 as a result of
the above factors. The $4.3 million charge for in process research and
development was based on an independent appraisal and was a result of
adjustments taken as part of the acquisition of Flexible Circuits Technology dba
<PAGE> 7
FORM 10-Q
Dynaflex Technology in November 1997. The charge reduced income from operations
resulting in a loss of $1.9 million.
Net interest expense increased $553,000 to $612,000 for the three
months ended January 31, 1998 from $59,000 for the three months ended February
2, 1997. This increase was a result of maintaining a higher debt level during
the three months ended January 31, 1998 than during the three months ended
February 2, 1997 to support capital purchases for capacity expansion and the
Dynaflex Technology acquisition.
Other expense for the three month period ended February 2, 1997
included a one-time charge of approximately $300,000 as a result of legal and
other professional costs associated with the abandoned acquisition of Sigma
Circuits, Inc.
Income taxes decreased 88.3 % to $136,000 for the three months ended
January 31, 1998 from $1.2 million for the three months ended February 2, 1997
as a result of lower income before taxes and a year-to-date adjustment to
reflect the benefits of one-time and ongoing tax credits available to company.
The Company believes that the effective tax rate should be approximately 28 %
for 1998 compared to 39 % for the three months ended February 2, 1997 as a
result of the tax credits identified for the current year.
Comparison of Six Months ended January 31, 1998 and February 2, 1997
Net sales increased 22.9 % to $69.7 million for the six months ended
January 31, 1998 from $56.7 million for the six months ended February 2, 1997.
Of the increase, $3.0 million was from recent corporate acquisitions in Texas
and California with approximately 64 % of the balance driven by higher
production volumes and 36 % as a result of a continuing mix shift toward higher
layer count, more complex products.
Gross profit as a percent of net sales decreased to 15.6 % for the six
months ended January 31, 1998 from 17.0 % for the six months ended February 2,
1997. Gross profit was negatively impacted during the 1998 period by higher
scrap rates than the corresponding prior period and startup costs and reduced
new hire productivity for the new innerlayer facility.
Selling, general and administrative expenses increased 20.2 % to $4.6
million for the six months ended January 31, 1998 from $3.8 million for the six
months ended February 2, 1997. This increase was the result of additional
professional fees in connection with corporate acquisitions and tax consulting,
recruiting, relocation costs and staffing.
Income from operations before a one time in process research and
development write-off of $4.3 million increased 8.2 % to $6.3 million for the
six months ended January 31, 1998 from $5.8 million for the six months ended
February 2, 1997 as a result of the above factors. The $4.3 million charge for
in process research and development was a result of adjustments taken as part of
the acquisition of Flexible Circuits Technology dba Dynaflex Technology and
reduced final income from operations by 66.0 % to $2.0 million for the six
months ended January 31, 1998 compared to the corresponding prior period.
Interest expense increased $611,000 to $734,000 for the six months
ended January 31, 1998 from $123,000 for the six months ended February 2, 1997.
This increase was a result of a maintaining a higher debt level supporting
capital purchases for capacity expansion and the Dynaflex Technology acquisition
during the six months ended January 31, 1998 than during the six months ended
February 2, 1997.
Income taxes decreased 26.2 % to $1.5 million for the six months ended
January 31, 1998 compared to $2.1 million for the six months ended February 2,
1997 as a result of an effective tax rate adjustment reflecting the benefits of
one-time and ongoing tax credits available to company. The effective tax rate
was approximately 28 % for the six months ended January 31, 1998 compared to
approximately 39 % for the six months ended February 2, 1997 as a result of the
credits. The Company believes that the effective tax rate should increase from
the 1998 rate of 28 % in future years as the tax credit benefits moderate.
<PAGE> 8
FORM 10-Q
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 had
$29.4 million outstanding in line of credit and term notes as of January 31,
1998. Principal uses of cash have been to pay operating expenses, make capital
expenditures and service debt.
Cash generated from operations totaled $4.0 million and $5.9 million
for the six months ended January 31, 1998 and February 2, 1997 respectively.
Major cash uses include inventory growth of $3.9 million and accrued expenses of
$1.1 million for the six months ended January 31, 1998 and inventory growth of
$1.9 million and accounts receivable growth of $3.0 million for the six months
ended February 2, 1997. The inventory increase for both periods was primarily in
work in process to support the sales growth over the periods. For 1998, the
increase also included the initial production ramp up of the new innerlayer
facility. Accounts receivable growth for the six month period ended February 2,
1997 was a result of strengthening end of quarter sales.
Capital expenditures totaled $23.3 million and $7.6 million for the six
months ended January 31, 1998 and February 2, 1997 respectively. Capital
expenditures for the six months ended January 31, 1998 were primarily for the
capacity expansion in the new innerlayer facility and the acquisition of
Flexible Circuits Technology dba Dynaflex Technology for approximately $6.9
million. Capital expenditures for the six months ended February 2, 1997 were for
routine replacements and the purchase of two buildings adjacent to the current
Phoenix operations for a total of $2.8 million. Purchases were financed
primarily through borrowings against the Company's line of credit.
The Company believes that funds generated from operations and borrowing
availability under the existing line of credit agreement will be sufficient for
routine equipment replacement and completion of the capacity expansion plans
through fiscal 1998.
SUBSEQUENT EVENTS
On February 9, 1998, the Company announced it had completed the
purchase, through CCIR of California Corp., a wholly owned subsidiary of the
Company, of substantially all the assets of PCA Design of Saratoga, California,
a privately held company with approximately $2 million in annual sales. On
February 11, 1998, the Company secured, through CCIR of Texas Corp, a wholly
owned subsidiary of the Company, a $6.0 million tax-exempt revenue bond
financing through the Capital Industrial Development Corporation of Travis
County, Texas. Additionally, in an announcement made February 17, 1998, the
Company said its board had accepted an offer to be acquired by Hadco Corporation
for $23.90 per share or approximately $185 million in cash.
<PAGE> 9
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit Index following the signature page, which is incorporated
herein by this reference.
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended January 31,
1998.
<PAGE> 10
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CONTINENTAL CIRCUITS CORP.
(Registrant)
Date: March 17, 1998 By:/s/ Frederick G. McNamee, III
-----------------------------
Frederick G. McNamee, III
Chairman of the Board, President
and Chief Executive Officer
Date: March 17, 1998 By:/s/ Joseph G. Andersen
----------------------
Joseph G. Andersen
Vice-President of Finance, Chief Financial
Officer, Secretary and Treasurer
<PAGE> 11
FORM 10-Q
EXHIBIT INDEX
TO
CONTINENTAL CIRCUITS CORP.
FORM 10-Q
QUARTERLY REPORT FOR THE QUARTER ENDED JANUARY 31, 1998
(Commission File 0-25554)
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
3.1 Certificate of Incorporation of Registrant, as amended (1)
3.2 Bylaws of Registrant, as amended (1)
10.1 Asset Purchase Agreement between CCIR of California Corp. and PCA Design Incorporated
dated as of February 9, 1998.
10.2 Registration Rights Agreement between Registrant and PCA Design Incorporated dated as of
February 9, 1998.
10.3 Loan Agreement between Capital Industrial Development Corporation and CCIR of Texas Corp.
dated as of January 1, 1998.
10.4 Bond Placement Agreement among Capital Industrial Development Corporation and CCIR of
Texas Corp. dated as of February 10, 1998.
10.5 Assumption Agreement between CCIR of Texas Corp. and Bank One Arizona, NA, dated as of
February 11, 1998.
10.6 Custody, Security and Pledge Agreement among CCIR of Texas Corp., The Huntington National
Bank and Bank One Arizona, NA dated as of January 1, 1998.
10.7 Agreement and Plan of Merger among Hadco Corporation, Hadco Acquisition Corp. II and
Registrant dated as of February 16, 1998. (2)
10.8 Opinion of A.G. Edwards & Sons, Inc. to the Board of Directors of the Company dated
February 16, 1998. (2)
10.9 Amendment No. 1 to Agreement and Plan of Merger among Hadco Corporation, Hadco
Acquisition Corp. II and Registrant dated as of March 13, 1998.
11 Statement re: computation of net income per share
27 Financial Data Schedule
</TABLE>
- ---------------------
(1) Incorporated by reference to identically numbered exhibit in
Registrant's registration statement on Form S-1 (SEC File No.
33-88368), as amended, initially filed on January 9, 1995.
(2) Incorporated by reference to exhibits in Registrant's Solicitation and
Recommendation Statement on Schedule 14D-9, filed on February 20, 1998.
<PAGE> 1
Exhibit 10.1
ASSET PURCHASE AGREEMENT
BETWEEN
CCIR OF CALIFORNIA CORP.
AND
PCA DESIGN INCORPORATED
DATED AS OF FEBRUARY 9, 1998
<PAGE> 2
TABLE OF CONTENTS
Page
----
RECITALS ......................................................................1
ARTICLE 1
DEFINITIONS...........................................................1
1.1 "Accounts"...................................................1
1.2 "Account Payment"............................................1
1.3 "Accrued Employee Benefits"..................................1
1.4 "Agreement"..................................................2
1.5 "Assumed Liabilities"........................................2
1.6 "Bill of Sale"...............................................2
1.7 "Business"...................................................2
1.8 "Buyer"......................................................2
1.9 "Buyer's Closing Certificate"................................2
1.10 "Cash".......................................................2
1.11 "CERCLA".....................................................2
1.12 "Closing"....................................................2
1.13 "Closing Date................................................2
1.14 "Code".......................................................2
1.15 "Commission Agreement".......................................2
1.16 "Continental"................................................2
1.17 "Contracts"..................................................3
1.18 "Corporate Documents"........................................3
1.19 "Damages"....................................................3
1.20 "Deposit"....................................................3
1.21 "Dollars"....................................................3
1.22 "Employee Benefit Plans".....................................3
1.23 "Employment Agreement".......................................3
1.24 "Environmental Claim"........................................3
1.25 "Environmental Laws".........................................4
1.26 "Environmental Release"......................................4
1.27 "ERISA"......................................................4
1.29 "Escrow Agent"...............................................4
1.30 "Escrow Instructions"........................................4
1.31 "Financial Information"......................................4
1.32 "Fixed Assets"...............................................4
1.33 "Hazardous Materials"........................................4
1.34 "Insurance Contracts"........................................5
1.35 "Intangible Assets"..........................................5
i
<PAGE> 3
1.36 "Inventory"..................................................5
1.37 "Knowledge"..................................................5
1.38 "Law"........................................................5
1.39 "Leased Assets"..............................................5
1.40 "Letter of Investment Intent"................................5
1.41 "Lien".......................................................5
1.42 "Opinion of Buyer's Counsel".................................6
1.43 "Opinion of Buyer's California Counsel"......................6
1.44 "Opinion of Seller's Counsel"................................6
1.45 "Permits"....................................................6
1.46 "Premises"...................................................6
1.47 "Purchase Price".............................................6
1.48 "Purchased Assets"...........................................6
1.49 "Records"....................................................6
1.50 "Registration Rights Agreement"..............................6
1.51 "Retained Assets"............................................6
1.52 "Retained Liabilities".......................................7
1.53 "Seller".....................................................7
1.54 "Seller's Closing Certificate"...............................7
1.55 "Shares".....................................................7
1.56 "Software....................................................7
1.57 "WARN Act"...................................................7
ARTICLE 2
PURCHASE AND SALE OF PURCHASED ASSETS;
OTHER AGREEMENTS......................................................7
2.1 Purchase and Sale............................................7
2.2 Payment of Purchase Price....................................7
2.3 Allocation of Purchase Price.................................8
2.4 Prorations...................................................8
2.5 Referrals and Deliveries.....................................8
2.6 Risk of Loss.................................................8
2.7 Access to Records............................................8
2.8 Employee Matters.............................................8
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER..............................9
3.1 Organization; Business.......................................9
3.2 Authorization; Enforceability................................9
3.3 No Violation or Conflict....................................10
3.4 Purchased Assets............................................10
ii
<PAGE> 4
3.5 Financial Information.......................................10
3.6 Absence of Certain Changes; Conduct of Business.............11
3.7 Contracts...................................................12
3.8 Performance of Contracts; Business Relationships............12
3.9 Accounts....................................................12
3.10 Intangible Assets...........................................13
3.11 Licenses....................................................13
3.12 Violations of Law...........................................13
3.13 Books of Account............................................14
3.14 Disclosure..................................................14
3.15 Brokers.....................................................14
3.16 Taxes.......................................................14
3.17 Permits.....................................................14
3.18 Environmental Matters.......................................14
3.19 Employment Matters..........................................16
3.20 Litigation..................................................17
3.21 Insurance...................................................17
3.22 Nondisclosure Agreements....................................17
3.23 Products....................................................18
3.24 Pricing.....................................................18
3.25 Distributors................................................18
3.26 Transactions with Related Parties...........................18
3.27 Customers and Suppliers.....................................18
3.28 Capitalization..............................................19
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER..............................19
4.1 Organization................................................19
4.2 Authorization; Enforceability...............................19
4.3 No Violation or Conflict....................................19
ARTICLE 5
CERTAIN MATTERS PENDING THE CLOSING..................................19
5.1 Full Access.................................................20
5.2 Conduct of Business.........................................20
5.3 Prohibited Action...........................................21
5.4 Preservation of Relationships...............................21
5.5 No Default..................................................21
5.6 Publicity...................................................21
5.7 Compliance with Laws........................................21
5.8 Exclusive Dealing...........................................21
iii
<PAGE> 5
5.9 Cooperation.................................................21
ARTICLE 6
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER.....................22
6.1 Compliance with Agreement...................................22
6.2 Proceedings and Instruments Satisfactory....................22
6.3 Litigation..................................................22
6.4 Representations and Warranties..............................22
6.5 No Adverse Change...........................................23
6.6 Due Diligence...............................................23
6.7 Commission and Employment Agreements........................23
6.8 Leases......................................................23
6.9 Deliveries at Closing.......................................23
6.10 Other Deliveries............................................23
6.11 Approvals and Consents......................................24
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER....................24
7.1 Compliance with Agreement...................................25
7.2 Proceedings and Instruments Satisfactory....................25
7.3 Litigation..................................................25
7.4 Representations and Warranties..............................25
7.5 Payment of Purchase Price...................................25
7.6 Commission and Employment Agreements........................25
7.7 Deliveries at Closing.......................................25
7.8 Other Documents.............................................25
7.9 Approvals and Consents......................................26
ARTICLE 8
INDEMNITY; TERMINATION; MISCELLANEOUS................................26
8.1 Seller's Indemnity..........................................26
8.2 Buyer's Indemnity...........................................27
8.3 Termination.................................................28
8.4 Rights on Termination; Waiver...............................28
8.5 Further Assurances..........................................29
8.6 Survival of Representations and Warranties..................29
8.7 Entire Agreement; Amendment.................................29
8.8 Expenses....................................................29
8.9 Governing Law...............................................29
8.10 Assignment..................................................29
iv
<PAGE> 6
8.12 Counterparts; Headings......................................30
8.13 Income Tax Position.........................................31
8.14 Taxes and Fees..............................................31
8.15 Interpretation..............................................31
8.16 Severability................................................31
8.17 No Reliance.................................................31
8.18 Legal Proceedings...........................................31
SIGNATURES....................................................................25
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EXHIBITS
Exhibit Description
1 Bill of Sale
2 Buyer's Closing Certificate
3 Seller's Closing Certificate
4 Escrow Agreement
5 Commission Agreement
6 Employment Agreement
7 Opinion of Buyer's Counsel
8 Opinion of Seller's Counsel
9 Registration Rights Agreement
10 Opinion of Buyer's California Counsel
11 Letter of Investment Intent
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SCHEDULES
Schedule No. Description
1.1 Accounts
1.5 Assumed Liabilities
1.17 Contracts
1.32 Fixed Assets
1.36 Inventory
1.39 Leased Assets
1.45 Permits
2.3 Allocation of Purchase Price
3.10(a) Intangible Assets
3.10(b) Intangible Asset Licenses
3.19(a) Employees
3.19(b) Employee Benefit Plans
3.19(e) Unemployment Compensation
3.21(a) Insurance Policies
3.21(b) Insurance Claims
3.22 Nondisclosure Agreements
3.23 Products
3.24 Pricing
3.25 Distributors
3.27 Customers and Suppliers
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of this 9th day of February,
1998, by and among CCIR OF CALIFORNIA CORP., a California corporation ("Buyer")
and PCA DESIGN INCORPORATED, a California corporation ("Seller").
RECITALS
WHEREAS, Seller, is and has been engaged for many years in the
ownership and operation of the Business; and
WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase
from Seller, substantially all of the assets, rights and properties relating to
the Business as an operating business, and the goodwill of Buyer, on the terms
and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the Recitals and of the mutual
covenants, conditions, and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:
ARTICLE 1
DEFINITIONS
When used in this Agreement, the following terms shall have the
meanings specified:
1.1 "Accounts" shall mean Seller's open trade accounts and notes
receivable, rights to payment for goods and services sold, notes and associated
rights related to the Business as of the Closing Date, totaling approximately
$450,000, descriptions and exact amounts of which are listed and set forth on
Schedule 1.1 hereto.
1.2 "Account Payment" shall mean $_________, the amount of the Cash and
Accounts net of Seller's accounts payable.
1.3 "Accrued Employee Benefits" shall have the meaning set forth in
Section 2.9(a).
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1.4 "Agreement" shall mean this Asset Purchase Agreement, together with
the Schedules and Exhibits hereto, as the same shall be amended from time to
time in accordance with the terms hereof.
1.5 "Assumed Liabilities" shall mean only certain debts of Seller
outstanding as of the Closing Date, totaling approximately $875,000,
descriptions and exact amounts of which are listed and set forth on Schedule 1.5
hereto.
1.6 "Bill of Sale" shall mean the Bill of Sale and Assumption of
Liabilities, substantially in the form of Exhibit 1 hereto.
1.7 "Business" shall mean the business conducted by Seller which
consists of the design of printed circuit boards.
1.8 "Buyer" shall mean CCIR of California Corp., a California
corporation wholly owned by Continental.
1.9 "Buyer's Closing Certificate" shall mean a certificate of Buyer,
substantially in the form of Exhibit 2 hereto.
1.10 "Cash" means all cash generated by Seller in the normal course of
business, without any extraordinary treatment of payables, receivables or
inventories.
1.11 "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C.A. Section 9601, et
seq., and the rules, regulations and orders promulgated thereunder.
1.12 "Closing" shall mean the conference to be held on the Closing Date
at the offices of Seller at 10:00 a.m. or such other time and place as the
parties may mutually agree at which the transactions contemplated by this
Agreement shall be consummated.
1.13 "Closing Date" shall mean February 9, 1998, or such other date as
Buyer and Seller may actually consummate the transactions contemplated by this
Agreement.
1.14 "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder.
1.15 "Commission Agreement" shall mean the Commission Agreement,
substantially in the form of Exhibit 5 hereto.
1.16 "Continental" shall mean Continental Circuits Corp., a Delaware
corporation.
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1.17 "Contracts" shall mean all of the agreements whether written, oral
or implied, under which Seller conducts the Business. Said Contracts are listed
and briefly described on or attached to Schedule 1.17 hereto.
1.18 "Corporate Documents" shall mean Seller's corporate seal, minute
books, charter documents, corporate stock, corporate record books and such other
books and records as pertain to the organization, existence or share
capitalization of Seller and such records as are necessary to enable Seller to
file its tax returns and reports, and such other books and records not a part of
the Records.
1.19 "Damages" shall have the meaning set forth in Section 8.1(a)
hereof.
1.20 "Deposit" shall mean the deposit in the amount of $50,000
previously paid into the Escrow Account by Buyer.
1.21 "Dollars" shall mean the lawful currency of the United States of
America.
1.22 "Employee Benefit Plans" shall mean any pension plan, profit
sharing plan, bonus plan, incentive compensation plan, stock purchase plan,
stock option plan, stock appreciation plan, benefit plan, benefit policy,
retirement plan, fringe benefit program, insurance plan, severance plan or any
other plan or program to provide income or benefits to active or former
employees of Seller.
1.23 "Employment Agreement" shall mean the Employment Agreement,
substantially in the form of Exhibit 6 hereto.
1.24 "Environmental Claim" shall mean any and all administrative,
regulatory, judicial, or third party actions, suits, demands, demand letters,
directives, claims, Liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any person or entity alleging
damage or other adverse effect on the environment, or potential liability
(including, without limitation, potential liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from: (i) the presence, or
release into the environment, of any Hazardous Materials, contaminant, odor,
audible noise, or other release into the environment from or at any location,
whether or not owned by any Seller; or (ii) environmental aspects of the
transportation, storage, treatment or disposal of Hazardous Materials in
connection with the operation of the Business; or (iii) circumstances forming
the basis of any violation or alleged violation of any Environmental Law; or
(iv) any and all claims by any person or entity seeking damages, contribution,
indemnification, cost, recovery, compensation or injunctive relief resulting
from the presence or release of any Hazardous Materials.
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1.25 "Environmental Laws" shall mean all federal, state, local,
foreign, and other applicable jurisdiction Laws relating to the environment or
the use, disposal, existence, or release of any Hazardous Materials, including
but not limited to any and all Laws concerning, affecting, controlling, or in
any way relating to, whether in whole or in part, noise levels, ground
vibrations, air pollutants, water pollutants, process waste water, or Hazardous
Materials.
1.26 "Environmental Release" shall mean any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or property.
1.27 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the regulations promulgated thereunder.
1.28 "Escrow Account" shall mean the deposit account or accounts
established with the Escrow Agent for the Deposit.
1.29 "Escrow Agent" shall mean Arizona Escrow & Financial Corporation,
which is the escrow agent selected by the parties hereto to monitor and service
the Escrow Account.
1.30 "Escrow Instructions" shall mean the agreement between the Escrow
Agent and the parties hereto with respect to their various rights and
obligations regarding the Escrow Account, the form of which is attached hereto
as Exhibit 4.
1.31 "Financial Information" shall mean (a) the unaudited financial
statements of the Business for the fiscal year ended December 31, 1996; (b) the
unaudited financial statements of the Business for the fiscal year ended
December 31, 1997; (c) the books and records of account of Seller relating to
the Business; and (d) all other financial information relating to the financial
condition of the Business delivered or to be delivered by Seller to Buyer.
1.32 "Fixed Assets" shall mean the manufacturing, production, computer,
maintenance, packaging and/or testing machinery, equipment, supplies, furniture,
office equipment, fixtures, molds, tools, spare and maintenance parts, software
programs, any products currently under development, and all other real or
tangible property owned by Seller and used by or useful to Seller in the
operation of the Business, including but not limited to those assets which are
listed and set forth on Schedule 1.32 hereto.
1.33 "Hazardous Materials" shall mean: (a) any waste, hazardous waste,
pollutant, contaminant, or hazardous or toxic substance as specified, listed,
identified, or defined in (i) the Resource Conservation and Recovery Act, 42
U.S.C.A. Section 6901, et seq., and the rules, regulations and orders
promulgated thereunder; (ii) CERCLA; (iii) the Clean Water Act, 33 U.S.C. 1251,
et seq., and the rules, regulations and orders promulgated thereunder; (iv) the
Clean Air Act, 42 U.S.C. 7401 et seq., and the rules, regulations and orders
promulgated thereunder; (v) the Toxic Substances Control Act, 15 U.S.C. 2601, et
seq., and the rules, regulations and orders
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promulgated thereunder; (vi) the Hazardous Materials Transportation Act, 49
U.S.C. 1801, et seq., and the rules, regulations and orders promulgated
thereunder; (vii) the Occupational Safety and Health Act, 29 U.S.C. 651 et seq.,
and the rules, regulations, and orders promulgated thereunder; and (viii) any
other applicable U.S. federal, state, local, foreign, or other statutes or Laws,
and the rules, regulations, and orders promulgated thereunder; (b) asbestos; (c)
formaldehyde; (d) polychlorinated biphenyls; (e) radioactive materials; (f)
waste oil and other petroleum products; and (g) any other substance which
constitutes a nuisance or hazard to the environment or to the public health,
safety, or welfare.
1.34 "Insurance Contracts" shall mean all contracts of insurance,
insurance proceeds or claims made by Seller, relating to property or equipment
repaired, replaced or restored by Seller prior to the Closing Date.
1.35 "Intangible Assets" shall mean, all of the intangible assets owned
or used by Seller in the Business, including but not limited to trade secrets,
know-how, operating methods and procedures, proprietary information, processes,
technical knowledge, formulae, advertising formats, logos, trademarks, trade
designations, service marks, tradenames, patents, copyrights, applications for
any of the foregoing, goodwill, advertising and promotional rights, franchise
rights, customer lists, telephone number(s), and related rights.
1.36 "Inventory" shall mean all of Seller's inventories of raw
materials and supplies, work in process, and finished goods owned or used in the
Business, descriptions and quantities of which are listed and set forth on
Schedule 1.36 hereto.
1.37 "Knowledge" shall mean, with respect to a corporate party, the
knowledge of any stockholder, officer, manager, or supervisor of such party, or
knowledge which any such person reasonably should have by virtue of his or her
position with such party and, with respect to an individual party, the knowledge
of such party after due inquiry.
1.38 "Law" shall mean any federal, state, foreign, local or other law,
ordinance, rule, regulation, or governmental requirement or restriction of any
kind, including any rules, regulations, and orders promulgated thereunder, and
any final orders, decrees, consents, or judgments of any regulatory agency or
court.
1.39 "Leased Assets" shall mean all items of real or personal property
which Seller leases and uses in the Business, including but not limited to those
items listed and set forth in Schedule 1.39 hereto.
1.40 "Letter of Investment Intent" shall mean the Letter of Investment
Intent substantially in the form of Exhibit 11 hereto.
1.41 "Lien" shall mean with respect to any asset: any mortgage, pledge,
lien, charge, claim, restriction, reservation, condition, easement, covenant,
lease, encroachment, title defect,
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imposition, security interest, inchoate lien, or other encumbrance of any kind
and the interest of a vendor or lessor under any conditional sale agreement,
financing lease or other title retention agreement related to such asset.
1.42 "Opinion of Buyer's Counsel" shall mean the opinion of Quarles &
Brady, substantially in the form of Exhibit 7 hereto.
1.43 "Opinion of Buyer's California Counsel" shall mean the opinion of
Bronson, Bronson & McKinnon, LLP, substantially in the form of Exhibit 10
hereto.
1.44 "Opinion of Seller's Counsel" shall mean the opinion of David P.
Kerr, attorney at law, substantially in the form of Exhibit 8 hereto.
1.45 "Permits" shall mean those permits, licenses, approvals,
registrations, filings, notices, and governmental authorizations required for
the conduct of the Business as presently conducted and the use of the Purchased
Assets. Said Permits are listed and briefly described on Schedule 1.45 hereto.
1.46 "Premises" shall mean the buildings in Saratoga, California,
Loveland, Colorado and Georgetown, Texas at which Seller conducts the Business.
1.47 "Purchase Price" shall mean two hundred fifty thousand dollars
($250,000), the Shares, the Account Payment, and the assumption of the Assumed
Liabilities less the Deposit.
1.48 "Purchased Assets" shall mean all assets of Seller used or useful
in the conduct of the Business, including but not limited to the Accounts,
Contracts, Fixed Assets, Intangible Assets, Inventory, Leased Assets, Permits,
Records and Software, but not including the Retained Assets.
1.49 "Records" shall mean the books, documents and records owned or
used by Seller in connection with the Purchased Assets, including personnel
records, correspondence, governmentally required records, manuals, engineering
data, designs, drawings, blueprints, plans, specifications, lists, customer
lists, computer media, software and software documentation, property records,
manufacturing records, and other written materials.
1.50 "Registration Rights Agreement" shall mean the Registration Rights
Agreement, substantially in the form of Exhibit 9 hereto.
1.51 "Retained Assets" shall mean the following assets of Seller as of
the Closing Date which, although they relate to the Business, are not Purchased
Assets and are to be retained by Seller: Corporate Documents, and all other
assets not included in the Purchased Assets.
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1.52 "Retained Liabilities" shall mean all liabilities of Seller which
are not Assumed Liabilities
1.53 "Seller" shall mean PCA Design Incorporated, a California
corporation.
1.54 "Seller's Closing Certificate" shall mean a certificate of the
Seller, substantially in the form of Exhibit 3 hereto.
1.55 "Shares" shall mean 20,000 shares of the authorized but previously
unissued common stock of Continental with the rights and restrictions set forth
in the Registration Rights Agreement.
1.56 "Software" shall mean Seller's 60% ownership interest in the
"Power Links" software product.
1.57 "WARN Act" shall mean the Worker Adjustment and Retraining
Notification Act, as amended.
ARTICLE 2
PURCHASE AND SALE OF PURCHASED ASSETS;
OTHER AGREEMENTS
2.1 Purchase and Sale. At the Closing, and upon all of the terms and
subject to all of the conditions of this Agreement:
(a) Seller shall sell, assign, convey, and deliver to Buyer,
and Buyer shall purchase and accept from Seller, the Purchased Assets; and
(b) Buyer shall assume and agree to perform in accordance with
and be bound by all of the covenants, terms, and obligations under the Assumed
Liabilities. Buyer shall also forgive the repayment of a shareholder loan made
by Seller to Steven C. Bird in the amount of approximately $25,000. Except as
otherwise specifically provided for herein, Buyer is not assuming any
liabilities or obligations of Seller, and Seller shall satisfy all of the
Retained Liabilities in the ordinary course of business.
2.2 Payment of Purchase Price. The Purchase Price shall be paid as
follows:
(a) At the Closing, Buyer shall pay the cash portion of the
Purchase Price, less the Deposit, in immediately available funds via check or
wire transfer, and assume the Assumed Liabilities.
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(b) Buyer shall cause the registrar and transfer agent of the
common stock of Continental to issue the Shares to Seller.
2.3 Allocation of Purchase Price. The Purchase Price shall be allocated
in accordance with Section 1060 of the Code and substantially as set forth on
Schedule 2.3 hereto. Buyer and Seller shall cooperate with each other in the
preparation and filing of I.R.S. Form 8594 in connection with the Purchase Price
allocation. Neither Buyer nor Seller, nor any of their respective affiliates,
shall take any position (whether in financial statements, audits, tax returns or
otherwise) which is inconsistent with the allocation of the consideration unless
required to do so by applicable Law.
2.4 Prorations. All personal property taxes, real property expenses,
rent, utility expenses, and other similar expenses in connection with the
Purchased Assets if any, payable after the Closing shall be prorated, whereby
Seller shall be responsible for that portion of the prorated expenses accrued
for the period ending as of the Closing, and Buyer shall be responsible for that
portion of the prorated expenses attributable to the period beginning as of the
Closing. Prorated expenses shall be settled between the parties promptly after
the determination from time to time of said prorated expenses.
2.5 Referrals and Deliveries. After the Closing, Buyer shall promptly:
(a) Deliver to Seller, in the form received with the addition
of any required endorsements by Buyer, any cash, checks, or other payments
received after the Closing Date by Buyer relating to the conduct of the Business
after the Closing, but not relating to the Purchased Assets; and
(b) Refer to Seller any and all inquiries or purchase orders
from customers or suppliers of Seller or other persons relating to the Business.
2.6 Risk of Loss. Risk of loss with respect to the Purchased Assets
shall remain with Seller until the Closing and shall pass to Buyer upon the
Closing.
2.7 Access to Records. Seller shall permit Buyer, and its attorneys,
accountants, agents and designees, such access to, and right to copy, all books,
papers and records of Seller which are not a part of the Purchased Assets, from
and after the Closing Date hereof as Buyer may deem necessary or desirable. Any
such examination shall be at the expense of Buyer, shall be performed during
normal business hours at the place where such records are regularly maintained
by Seller and shall not unreasonably interfere with the normal business
activities of Seller. Seller shall notify Buyer at any time within the five (5)
year period after the Closing Date if it intends to destroy any or all of the
books, papers, and records described above, and Buyer shall have the right to
review and remove any of such books, papers and records at Buyer's expense.
2.8 Employee Matters.
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(a) Buyer shall not be under any obligation to hire any
employees of Seller. Immediately prior to the Closing, Seller shall terminate
the employment of all employees of Seller. Buyer shall then hire the employees
of Seller that Buyer desires to hire as employees of Buyer.
(b) With respect to all employees of Seller, Seller shall
provide any notices to such employees required by the WARN Act, if applicable,
and, Seller shall make all payments to said employees for wages, commissions,
bonuses, vacations, severance and other similar forms of compensation owing to
or accrued by such employees.
(c) Buyer shall not be obligated to Seller or any other party
for any labor-related obligations or liabilities arising out of any person's
employment with Seller, and Seller agrees to satisfy said obligations and/or
liabilities.
(d) Seller and Buyer agree that the responsibilities for
furnishing Form W-2s for the 1998 calendar year with respect to employees of the
Business hired by Buyer in accordance with Section 2.10(a) hereof shall be
Buyer's pursuant to the Alternative Procedure described in Section 5 of Rev.
Proc. 83-66. Seller shall provide Buyer with all payroll and other records and
documents (including, without limitation, Form W-4s) necessary for Buyer to
comply with such Alternative Procedure.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that:
3.1 Organization; Business. Seller is a corporation duly and validly
organized and existing and in good standing under the Laws of the State of
California and has full corporate power to own its assets and to convey the
Purchased Assets to Buyer pursuant to this Agreement. Seller is duly qualified
to do business as a foreign corporation and is in good standing in all
jurisdictions in which Seller conducts business.
3.2 Authorization; Enforceability. The execution, delivery, and
performance of this Agreement, and all of the documents and instruments required
hereby, by Seller are within the corporate power of Seller and have been duly
authorized by all necessary corporate action by Seller. This Agreement is, and
the other documents and instruments required hereby will be, when executed and
delivered by Seller, the valid and binding obligations of Seller, enforceable
against Seller in accordance with their respective terms, and sufficient to
transfer and convey to Buyer all of Seller's right, title, and interest in and
to the Purchased Assets.
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3.3 No Violation or Conflict. The execution, delivery and
performance of this Agreement and the other documents and instruments to be
executed and delivered by Seller pursuant hereto, and the consummation by
Seller of the transactions contemplated herein or therein:
(a) will not violate or conflict with any applicable Law;
(b) will not require any authorization, consent, approval,
exemption or other action by or notice to any government entity (including,
without limitation, under any "plant closing" or similar law); or
(c) will not violate or conflict with, or constitute a default
(or event which, with notice or lapse of time, or both, would constitute a
default) under, or will not result in the termination of, or accelerate the
performance required by, or result in the creation of any Lien upon any of the
Purchased Assets under, any term or provision of the Seller's articles of
incorporation or bylaws, or any contract, commitment, understanding,
arrangement, agreement or restriction of any kind or character to which Seller
is a party or by which Seller or any of the Purchased Assets may be bound or
affected.
3.4 Purchased Assets.
(a) Seller owns and will convey to Buyer at Closing good and
marketable title to all of the Purchased Assets, free and clear of all Liens of
any nature whatsoever. Seller is in sole possession of, and has sole control of,
the Purchased Assets. Except for the Leased Assets set forth on Schedule 1.39
hereto, none of the Purchased Assets is leased, rented, licensed, or otherwise
not owned by Seller.
(b) The Purchased Assets include all of the assets of Seller
which are used in or necessary for the operation of the Business, excepting
therefrom only any Retained Assets.
(c) The Fixed Assets and Leased Assets are in good operating
condition and repair, normal wear and tear excepted, free from any defects
(except minor defects as do not interfere with the use thereof in the conduct of
the normal operations of the Business), have been maintained consistent with the
standards generally followed in the industry, and are sufficient to carry on the
Business as previously conducted by Seller.
(d) All of the tangible Purchased Assets are physically
located on the Premises.
3.5 Financial Information.
(a) The Financial Information is accurate and complete in all
material respects, was prepared in accordance with generally accepted accounting
principles consistently applied throughout all periods, was prepared on a
consistent basis, and presents fairly the financial
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condition and the results of operations of the Business as of the relevant dates
thereof and for the periods covered thereby.
(b) Seller has no material liabilities or indebtedness,
contingent, absolute, accrued, or otherwise, in connection with the Business,
other than as set forth in the Financial Information.
3.6 Absence of Certain Changes; Conduct of Business.
Except as set forth in this Agreement or the Exhibits hereto,
since the date of the Financial Statements:
(a) there has not been any material adverse change in the
business, financial condition, results of operations or prospects (financial or
otherwise) of Seller;
(b) no event has occurred (or to the Knowledge of Seller is
likely to occur) which so far as reasonably can be foreseen at this time, may
result in any such change;
(c) there has not been any loss, damage or destruction to the
properties of the Seller (whether or not covered by insurance) materially
adversely affecting Seller's business or properties;
(d) there has not been any labor dispute or disturbance which
has or may materially adversely affect the Seller's business;
(e) the Seller has conducted its business only in, and has not
taken any action other than in, the usual and ordinary course of its business;
and
(f) the Seller has not:
(i) entered into any commitment or transaction (including,
without limitation, any capital expenditure) other than in the ordinary
course of business;
(ii) granted any security interest in, mortgage, pledge or
other lien or encumbrance affecting or relating to any of its
properties or assets;
(iii) sold or otherwise disposed of any assets or properties
other than in the ordinary course of business or entered into any joint
venture, partnership or other agreement with respect thereto;
(iv) entered into any fixed term employment contract or
deferred compensation arrangement with or granted any material increase
in the compensation payable or to become payable to, any of its key
employees, made any material increase in any bonus,
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insurance, pension or other employee benefit plan, payment or
arrangement made to, for, or with any of its employees or instituted
any retirement plan or policy for the issuance of severance pay; or
(v) incurred or guaranteed any material liability (whether
absolute or contingent and whether or not currently due and payable),
or entered into or assumed any material contract, agreement,
arrangement, lease (as lessor or lessee), license or other commitment,
whether written or oral, other than in the ordinary course of business.
(g) Seller knows of no facts, circumstances, or proposed or
contemplated events which would materially adversely affect the operations,
results, or prospects of the Business after the Closing Date.
3.7 Contracts. Seller is not a party to any written or unwritten
agreement that is material to the ongoing operations of the Business and that is
not otherwise contained on Schedule 1.17 hereto and being assigned to Buyer
hereunder.
3.8 Performance of Contracts; Business Relationships.
(a) Seller and, to the Knowledge of Seller, each party to each
Contract, have performed in all material respects each term, covenant, and
condition of each Contract which is to be performed by them at or before the
date hereof. Each of the Contracts is in full force and effect and constitutes
the legal and binding obligation of Seller and, to the Knowledge of Seller, the
other parties thereto. Except as conspicuously disclosed on Schedule 1.17, no
Contract requires the written consent of, or prior notice to, any third party in
order for Seller to assign such contract to Buyer hereunder.
(b) Seller maintains a good business relationship with each of
the customers and suppliers of the Business, and Seller knows of no unresolved
complaint or dispute which presently exists.
(c) Buyer will not be obligated or liable to any of Seller's
vendors, suppliers, or other parties who may have or may have had a contractual
relationship with Seller, unless said relationship arises from a Contract being
assigned pursuant to Section 2.1 above or is otherwise an Assumed Liability.
3.9 Accounts.
(a) All of the Accounts have arisen from bona fide
transactions by Seller, are collectable in the ordinary course, and no portion
of any such Account is subject to counterclaim or set-off or, to Seller's
Knowledge, is in dispute.
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(b) Since December 31, 1997, Seller has not discounted any
accounts receivable relating to the Business in order to collect same or
implemented any other collection procedures not consistent with Seller's past
practices.
3.10 Intangible Assets.
(a) Schedule 3.10(a) lists all Intangible Assets relating to
the Business in which Seller now has any interest, specifying whether such
Intangible Assets are owned, controlled, used or held (under license or
otherwise) by Seller, and also indicating which of such Intangible Assets are
registered. All Intangible Assets shown as registered in Schedule 3.10(a) have
been properly registered or ownership rights have been perfected in the name of
Seller, all pending registrations and applications have been properly made and
filed and all annuity, maintenance, renewal and other fees relating to
registrations or applications are current.
(b) Schedule 3.10(b) hereto sets forth all license and similar
agreements that Seller is a party to with respect to intellectual property
either licensed by or licensed to Seller in relation to the Business.
(c) Seller owns the entire right, title, and interest in and
to each of the patents, trademarks, and licenses set forth on Schedules 3.10(a)
and 3.10(b) hereto, and all other Intangible Assets of the Business. Neither the
Purchased Assets, nor the Business infringes on any intellectual property rights
of others. There are no claims, demands or proceedings instituted, pending or,
to the Knowledge of Seller, threatened, by any third party pertaining to or
challenging Seller's rights to any of the intellectual property rights used in
the Business. Seller knows of no facts which would render any of the
intellectual property rights used in the Business invalid or unenforceable. All
patents, patent applications, and rights to discoveries or inventions (whether
or not patentable) owned or held by any officer, director, employee, former
employee, or independent contractor engaged by Seller and relating to the
Business have been, or on or prior to the Closing Date shall have been, duly and
effectively transferred to Seller.
3.11 Licenses.
There are no license or similar agreements that Seller is a
party to with respect to intellectual property either licensed by or licensed to
Seller in relation to the Purchased Assets.
3.12 Violations of Law.
(a) None of the present or past operation of the Business, the
products of the Business, or the Purchased Assets violates or conflicts, in any
material respect, with any Permits, any Law (including Environmental Laws),
governmental specification, authorization, or requirement, or any decree,
judgment, order, or similar restriction. To the Knowledge of Seller, neither
Seller nor any supplier of Seller is the subject of an inspection or inquiry
regarding violations or alleged violations of any Law by any other state,
federal, or local agency.
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(b) There are no proceedings, threatened proceedings, orders,
notice of violations, inspection reports, and other similar occurrences, if any,
relating to the conduct of the Business or the Purchased Assets.
(c) Seller has not been the subject of an Occupational and
Safety Health Administration inspection, or found by any agency to be in
violation of any state or federal occupational safety or health Law in the
conduct of the Business.
3.13 Books of Account. The books of account of the Business relating to
the Purchased Assets are complete and correct in all material respects, and
reflect all transactions entered into by Seller or to which Seller is a party
and which relate to the Purchased Assets.
3.14 Disclosure. Seller has furnished to Buyer complete and accurate
copies or originals of all documents and/or information requested by Buyer. No
disclosure (including the Schedules hereto) or statement of fact by Seller
contained in this Agreement and no disclosure or statement of fact furnished or
to be furnished by Seller to Buyer pursuant to this Agreement or pursuant to
Buyer's due diligence contains or will contain any untrue statement of a
material fact or omits or will omit to state any item or a material fact
necessary in order to make the statements herein or therein contained not
misleading. The Schedules to this Agreement are complete and accurate in all
material respects with respect to the information the Schedules purport to
provide.
3.15 Brokers. Seller shall pay and be responsible for any brokers',
finders', or similar fee it has incurred in connection with the transactions
contemplated by this Agreement.
3.16 Taxes. Seller has paid or made provision for all federal, state,
and local taxes or other governmental charges with respect to the Business
and/or Purchased Assets that may or could follow the Purchased Assets or
otherwise affect Buyer after the consummation of the transactions contemplated
herein, subject to Section 8.14. All required returns and reports with respect
to such taxes and charges have been duly and timely filed.
3.17 Permits. The Permits listed on Schedule 1.45 constitute all
licenses, permits, approvals, qualifications, and governmental specifications,
authorizations, registrations, or requirements which Seller currently has in
connection with the Purchased Assets or the Business (including the products
thereof) and constitute all such licenses, permits, approvals, qualifications,
and governmental specifications, authorizations, registrations, and requirements
necessary for the ownership or use of the Purchased Assets or conduct of the
Business as currently conducted by Seller.
3.18 Environmental Matters.
(a) The Purchased Assets and the Business are in conformance
with all applicable Environmental Laws, and there are no past or present (or, to
the Knowledge of Seller, future) events, conditions, circumstances, activities,
practices, incidents, actions, omissions or
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plans (i) which, in connection with the Business or the Purchased Assets, may
interfere with or prevent compliance or continued compliance with Environmental
Laws or with any order issued, entered, promulgated or approved thereunder, or
(ii) which may subject Seller or Buyer to damages (including liability under
CERCLA), penalties, injunctive relief, or cleanup costs under any Environmental
Laws or pursuant to any third-party claim, or which require or are likely to
require reporting, cleanup, removal, remedial action, or other response pursuant
to Environmental Laws or a third party claim.
(b) To the Knowledge of Seller, there are not now, nor have
there ever been, tanks or other facilities in, on, or under any property that is
or was owned, leased, used, or occupied by Seller in connection with the conduct
of the Business or the use of the Purchased Assets or at any time in its care,
custody, or control, that contain materials which, if known to be present in
soils or groundwater, would require reporting, clean up, removal, or some other
action under Environmental Laws.
(c) Neither Seller, nor, to the Knowledge of Seller, any other
person or entity has caused or permitted any Environmental Releases of materials
on, under, or at the Premises, or at any other real estate previously owned or
occupied by Seller or at any time in its care, custody, or control, which
materials, if known to be present, would require reporting, clean-up, removal,
or some other action under Environmental Laws.
(d) Seller is not subject to any judgment, decree, order, or
citation related to or arising out of applicable Environmental Laws in
connection with the conduct of the Business or the use of the Purchased Assets.
(e) Seller possesses all permits, licenses, and approvals, if
any, required under applicable Environmental Laws in connection with the conduct
of the Business, all of which are included on Schedule 1.44 hereto.
(f) Seller has not received (nor, to the Knowledge of Seller,
has there been issued) any notice, whether from a public or governmental
authority, citizens' group, employee or any other person or entity, that alleges
that the Business is or may not be in compliance with any Environmental Law or
Permit.
(g) No friable asbestos or asbestos requiring remediation
under applicable Environmental Laws is present on or at the Premises.
(h) No real property at any time owned, leased, operated, used
or controlled by Seller in the conduct of the Business is currently listed on
the National Priorities List or the Comprehensive Environmental Response,
Compensation and Liability Information System, both promulgated under CERCLA, or
on any comparable state or foreign list, and Seller has not received any written
notice from under or relating to CERCLA or any comparable state or local
Law.
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(i) No off-site location at which Seller has disposed or
arranged for the disposal of any waste is listed on the National Priorities List
or on any comparable state or foreign list and Seller has not received any
written notice with respect to any off-site location, of potential or actual
liability or a written request for information under or relating to CERCLA or
any comparable state or local Law.
3.19 Employment Matters.
(a) Schedule 3.19(a) hereto lists all employees of the
Business, their current rates of compensation and most recent pay increase, date
of hire, benefits, location of employment, whether such employee is a senior
management employee, and other related information requested by Buyer. Seller
has not increased the rate of compensation of any employee of the Business since
December 31, 1997, except as set forth on Schedule 3.19(a) hereto.
(b) Schedule 3.19(b) hereto lists and describes all of
Seller's present or past Employee Benefit Plans. Each Employee Benefit Plan is
and at all times has been in full compliance with all applicable Laws (including
ERISA). Seller is not contributing to, and has not contributed to any
multi-employer plan, as defined in ERISA. Any past Employee Benefit Plan that
has been terminated was done so in full compliance with all applicable Laws, and
there is no basis for further liability or obligation of Seller pursuant to any
and all past Employee Benefit Plans.
(c) Seller has no Employee Benefit Plan or other agreements
(including collective bargaining agreements), arrangements, or plans which would
bind or in any way affect Buyer after the Closing Date, regardless of whether
Buyer employs any such employees.
(d) Seller is in material compliance with all federal,
foreign, state, or other applicable laws respecting employment and employment
practices, terms and conditions of employment, wages and hours, and has not and
is not engaged in any unfair labor practice that would in any way affect Buyer
after the Closing Date.
(e) No present or former employee of the Business has any
claim against Seller (whether under federal, foreign or state Law, under any
employee agreement or otherwise), that would in any way affect Buyer after the
Closing Date, on account of or for (i) overtime pay, other than overtime pay for
the current payroll period; (ii) wages or salaries, other than wages or salaries
for the current payroll period; or (iii) vacations, time off or pay in lieu of
vacation or time off, other than vacation or time off (or pay in lieu thereof)
earned in the past twelve-month period.
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(f) Schedule 3.19(e) sets forth Seller's unemployment
compensation contribution and solvency rates. Seller has made all required
payments to its unemployment compensation reserve account with the appropriate
governmental department under California law, such accounts have positive
balances and, except as set forth on Schedule 3.19(e) and to the Knowledge of
Seller, there are no current or former employees (i) receiving unemployment
compensation benefits which are being charged against such account, (ii) that
are eligible for such benefits, or (iii) that are claiming such benefits.
3.20 Litigation.
(a) There is not now, nor has there been, any (i) litigation;
(ii) charge, grievance or other labor-related claim, strikes, lockouts or union
organizing drives; (iii) product liability claim; (iv) Environmental Claim; (v)
arbitration; (vi) proceeding; (vii) governmental investigation or inquiry;
(viii) citation; (ix) action of any kind; or (x) order, notice of violation or
inspection report, pending, or, to the Knowledge of Seller, proposed or
threatened against Seller, relating to the Business or any of the Purchased
Assets, nor is there any basis known to Seller for any such action.
(b) There are no actions, suits or proceedings pending, or, to
the Knowledge of Seller, proposed or threatened, by any person or governmental
agency which question the legality, validity, or propriety of the transactions
contemplated by this Agreement.
3.21 Insurance.
(a) Schedule 3.21(a) hereto lists and describes all of
Seller's insurance policies covering any of the Purchased Assets or the
Business. Said policies are in full force and effect.
(b) Schedule 3.21(b) hereto lists and summarizes all claims in
excess of $10,000 under said insurance policies made or pending since December
31, 1997.
(c) During the last five (5) years, no lapse of insurance
coverage has occurred, and Seller has not had any application for such insurance
coverage denied or any insurance policy or coverage thereunder canceled,
withdrawn, or not renewed.
(d) The insurance policies, with respect to their amounts and
types of coverage, are adequate to insure fully against risks to which the
Purchased Assets and the Business are normally exposed.
3.22 Nondisclosure Agreements. Schedule 3.22 hereto lists all
persons, other than vendors or customers, who have executed nondisclosure or
secrecy agreements relating to the Business with Seller since December 31, 1997.
At the request of Buyer, Seller shall diligently enforce said nondisclosure
agreements for a five (5) year period commencing on the Closing Date. Said
enforcement shall be at the specific request of Buyer and any legal fees or
costs incurred as
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a result of said request shall be borne solely by Buyer. Seller shall assign its
rights under said agreements to Buyer.
3.23 Products.
(a) Schedule 3.23 hereto lists all products of Seller relating
to the Business, including all products offered for sale since December 31,
1997. Such products meet all product and/or process specifications (including
product testing procedures) that they purport or are required to meet.
(b) The Products of the Business satisfy all applicable United
States Environmental Protection Agency, United States Department of
Transportation, and all other governmental agency requirements, including
registration, notice, and label requirements, and Seller is current on all
applicable fees, renewals, reports, and other similar obligations.
3.24 Pricing. Schedule 3.24 describes all special (i.e., differs
from published price list) pricing and rebate arrangements and/or commitments of
Seller currently in effect which relate to the Business. Except as set forth on
Schedule 3.24, no customer of the Business will be entitled to or, to the
Knowledge of Seller will be expectant of, any rebates, or similar commitments
after the Closing Date.
3.25 Distributors.
(a) Schedule 3.25 hereto: (i) lists all persons or entities
that purchased Seller's products as distributors during the last fiscal year of
Seller; (ii) lists all non-employee persons or entities that serve as a
manufacturer's representative for Seller's products; and (iii) describes and
sets forth the terms of the arrangement or agreement (written or unwritten) with
each such distributor or representative.
(b) Except as set forth on Schedule 3.25, all contracts with
distributors and/or manufacturer's representatives of the Business can be
terminated by Seller upon sixty (60) days' notice, with or without cause,
without liability, penalty, or premium of any nature whatsoever.
3.26 Transactions with Related Parties. Seller is not a party to
any transaction or proposed transaction, including, without limitation, the
leasing of property, the purchase or sale of raw materials or finished goods,
the furnishing of services or the borrowing or lending of money with any
director, officer or stockholders of Seller, or any person or entity who is an
affiliate of such director, officer or stockholders of Seller. No director,
officer or stockholders of Seller, nor any of their affiliates, own or have any
ownership interest in any corporation or other entity which is in competition
with the Business.
3.27 Customers and Suppliers. Schedule 3.27 hereto sets forth a
list of Seller's ten (10) largest customers relating to the Business and
Seller's ten (10) largest suppliers relating to
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the Business during Seller's two most recent fiscal years determined on the
basis of the total dollar amount of net sales to such customers and purchases
from such suppliers.
3.28 Capitalization. Seller currently has outstanding 1,000 shares of
its Common Stock, 130 shares of which are owned by Steven C. Bird, and 870
shares of which are owned by The Bird Charitable Trust, of which Steven C. Bird
and his wife Marilyn Bird are Trustees. Seller currently has outstanding no
shares of Preferred Stock.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
4.1 Organization. Buyer is a corporation duly and validly organized and
existing and in current status under the laws of the State of California and has
full corporate power to consummate the transactions contemplated in and pursuant
to this Agreement.
4.2 Authorization; Enforceability. The execution, delivery, and
performance of this Agreement, and all of the documents and instruments required
hereby, are within the corporate power of Buyer and have been duly authorized by
all necessary corporate action by Buyer. This Agreement is, and the other
documents and instruments required hereby will be, when executed and delivered
by Buyer, the valid and binding obligations of Buyer, enforceable in accordance
with their respective terms.
4.3 No Violation or Conflict. The execution, delivery, and performance
of this Agreement (and the transactions contemplated herein) by Buyer do not and
will not conflict with or violate any Law, judgment, order, decree, the Articles
of Incorporation or Bylaws of Buyer, or any contract or agreement to which Buyer
is a party or by which Buyer is bound.
ARTICLE 5
CERTAIN MATTERS PENDING THE CLOSING
From and after the date of this Agreement and until the Closing Date:
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5.1 Full Access.
(a) Buyer and its authorized agents, officers, and
representatives shall have full and complete access to the Seller, Seller's key
personnel, and the Purchased Assets and Seller's books, records, facilities and
other documents and materials relating to Seller's assets, liabilities and
business during normal business hours in order to conduct such examination and
investigation of the Purchased Assets as it deems necessary, provided that such
examinations shall not unreasonably interfere with Seller' operations and
activities. Access to Seller's key personnel shall be determined by mutual
agreement of Buyer and Seller.
(b) If the transactions provided for herein are not
consummated, Buyer and its respective officers, agents, and representatives will
hold in strict confidence all information obtained from Seller and their
officers, agents, or representatives, and will promptly return to Seller, or
destroy at the written request of Seller, all documents obtained from Seller and
their officers, agents, or representatives, and all copies of such documents
made by Buyer and its officers, agents, and representatives, excepting however,
any such information or documents which: (i) was, is, or becomes in the public
domain; (ii) was in fact lawfully known or lawfully furnished to Buyer prior to
disclosure to Buyer by Seller or their officers, agents, or representatives;
(iii) was independently created by Buyer; or (iv) is lawfully disclosed or
lawfully furnished to Buyer by a third party (other than officers, directors,
employees, and agents of Seller) after disclosure to Buyer by Seller.
5.2 Conduct of Business. With regard to the Business, Seller
shall:
(a) carry on its business in the regular course and
substantially in the same manner as heretofore carried on by the Seller.
(b) satisfy its obligations under all material agreements and
commitments;
(c) maintain its books of account and records in the usual,
regular and ordinary manner in accordance with generally accepted accounting
principles applied on a consistent basis;
(d) continue to withhold and deposit all payroll withholding
taxes as and when due; and
(e) maintain its properties in customary repair, order and
condition, reasonable wear and tear excepted.
Seller shall promptly advise the Buyer of any adverse change
in the financial condition, properties, business, results of operations or
prospects (financial or otherwise) of the Seller's business, including the
Purchased Assets and the Assumed Liabilities.
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5.3 Prohibited Action. With regard to the Purchased Assets, except with
the prior consent of Buyer or as expressly contemplated by this Agreement,
Seller shall not:
(a) sell or otherwise dispose of, or grant any mortgage,
pledge security interest in, lien or encumbrance on, any of its assets or
properties other than in the ordinary course of business, or enter into any
agreement with respect thereto;
(b) enter into any employment contract or deferred
compensation arrangement with or grant any material increase in the compensation
payable or to become payable to any of its employees, make any material increase
in any bonus, insurance, or other employee benefit plan, payment, arrangement or
policy made to, for or with any such or employees, or institute any employee
benefit plan within the meaning of Section 3(3) of ERISA or institute any
retirement plan or policy for the issuance of severance pay; and
(c) waive any rights of substantial value in connection with
its operations or take any other material action which is not in the ordinary
course of business.
5.4 Preservation of Relationships. Seller will use its best efforts to
preserve its business relationships and will generally assist Buyer in arranging
for the orderly transfer and reception of the Purchased Assets from Seller to
Buyer.
5.5 No Default. The Seller shall not do any act or omit to do any act,
or permit any act or omission to act, which will cause a breach of any of the
Permits.
5.6 Publicity. All general notices, releases, statements and
communications to employees, suppliers, and customers of the Business and to the
general public and the press relating to the transactions covered by this
Agreement shall be made only at such times and in such manner as may be mutually
agreed upon by Buyer and Seller; provided however, that any party shall be
entitled to make a public announcement of the proposed transaction if, in the
opinion of its counsel, such announcement is required to comply with any Law or
any rule or regulation of any securities exchange or securities quotation system
and such party shall, to the extent practicable, consult with the other parties
with respect to such announcement and give reasonable prior written notice of
its intent to issue such announcement.
5.7 Compliance with Laws. Seller shall comply in all material respects
with all applicable Laws and orders of any court or federal, state, municipal,
or other governmental department.
5.8 Exclusive Dealing. Seller shall not, and shall not permit its
officers, directors, or shareholders to, negotiate or have discussions with any
other party relating to a sale of any portion of the Business or the Purchased
Assets, without the prior written consent of Buyer.
5.9 Cooperation. Seller and Buyer shall:
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(a) fully cooperate with each other and their respective legal
counsel and accountants in connection with any steps to be taken as part of
their obligations under this Agreement;
(b) use their reasonable efforts to satisfy those conditions
set forth in Articles 6 and 7 which are to be satisfied by them; and
(c) promptly give notice to the other party of the existence
or occurrence of any fact or condition which would make any representation or
warranty contained herein untrue in any material respect or which might
reasonably be expected to prevent the consummation of the transactions
contemplated hereby.
ARTICLE 6
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
Each and every obligation of Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent (any or all of which Buyer may expressly waive in
writing):
6.1 Compliance with Agreement. Seller shall have performed and complied
with all of their obligations under this Agreement which are to be performed or
complied with by them prior to or on the Closing Date.
6.2 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Agreement, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to Buyer and Buyer's counsel, and Seller
shall have made available to Buyer for examination the originals or true and
correct copies of all documents which Buyer may reasonably request in connection
with the transactions contemplated by this Agreement.
6.3 Litigation. No investigation, suit, action, or other proceeding
shall be threatened or pending before any court or governmental agency that
seeks the restraint, prohibition, damages, or other relief in connection with
this Agreement or the consummation of the transactions contemplated by this
Agreement.
6.4 Representations and Warranties. The representations and warranties
made by Seller shall be true and correct in all material respects as of the date
hereof and as of the Closing Date with the same force and effect as though said
representations and warranties had been made at such times.
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6.5 No Adverse Change. During the period from the date of this
Agreement to the Closing Date there shall not have occurred or been discovered,
and there shall not exist on the Closing Date, any material damage to the
Purchased Assets, or any condition or fact which is or may be materially adverse
to the Purchased Assets.
6.6 Due Diligence. During the period from the date of this Agreement to
the Closing Date, Buyer shall have completed, to its sole satisfaction, its due
diligence investigation of Seller and the Purchased Assets, and nothing shall
have come to its attention that materially and adversely affects the value of
the Purchased Assets.
6.7 Commission and Employment Agreements. Buyer shall have received
executed copies of the Commission Agreement and the Employment Agreement.
6.8 Leases. Buyer shall have (a) entered into a lease of the Premises
in Saratoga, California and Loveland, Colorado with the current landlord of such
Premises on terms that are satisfactory to Buyer, and (b) received assignments
of the Leased Assets listed on Schedule 1.39 hereto.
6.9 Deliveries at Closing. Seller shall have delivered to Buyer the
following documents, each properly executed and dated as of the Closing Date:
(a) the Bill of Sale;
(b) the Seller's Closing Certificate;
(c) the Opinion of Seller's Counsel;
(d) the Registration Rights Agreement;
(e) the Letter of Investment Intent;
(f) the Escrow Agreement; and
(g) any assignments necessary to effect the transfer of
the Intangible Assets, Fixed Assets and Software to
Buyer.
6.10 Other Deliveries. Seller shall have delivered to Buyer prior to or
at Closing:
(a) such certificates and documents of officers of
Seller and public officials as shall be reasonably requested by Buyer's counsel
to establish the existence and good standing of Seller and the due authorization
of this Agreement and the transactions contemplated by this Agreement by Seller;
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(b) UCC terminations and releases for any security interests
encumbering the Purchased Assets (unless they relate to an Assumed Liability);
(c) legal title to and legal possession of the Purchased
Assets; and
(d) such deeds, bills of sale, endorsements, assignments and
other good and sufficient instruments of conveyance and transfer as shall be
effective to vest in Buyer free and clear title to the Purchased Assets as
contemplated by this Agreement.
6.11 Approvals and Consents.
(a) Seller shall have filed all notices and obtained, in
writing, and conveyed to Buyer such permissions, approvals, determinations,
consents and waivers, if any, as may be required by Law, regulatory authorities,
the Contracts, the Permits, secured creditors of Seller or from any third party
pursuant to any contract to which Seller is a party, in order to consummate the
transactions contemplated by this Agreement and to vest in Buyer good and
marketable title to the Purchased Assets as contemplated by this Agreement.
(b) Seller shall have obtained the necessary approvals of
their respective shareholders and Board of Directors to enter into this
Agreement and consummate the transactions contemplated by this Agreement.
(c) Buyer shall have filed all notices and obtained in
writing, and conveyed to Seller such permissions, approvals, determinations,
consents and waivers, if any, as may be required by law, regulatory authorities
or from any third party pursuant to any contract to which Buyer is a party, in
order to consummate the transactions contemplated by this Agreement.
(d) Buyer shall have obtained, at Buyer's expense, all
approvals, authorizations, and permits, governmental and otherwise, that it
deems necessary and appropriate to conduct the Business and use the Purchased
Assets in substantially the same manner in which the Business is currently
conducted and the Purchased Assets are used on and after the Closing Date.
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
Each and every obligation of Seller to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent (any or all of which Seller may expressly waive):
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7.1 Compliance with Agreement. Buyer shall have performed and complied
with all of its obligations under this Agreement which are to be performed or
complied with by it prior to or on the Closing Date.
7.2 Proceedings and Instruments Satisfactory. All proceedings,
corporate or other, to be taken in connection with the transactions contemplated
by this Agreement by Buyer, and all documents incident thereto, shall be
reasonably satisfactory in form and substance to Seller and Seller' counsel.
7.3 Litigation. No investigation, suit, action, or other proceeding
shall be threatened or pending before any court or governmental agency that
seeks the restraint, prohibition, damages, or other relief in connection with
this Agreement or the consummation of the transactions contemplated by this
Agreement.
7.4 Representations and Warranties. The representations and warranties
made by Buyer in this Agreement shall be true and correct in all material
respects as of the date hereof and as of the Closing Date with the same force
and effect as though such representations and warranties had been made at such
times.
7.5 Payment of Purchase Price. Buyer shall have paid to Seller the
Purchase Price as described in Section 2.2(a) of this Agreement.
7.6 Commission and Employment Agreements. Seller shall have received
executed copies of the Commission Agreement and the Employment Agreement.
7.7 Deliveries at Closing. Buyer shall have delivered to Seller the
following documents, each properly executed and dated as of the Closing Date:
(a) the Bill of Sale;
(b) the Buyer's Closing Certificate;
(c) the Opinion of Buyer's Counsel;
(d) the Opinion of Buyer's California Counsel;
(e) the Registration Rights Agreement; and
(f) the Escrow Instructions.
7.8 Other Documents. Buyer shall have delivered to Seller such
certificates and documents of officers of Buyer and of public officials as shall
be reasonably requested by Seller's
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counsel to establish the existence and current status of Buyer and the due
authorization of this Agreement and the transactions contemplated by this
Agreement by Buyer.
7.9 Approvals and Consents. Buyer shall have obtained the
necessary approvals of its Board of Directors to enter into this Agreement and
to consummate the transactions contemplated by this Agreement.
ARTICLE 8
INDEMNITY; TERMINATION; MISCELLANEOUS
8.1 Seller's Indemnity.
(a) Seller shall indemnify and hold Buyer harmless from and
against and shall defend promptly Buyer from and reimburse Buyer for any and all
losses, damages, costs, expenses, liabilities, obligations, and claims of any
kind (including, without limitation, reasonable attorneys' fees and other costs
and expenses) (collectively, "Damages") which Buyer may at any time suffer or
incur, or become subject to, as a result of or in connection with:
(i) any breach of this Agreement or inaccuracy of any
of the representations and warranties made by Seller in or pursuant to this
Agreement;
(ii) any failure by Seller to carry out, perform,
satisfy, and discharge any of its covenants, agreements, undertakings,
liabilities, or obligations under this Agreement or under any of the documents
delivered by Seller pursuant to this Agreement;
(iii) the Retained Liabilities;
(vi) the ownership, and/or operation of the Purchased
Assets or any property occupied or used by Seller in connection with the
Business, prior to the Closing;
(vii) noncompliance by Seller, the Business, the
Purchased Assets or any property occupied or used by Seller with any Law,
required specification, Environmental Law, or the infringement of property
rights of others;
(viii) any Environmental Claim arising out of
conditions existing as of or prior to the Closing at the Premises, former
properties owned or occupied by Seller, or present or former off-site disposal
locations used by Seller;
(ix) any remedial action reasonably taken by Buyer to
prevent an Environmental Claim or to achieve compliance with any Environmental
Laws with which Seller is not in compliance on or prior to the Closing;
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(x) any other Environmental Claim with respect to the
conduct of the Business as of or prior to the Closing;
(xi) the ownership and/or operation of the Business
by Seller prior to Closing, including but not limited to the employment and
termination of the employees of Seller by Seller, any litigation or governmental
claims arising from occurrences prior to Closing, the lack or inadequacy of
insurance coverage prior to Closing, and the use of any third party software
prior to Closing; and
(xii) any suit, action or other proceeding brought by
any governmental authority or person arising out of any of the matters referred
to in this Section 8.1(a) of this Agreement.
(b) Buyer shall promptly notify Seller of any claim, demand,
action, or proceeding for which indemnification will be sought under this
Section 8.1 of this Agreement and, if such claim, demand, action, or proceeding
is a third party claim, demand, action, or proceeding, Seller shall have the
right at their expense to assume the defense thereof using counsel reasonably
acceptable to Buyer. Buyer shall have the right to participate, at its own
expense, with respect to any such third party claim, demand, action, or
proceeding. In connection with any such third party claim, demand, action, or
proceeding, Buyer and Seller shall cooperate with each other and provide each
other with access to relevant books and records in their possession. No such
third party claim, demand, action, or proceeding shall be settled without the
prior written consent of Buyer and Seller. If a firm written offer is made to
settle any such third party claim, demand, action, or proceeding and Buyer
refuses to consent to such settlement, then: (i) Seller shall be excused from,
and Buyer shall be solely responsible for, all further defense of such third
party claim, demand, action, or proceeding; and (ii) the maximum liability of
Seller relating to such third party claim, demand, action, or proceeding shall
be the amount of the proposed settlement if the amount thereafter recovered from
Buyer on such third party claim, demand, action, or proceeding is greater than
the amount of the proposed settlement.
8.2 Buyer's Indemnity.
(a) Buyer shall indemnify and hold Seller harmless from and
against, and shall defend promptly Seller from and reimburse Seller for, any and
all Damages which Seller may at any time suffer or incur, or become subject to,
as a result of or in connection with:
(i) any breach or inaccuracy of any representations
and warranties made by Buyer in or pursuant to this Agreement;
(ii) any failure by Buyer to carry out, perform,
satisfy and discharge any of its covenants,
agreements, undertakings, liabilities, or obligations under this Agreement or
under any of the documents and materials delivered by Buyer pursuant to this
Agreement;
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<PAGE> 36
(iii) the ownership, and/or operation of the
Purchased Assets after the Closing;
(v) the Assumed Liabilities; and
(vi) any suit, action, or other proceeding brought by
any governmental authority or person arising out of any of the matters referred
to in Section 8.2 of this Agreement.
(b) Seller shall promptly notify Buyer of any claim, demand,
action, or proceeding for which indemnification will be sought under this
Section 8.2 of this Agreement and, if such claim, demand, action, or proceeding
is a third party claim, demand, action, or proceeding, Buyer will have the right
at its expense to assume the defense thereof using counsel reasonably acceptable
to Seller. Seller shall have the right to participate, at its own expense, with
respect to any such third party claim, demand, action, or proceeding. In
connection with any such third party claim, demand, action, or proceeding, Buyer
and Seller shall cooperate with each other and provide each other with access to
relevant books and records in their possession. No such third party claim,
demand, action, or proceeding shall be settled without the prior written consent
of Seller and Buyer. If a firm written offer is made to settle any such third
party claim, demand, action, or proceeding and Seller refuses to consent to such
settlement, then: (i) Buyer shall be excused from, and Seller shall be solely
responsible for, all further defense of such third party claim, demand, action,
or proceeding; and (ii) the maximum liability of Buyer relating to such third
party claim, demand, action, or proceeding shall be the amount of the proposed
settlement if the amount thereafter recovered from Seller on such third party
claim, demand, action, or proceeding is greater than the amount of the proposed
settlement.
8.3 Termination. Time is of the essence. Unless otherwise agreed to in
writing, this Agreement may be terminated and the transactions contemplated by
this Agreement may be abandoned at any time as follows: (a) by mutual written
agreement of Seller and Buyer; (b) by Buyer (provided that it is not otherwise
in breach hereof) if any of the conditions set forth in Article 6 of this
Agreement shall not have been fulfilled on or prior to the Closing Date; (c) by
Seller (provided that it is not otherwise in breach hereof) if any of the
conditions set forth in Article 7 of this Agreement shall not have been
fulfilled on or prior to the Closing Date.
8.4 Rights on Termination; Waiver. If this Agreement is terminated
pursuant to Section 8.3 hereof, all further obligations of the parties under or
pursuant to this Agreement shall terminate without further liability of either
party to the other, except for violation of Section 5.9 (cooperation), and
except that Buyer's obligations contained in Section 5.1(b) (confidentiality) of
this Agreement shall survive any such termination. If any of the conditions set
forth in Article 6 of this Agreement have not been satisfied, Buyer may
nevertheless elect to proceed with the consummation of the transactions
contemplated by this Agreement and, if any of the conditions set forth in
Article 7 of this Agreement have not been satisfied, Seller may nevertheless
elect to proceed with the consummation of the transactions contemplated by this
Agreement.
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8.5 Further Assurances. From time to time after the Closing Date, upon
the request of Buyer, and without further cost or expense to Buyer, Seller shall
execute and deliver, and cause to be executed and delivered, such further
documents, including but not limited to instruments of conveyance, assignment,
and transfer and securities law filings and take such further action as Buyer
may reasonably request in order more effectively to sell, assign, convey,
transfer, reduce to possession, and record title to any of the Purchased Assets,
to assign and transfer the Permits to Buyer and to comply with any federal or
state securities laws. Seller agree to cooperate with Buyer in all reasonable
respects to assure to Buyer the continued title to and possession of the
Purchased Assets in the condition and manner contemplated by this Agreement.
8.6 Survival of Representations and Warranties. All representations and
warranties of Buyer and Seller contained in this Agreement or made pursuant to
this Agreement shall survive the Closing Date and the consummation of the
transactions contemplated by this Agreement.
8.7 Entire Agreement; Amendment. This Agreement and the documents
referred to herein and included herein by this reference and to be delivered
pursuant hereto constitute the entire agreement between the parties pertaining
to the subject matter hereof, and supersede all prior and contemporaneous
agreements, understandings, negotiations, and discussions of the parties,
whether oral or written, and there are no warranties, representations, or other
agreements between the parties or on which any of the parties have relied in
connection with the subject matter hereof, except as specifically set forth in
this Agreement. No amendment, supplement, modification, waiver, or termination
of this Agreement shall be binding unless executed in writing by the party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision of this Agreement,
whether or not similar, nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
8.8 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, each of the parties hereto shall pay the fees and
expenses incurred by it, including the fees of respective counsel, accountants,
brokers, investment bankers, and other experts incident to the negotiation and
preparation of this Agreement and consummation of the transactions contemplated
by this Agreement.
8.9 Governing Law. This Agreement shall be construed and interpreted
according to the laws of the State of California.
8.10 Assignment. This Agreement shall not be assigned by Seller or
Buyer without the prior written consent of the other party; provided, however,
that Buyer shall have the right to assign all or any portion of its rights under
this Agreement or to delegate all or any portion of its obligations under this
Agreement, in each case with reference to all or any portion of the Purchased
Assets, to a subsidiary or affiliate of Buyer without Seller's consent. Any such
assignment shall not release Buyer from its obligations herein.
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<PAGE> 38
8.11 Notices. All communications or notices required or permitted by
this Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of a party or the
second business day after having deposited the notice or communication in the
United States mail, certified or registered mail, postage prepaid, return
receipt requested, or upon delivery by courier or facsimile with receipt of
confirmation, and addressed as follows, unless and until any of such parties
notifies the others in accordance with this section of a change of address:
If to Seller: PCA Design Incorporated
1821 Saratoga Avenue
Suite 280
Saratoga, California 95070
Attention: Steven Bird
President
Fax #: 408-366-9049
with a copy to: David P. Kerr, Esq.
c/o PCA Design Incorporated
1821 Saratoga Avenue
Suite 280
Saratoga, California 95070
Fax #: 408-366-9049
If to Buyer: CCIR of California Corp.
5020 South 36th Street
Phoenix, Arizona 85040
Attention: Joseph G. Andersen,
Vice President, Secretary and Treasurer
Fax #: 602-232-9157
with a copy to: P. Robert Moya, Esq.
Quarles & Brady
One East Camelback, Suite 400
Phoenix, Arizona 85012
Fax #: 602-230-5598
8.12 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part of this Agreement.
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<PAGE> 39
8.13 Income Tax Position. Neither Buyer nor Seller shall take a
position for income tax purposes which is inconsistent with this Agreement.
8.14 Taxes and Fees. Buyer shall pay all sales taxes of any kind which
arise as a result of the conveyance of the Purchased Assets to Buyer pursuant to
this Agreement. Buyer and Seller shall each pay fifty percent of all use or
other taxes and all escrow, documentary, stamp, recording and filing taxes or
fees which arise as a result of the conveyance of the Purchased Assets to Buyer
pursuant to this Agreement; provided, however, notwithstanding the above, that
Seller shall pay all income and gross receipts taxes.
8.15 Interpretation. Unless the context requires otherwise, all words
used in this Agreement in the singular number shall extend to and include the
plural, all words in the plural number shall extend to and include the singular,
and all words in any gender shall extend to and include all genders.
8.16 Severability. If any provision, clause, or part of this Agreement,
or the application thereof under certain circumstances, is held invalid, the
remainder of this Agreement, or the application of such provision, clause, or
part under other circumstances, shall not be affected thereby.
8.17 No Reliance. Except for any assignees permitted by section 1.10 of
this Agreement: (a) no third party is entitled to rely on any of the
representations, warranties, and agreements of Buyer or Seller contained in this
Agreement; and (b) Buyer and Seller assume no liability to any third party
because of any such reliance.
8.18 Legal Proceedings. If a dispute arises between the parties
relating to this Agreement or any of the other agreements to be delivered
hereunder, the parties agree to use the following procedure prior to either
party pursuing other available remedies:
(a) A meeting shall be held promptly between the parties,
attended by individuals with decision-making authority regarding the dispute, to
attempt in good faith to negotiate a resolution of the dispute.
(b) If, within 30 days after such meeting, the parties have
not succeeded in negotiating a resolution of the dispute, they will jointly
appoint a mutually acceptable neutral person not affiliated with either of the
parties (the "neutral"), seeking assistance in such regard from the Center for
Public Resources if they have been unable to agree upon such appointment within
40 days from the initial meeting. The fees of the neutral shall be shared
equally by the parties.
(c) In consultation with the neutral, the parties will select
or devise an alternative dispute resolution procedure ("ADR") by which they will
attempt to resolve the dispute, and a time and place for the ADR to be held,
with the neutral making the decision as to
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<PAGE> 40
the procedure, and/or place and time (but unless circumstances require
otherwise, not later than 60 days after selection of the neutral) if the parties
have been unable to agree on any of such matters within 20 days after initial
consultation with the neutral.
(d) The parties agree to participate in good faith in the ADR
to its conclusion as designated by the neutral. If the parties are not
successful in resolving the dispute through the ADR, then the parties may agree
to submit the matter to binding arbitration or a private adjudicated resolution
through the appropriate court.
(e) In the event legal proceedings through the courts are
commenced to enforce the parties' respective rights and obligations herein, the
prevailing party shall be entitled to reimbursement for its related costs and
expenses, including reasonable legal fees, incurred with respect to said legal
proceedings.
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IN WITNESS WHEREOF, the parties have caused this Asset Purchase
Agreement to be duly executed as of the day and year first above written.
CCIR OF CALIFORNIA CORP.
By: /s/ Frederick G. McNamee, III
------------------------------------------
Frederick G. McNamee, III,
President
By: /s/ Joseph G. Andersen
------------------------------------------
Joseph G. Andersen, Vice President,
Secretary and Treasurer
PCA DESIGN INCORPORATED
By: /s/ Steven C. Bird
------------------------------------------
Steven C. Bird,
Chief Executive Officer
By: /s/ Steven C. Bird
------------------------------------------
Steven C. Bird,
Secretary
<PAGE> 1
Exhibit 10.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement"), which shall be
effective as of February 9, 1998, is by and between Continental Circuits Corp.,
a Delaware Corporation (the "Company") and PCA Design Incorporated, a California
corporation ("PCA").
RECITALS:
A. CCIR of California Corp., a California corporation and wholly-owned
subsidiary of the Company ("CCIR") and PCA are parties to an Asset Purchase
Agreement dated February 9, 1998 (the "Asset Purchase Agreement").
B. Pursuant to the Asset Purchase Agreement, PCA is acquiring 20,000
shares of the Company's authorized but previously unissued common stock ("Common
Stock").
C. The Common Stock will not be registered under the Securities Act of
1933, as amended, or under the securities laws of any state, in reliance upon
exemptions from registration thereunder.
D. The execution and delivery of this Agreement is a condition
precedent to the closing of the transactions contemplated by the Asset Purchase
Agreement.
In consideration of the mutual covenants and obligations hereinafter
set forth, the Company and PCA, hereby agree as follows:
SECTION 1. Definitions. As used in this Agreement, the terms listed in
this Section shall have the meanings set forth below:
(a) "Affiliate" of any Person means any other Person who
either directly or indirectly is in control of, is controlled by or is under
common control with such Person; provided that for purposes of this definition
an investment entity shall be deemed to be controlled by its investment manager,
investment advisor or general partner.
(b) "Business Day" shall mean any Monday, Tuesday, Wednesday,
Thursday or Friday that is not a day on which banking institutions in the City
of Phoenix are authorized by law, regulation or executive order to close.
(c) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended (or any similar successor federal statute), and the rules and
regulations thereunder, as the same are effect from time to time.
<PAGE> 2
(d) "Holder" shall mean PCA and its successors, assigns and
transferees (subject to Section 10 hereof). For purposes of this Agreement, the
Company may deem the registered holder of a Registrable Security as the Holder
thereof (subject to Section 10 hereof).
(e) "Person" shall mean an individual, partnership,
corporation, limited liability company, joint venture, trust or unincorporated
organization, a government or agency or political subdivision thereof or any
other entity.
(f) "Prospectus" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by a prospectus supplement
with respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and by all other amendments
and supplements to the prospectus, including post-effective amendments, and all
material incorporated by reference in such prospectus.
(g) "Registrable Securities" shall mean the Securities which
are registrable at any given time. The Securities shall become registrable in
the following amounts and at the following times: 10,000 beginning January 30,
1999, and the remaining 10,000 beginning January 30, 2000.
(h) "Registration Statement" shall mean any registration
statement which covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus included therein, all
amendments and supplements to such Registration Statement including post
effective amendments, all exhibits and all material incorporated by reference in
such Registration Statement.
(i) "Registration Termination Date" shall mean the earlier to
occur of (i) the date that is two years following the date hereof or (ii) the
first date upon which the Registrable Securities may be sold without limitation
under Rule 144 under the Securities Act (as such Rule may be amended from time
to time), other than the limitations set forth in paragraphs (c), (f) and (h) of
such Rule, as determined by the opinion of counsel to the Company (which shall
be reasonably satisfactory to counsel to the Holders).
(j) "SEC" shall mean the U.S. Securities and Exchange
Commission, or any other U.S. federal agency at the time administering the
Securities Act.
(k) "Securities" shall mean (i) all shares of Common Stock
issued or issuable to PCA pursuant to the Asset Purchase Agreement as further
described in Recital Section B; and (ii) any other securities issued as a result
of or in connection with any stock dividend, stock split or reverse stock split,
combination, recapitalization, reclassification, merger or consolidation,
exchange or distribution in respect of the shares of Common Stock referred in to
(i) above.
(l) "Securities Act" shall mean the Securities Act of 1933, as
amended (or any similar successor federal statute), and the rules and
regulations thereunder, as the same are in effect from time to time.
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<PAGE> 3
(m) "Underwritten Offering" shall mean an offering that is
registered under the Securities Act in which securities of the Company are sold
pursuant to a firm commitment underwriting, to an underwriter at a fixed price
for reoffering to the public or pursuant to agency or best efforts arrangements
with an underwriter.
SECTION 2. Securities Subject to this Agreement. The Registrable
Securities are entitled to the benefits of this Agreement.
SECTION 3. Piggyback Registration.
(a) Piggyback Registration. If the Company at any time
proposes to file a registration statement with respect to any class of equity
securities, whether for its own account (other than a registration statement on
Form S-4 or S-8, or any successor or substantially similar form or a
registration statement covering (i) an employee stock option, stock purchase or
compensation plan or securities issued or issuable pursuant to any such plan or
(ii) a dividend reinvestment plan) or for the account of a holder of securities
of the Company pursuant to registration rights granted by the Company (a
"Requesting Securityholder"), then the Company shall in each case give written
notice of such proposed filing to all Holders of Registrable Securities at least
20 Business Days before the anticipated filing date of any such registration
statement by the Company, and such notice shall offer to all Holders the
opportunity to have any or all of the Registrable Securities held by such
Holders included in such registration statement. Each Holder of Registrable
Securities desiring to have his Registrable Securities registered under this
Section 3 shall so advise the Company in writing within 10 Business Days after
the date of receipt of such notice (which request shall set forth the amount of
Registrable Securities for which registration is requested), and the Company
shall include in such Registration Statement all such Registrable Securities so
requested to be included therein; provided, however, that if such Registration
Statement is for an Underwritten Offering, the Holders of Registrable Securities
included therein shall join in the underwriting on the same terms and conditions
as the Company or the Requesting Securityholders except that the Holders of
Registrable Securities shall not be required to give any representations and
warranties relating to the Company, and shall execute any underwriting
agreement, "lock-up" letters or other customary agreements or documents executed
by the Company or the Requesting Securityholders in connection therewith.
Notwithstanding the foregoing, if the managing underwriter or underwriters of
any such proposed public offering advise the Holders in writing that the total
amount or kind of securities which the Holders of Registrable Securities, the
Company, the Requesting Securityholders and any other Persons intended to be
included in such proposed public offering is sufficiently large to affect the
success of such proposed public offering materially and adversely, then the
amount or kind of securities to be offered for the accounts of the Holders of
Registrable Securities shall be reduced pro rata, together with the amount or
kind of securities to be offered for the accounts of any other Persons
requesting registration of securities pursuant to rights similar to the rights
of the Holders under this Section 3, to the extent necessary to reduce the total
amount or kind of securities to be included in such proposed public offering to
the amount or kind recommended by such managing underwriter or underwriters
before the securities offered by the Company or any Requesting Securityholder
are so reduced.
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<PAGE> 4
(b) No Obligation. Neither the giving of notice by the Company
nor any request by the Holders to register Registrable Securities pursuant to
Section 3(a) shall in any way obligate the Company to file any such Registration
Statement. The Company may, at any time prior to the effective date thereof,
determine not to offer the securities to which Registration Statement relates
and/or withdraw the Registration Statement from the SEC, without liability of
the Company to the Holders.
SECTION 4. Registration Procedures and Other Agreements.
(a) General. In connection with the Company's registration
obligations pursuant to Section 3 hereof, the Company will:
(i) prepare and file with the SEC a new Registration
Statement or such amendments and post-effective amendments to an existing
Offering Registration Statement as may be necessary to keep such Registration
Statement effective; provided, however, that no Registration Statement shall be
required to remain in effect after all Registrable Securities covered by such
Registration Statement have been sold and distributed as contemplated by such
Registration Statement;
(ii) notify each selling Holder promptly (1) when a new
Registration Statement, amendment thereto, Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to any
new Registration Statement or posteffective amendment, when it has become
effective, (2) of any request by the SEC for amendments or supplements to any
Registration Statement or Prospectus or for additional information, (3) of the
issuance by the SEC of any comments with respect to any filing, (4) of any stop
order suspending the effectiveness of any Registration Statement or the
initiation or threatening of any proceedings for such purpose, (5) of any
suspension of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose, and (6) of the happening of any event which makes any statement of a
material fact made in any Registration Statement, Prospectus or any document
incorporated therein by reference untrue or which requires the making of any
changes in any Registration Statement, Prospectus or any document incorporated
therein by reference in order to make the statements therein (in the case of any
Prospectus, in the light of the circumstances under which they were made) not
misleading; and make every reasonable effort to obtain as promptly as
practicable the withdrawal of any order or other action suspending the
effectiveness of any Registration Statement or suspending the qualification or
registration (or exemption therefrom) of the Registrable Securities for sale in
any jurisdiction;
(iii) furnish to each selling Holder, without charge, at
least one manually signed or "edgarized" copy and as many conformed copies as
may reasonable be requested, of the then effective Registration Statement and
any post-effective amendment thereto, and one copy of all financial statements
and schedules, all documents incorporated therein by reference and all exhibits
thereto (including those incorporated by reference);
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<PAGE> 5
(iv) deliver to each selling Holder, without charge, as
many copies of the then effective Prospectus (including each prospectus subject
to completion) and any amendments or supplements thereto as such Holder may
reasonably request;
(v) use its best efforts to register or qualify under
the securities or blue sky laws of such jurisdictions as the selling Holders
reasonably request in writing and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the then effective Registration Statement;
provided, however, that the Company will not be required to (x) qualify to do
business in any jurisdiction where it would not otherwise be required to
qualify, or (y) subject itself to general taxation in any such jurisdiction, or
(z) register or qualify such Registrable Securities under the securities or blue
sky laws of any jurisdiction in which the Company does not then maintain a
currently effective registration or qualification of any of its securities;
(vi) upon the occurrence of any event contemplated by
clause (6) of Section 4(a)(ii) hereof, as promptly as practicable (in light of
the circumstances causing the occurrence of such event) prepare a supplement or
post-effective amendment to the Registration Statement or the related Prospectus
or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Securities, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements therein
in the light of the circumstances under which they were made, not misleading;
(vii) use reasonable efforts to cause all Registrable
Securities covered by the Registration Statement to be listed on each securities
exchange (or quotation system operated by a national securities association) on
which identical securities issued by the Company are then listed, and enter into
customary agreements including, if necessary, a listing application and
indemnification agreement in customary form;
(viii) if the registration is in connection with an
Underwritten Offering, enter into an underwriting agreement with respect to the
Registrable Securities, which agreement shall contain provisions that are
customary in connection with underwritten secondary offerings, including
representations and warranties, opinions of counsel, letters of accountants and
indemnification provisions with underwriters that acquire Registrable
Securities;
(ix) otherwise use its best efforts to comply in all
material respects with all applicable rules and regulations of the SEC relating
to such registration and the distribution of the securities being offered and
make generally available to its securities holders earnings statements
satisfying the provisions of Section 11 (a) of the Securities Act and complying
with Rule 158 of the SEC thereunder;
(x) cooperate and assist in any filings required to be
made with the National Association of Securities Dealers, Inc.; and
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<PAGE> 6
(xi) make available for inspection by a representative
of selling Holders and any attorney or accountant retained by such selling
Holders, all financial and other records, pertinent corporate documents and
properties of the Company and cause the Company's officers, directors and
employees to supply all information reasonably requested by, and to cooperate
fully with, any such representative, underwriter, attorney or accountant in
connection with such registration, and otherwise to cooperate fully in
connection with any due diligence investigation; provided that such
representatives, underwriters, attorneys or accountants enter into a
confidentiality agreement in form and substance reasonably satisfactory to the
Company, prior to the release or disclosure to them of any such information,
records or documents.
(b) Each selling Holder shall furnish to the Company, upon
request, in writing such information and documents as, in the opinion of counsel
to the Company may be reasonably required to prepare properly and file such
Registration Statement in accordance with the applicable provisions of the
Securities Act.
SECTION 5. Registration Expenses. All expenses incident to the Company
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses (including expenses of printing
Prospectuses), messenger and delivery expenses, fees and disbursements of the
Company's counsel and the Company's independent certified public accountants
(including the expenses of any special audit or "comfort" letters required by or
incident to such performance or compliance), securities acts liability insurance
(if the Company elects to obtain such insurance), fees and expenses of any
special experts retained by the Company in connection with any registration
hereunder and the fees and expenses of any other Person retained by the Company,
shall be borne by the Company, whether or not any Registration Statement becomes
effective; provided, however, that the Holders shall bear underwriting
commissions attributable to their Registrable Securities being registered in an
Underwritten Offering and the fees and expenses of any independent counsel and
accountants for the Holders.
SECTION 6. Suspension of Sales under Certain Circumstances.
(a) Upon receipt of any notice from the Company that
dispositions under the then current Prospectus must be discontinued and
suspended, whether as a result of an event described in Section 4(a)(ii)(4),(5)
or (6) hereof or otherwise, each Holder will forthwith discontinue and suspend
disposition of Registrable Securities pursuant to such Prospectus until (i) the
Holders are advised in writing by the Company that a new Registration Statement
covering the offer of Registrable Securities has become effective under the
Securities Act, or (ii) the Holders receive copies of a supplemented or amended
Prospectus contemplated by Section 4(a) hereof, or (iii) the Holders are advised
in writing by the Company that the use of the Prospectus may be resumed.
(b) If at any time following the date hereof any of the
Company's shares of Common Stock are to be sold pursuant to an Underwritten
Offering, then for the period commencing 45 days prior to, and expiring 180 days
after, the effective date of such Underwritten Offering, none
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<PAGE> 7
of the Holders will effect any public sale or distribution of any Registrable
Securities or any other shares of Common Stock of the Company then owned by such
Holders, other than pursuant to such Underwritten Offering (if any Registrable
Securities are included in such Underwritten Offering).
SECTION 7. Indemnification.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the full extent permitted by law, but without
duplication, each Holder of Registrable Securities, any their respective
officers and directors, if any, and each Person who controls such Holder within
the meaning of the Securities Act, against all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation and
reasonable legal fees and expenses) resulting from any untrue statement of a
material fact in, or any omission of a material fact required to be stated in,
any Registration Statement or in any preliminary or final Prospectus, or any
amendment or supplement thereto, or necessary to make the statements therein (in
the case of a Prospectus in light of the circumstances under which they were
made) not misleading, except insofar as the same are caused by or contained in
any information furnished in writing to the Company by any Holder or any
underwriter expressly for use therein; provided that the Company will not be
liable pursuant to this Section 7(a) if such losses, claims, damages,
liabilities or expenses have been caused by the failure of any selling Holder to
deliver a copy of the Registration Statement or Prospectus, or any amendments or
supplements thereto, after the Company has furnished such copies to such Holder.
(b) Indemnification by the Holders of Registrable Securities.
In connection with any Registration Statement covering Registrable Securities of
any Holder, such Holder will furnish to the Company in writing such information
as the Company reasonably requests for use in connection with any such
Registration Statement or Prospectus and agrees to indemnify and hold harmless,
to the full extent permitted by law, but without duplication, the Company, its
officers, directors, shareholders, employees, advisors and agents, and each
Person who controls the Company (within the meaning of the Securities Act),
against any losses, claims, damages, liabilities and expenses resulting from any
untrue statement of a material fact in, or any omission of a material fact
required to be stated in, the Registration Statement or in any preliminary or
final Prospectus, or any amendment or supplement thereto, or necessary to make
the statements therein (in the case of a Prospectus in light of the
circumstances under which they were made) not misleading, but only to the extent
that such untrue statement or omission is contained in any information so
furnished in writing by such Holder to the Company specifically for inclusion
therein. If the offering to which the Registration Statement relates is an
Underwritten Offering, each Holder agrees to enter into an underwriting
agreement in customary form with such underwriters and to indemnify such
underwriters, their officers and directors, if any, and each Person who controls
such underwriters within the meaning of the Securities Act to the same extent as
hereinabove provided with respect to indemnification by such Holder of the
Company.
(c) Conduct of Indemnification Proceedings. Any Person
entitled to indemnification hereunder will (i) give prompt notice to the
indemnifying party of any claim with respect to which
7
<PAGE> 8
it seeks indemnification, and (ii) permit such indemnifying party to assume the
defense of such claim with counsel reasonably satisfactory to the indemnified
party; provided, however, that any Person entitled to indemnification hereunder
shall have the right to employ separate counsel and to participate in, but not
control, the defense of such claim, but the fees and expenses of such counsel
shall be at the expense of such indemnified Person, unless (A) the indemnifying
party shall have failed to assume the defense of such claim and employ counsel
reasonably, satisfactory to the indemnified party in a timely manner, or (B) in
the reasonable judgment of any such Person, based upon written advice of its
counsel, a conflict of interest may exist between such Person and the
indemnifying party with respect to such claims (in which case, if the Person
notifies the indemnifying party in writing, that such Person elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of any such claim as to
which such conflict of interest may exist). The indemnifying party will not be
subject to any liability for any settlement made without its consent. No
indemnified party will be required to consent to the entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or litigation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of the claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, as well as one local counsel in each relevant jurisdiction.
(d) Contribution. If for any reason the indemnification
provided for in Section 7(a) or 7(b) hereof is unavailable to an indemnified
party or insufficient to hold it harmless as contemplated by Sections 7(a) and
7(b) hereof, then the indemnifying party shall contribute to the amount paid or
payable by the indemnified party as a result of such loss, claim, damage,
liability or expense in such proportion as is appropriate to reflect not only
the relative benefits received by the indemnifying party and the indemnified
party, but also the relative fault of the indemnifying party and the indemnified
party, as well as any other relevant equitable considerations. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11 (f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentations.
SECTION 8. Current Public Information. The Company agrees that it will
file all reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder (or, if
it ceases to be required to file such reports, it will, upon the request of
Holders owning not less than 51% of the Registrable Securities [excluding any
Registrable Securities that have previously been sold pursuant to a Registration
Statement hereunder or Rule 144 under the Securities Act], make publicly
available other information), and it will take such further action as may
reasonably be required, in each case to the extent required from time to time to
enable the Holders to sell Registrable Securities without registration under the
Securities Act within the limitations of the applicable exemptions provided by
(x) Rule 144 under the Securities Act, as such Rule may be amended from time to
time, or (y) any similar regulation hereinafter adopted by the SEC.
8
<PAGE> 9
SECTION 9. No Inconsistent Agreements. The Company has not previously
entered into and shall not in the future enter into any agreement, arrangement
or understanding with respect to its securities which is inconsistent with the
rights granted to the Holders in this Agreement.
SECTION 10. Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given, without the written
consent of (a) the Company and (b) the Holders owning not less than 51% of the
Registrable Securities (excluding any Registrable Securities that have
previously been sold pursuant to a Registration Statement hereunder or Rule 144
under the Securities Act).
SECTION 11. Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, confirmed facsimile, or air-courier guaranteeing overnight
delivery:
(a) If to a Holder of Registrable Securities, at the most
current address for such Holder, as it appears on the books of the Company; and
(b) If to the Company: Continental Circuits Corp., 6020 South
36th Street, Phoenix, Arizona 85040, Attention: Chief Executive Officer;
facsimile no. (602) 268-0208, or at such other address as may be designated from
time to time by notice given in accordance with the provisions of this Section
11.
All such notices and other communications shall be deemed to
have been delivered and received (i) in the case of personal delivery or
facsimile, on the date of such delivery, (ii) in the case of air courier, on the
Business Day after the date when sent, and (iii) in the case of mailing, on the
fifth Business Day following such mailing.
SECTION 12. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, transferees and assigns of the
parties hereto; provided, however, that (a) no transferee in any transfer made
in reliance on Rule 144 under the Securities Act shall have any rights as a
Holder under this Agreement; and (b) no Person to whom the Registrable
Securities are transferred shall have any rights under this Agreement as a
Holder unless such Person agrees to be bound by the terms and conditions of this
Agreement.
SECTION 13. Headings. The headings in this Agreement are inserted for
convenience only and shall not constitute a part hereof.
SECTION 14. Governing Law; Consent to Jurisdiction. This Agreement
shall be governed by and construed and enforced in accordance with the internal
laws of the State of Arizona without reference to principles of conflict of
laws. The parties to this Agreement hereby consent to the jurisdiction in
personam of the Superior Court of the State of Arizona, in and for the County of
Maricopa or of the United States District Court for the District of Arizona, in
any legal proceeding
9
<PAGE> 10
to enforce any obligations under this Agreement, and agree that venue in
Maricopa County is not inconvenient.
SECTION 15. Construction. 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. Whenever the words "include," "includes," or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation."
SECTION 16. Entire Agreement. This Agreement, together with any other
documents and certificates delivered hereunder and the Asset Purchase Agreement,
state the entire agreement of the Company and PCA with respect to the subject
matter hereof, merge all prior negotiations, agreements and understandings, if
any, and state in full all representations, warranties and agreements which have
induced this Agreement.
IN WITNESS WHEREOF, the Company and PCA have duly executed and
delivered this agreement as of the date written above.
CONTINENTAL CIRCUITS CORP.
By: /s/ Frederick G. McNamee, III,
--------------------------------------------
Frederick G. McNamee, III,
President
By: /s/ Joseph G. Andersen
--------------------------------------------
Joseph G. Andersen,
Vice President - Finance and Chief Financial
Officer
PCA DESIGN INCORPORATED
By: /s/ Steven C. Bird
--------------------------------------------
Steven C. Bird,
Chief Executive Officer
By: /s/ Steven C. Bird
--------------------------------------------
Steven C. Bird,
Secretary
10
<PAGE> 1
Exhibit 10.3
LOAN AGREEMENT
between
Capital Industrial Development Corporation
and
CCIR of Texas Corp.
--------------------------------------
$6,000,000
Capital Industrial Development Corporation
Adjustable Rate Industrial Revenue Bonds,
Series 1998
(CCIR of Texas Corp. Project)
Dated
as of
January 1, 1998
<PAGE> 2
INDEX
(This Index is not a part of the Agreement
but rather is for convenience of reference only)
<TABLE>
<CAPTION>
Preambles Page
- --------- ----
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.1 Use of Defined Terms............................................................................ 2
Section 1.2 Definitions..................................................................................... 2
Section 1.3 Interpretation.................................................................................. 5
Section 1.4 Captions and Headings........................................................................... 5
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1 Representations, Warranties and Covenants of the Issuer......................................... 6
Section 2.2 Representations, Warranties and Covenants of the User........................................... 7
ARTICLE III
COMPLETION OF THE PROJECT;
ISSUANCE OF THE BONDS
Section 3.1 Acquisition, Construction and Installation of the Project....................................... 9
Section 3.2 Plans and Specifications........................................................................ 9
Section 3.3 Issuance of the Bonds; Application of Proceeds.................................................. 9
Section 3.4 Disbursements from the Project Fund............................................................. 10
Section 3.5 User Required to Pay Costs in Event Project Fund Insufficient................................... 12
Section 3.6 Completion Date................................................................................. 12
Section 3.7 Investment of Fund Moneys....................................................................... 13
Section 3.8 Rebate Fund..................................................................................... 13
ARTICLE IV
LOAN BY ISSUER; REPAYMENT OF THE LOAN;
LOAN PAYMENTS AND ADDITIONAL PAYMENTS
Section 4.1 Loan Repayment: Delivery of Notes and Letter of Credit.......................................... 14
</TABLE>
ii
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 4.2 Additional Payments............................................................................ 15
Section 4.3 Place of Payments.............................................................................. 15
Section 4.4 Obligations Unconditional...................................................................... 15
Section 4.5 Assignment of Agreement and Revenues........................................................... 16
Section 4.6 Letter of Credit............................................................................... 16
Section 4.7 Usury.......................................................................................... 16
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
Section 5.1 Right of Inspection........................................................................... 16
Section 5.2 Sale, Lease or Grant of Use by User........................................................... 16
Section 5.3 Indemnification............................................................................... 17
Section 5.4 No Arbitrage.................................................................................. 18
Section 5.5 Tax-Exempt Status of Interest on the Bonds.................................................... 18
Section 5.6 Payment to Rebate Fund........................................................................ 21
Section 5.7 Assignment by Issuer.......................................................................... 22
Section 5.8 User's Performance Under Indenture............................................................ 22
Section 5.9 Compliance with Laws.......................................................................... 22
Section 5.10 Taxes, Permits, Utility and Other Charges..................................................... 22
Section 5.11 Continued Existence........................................................................... 23
Section 5.12 Removal of Portions of the Project............................................................ 23
Section 5.13 Governmental Regulation....................................................................... 23
ARTICLE VI
REDEMPTION OF BONDS
Section 6.1 Optional Redemption........................................................................... 23
Section 6.2 Extraordinary Optional Redemption............................................................. 23
Section 6.3 Mandatory Redemption of Bonds................................................................. 25
Section 6.4 Actions by Issuer............................................................................. 25
Section 6.5 Required Deposits for Optional Redemption..................................................... 25
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default............................................................................. 25
Section 7.2 Remedies on Default........................................................................... 27
Section 7.3 No Remedy Exclusive........................................................................... 28
Section 7.4 Agreement to Pay Attorneys' Fees and Expenses................................................. 28
</TABLE>
iii
<PAGE> 4
<TABLE>
<S> <C> <C>
Section 7.5 No Waiver..................................................................................... 28
Section 7.6 Notice of Default............................................................................. 28
Section 7.7 Remedies Subject to Bank's Direction.......................................................... 28
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Term of Agreement............................................................................. 28
Section 8.2 Notices....................................................................................... 29
Section 8.3 Extent of Covenants of the Issuer; No Personal Liability...................................... 29
Section 8.4 Binding Effect................................................................................ 29
Section 8.5 Amendments and Supplements.................................................................... 29
Section 8.6 Execution Counterparts........................................................................ 29
Section 8.7 Severability.................................................................................. 29
Section 8.8 Sales and Use Tax Exemption................................................................... 30
Section 8.9 Governing Law................................................................................. 30
Section 8.10 Amounts Remaining in Funds.................................................................... 30
Section 8.11 Final Agreement of the Parties................................................................ 30
Section 8.12 Conflicts..................................................................................... 31
Signatures............................................................................ 32
Exhibit A - PROJECT............................................................................................. A-1
Exhibit B - PROJECT SITE........................................................................................ B-1
Exhibit C - NOTE................................................................................................ C-1
Exhibit D - FORM OF DISBURSEMENT REQUEST........................................................................ D-1
</TABLE>
iv
<PAGE> 5
LOAN AGREEMENT
THIS LOAN AGREEMENT is made and entered into as of January 1, 1998
between the Capital Industrial Development Corporation (the "Issuer") and CCIR
of Texas Corp., a Texas corporation (the "User"), under the circumstances
summarized in the following recitals (the capitalized terms not defined above or
in the recitals being used therein as defined in or pursuant to Article 1
hereof):
A. The Issuer is a nonstock, nonprofit industrial development
corporation organized and existing under the laws of the State of Texas,
including particularly the Act to provide financing for certain "projects," as
defined in the Act, located within the boundaries of the Governmental Unit; and
B. Pursuant to law, and particularly the Act, the Issuer is empowered
to finance the costs of manufacturing facilities and to issue industrial
development revenue bonds to provide funds to pay all or a portion of the costs
of acquiring, constructing, equipping and installing such facilities; and
C. The User has requested that the Issuer issue its revenue bonds for
the purpose of making a loan to the User to finance the Project; and
D. The Issuer has determined, in the public interest, that it will
finance the Project Costs and loan proceeds of such bonds to the User for such
purpose in the manner provided in the Act and this Agreement; and
E. The User has agreed to make Loan Payments as provided hereunder; and
F. The governing body of the Governmental Unit has approved this
Agreement by written resolution as required by the Act; and
G. This Agreement is authorized and executed pursuant to applicable
laws, including the Act; and
H. The Issuer and the User have taken all action and have complied with
all provisions of law with respect to the execution, delivery and performance of
this Agreement and the due authorization of the consummation of the transactions
contemplated hereby, and this Agreement has been duly executed and delivered by,
and constitutes a valid and legally binding agreement of, the Issuer and the
User, enforceable against the respective parties in accordance with its terms,
subject to bankruptcy and other debtor relief laws.
NOW, THEREFORE, in consideration of the covenants and agreements herein
made, and subject to the condition herein as set forth, the Issuer and the User
contract and agree as follows:
<PAGE> 6
ARTICLE I
DEFINITIONS
SECTION 1.1. USE OF DEFINED TERMS. Words and terms defined in the
Indenture shall have the same meanings when used herein, unless the context or
use clearly indicates another meaning or intent. In addition, the words and
terms set forth in Section 1.2 hereof shall have the meanings set forth therein
unless the context or use clearly indicates another meaning or intent.
SECTION 1.2. DEFINITIONS. As used herein:
"Act" means the Development Corporation Act of 1979, as amended,
Article 5190.6, Vernon's Texas Civil Statutes, as amended.
"Additional Payments" means the amounts required to be paid by the User
pursuant to the provisions of Section 4.2 hereof.
"Agreement" means this Loan Agreement, as amended or supplemented from
time to time.
"Bank" means Bank One, Arizona, NA.
"Bonds" means the Capital Industrial Development Corporation Adjustable
Rate Industrial Revenue Bonds, Series 1998 (CCIR of Texas Corp. Project).
"Completion Date" means the date of the substantial completion of the
acquisition, construction, equipping and installation of the Project evidenced
in accordance with the requirements of Section 3.6 hereof.
"Construction Period" means the period between the beginning of the
acquisition, construction, renovation, equipping and installation of the Project
or the date on which the Bonds are initially issued, whichever is earlier, and
the Completion Date.
"Department" means the Texas Department of Economic Development and any
successor to its functions and duties.
"Engineer" means an individual or firm acceptable to the Trustee and
the Bank and qualified to practice the profession of engineering or architecture
under the laws of the State.
"Event of Default" means any of the events described as an Event of
Default in Section 7.1 hereof.
"Force Majeure" means any of the causes, circumstances or events
described as constituting Force Majeure in Section 7.1 hereof.
2
<PAGE> 7
"Governmental Unit" means Travis County, Texas.
"Indenture" means the Trust Indenture, dated as of even date herewith,
between the Issuer and the Trustee, as amended or supplemented from time to
time.
"Inducement Resolution" means the "Resolution Taking Affirmative
Official Action Towards the Issuance of the Bonds to Provide a Manufacturing
Project for CCIR of Texas Corp." approved by the Issuer on October 7, 1997.
"Issuer" means the Capital Industrial Development Corporation, a
nonstock, nonprofit industrial development corporation existing under the laws
of the State of Texas.
"Loan" means the loan by the Issuer to the User of the proceeds
received from the sale of the Bonds.
"Loan Payment Date" means any date on which any of the Loan Payments
are due and payable, whether at maturity, upon acceleration, call for redemption
or prepayment, or otherwise.
"Loan Payments" means the amounts required to be paid by the User in
repayment of the Loan pursuant to the provisions of the Notes and of Article IV
hereof.
"Note" means the promissory note of the User, dated as of even date
with the Bonds, in the form attached hereto as Exhibit C and in the principal
amount of $6,000,000 evidencing the obligation of the User to make loan
payments.
"Notes" means the Note and any Additional Notes.
"Notice Address" means:
(a) As to the Issuer: Capital Industrial Development Corporation
P. O. Box 1748
5th Floor, Stokes Building
Austin, Texas 78767
Attn: Darwin McKee, President
(b) As to the User: CCIR of Texas Corp.
15508 Bratton Lane
Austin, Texas 78728-3805
Attn: Jerome Wilson, General Manager
3
<PAGE> 8
With a copy to: Quarles & Brady
One Camelback Bldg.
1 E Camelback Road, Suite 400
Phoenix, Arizona 85012-1649
Attn: Mary Beth Orson
(c) As to the Trustee: The Huntington National Bank
41 South High Street
Columbus, Ohio 43215
Attention: Canada Moore
(d) As to the Bank: Bank One, Arizona, NA
241 North Central Avenue
Phoenix, Arizona 85004
Attention: Steve Reinhart, Vice President
Commercial Banking AZ1-1178
(e) As to the Remarketing Banc One Capital Corporation
Agent, at: 150 East Gay Street, 24th Floor
Columbus, Ohio 43215
Attention: Thomas L. Whitman,
Sr. Vice President
With a copy to: Ms. Peggy Seymour
150 East Gay Street, 29th Floor
Columbus, Ohio 43215
or such additional or different address, notice of which is given under Section
8.2 hereof.
"Plans and Specifications" means the User's plans and specifications
for the acquisition, renovation, construction, equipping and installation of the
Project, as approved by the Bank and as amended from time to time in accordance
with the terms and conditions of the Reimbursement Agreement.
"Project" means the real and personal property located in Governmental
Unit, including undivided interests or other interests therein, identified in
Exhibit A attached hereto as a part hereof, or acquired, constructed or
installed as a replacement or substitution therefor or an addition thereto, or
as may result from any revision thereof in accordance with the provisions of
this Agreement.
"Project Costs" means the costs set forth in Section 3.4 of this
Agreement.
4
<PAGE> 9
"Project Site" means the real estate and interests in real estate
constituting the site of the Project, as described in Exhibit B attached hereto
as a part hereof.
"Tax Letter of Representation" means the letter of representation
regarding the use of the proceeds of the Bonds and other facts that are within
the User's knowledge furnished by the User to the Issuer in connection with the
issuance of the Bonds.
"Trustee" means the Trustee at the time acting as such under the
Indenture, originally The Huntington National Bank, as Trustee, and any
successor Trustee as determined or designated under or pursuant to the
Indenture.
"Unassigned Issuer's Rights" means all of the rights of the Issuer to
issue Additional Bonds under Section 3.3 hereof, to receive Additional Payments
under Section 4.2 hereof, to be held harmless and indemnified under Section 5.3
hereof, to be reimbursed for attorney's fees and expenses under Section 7.4
hereof, and to give or withhold consent to amendments, changes, modifications,
alterations and termination of this Agreement under Section 8.5 hereof.
"User" means CCIR of Texas Corp., a Texas corporation and any successor
as permitted herein.
SECTION 1.3. INTERPRETATION. Any reference herein to the Issuer, to the
Governmental Unit or to any member or officer of either includes entities or
officials succeeding to their respective functions, duties or responsibilities
pursuant to or by operation of law or lawfully performing their respective
functions.
Any reference to a section or provision of the Constitution of the
State or the Act, or to a section, provision or chapter of Texas law or to any
statute of the United States of America, includes that section, provision,
chapter or statute as amended, modified, revised, supplemented or superseded
from time to time; provided, that no amendment, modification, revision,
supplement or superseding section, provision, chapter or statute shall be
applicable solely by reason of this provision if it constitutes in any way an
impairment of the rights or obligations of the Issuer, the Holders, the Trustee,
the Bank or the User under this Agreement.
Unless the context indicates otherwise, words importing the singular
number include the plural number, and vice versa; the terms "hereof", "hereby",
"herein", "hereto", "hereunder" and similar terms refer to this Agreement; and
the term "hereafter" means after, and the term "heretofore" means before, the
date of delivery of the Bonds. Words of any gender include the correlative words
of the other genders, unless the sense indicates otherwise.
SECTION 1.4. CAPTIONS AND HEADINGS. The captions and headings in this
Agreement are solely for convenience of reference and in no way define, limit or
describe the scope or intent of any Articles, Sections, subsections, paragraphs,
subparagraphs or clauses hereof.
5
<PAGE> 10
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 2.1. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ISSUER.
The Issuer represents and warrants that:
(a) The Issuer is a nonstock, nonprofit industrial development
corporation organized and existing under the laws of the State, particularly,
the Act. The Issuer has all requisite power and authority under the Act to (i)
adopt the Bond Resolution, (ii) issue the Bonds and (iii) enter into, and
perform obligations under, this Agreement, the Bond Placement Agreement, the
Letter of Representations and the Indenture.
(b) The Issuer has duly authorized (i) the execution, delivery
and performance of this Agreement, the Bonds, the Bond Placement Agreement, the
Letter of Representations and the Indenture, and (ii) the taking of any and all
such actions as may be required on the part of the Issuer to carry out, give
effect to and consummate the transactions contemplated by such instruments.
(c) This Agreement, the Bond Placement Agreement, the Letter
of Representations and the Indenture constitute legal, valid and binding
obligations of the Issuer, enforceable in accordance with their respective
terms; this Agreement, the Bond Placement Agreement, the Letter of
Representations and the Indenture have been duly authorized and executed by the
Issuer; and, when authenticated by the Trustee in accordance with the provisions
of the Indenture, the Bonds will have been duly authorized, executed, issued and
delivered and will constitute legal, valid and binding special obligations of
the Issuer; payable solely from the Loan Payments by the User, issued in
conformity with the provisions of the Act and the Constitution of the State,
subject to bankruptcy, insolvency and similar laws, and the application of
equitable principles.
(d) There is no action, suit, proceeding, inquiry, or
investigation at law or in equity or before or by any court, public board or
body, pending or, to the best knowledge of the Issuer, threatened against the
Issuer, nor to the best knowledge of the Issuer is there any basis therefor,
which in any manner questions the validity of the Act, the powers of the Issuer
referred to in paragraph (b) above or the validity of any proceedings taken by
the Issuer in connection with the issuance of the Bonds or wherein any
unfavorable decision, ruling or finding could materially adversely affect the
transactions contemplated by this Agreement or which, in any way, would
adversely affect the validity or enforceability of the Bonds, the Letter of
Representations, the Indenture, the Bond Placement Agreement or this Agreement
(or of any other instrument required or contemplated for use in consummating the
transactions contemplated thereby and hereby).
(e) The execution and delivery by the Issuer of this
Agreement, the Bonds, the Bond Placement Agreement, the Letter of
Representations and the Indenture in compliance with the provisions of each of
such instruments will not conflict with or constitute a breach of, or default
under, any material commitment, agreement or other instrument to which the
Issuer is a party or by
6
<PAGE> 11
which it is bound, or under any provision of the Act, the Constitution of the
State or any existing law, rule, regulation, ordinance, judgment, order or
decree to which the Issuer is subject.
(f) The Issuer will do or cause to be done all things
necessary, so far as lawful, to preserve and keep in full force and effect its
existence or to assure the assumption of its obligations under this Agreement,
the Indenture, the Letter of Representations and the Bonds by any successor
public body.
(g) Notwithstanding anything herein contained to the contrary,
any obligation the Issuer may hereby incur for the payment of money shall not
constitute an indebtedness of the State or of any political subdivision thereof
within the meaning of any state constitutional provision or statutory limitation
and shall not give rise to a pecuniary liability of the State or a political
subdivision thereof, or constitute a charge against the general credit or taxing
power of the State or a political subdivision thereof or general funds or assets
of the Issuer (including funds relating to other Issuer loans or activities),
but shall be limited obligations of the Issuer payable solely from (i) the
security for the Bonds, (ii) revenues derived from the sale of the Bonds, and
(iii) amounts on deposit from time to time under the Indenture, subject to the
provisions of this Agreement and the Indenture permitting the application
thereof for the purposes and on the terms and conditions set forth herein and
therein.
(h) The Project is located within the boundaries of the
Governmental Unit.
SECTION 2.2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE USER. The
User represents, warrants and covenants that:
(a) The User is a Texas corporation duly organized and validly
existing under the laws of the State. The User has full power and authority to
execute, deliver and perform this Agreement, the Bond Placement Agreement, the
Reimbursement Agreement, the Remarketing Agreement and the Note and to enter
into and carry out the transactions contemplated by those documents. That
execution, delivery and performance do not, and will not, violate any provision
of law applicable to the User or its articles of incorporation or bylaws and do
not, and will not, conflict with or result in a default under any material
agreement or instrument to which the User is a party or by which the User is
bound.
(b) This Agreement, the Bond Placement Agreement, the
Remarketing Agreement, the Reimbursement Agreement and the Note, by proper
corporate action, have been duly authorized, executed and delivered by the User
and are valid and binding obligations of the User.
(c) The Project at all times will be located entirely within
the boundaries of the Governmental Unit and will create and preserve jobs and
employment opportunities within the boundaries of the State and the Governmental
Unit. If all or substantially all of the Project is ever voluntarily removed
from within the boundaries of the Governmental Unit, the User will promptly
7
<PAGE> 12
prepay the Loan and cause the Bonds to be redeemed provided; however, the User
may remove from the Project personal property and equipment deemed immaterial by
the User for the operation of the Project.
(d) The acquisition, renovation, construction, equipping and
installation of the property comprising the Project by the User will comply in
all material respects with all applicable zoning, planning, building,
environmental and other regulations of the governmental authorities having
jurisdiction over the Project, and all necessary permits, licenses, consents and
permissions necessary for the Project have been or will be obtained.
(e) The User represents to the Issuer and the Department that
(i) the Project will contribute to the economic growth or stability of the
Governmental Unit by (A) increasing or stabilizing employment opportunities
within the boundaries of the Governmental Unit, (B) significantly increasing or
stabilizing the property tax base of the Governmental Unit and (C) promoting
commerce within the boundaries of the Governmental Unit and the State; (ii) it
has no present intention of using or moving any portion of the Project outside
the State or disposing of or abandoning the Project; (iii) it has no present
intention of directing the Project to a use other than the purposes represented
to the Governmental Unit and the Department; and (iv) no car, truck, mobile unit
or any vehicle of any kind whatsoever, which is financed in whole or in part by
the proceeds of the Bonds, will be away from the Project Site for more than 30
continuous calendar days and that all cars, trucks, mobile units or vehicles of
any kind whatsoever, financed in whole or in part by the proceeds of the Bonds,
will be rendered on the local tax rolls.
(f) The User is not in default in the payment of principal of,
or interest on, any of the User's indebtedness for borrowed money, or in
material default under any instrument under which, or subject to which, any
material indebtedness has been incurred, and no event has occurred and is
continuing under the provisions of any material agreement involving the User
that, with the lapse of time or the giving of notice, or both, would constitute
an event of default thereunder.
(g) No litigation at law or in equity nor any proceeding
before any governmental agency or other tribunal involving the User is pending
or, to the knowledge of the User, threatened, in which any liability of the User
is not adequately covered by insurance or reserve and in which any judgment or
order would have a material and adverse effect upon the business or assets of
the User or would materially and adversely affect the Project, the validity of
this Agreement, the Bond Placement Agreement, the Reimbursement Agreement, the
Remarketing Agreement or the Note or the performance of the User's obligations
thereunder or the transactions contemplated hereby.
(h) The User shall not use or operate the Project in any way
which would affect the qualification of the Project under the Act or impair the
exclusion from gross income for federal income tax purposes of the interest on
the Bonds.
(i) All material statements of facts or other information
furnished by the User to the Issuer and Bond Counsel in connection with Bond
Counsel's opinion relating to the Bonds,
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including particularly the Tax Letter of Representation, were true and correct
when made and nothing has come to the User's attention that would change the
truth or correctness of such statements of facts or other information furnished
to Bond Counsel.
(j) The proceeds of the Bonds will not exceed the Project Costs.
(k) The User intends to operate the Project as a "project" within the
meaning of the Act.
(l) The Project is required or suitable for the User's promotion of
development and expansion of manufacturing enterprises of the User.
(m) The User intends that the Project be in furtherance of the public
purposes of the Act, to-wit: the promotion and development of manufacturing
enterprises to promote and encourage employment and the public welfare.
(n) The Bank does not control, either directly or indirectly through
one or more intermediaries, the User. Likewise, the User does not control,
either directly or indirectly through one or more intermediaries, the Bank.
"Control" for this purpose has the meaning given to such term in Section 2(a)(9)
of the Investment Company Act of 1940. The User agrees to provide written notice
to the Issuer, the Trustee, the Remarketing Agent, and the Bondholders thirty
days prior to consummation of any transaction that would result in the User
controlling or being controlled by the Bank or any provider of an Alternate
Letter of Credit or Supplemental Credit Facility.
ARTICLE III
COMPLETION OF THE PROJECT;
ISSUANCE OF THE BONDS
SECTION 3.1. ACQUISITION, RENOVATION, CONSTRUCTION, EQUIPPING AND
INSTALLATION OF THE PROJECT. The User shall acquire, renovate, construct, equip
and install the property comprising the Project with all commercially reasonable
dispatch, all on the Project Site and substantially in accordance with the Plans
and Specifications. The User shall (a) pay when due all fees, costs and expenses
incurred in connection with the foregoing from funds made available therefor in
accordance with this Agreement or otherwise, unless any such fees, costs or
expenses are being contested by the User in good faith and by appropriate
proceedings, (b) to the extent commercially reasonable, ask, demand, sue for,
levy, recover and receive all those sums of money, debts and other demands
whatsoever which may be due, owing and payable under the terms of any contract,
order, receipt, writing and instruction in connection with the acquisition,
renovation, construction, equipping and installation of the Project, and (c) to
the extent commercially reasonable, enforce the provisions of any contract,
agreement, obligation, bond or other performance security with respect thereto.
SECTION 3.2. PLANS AND SPECIFICATIONS. The User, with the prior written
consent of the
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Bank in accordance with the terms and condition of the Reimbursement Agreement,
may revise the Plans and Specifications from time to time, provided that no
revision shall be made which would change the purposes of the Project to other
than purposes permitted by the Act. The User shall promptly deliver to the Bank
a copy of the final Plans and Specifications upon their completion.
SECTION 3.3. ISSUANCE OF THE BONDS; APPLICATION OF PROCEEDS. As a
condition to User's obligations under this Agreement and to provide funds to
make the Loan for purposes of assisting the User in the financing of the Project
or to reimburse the User for the financing of the Project and the Project Site,
the Issuer will issue, sell and deliver the Bonds in the manner provided in the
Bond Placement Agreement. The Bonds will be issued pursuant to the Indenture in
the aggregate principal amount, will bear interest, will mature and will be
subject to redemption as set forth therein. The User hereby approves the terms
and conditions of the Indenture and the Bonds, and the terms and conditions
under which the Bonds will be issued, sold and delivered.
The proceeds from the sale of the Bonds shall be loaned to the User and
paid over to the Trustee for the benefit of the User and the Holders of the
Bonds and deposited as provided in Section 5.01 of the Indenture. Pending
disbursement pursuant to Section 3.4 hereof, the proceeds deposited in the
Project Fund, together with any investment earnings thereon, shall constitute a
part of the Revenues assigned by the Issuer to the payment of Bond Service
Charges as provided in the Indenture.
At the request of the User and with the approval of the Department and
the Attorney General of Texas, to the extent required by law, and for the
purposes and upon fulfillment of the conditions specified in the Indenture, the
Issuer may provide for the issuance, sale and delivery of Additional Bonds and
loan the proceeds from the sale thereof to the User.
SECTION 3.4 DISBURSEMENTS FROM THE PROJECT FUND. Subject to the
provisions below and to the representations, warranties and covenants contained
herein and in the Tax Letter of Representations, disbursements from the Project
Fund shall be made only to pay (or to reimburse the User for payment of) the
following Project Costs:
(a) Costs incurred directly or indirectly for or in connection
with the acquisition, construction, renovation, equipping or installation of the
Project, including costs incurred with respect to the Project and Project Site
for preliminary planning and studies; architectural, legal, engineering,
accounting, consulting, supervisory and other services; labor, services and
materials; and recording of documents and title work;
(b) Costs incurred directly or indirectly in seeking to
enforce any remedy against any contractor or subcontractor in respect of any
actual or claimed default under any contract relating to the Project;
(c) Financial, legal, accounting, printing and engraving fees,
charges and expenses, and all other fees, charges and expenses incurred in
connection with the authorization, sale, issuance
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and delivery of the Bonds, including, without limitation, the fees and expenses
of the Issuer and Bond Counsel, the fees and expenses of the Trustee and the
fees and expenses of the Placement Agent and its counsel; provided, however, any
fees and expenses incurred in connection with the issuance of the Bonds and paid
with Bond proceeds shall not exceed 2% of the proceeds of the Bonds within the
meaning of Section 147(g) of the Code;
(d) Any other incidental and necessary costs, expenses, fees
and charges relating to the acquisition, construction, renovation, equipping or
installation of the Project;
(e) Interest on the Bonds accrued during the Construction
Period to be paid into the Bond Fund; and
(f) The fees and expenses of the Bank under the Reimbursement
Agreement applicable to the Construction Period.
Any disbursements from the Project Fund described above to pay such
fees, costs or expenses or to reimburse the User for the payment of such fees,
costs or expenses shall be made by the Trustee only upon the written order of
the Authorized User Representative and only with written consent of the Bank
which consent shall not be unreasonably withheld. Each such written order shall
be in substantially the form of the disbursement request attached hereto as
Exhibit D and shall be consecutively numbered and accompanied by invoices or
other appropriate documentation supporting the payments or reimbursements
requested. Any disbursement for any item not described in, or the cost for which
item is other than as described in, the information statement filed by the User
in connection with the issuance of the Bonds, shall be accompanied by evidence
satisfactory to the Trustee and the Bank that the average reasonably expected
economic life of the facilities being financed by the Bonds is not less than
5/6ths of the average maturity of the Bonds or, if such evidence is not
presented with the disbursement or at the request of the Trustee or the Bank, by
an opinion of Bond Counsel to the effect that such disbursement will not result
in the interest on the Bonds becoming subject to federal income taxation. In
case any contract provides for the retention by the User of a portion of the
contract price, there shall be paid from the Project Fund only the net amount
remaining after deduction of any such portion and, only when that retained
amount is due and payable, may it be paid from the Project Fund.
The User covenants, represents and warrants, with respect to any
disbursement made to reimburse it for an original expenditure that was paid
prior to the date of issuance of the Bonds, that under Treas. Reg.
Section 1.150-2 such disbursement will constitute a reimbursement allocation
treated as an expenditure of proceeds of a reimbursement bond for the
governmental purpose of the original expenditure on the date of the
reimbursement allocation and will be made within the reimbursement period set
forth in Treas. Reg. Section 1.150-2(d)(2) (not later than 18 months after the
later of (i) the date the original expenditure is paid or the date the Project
is placed in service or abandoned, but in no event more than 3 years after the
original expenditure).
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Any moneys in the Project Fund remaining after the Completion Date and
payment, or provision for payment, of the costs of financing the Project
described above, at the direction of the Authorized User Representative with
prior written consent of the Bank, promptly shall be:
(i) used to acquire, construct, renovate, equip and install
such additional real or personal property in connection with the Project as is
designated by the Authorized User Representative and approved in writing by the
Bank, and the acquisition, renovation, construction, equipping and installation
of which will be permitted under the Act, provided that any such use shall be
accompanied by evidence satisfactory to the Trustee that the average reasonably
expected economic life of such additional property, together with the other
property theretofore acquired with the proceeds of the Bonds, will not be less
than 5/6ths of the average maturity of the Bonds or, if such evidence is not
presented with the direction, an opinion of Bond Counsel to the effect that the
acquisition of such additional property will not result in the interest on the
Bonds becoming subject to federal income taxation;
(ii) used to reimburse the Bank for draws on the Letter of
Credit or to redeem Bonds in accordance with the terms of the Indenture;
(iii) used for the purchase of Bonds in the open market for
the purpose of cancellation; or
(iv) used to accomplish a combination of the foregoing as is
provided in that direction.
In all cases such moneys shall be so used or applied only to the extent
that, as stated in an opinion of Bond Counsel delivered to the Trustee, such use
or application will not adversely affect the exclusion of the interest on the
Bonds from gross income for federal income tax purposes.
In the event that all of the Bonds are either redeemed or accelerated
pursuant to the terms of the Indenture, any remaining funds in the Project Fund
shall be transferred to the Bond Fund.
SECTION 3.5. USER REQUIRED TO PAY COSTS IN EVENT PROJECT FUND
INSUFFICIENT. If moneys in the Project Fund are not sufficient to pay all costs
of the Project, the User, nonetheless, will complete the Project in accordance
with the Plans and Specifications, unless the Bank consents in writing
otherwise, and, unless Additional Bonds shall have been issued for that purpose,
shall pay all such additional Project Costs from the User's own funds. The User
shall not be entitled to any reimbursement for any such additional Project Costs
from the Issuer, the Trustee or any Holder; nor shall it be entitled to any
abatement, diminution or postponement of its obligation to make the Loan
Payments.
SECTION 3.6. COMPLETION DATE. The User shall notify the Issuer, the
Bank and the Trustee of the Completion Date by a certificate signed by the
Authorized User Representative stating:
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(a) the date on which the Project was substantially completed,
which date shall be not later than three (3) years after initial delivery of the
Bonds or such later date as has been approved in writing by the Bank and as will
not, in the opinion of Bond Counsel, cause interest on the Bonds to become
includable in gross income for federal income tax purposes;
(b) that the acquisition, construction, renovation, equipping
and installation of the property comprising the Project has been accomplished in
such a manner as to conform with all applicable planning, building,
environmental and other similar governmental regulations in all material
respects;
(c) that except as provided in subsection (d) of this Section,
all costs of that acquisition, construction, renovation, equipping and
installation then or theretofore due and payable have been paid; and
(d) the amounts which the Trustee shall retain in the Project
Fund for the payment of the Project Costs not yet due or for liabilities which
the User is contesting or which otherwise should be retained and the reasons
such amounts should be retained.
That certificate shall state that it is given without prejudice to any
rights against third parties which then exist or subsequently may come into
being. The Authorized User Representative shall include with that certificate a
statement specifically describing all items of personal property comprising a
part of the Project. The certificate shall be delivered as promptly as
practicable after the occurrence of the events and conditions referred to in
subsections (a) through (c) of this Section.
SECTION 3.7. INVESTMENT OF FUND MONEYS. At the written or oral request
(promptly confirmed in writing) of the Authorized User Representative with the
written consent of the Bank, any moneys held as part of the Bond Fund (except
moneys held in the Bond Fund from draws on the Letter of Credit for purposes of
defeasing the Bonds pursuant to Article IX of the Indenture), the Project Fund
or the Rebate Fund shall be invested or reinvested by the Trustee in Eligible
Investments. The Issuer and the User each hereby covenants that it will
restrict that investment and reinvestment and the use of the proceeds of the
Bonds in such manner and to such extent, if any, as may be necessary, after
taking into account reasonable expectations at the time of delivery of and
payment for the Bonds, so that the Bonds will not constitute arbitrage bonds
under Section 148 of the Code.
The User shall provide the Issuer with, and the Issuer may base its
certifications as authorized by the Act on, a certificate of the User for
inclusion in the transcript of proceedings for the Bonds, setting forth the
reasonable expectations of the User on the date of delivery of and payment for
the Bonds regarding the amount and use of the proceeds of the Bonds and the
facts, estimates and circumstances on which those expectations are based.
SECTION 3.8. REBATE FUND. The User agrees to make such payments to the
Trustee as are
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required of it under Section 5.11 of the Indenture. The obligation of the User
to make such payments shall remain in effect and be binding upon the User
notwithstanding the release and discharge of the Indenture.
The User and the Issuer each covenants to the owners of the Bonds that,
notwithstanding any other provision of this Agreement or any other instrument,
it shall take no action, nor shall the User direct the Trustee to take or
approve the Trustee's taking any action or direct the Trustee to make or approve
the Trustee's making any investment or use of proceeds of the Bonds or any other
moneys which may arise out of or in connection with this Agreement, the
Indenture or the Project, which would cause the Bonds to be treated as
"arbitrage bonds" within the meaning of Section 148 of the Code. In addition,
the User covenants and agrees to comply with the requirements of Section 148(f)
of the Code as it may be applicable to the Bonds or the proceeds derived from
the sale of the Bonds or any other moneys which may arise out of, or in
connection with, this Agreement, the Indenture or the Project throughout the
term of the Bonds. No provision of this Agreement shall be construed to impose
upon the Trustee any obligation or responsibility for compliance with arbitrage
regulations, except as provided in the Indenture.
ARTICLE IV
LOAN BY ISSUER; REPAYMENT OF THE LOAN;
LOAN PAYMENTS AND ADDITIONAL PAYMENTS
SECTION 4.1. LOAN REPAYMENT; DELIVERY OF NOTES AND LETTER OF CREDIT.
Upon the terms and conditions of this Agreement, the Issuer will make the Loan
to the User. In consideration of and in repayment of the Loan, the User shall
make, as Loan Payments, payments sufficient in time and amount to pay when due
all Bond Service Charges, all as more particularly provided in the Note and any
Additional Notes. The Note shall be executed and delivered by the User
concurrently with the execution and delivery of this Agreement. All Loan
Payments shall be paid to the Trustee in accordance with the terms of the Notes
for the account of the Issuer and shall be held and applied in accordance with
the provisions of the Indenture and this Agreement. To the extent of payments
made with respect to Bond Service Charges pursuant to draws upon the Letter of
Credit, the User shall receive a credit against its obligation to make Loan
Payments under this Agreement and the Note.
In connection with the issuance of any series of Additional Bonds
permitted by the Bank, the User shall execute and deliver to the Trustee an
Additional Note in a form substantially similar to the form of the Note. All
such Additional Notes shall:
(a) provide for payments of interest equal to the payments of
interest on the corresponding Additional Bonds;
(b) require payments of principal and prepayments and any
premium equal to the payments of principal, redemption payments and sinking fund
payments and any premium on the
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corresponding Additional Bonds;
(c) require all payments on any such Additional Notes to be
made no later than the due dates for the corresponding payments to be made on
the corresponding Additional Bonds; and
(d) contain by reference or otherwise optional and mandatory
prepayment provisions and provisions in respect of the optional and mandatory
acceleration or prepayment of principal and any premium corresponding with the
redemption and acceleration provisions of the corresponding Additional Bonds.
All Notes shall secure equally and ratably all outstanding Bonds,
except that, so long as no Event of Default described in paragraph (a), (b),
(c), (g) or (h) of Section 7.01 of the Indenture has occurred and is continuing,
payments by the User on the Note shall be used by the Trustee to reimburse the
Bank for drawings on the Letter of Credit used to pay Bond Service Charges on
the Bonds.
Upon payment in full, in accordance with the Indenture, of the Bond
Service Charges on any series of Bonds, whether at maturity or by redemption or
otherwise, or upon provision for the payment thereof having been made in
accordance with the provisions of the Indenture, the Note issued concurrently
with those corresponding Bonds shall be deemed fully paid, the obligations of
the User thereunder shall be terminated, and any such Note shall be surrendered
by the Trustee to the User, and shall be canceled by the User.
Except for such interest of the User and the Bank as may hereafter
arise pursuant to Section 5.07 or 5.08 of the Indenture, the User and the Issuer
each acknowledge that neither the User nor the Issuer has any interest in the
Bond Fund and any moneys deposited therein shall be in the custody of and held
by the Trustee in trust for the benefit of the Holders and, to the extent of
amounts due under the Reimbursement Agreement, the Bank.
SECTION 4.2. ADDITIONAL PAYMENTS. The User shall pay to the Issuer, as
Additional Payments hereunder, within five days after request therefore made in
writing and specifying such costs and expenses with reasonable particularity any
and all reasonable costs and expenses actually incurred or to be paid by the
Issuer in connection with the issuance and delivery of the Bonds and Additional
Bonds or otherwise related to actions taken by the Issuer under this Agreement
or the Indenture.
The User shall pay to the Trustee, the Registrar and any Paying Agent
or Authenticating Agent, their reasonable fees, charges and expenses for acting
as such under the Indenture.
Any payment under this Section not paid when due shall bear interest at
the Interest Rate for Advances.
SECTION 4.3. PLACE OF PAYMENTS. The User shall make all Loan Payments
directly to the
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Trustee at its Columbus, Ohio office. Additional Payments shall be made directly
to the person or entity to whom or to which they are due.
SECTION 4.4. OBLIGATIONS UNCONDITIONAL. Subject to the terms and
conditions of this Agreement, the obligations of the User to make Loan Payments,
Additional Payments and any payments required of the User under Section 4.3
hereof shall be absolute and unconditional, and the User shall make such
payments without abatement, diminution or deduction regardless of any cause or
circumstances whatsoever including, without limitation, any defense, set-off,
recoupment or counterclaim which the User may have or assert against the Issuer,
the Trustee, any Paying Agent or Authenticating Agent, the Bank or any other
Person; provided that the User may contest or dispute the amount of any such
obligation (other than Loan Payments) so long as such contest or dispute does
not result in an Event of Default under the Indenture.
SECTION 4.5. ASSIGNMENT OF AGREEMENT AND REVENUES. To secure the
payment of Bond Service Charges, the Issuer shall assign to the Trustee, by the
Indenture, all its right, title and interest in and to the Revenues, the
Agreement (except for Unassigned Issuer's Rights) and the Note. The User hereby
agrees and consents to that assignment.
SECTION 4.6. LETTER OF CREDIT. Simultaneously with the initial delivery
of the Bonds pursuant to the Indenture and the Bond Placement Agreement, the
User shall cause the Bank to issue and deliver to the Trustee the Letter of
Credit, in substantially the form attached to the Reimbursement Agreement and
made a part thereof. The Letter of Credit may be replaced by an Alternate Letter
of Credit complying with the provisions of Section 5.09 of the Indenture.
SECTION 4.7. USURY. Anything herein to the contrary notwithstanding, it
is the intention of the parties hereto to conform strictly to the usury laws in
force that are applicable to this transaction. Accordingly, all agreements among
the parties hereto and beneficiaries hereof and their assigns or any of them,
whether now existing or hereafter arising, and whether written or oral, are
hereby limited so that in no contingency, whether by reason of acceleration of
amounts due hereunder or any part thereof or otherwise, shall the interest
(including all sums that are deemed to be interest) contracted for, charged or
received hereunder and/or with respect to the purchase of the Project exceed the
maximum amount permissible under applicable law. The parties hereto agree that
to the extent interest is payable by the User under this Agreement, Chapter 303,
Texas Finance Code, as amended, shall apply, and, to the extent Chapter 303,
Texas Finance Code is applicable to this Agreement, the indicated rate ceiling
thereunder shall apply.
ARTICLE V
ADDITIONAL AGREEMENTS AND COVENANTS
SECTION 5.1. RIGHT OF INSPECTION. Subject to reasonable security and
safety regulations and upon reasonable notice, the Issuer, the Bank and the
Trustee, and their respective agents, shall have the right during normal
business hours to inspect the Project, provided, however, the Bank, and
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to the extent authorized by law, the Trustee and the Issuer shall keep any
records related to the Project confidential.
SECTION 5.2. SALE, LEASE OR GRANT OF USE BY USER. Subject to the
provisions of the Reimbursement Agreement and any other agreement to which the
User is a party or by which it is bound, the User may sell, lease or grant the
right to occupy and use the Project, in whole or in part, to others, provided
that:
(a) No such sale, lease or grant shall relieve the User from
the User's obligations under this Agreement or the Notes;
(b) In connection with any such sale, lease or grant the User
shall retain such rights and interests as will permit the User to comply with
the User's obligations under this Agreement and the Notes; and
(c) No such sale, lease or grant shall impair materially the
purposes of the Act to be accomplished by operation of the Project as herein
provided or adversely affect the exclusion from gross income for federal income
tax purposes of the interest on the Bonds.
SECTION 5.3. INDEMNIFICATION. The User releases the Department, its
directors, employees, and agents and the Issuer and the Governmental Unit, their
respective officers, directors, employees, agents and attorneys (the
"Indemnified Parties") from, and the Indemnified Parties shall not be liable
for, and shall indemnify the Indemnified Parties against, all liabilities,
claims, costs and expenses, including attorneys fees and expenses, litigation,
court costs, amounts paid in settlement and amounts paid to discharge judgments,
imposed upon, incurred or asserted against the Indemnified Parties on account
of: (a) any loss or damage to property or injury to or death of or loss by any
person that may be occasioned by any cause whatsoever pertaining to the
acquisition, construction, installation, equipping, maintenance, operation or
use of the Project; (b) any breach or default on the part of the User in the
performance of any covenant or agreement of the User under this Agreement, the
Reimbursement Agreement, the Note or any related document, or arising from any
act or failure to act by the User, or any of the User's agents, contractors,
servants, employees or licensees; (c) the authorization, issuance, sale,
trading, redemption or servicing of the Bonds, and the provision of any
information or certification furnished in connection therewith concerning the
Bonds, the Project, the User including, without limitation, the Preliminary
Offering Memorandum and the Offering Memorandum (each as defined in the Bond
Placement Agreement), any information furnished by the User for, and included
in, or used as a basis for preparation of, any certifications, information
statements or reports furnished by the Issuer, and any other information or
certification obtained from the User to assure the exclusion of the interest on
the Bonds from gross income of the Holders thereof for federal income tax
purposes; (d) any action required to be taken by the Issuer under this
Agreement, the Bond Resolution, the Bond Placement Agreement or the Indenture;
(e) the User's failure to comply with any requirement of this Agreement or the
Code pertaining to such exclusion of that interest, including the covenants in
Section 5.4 hereof; and (f) any claim, action or proceeding brought with respect
to the matters set forth in (a), (b), (c), (d), or (e) above.
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The User agrees to indemnify the Trustee for, and to hold it harmless
against, all reasonable liabilities, claims, costs and expenses incurred without
gross negligence or willful misconduct on the part of the Trustee on account of
any action taken or omitted to be taken by the Trustee in accordance with the
terms of this Agreement, the Bonds, the Reimbursement Agreement, the Letter of
Credit, the Notes or the Indenture, or any action taken at the request of or
with the consent of the User, including the reasonable costs and expenses of the
Trustee in defending itself against any such claim, action or proceeding brought
in connection with the exercise or performance of any of its powers or duties
under this Agreement, the Bonds, the Indenture, the Reimbursement Agreement, the
Letter of Credit or the Notes.
In case any action or proceeding is brought against the Issuer or the
Trustee in respect of which indemnity may be sought hereunder, the party seeking
indemnity promptly shall give notice of that action or proceeding to the User,
and the User upon receipt of that notice shall have the obligation and the right
to assume the defense of the action or proceeding; provided, that failure of a
party to give that notice shall not relieve the User from any of the User's
obligations under this Section. An indemnified party at its own expense may
employ separate counsel and participate in the defense. The User shall not be
liable for any settlement made without the User's consent.
The indemnification set forth above is intended to and shall include
the indemnification of all affected officials, directors, officers and employees
of the Issuer, the Governmental Unit, the Department and the Trustee,
respectively. That indemnification is intended to and shall be enforceable by
the Issuer, the Governmental Unit and the Trustee, respectively, to the full
extent permitted by law.
THE PROVISIONS OF SECTIONS 5.3 SHALL REMAIN AND BE IN FULL FORCE AND
EFFECT EVEN IF ANY SUCH LIABILITY, COST, EXPENSE, DAMAGE, OR LOSS OR CLAIM
THEREFOR BY ANY PERSON, DIRECTLY OR INDIRECTLY RESULTS FROM, ARISES OUT OF, OR
RELATES TO, OR IS ASSERTED TO HAVE RESULTED FROM, ARISE OUT OF, OR BE RELATED
TO, IN WHOLE OR IN PART, ONE OR MORE NEGLIGENT ACTS OR OMISSIONS (OTHER THAN, IN
THE CASE OF AN INDEMNIFIED PARTY, AS A RESULT OF WILLFUL MISCONDUCT OR BAD FAITH
OF THE PARTY SEEKING INDEMNITY OR, IN THE CASE OF THE TRUSTEE, AS A RESULT OF
GROSS NEGLIGENCE, WILLFUL MISCONDUCT, OR BAD FAITH ON THE PART OF THE TRUSTEE)
OF THE PARTY SEEKING INDEMNITY, IN CONNECTION WITH THE MATTERS SET FORTH
THEREIN.
SECTION 5.4. NO ARBITRAGE. The Issuer and the User hereby covenant with
each other and with the Holders that they will make no use, directly or
indirectly, of the proceeds of the Bonds at any time which will cause the Bonds
to be arbitrage bonds within the meaning of Section 148 of the Code or the
regulations pertaining thereto; and by this covenant the Issuer and the User are
obligated to comply with the requirements of the aforesaid Section 148 and the
pertinent regulations.
SECTION 5.5. TAX-EXEMPT STATUS OF INTEREST ON THE BONDS. The User and
Issuer covenant
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to refrain from such action which would adversely affect the treatment of the
Bonds as obligations described in Section 103 of the Code, the interest on which
is excludable from "gross income" of the holder for purposes of federal income
taxation. In furtherance thereof, the User covenants as follows:
(a) not to use or invest nor to permit the use or investment
of proceeds of the Bonds (including investment earnings thereon) or the
facilities constituting the Project in a manner that would result in the Bonds
not being "qualified small issue bonds" within the meaning of Section 141(e) of
the Code;
(b) to use at least 95 percent of the proceeds of the Bonds to
provide for the payment of costs of the acquisition, construction,
reconstruction, equipment or improvement of land or depreciable property, and
paid for subsequent to August 7, 1997;
(c) during the six-year period beginning on a date three years
prior to the date of issue of the Bonds and ending three years after such date,
will not pay or incur or permit any related person or "principal user" of the
Project to pay or incur capital expenditures (within the meaning of Section 263
of the Code) for facilities located in Travis County, Texas to the extent that
such expenditures when added to the aggregate face amount of the Bonds would
exceed $10,000,000;
(d) that the User will be the only principal user of the
Project;
(e) that all outstanding obligations the interest on which is
exempt from federal income taxation pursuant to Section 103 of the Code which
are allocated to the User (or persons related to the User) do not as of the date
of issue and will not, at any time during the three-year period commencing on
the later of such date or the date on which the Project was placed-in-service,
exceed $40,000,000;
(f) that the User will not cause the Bonds to be treated as
"federally guaranteed" obligations for purposes of Section 149 of the Code, as
may be modified in any applicable rules, rulings, policies, procedures,
regulations or other official statements promulgated or proposed by the
Department of the Treasury or the Internal Revenue Service with respect to the
"federally guaranteed" obligations described in Section 149 of the Code as in
effect on the date of this Agreement. For purposes of this paragraph, the Bonds
shall be treated as "federally guaranteed" if (i) all or any portion of the
principal or interest is or will be guaranteed directly or indirectly by the
United States of America or any agency or instrumentality thereof, or (ii) a
significant portion of the proceeds of the Bonds will be (A) used in making
loans the payment of principal or interest with respect to which is to be
guaranteed in whole or in part by the United States of America or any agency or
instrumentality thereof, or (B) invested directly or indirectly in federally
insured deposits or accounts, and (iii) such guarantee is not described in
Section 149(b) of the Code;
(g) that the costs of issuing the Bonds which are financed
with proceeds of the Bonds will not exceed an amount equal to two percent of the
proceeds received from the sale of the Bonds. Such amounts will not be taken
into account in satisfying the requirement stated above that
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at least 95 percent of the Bond proceeds be used to provide the facilities. Any
costs of issuance in excess of two percent shall be an out-of-pocket expense of
the User;
(h) that no portion of the proceeds of the Bonds are to be
used to provide the following: an airplane, a skybox or other private luxury
box, a facility primarily used for gambling or any store the principal business
of which is the sale of alcoholic beverages for consumption off premises;
(i) to comply with the limitations imposed by Section 147(c)
of the Code (relating to the limitation on the use of proceeds to acquire
land)and Section 147(d) of the Code (relating to restrictions on the use of bond
proceeds to acquire existing buildings, structures or other property);
(j) that the User shall make such use of the proceeds of the
Bonds and any other funds constituting gross proceeds (whether or not held by
the Trustee under the Indenture) which are allocable to the Bonds, restrict the
investment of such proceeds and other funds, and take such further action as may
be required so that the Bonds will not constitute "arbitrage bonds" under
Section 148 of the Code and the regulations. In particular, but not by way of
limitation, the User covenants that it will provide written instructions to the
Trustee with respect to investments in accordance with the Indenture;
(k) that the User shall immediately remit to the Trustee for
deposit in the Rebate Fund any deficiency with respect to the Rebate Amount as
required by Section 5.11 of the Indenture;
(l) the User agrees to provide all information required with
respect to Nonpurpose Investments (within the meaning of Section 148 of the
Code) not held in any Fund under the Indenture; and
(m) that, at no time during the period which the Bonds remain
outstanding, will proceeds invested in Nonpurpose Investments (within the
meaning of Section 148 of the Code) at a yield higher than the yield on the
Bonds, other than amounts invested pursuant to an initial temporary period or as
part of a bona fide debt service fund, exceed 150 percent of the debt service on
the issue for the bond year and that the aggregate amount so invested will be
promptly and appropriately reduced as the amount of outstanding obligations
constituting the Bonds is reduced.
(n) the User shall monitor the capital expenditures incurred
by it and by any other "principal user" of the Project, with respect to the
Project or elsewhere within Travis County, Texas. Within 30 days after each of
the first, second and third anniversary dates of the issuance of the Bonds, the
User shall file with the Trustee and the Remarketing Agent a report showing
cumulative capital expenditures which must be counted for purposes of the $10
million capital expenditure limitation contained in Section 144(a) of the Code.
Such report shall be certified as true and accurate by the Authorized User
Representative.
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(o) the User shall account for on its books and records the
expenditure of proceeds from the sale of the Bonds and any investment earnings
thereon to be used for the Project by allocating proceeds to expenditures within
18 months of the later of the date that (a) the expenditure on a component of
the Project is made or (b) each such component of the Project is completed;
however, the foregoing notwithstanding, the User shall not expend such proceeds
or investment earnings more than 60 days after the later of (a) the fifth
anniversary of the date of delivery of the Bonds or (b) the date the Bonds are
retired, unless the User obtains an opinion of nationally-recognized bond
counsel substantially to the effect that such expenditure will not adversely
affect the tax-exempt status of the Bonds. For purposes of this subsection, the
User shall not be obligated to comply with this covenant if it obtains an
opinion of nationally-recognized bond counsel to the effect that such failure to
comply will not adversely affect the excludability for federal income tax
purposes from gross income of the interest.
(p) any property constituting part of the Project will not be
sold or otherwise disposed in a transaction resulting in the receipt by the User
of cash or other compensation, unless the User obtains an opinion of
nationally-recognized bond counsel substantially to the effect that such sale or
other disposition will not adversely affect the tax-exempt status of the Bonds.
For purposes of this subsection, the portion of the property comprising personal
property and disposed of in the ordinary course of business shall not be treated
as a transaction resulting in the receipt of cash or other compensation. For
purposes of this subsection, the User shall not be obligated to comply with this
covenant if it obtains an opinion of nationally-recognized bond counsel to the
effect that such failure to comply will not adversely affect the excludability
for federal income tax purposes from gross income of the interest.
The covenants and representations contained in Section 5.4 and 5.5 of
this Agreement are intended to assure compliance with the Code and any
regulations promulgated by the U.S. Department of Treasury pursuant thereto. In
the event that regulations are hereafter promulgated which modify or expand
provisions of the Code, the User will not be required to comply with a covenant
contained in this section to the extent that such failure to comply, in the
opinion of Bond Counsel, will not adversely affect the exemption from federal
income taxation of interest on the Bonds under Section 103(a) of the Code. In
the event that regulations are hereafter promulgated which impose additional
requirements which are applicable to the Bonds, the User and the Issuer agree to
comply with such additional reasonable requirements to the extent necessary, in
the opinion of Bond Counsel, to preserve the exemption from federal income
taxation of interest on the Bonds under Section 103(a) of the Code. In
furtherance of such intention, the Issuer hereby authorizes and directs the
President or Vice President to execute any documents, certificates or reports
required by the Code and to make such elections, on behalf of the Issuer, which
may be permitted by the Code as are consistent with the purpose for the issuance
of the Bonds.
In order to facilitate compliance with the above covenants (k), (l) and
(m), a "Rebate Fund" is hereby established by the Issuer for the sole benefit of
the United States of America, and such fund shall not be subject to the claim of
any other person, including without limitation, the bondholders. The Rebate Fund
is established for the additional purpose of compliance with Section 148 of the
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Code.
The Issuer hereby elects to have the provisions as to the $10 million
limit in Section 144(a)(4) of the Code apply to the Bonds.
SECTION 5.6. PAYMENT TO REBATE FUND. The User hereby covenants and
agrees to make the determinations and to pay any deficiency in the Rebate Fund,
at the times and as described in Section 5.11 of the Indenture. In any event, if
the amount of cash held in the Rebate Fund shall be insufficient to permit
Trustee to make payment to the United States of any amount due under Section
148(f)(2) of the Code, the User forthwith shall pay the amount of such
insufficiency on such date to Trustee in immediately available funds. The
obligations of the User under this Section 5.6 are direct obligations of the
User, acting under the authorization of, and on behalf of, the Issuer and the
Issuer shall have no further obligation or duty with respect to the Rebate Fund.
SECTION 5.7. ASSIGNMENT BY ISSUER. Except for the assignment of this
Agreement to the Trustee, the Issuer shall not attempt to further assign,
transfer or convey its interest in the Revenues or this Agreement or create any
pledge or lien of any form or nature with respect to the Revenues or the
payments hereunder.
SECTION 5.8. USER'S PERFORMANCE UNDER INDENTURE. By execution and
delivery of this Agreement, the User hereby approves the Bond Resolution and the
Indenture. It is hereby agreed that the foregoing approval of the Bond
Resolution and the Indenture constitutes the acknowledgment and agreement of the
User that the Bonds, when issued, sold, and delivered as provided in the Bond
Resolution and the Indenture, will be issued in accordance with and in
compliance with this Agreement or any other contract or agreement to the
contrary. Any Bondholder is entitled to rely fully and unconditionally on the
foregoing approval. Notwithstanding any provisions of this Agreement or any
other contract or agreement to the contrary, the User's approval of the Bond
Resolution and the Indenture shall be the User's agreement that all covenants
and provisions in this Agreement and the Indenture affecting the User shall,
upon the delivery of the Bonds and the Indenture, become unconditional, valid
and binding covenants and obligations of the User so long as the Bonds and the
interest thereon are outstanding and unpaid. The User has examined the Indenture
and approves the form and substance of, and agrees to be bound by, its terms.
The User, for the benefit of the Issuer and the Bondholders, shall do and
perform all acts and things required or contemplated in the Indenture to be done
or performed by the User. The User is a third party beneficiary of certain
provisions of the Indenture, and Section 8.05 of the Indenture is hereby
incorporated herein by reference.
SECTION 5.9. COMPLIANCE WITH LAWS. The User shall, throughout the term
of this Agreement, promptly comply or cause compliance in all material respects
with all laws, ordinances, orders, rules, regulations and requirements of duly
constituted public authorities which may be applicable to the Project or to the
repair and alteration thereof, or to the use or manner of use of the Project or
to the User's and any lessee's operations on the Project Site. Notwithstanding
the foregoing, the User shall have the right to contest or cause to be contested
the legality or the
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applicability of any such law, ordinance, order, rule, regulation or requirement
so long as, in the opinion of counsel satisfactory to the Trustee and the Bank,
such contest shall not in any way materially adversely affect or impair the
obligations of the User hereunder or any right or interest of the Trustee or the
Bank in, to and under the Indenture or this Agreement.
SECTION 5.10. TAXES, PERMITS, UTILITY AND OTHER CHARGES. The User shall
pay and discharge or cause to be paid and discharged, promptly as and when the
same shall become due and payable, all taxes (including specifically any sales
and use taxes) and governmental charges of any kind whatsoever that may be
lawfully assessed against the Issuer, the Trustee, the Bank or the User with
respect to the Project or any portion thereof. The User may in good faith
contest or cause to be contested any such tax or governmental charge, and in
such event may permit such tax or governmental charge to remain unsatisfied
during the period of such contest and may appeal therefrom unless in the opinion
of counsel satisfactory to the Trustee and the Bank by such action any right or
interest of the Trustee or the Bank in, to and under the Indenture or this
Agreement shall be materially endangered or the Project or any part thereof,
shall become subject to imminent loss or forfeiture, in which event such tax or
governmental charge shall be paid prior to any such loss or forfeiture. The User
shall procure or has caused to be procured any and all necessary building
permits, other permits, licenses and other authorizations required for the
lawful and proper acquisition, renovation, construction, equipping and
installation of the property comprising the Project and Project Site for the
lawful and proper use and operation of the Project.
SECTION 5.11. CONTINUED EXISTENCE. During the term of this Agreement,
except as otherwise provided in or permitted pursuant to the Reimbursement
Agreement, or unless otherwise provided by law, the User shall maintain its
existence and continue to be a duly formed and validly existing corporation
under the laws of the State of Texas.
SECTION 5.12. REMOVAL OF PORTIONS OF THE PROJECT. The User shall have
the right, from time to time, subject to the terms of the Reimbursement
Agreement, to remove, substitute or modify any portion of the Project, provided
that such removal, substitution or modification shall not impair the character
of the Project as a "project" within the meaning of the Act. Any such
substituted or modified property shall be included under the terms of this
Agreement as part of the Project.
SECTION 5.13. GOVERNMENTAL REGULATION. The User recognizes and agrees
that this Agreement and the issuance of the Bonds pursuant hereto will not
diminish or limit the authority of the United States Environmental Protection
Agency, the Texas Natural Resources Conservation Commission, the Texas Water
Development Board, or any other State agency or local governments in performing
any of the powers, functions and duties vested in such entities by federal and
state laws, and that all applicable laws shall be enforced without regard to
ownership of the Project; and that the User will not be relieved of any
responsibility under any applicable federal or state laws or regulations
pertaining to pollution control, either now, or during, or after the
acquisition, construction and improvement of the Project.
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ARTICLE VI
REDEMPTION OF BONDS
SECTION 6.1. OPTIONAL REDEMPTION. Provided no Event of Default shall
have occurred and be continuing at any time and from time to time, the User may
deliver moneys to the Trustee in addition to Loan Payments or Additional
Payments required to be made and direct the Trustee to use the moneys so
delivered for the purpose of purchasing Bonds or of reimbursing the Bank for
drawings on the Letter of Credit used to redeem Bonds called for optional
redemption in accordance with the applicable provisions of the Indenture.
SECTION 6.2. EXTRAORDINARY OPTIONAL REDEMPTION. With the written
consent of the Bank, the User shall have, subject to the conditions hereinafter
imposed, the option to direct the redemption by the Issuer, at a redemption
price of 100% of principal amount and accrued interest, of the entire unpaid
principal balance of the Bonds in accordance with the applicable provisions of
the Indenture upon the occurrence of any of the following events:
(a) The Project or Project Site shall have been damaged or
destroyed to such an extent that (1) the Project or Project Site cannot
reasonably be expected to be restored, within a period of nine months, to the
condition thereof immediately preceding such damage or destruction or (2) normal
use and operation of the Project or the Project Site is reasonably expected to
be prevented for a period of three consecutive months;
(b) Title to, or the temporary use of, all or a significant
part of the Project or Project Site shall have been taken under the exercise of
the power of eminent domain (1) to such extent that the Project or Project Site
cannot reasonably be expected to be restored within a period of nine months to a
condition of usefulness comparable to that existing prior to the taking or (2)
as a result of the taking, normal use and operation of the Project or Project
Site is reasonably expected to be prevented for a period of nine consecutive
months;
(c) As a result of any changes in the Constitution of the
State, the Constitution of the United States of America, or state or federal
laws, or as a result of legislative or administrative action (whether state or
federal) or by final decree, judgment or order of any court or administrative
body (whether state or federal) entered after the contest thereof by the Issuer,
the Trustee or the User in good faith, this Agreement shall have become void or
unenforceable or impossible of performance in accordance with the intent and
purpose of the parties as expressed in this Agreement, or if unreasonable
burdens or excessive liabilities shall have been imposed with respect to the
Project or Project Site or the operation thereof, including, without limitation,
federal, state or other ad valorem, property, income or other taxes not being
imposed on the date of this Agreement other than ad valorem taxes presently
levied upon privately owned property used for the same general purpose as the
Project or the Project Site; or
(d) Changes in the economic availability of raw materials,
operating supplies, energy sources or supplies, or facilities (including, but
not limited to, facilities in connection with
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the disposal of industrial wastes) necessary for the operation of the Project or
the Project Site shall have occurred or technological or other changes shall
have occurred which the User cannot reasonably overcome or control and which in
the User's reasonable judgment render the operation of the Project or the
Project Site uneconomic.
The User also shall have the option, with the written consent of the
Bank, in the event that title to or the temporary use of a portion of the
Project or the Project Site shall be taken under the exercise of the power of
eminent domain, even if the taking is not of such nature as to permit the
exercise of the redemption option upon an event specified in clause (b) above,
to direct the redemption by the Issuer, at a redemption price of 100% of the
principal amount thereof prepaid, plus accrued interest to the redemption date,
of that part of the outstanding principal balance of the Bonds as may be payable
from the proceeds received by the User (after the payment of costs and expenses
incurred in the collection thereof) in the eminent domain proceeding, provided
that the User shall furnish to the Issuer and the Trustee a certificate of an
Engineer stating that (1) the property comprising the part of the Project or the
Project Site taken is not essential to continued operations of the Project in
the manner existing prior to that taking, (2) the Project has been restored to a
condition substantially equivalent to that existing prior to the taking, or (3)
other improvements have been acquired or made which are suitable for the
continued operation of the Project.
To exercise any option under this Section, the User within 90 days
following the event authorizing the exercise of that option, or at any time
during the continuation of the condition referred to in clause (d) of the first
paragraph of this Section, shall give notice to the Issuer and to the Trustee
specifying the date of redemption, which date shall be not more than 90 days
from the date that notice is mailed, and shall make arrangements satisfactory to
the Trustee for the giving of the required notice of redemption.
The rights and options granted to the User in this Section may be
exercised whether or not the User is in default hereunder; provided, that such
default will not relieve the User from performing those actions which are
necessary to exercise any such right or option granted hereunder.
SECTION 6.3. MANDATORY REDEMPTION OF BONDS. If, as provided in the
Bonds and the Indenture, the Bonds become subject to mandatory redemption, upon
the date requested by the Trustee, the User shall pay to the Trustee moneys
sufficient to pay in full the Bonds in accordance with the mandatory redemption
provisions relating thereto set forth in the Indenture.
SECTION 6.4. ACTIONS BY ISSUER. At the request of the User or the
Trustee, the Issuer shall take all steps required of it under the applicable
provisions of the Indenture or the Bonds to effect the redemption of all or a
portion of the Bonds pursuant to this Article VI.
SECTION 6.5. REQUIRED DEPOSITS FOR OPTIONAL REDEMPTION. Except with the
prior written consent of the Bank, the Trustee shall not give notice of call to
the Holders pursuant to the optional redemption provisions of Section 4.01 of
the Indenture and Sections 6.1 and 6.2 hereof unless, prior
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to the date by which the call notice is to be given, there shall be on deposit
with the Trustee Eligible Funds sufficient to redeem at the redemption price
thereof, including premium (if any) and interest accrued to the redemption date,
all Bonds for which notice of redemption is to be given.
All amounts paid by the User pursuant to this Article which are used to
pay principal of, premium, if any, or interest on the Bonds, or to reimburse the
Bank for moneys drawn under the Letter of Credit and used for such purposes,
shall constitute prepaid Loan Payments.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.1. EVENTS OF DEFAULT. Each of the following shall be an Event
of Default:
(a) The User shall fail to pay when due any Loan Payment;
(b) Any representation or warranty by the User contained
herein or in any certificate or instrument delivered by the User pursuant hereto
or in connection with the issuance of the Bonds or any Additional Bonds is false
or misleading in any material respect;
(c) The User shall fail to observe and perform any other
agreement, term, covenant or condition contained in this Agreement, and the
continuation of such failure for a period of 30 days after notice thereof shall
have been given to the User by the Issuer or the Trustee, or for such longer
period as the Issuer and the Trustee may agree to in writing; provided, that if
the failure is other than the payment of money and is of such nature that it can
be corrected but not within the applicable period, that failure shall not
constitute an Event of Default so long as the User institutes curative action
within the applicable period and diligently pursues that action to completion;
(d) The User shall: (i) admit in writing its inability to pay
its debts generally as they become due; (ii) have an order for relief entered in
any case commenced by or against it under the federal bankruptcy laws, as now or
hereafter in effect; (iii) commence a proceeding under any other federal or
state bankruptcy, insolvency, reorganization or similar law, or have such a
proceeding commenced against it and either have an order of insolvency or
reorganization entered against it or have the proceeding remain undismissed and
unstayed for 90 days; (iv) make an assignment for the benefit of creditors; or
(v) have a receiver or trustee appointed for it or for the whole or any
substantial part of its property; or
(e) There shall occur an "Event of Default" as defined in
Section 7.01 of the Indenture.
Notwithstanding the foregoing, if, by reason of Force Majeure, the User
is unable to perform or observe any agreement, term or condition hereof which
would give rise to an Event of Default under subsection (c) hereof (provided
that such failure is other than the payment of money), the User
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shall not be deemed in default during the continuance of such inability.
However, the User shall promptly give notice to the Trustee and the Issuer of
the existence of an event of Force Majeure and shall use its best efforts to
remove the effects thereof; provided that the settlement of strikes or other
industrial disturbances shall be entirely within the User's discretion.
The term Force Majeure shall mean, without limitation, the following:
(i) acts of God; strikes; lockouts or other industrial labor
disturbances; acts of public enemies; orders or restraints of any kind of the
government of the United States of America or of the State or any of their
departments, agencies, political subdivisions or officials, or any civil or
military authority; insurrections; civil disturbances; riots; epidemics;
landslides; lightning; earthquakes; fires; hurricanes; tornados; storms; blue
northers; droughts; floods; arrests; restraint of government and people;
explosions; breakage, malfunction or accident to facilities, machinery,
transmission pipes or canals; partial or entire failure of utilities; shortages
of labor, materials, supplies or transportation; or
(ii) any cause, circumstance or event not reasonably within
the control of the User.
The declaration of an Event of Default under subsection (d) above, and
the exercise of remedies upon any such declaration, shall be subject to any
applicable limitations of federal bankruptcy law affecting or precluding that
declaration or exercise during the pendency of or immediately following any
bankruptcy, liquidation or reorganization proceedings.
SECTION 7.2. REMEDIES ON DEFAULT. Whenever an Event of Default shall
have happened and be continuing, any one or more of the following remedial steps
may be taken:
(a) If and only if acceleration of the principal amount of the
Bonds has been declared pursuant to Section 7.03 of the Indenture, the Trustee
shall declare all Loan Payments and Notes to be immediately due and payable,
whereupon the same shall become immediately due and payable;
(b) The Bank or the Trustee may have access to, inspect,
examine and make copies of the books, records, accounts and financial data of
the User pertaining to the Project; and
(c) The Issuer or the Trustee may pursue all remedies now or
hereafter existing at law or in equity to collect all amounts then due and
thereafter to become due under this Agreement, the Letter of Credit or the Notes
or to enforce the performance and observance of any other obligation or
agreement of the User under those instruments including, without limitation,
exercise the remedies of mandamus or the appointment of a receiver in equity
with the power to charge and collect rents, purchase price payments, and Loan
Payments and to apply Revenues from the Project in accordance with the terms
hereof and the Indenture.
Notwithstanding the foregoing, the Issuer shall not be obligated to
take any step which in its
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opinion will or might cause it to expend time or money or otherwise incur
liability unless and until a satisfactory indemnity bond has been furnished to
the Issuer at no cost or expense to the Issuer. Any amounts collected as Loan
Payments or applicable to Loan Payments and any other amounts which would be
applicable to payment of Bond Service Charges collected pursuant to action taken
under this Section shall be paid into the Bond Fund and applied in accordance
with the provisions of the Indenture or, if the outstanding Bonds have been paid
and discharged in accordance with the provisions of the Indenture, shall be paid
as provided in Section 5.08 of the Indenture for transfers of remaining amounts
in the Bond Fund.
The provisions of this Section are subject to the further limitation
that the rescission by the Trustee of its declaration that all of the Bonds are
immediately due and payable also shall constitute an annulment of any
corresponding declaration made pursuant to paragraph (a) of this Section and a
waiver and rescission of the consequences of that declaration and of the Event
of Default with respect to which that declaration has been made, provided that
no such waiver or rescission shall extend to or affect any subsequent or other
default or impair any right consequent thereon.
SECTION 7.3. NO REMEDY EXCLUSIVE. No remedy conferred upon or reserved
to the Issuer or the Trustee by this Agreement is intended to be exclusive of
any other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement, the Letter of Credit or any Note, or now or hereafter existing at
law, in equity or by statute. No delay or omission to exercise any right or
power accruing upon any default shall impair that right or power or shall be
construed to be a waiver thereof (unless so stated in writing), but any such
right and power may be exercised from time to time and as often as may be deemed
expedient. In order to entitle the Issuer or the Trustee to exercise any remedy
reserved to it in this Article, it shall not be necessary to give any notice,
other than any notice required by law or for which express provision is made
herein.
SECTION 7.4. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. If an Event
of Default should occur and the Issuer or the Trustee should incur expenses,
including attorneys' fees, in connection with the enforcement of this Agreement,
the Letter of Credit or any Note or the collection of sums due thereunder, the
User shall reimburse the Issuer and the Trustee, as applicable, for the
reasonable expenses so incurred upon demand.
SECTION 7.5. NO WAIVER. No failure by the Issuer or the Trustee to
insist upon the strict performance by the User of any provision hereof shall
constitute a waiver of their right to strict performance and no express waiver
shall be deemed to apply to any other existing or subsequent right to remedy the
failure by the User to observe or comply with any provision hereof.
The Issuer and the Trustee may waive any Event of Default hereunder
only with the prior written consent of the Bank.
SECTION 7.6. NOTICE OF DEFAULT. The User or the Issuer shall notify the
Trustee and the Bank immediately if it becomes aware of the occurrence of any
Event of Default hereunder or of any
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fact, condition or event which, with the giving of notice or passage of time or
both, would become an Event of Default.
SECTION 7.7. REMEDIES SUBJECT TO BANK'S DIRECTION. Except in the case
of an Event of Default pursuant to Section 7.01(g) or (h) of the Indenture, the
Bank shall have the right to direct the remedies to be exercised by the Trustee,
whether under Article VII of this Agreement or under Article VII of the
Indenture.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. TERM OF AGREEMENT. This Agreement shall be and remain in
full force and effect from the date of initial delivery of the Bonds until such
time as all of the Bonds shall have been fully paid (or provision made for such
payment) pursuant to the Indenture and all other sums payable by the User under
this Agreement and the Notes shall have been paid, except for obligations of the
User under Sections 3.8, 4.2, 5.3 and 7.4 hereof, which shall survive any
termination of this Agreement.
SECTION 8.2. NOTICES. All notices, certificates, requests or other
communications hereunder shall be in writing and shall be deemed to be
sufficiently given when mailed by registered or certified mail, postage prepaid,
and addressed to the appropriate Notice Address. A duplicate copy of each
notice, certificate, request or other communication given hereunder to the
Issuer, the User, the Bank or the Trustee shall also be given to the others. The
User, the Issuer, the Bank and the Trustee, by notice given hereunder, may
designate any further or different addresses to which subsequent notices,
certificates, requests or other communications shall be sent.
SECTION 8.3. EXTENT OF COVENANTS OF THE ISSUER; NO PERSONAL LIABILITY.
All covenants, obligations and agreements of the Issuer contained in this
Agreement or the Indenture shall be effective to the extent authorized and
permitted by applicable law. No such covenant, obligation or agreement shall be
deemed to be a covenant, obligation or agreement of any present or future
member, officer, agent or employee of the Issuer or the Governmental Unit in
other than his official capacity, and neither the members of the Governmental
Unit nor any official executing the Bonds shall be liable personally on the
Bonds or be subject to any personal liability or accountability by reason of the
issuance thereof or by reason of the covenants, obligations or agreements of the
Issuer contained in this Agreement or in the Indenture.
SECTION 8.4. BINDING EFFECT. This Agreement shall inure to the benefit
of and shall be binding in accordance with its terms upon the Issuer, the User
and their respective successors and assigns; provided that this Agreement may
not be assigned by the User (except in connection with a sale, lease or grant of
use pursuant to Section 5.2 hereof) and may not be assigned by the Issuer except
to the Trustee pursuant to the Indenture or as otherwise may be necessary to
enforce or secure payment of Bond Service Charges. This Agreement may be
enforced only by the parties, their
29
<PAGE> 34
assignees and others who may, by law, stand in their respective places.
SECTION 8.5. AMENDMENTS AND SUPPLEMENTS. Except as otherwise expressly
provided in this Agreement, any Note or the Indenture, subsequent to the
issuance of the Bonds and prior to all conditions provided for in the Indenture
for release of the Indenture having been met, this Agreement or any Note may not
be effectively amended, changed, modified, altered or terminated except in
accordance with the applicable provisions of Article XI of the Indenture.
SECTION 8.6. EXECUTION COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall be regarded as an original and
all of which shall constitute but one and the same instrument.
SECTION 8.7. SEVERABILITY. If any provision of this Agreement, or any
covenant, obligation or agreement contained herein, is determined by a court of
competent jurisdiction to be invalid or unenforceable, that determination shall
not affect any other provision, covenant, obligation or agreement, each of which
shall be construed and enforced as if the invalid or unenforceable portion were
not contained herein. That invalidity or unenforceability shall not affect any
valid and enforceable application thereof, and each such provision, covenant,
obligation or agreement shall be deemed to be effective, operative, made,
entered into or taken in the manner and to the full extent permitted by law.
SECTION 8.8. SALES AND USE TAX EXEMPTION. The User has not and will not
maintain that it is entitled, by virtue of the Project being financed under the
Act, to any additional exemption from sale and use taxes on personal property
acquired in connection with the Project.
SECTION 8.9. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
EXCLUSIVELY BY AND CONSTRUED IN ACCORDANCE WITH THE APPLICABLE LAWS OF THE STATE
OF TEXAS. VENUE FOR ANY ACTIONS BROUGHT HEREUNDER TO WHICH THE ISSUER IS A PARTY
SHALL LIE IN TRAVIS COUNTY, TEXAS.
SECTION 8.10. AMOUNTS REMAINING IN FUNDS. Any amounts in the Bond Fund
remaining unclaimed by the Holders of Bonds for three years after the due date
thereof (whether at stated maturity, by redemption or pursuant to any mandatory
sinking fund requirements or otherwise), shall, subject to any applicable
provisions of Title 6 of the Texas Property Code relating to unclaimed property,
be paid to the User; provided that if the Trustee shall have drawn on the Letter
of Credit, and the Bank is owed any amount by the User pursuant to the
Reimbursement Agreement, such amounts remaining in the Bond Fund shall belong
and be paid first to the Bank to the extent of such unpaid amounts. With respect
to that principal of and any premium and interest on the Bonds to be paid from
moneys paid to the User or the Bank pursuant to the preceding sentence, the
Holders of the Bonds entitled to those moneys shall look solely to the User for
the payment of those moneys.
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<PAGE> 35
Further, any amounts remaining in the Bond Fund (subject to any
limitations in the Indenture) and any other special funds or accounts (other
than the Rebate Fund) created under this Agreement or the Indenture after all of
the outstanding Bonds shall be deemed to have been paid and discharged under the
provisions of the Indenture and all other amounts required to be paid under this
Agreement, the Notes and the Indenture have been paid, shall be paid (to the
extent that those moneys are in excess of the amounts necessary to effect the
payment and discharge of the outstanding Bonds) first to the Bank to the extent
that any amount is owed by the User to the Bank under the terms of the Letter of
Credit or Reimbursement Agreement, and then to the User.
SECTION 8.11. FINAL AGREEMENT OF THE PARTIES. THIS AGREEMENT
CONSTITUTES A LOAN AGREEMENT FOR PURPOSES OF SECTION 26.02(a) OF THE TEXAS
BUSINESS AND COMMERCE CODE, AND REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
SECTION 8.12. CONFLICTS. In the event of any actual conflict between
the obligations of the User under this Agreement and obligations of the User
under the terms and provisions of the Indenture, the terms and provisions of
this Agreement shall control as to the obligations of the User thereunder.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
31
<PAGE> 36
IN WITNESS WHEREOF, the Issuer and the User have caused this Agreement
to be duly executed in their respective names, all as of the date first above
written.
CAPITAL INDUSTRIAL DEVELOPMENT
CORPORATION
By: /s/ Darwin McKee
-------------------------------
Title: President
-------------------------------
CCIR OF TEXAS CORP.
By: /s/ Joseph G. Andersen
-------------------------------
Its: Vice President and Secretary
-------------------------------
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<PAGE> 37
EXHIBIT A
PROJECT
The Project includes the construction, improvement and equipment of a
manufacturing facility and related office facility located at 15508 Bratton
Lane, Austin, Travis County, Texas, to manufacture circuit boards and related
products.
A-1
<PAGE> 38
EXHIBIT B
PROJECT SITE
LEGAL DESCRIPTION
Facility located at 15508 Bratton Lane, Austin, Texas 78728.
B-1
<PAGE> 39
EXHIBIT C
NOTE
$6,000,000 _________, 1998
CCIR of Texas Corp., a Texas corporation (the "User"), for value
received, promises to pay to The Huntington National Bank, as trustee (the
"Trustee") under the Indenture hereinafter referred to the principal sum of
SIX MILLION DOLLARS
($6,000,000)
and to pay (i) interest on the unpaid balance of such principal sum from and
after the date of this Note at the interest rate or interest rates borne by the
Bonds and (ii) interest on overdue principal, and to the extent permitted by
law, on overdue interest, at the interest rate provided under the terms of the
Bonds.
This Note has been executed and delivered by the User pursuant to a
certain Loan Agreement (the "Agreement"), dated as of January 1, 1998, between
the Capital Industrial Development Corporation (the "Issuer") and the User.
Terms used but not defined herein shall have the meanings ascribed to such terms
in the Agreement and the Indenture, as defined below.
Subject to the terms of the Agreement, the Issuer has loaned the User
the proceeds received from the sale of $6,000,000 aggregate principal amount of
Capital Industrial Development Corporation Adjustable Rate Industrial Revenue
Bonds, Series 1998 (CCIR of Texas Corp. Project), dated as January 1, 1998 but
which accrue interest from the date of their issuance (the "Bonds"), to be
applied to assist the User in the financing of the Project. The User has agreed
to repay such loan by making Loan Payments at the times and in the amounts set
forth in this Note. The Bonds have been issued, concurrently with the execution
and delivery of this Note, pursuant to, and are secured by, the Trust Indenture
(the "Indenture"), dated as of January 1, 1998, between the Issuer and the
Trustee.
To provide funds to pay the Bond Service Charges on the Bonds as and
when due, or to reimburse the Bank for draws under the Letter of Credit to make
such payments, the User hereby agrees to and shall make Loan Payments as
follows: on each Interest Payment Date the amount equal to interest due on the
Bonds on such Interest Payment Date, and on each date on which principal of the
Bonds shall be due and payable pursuant to the mandatory redemption provisions
of Section 4.01 of the Indenture or upon maturity of the Bonds, an amount equal
to such principal due and payable on such date (each such day being a "Loan
Payment Date"). In addition, to provide
C-2
<PAGE> 40
funds to pay the Bond Service Charges and purchase price payments on the Bonds
as and when due at any other time, the User hereby agrees to and shall make Loan
Payments on any other date on which any Bond Service Charges or purchase price
payments on the Bonds shall be due and payable, whether upon acceleration, call
for redemption or otherwise.
If payment or provision for payment in accordance with the Indenture is
made in respect of the Bond Service Charges on the Bonds from moneys other than
Loan Payments, this Note shall be deemed paid to the extent such payments or
provision for payment of Bond Service Charges has been made. The User shall
receive a credit against its obligation to make Loan Payments hereunder to the
extent of the moneys delivered to the Trustee under and pursuant to the Letter
of Credit for the payment of Bond Service Charges and any other amounts on
deposit in the Bond Fund and available to pay Bond Service Charges on the Bonds
pursuant to the Indenture. Subject to the fore going, all Loan Payments shall be
in the full amount required hereunder.
All Loan Payments shall be payable in lawful money of the United States
of America, in immediately available funds, and shall be made to the Trustee at
its corporate trust office for the account of the Issuer, deposited in the Bond
Fund and used as provided in the Indenture.
The obligation of the User to make the payments required hereunder
shall be absolute and unconditional and the User shall make such payments
without abatement, diminution or deduction regardless of any cause or
circumstances whatsoever including, without limitation, any defense, set-off,
recoupment or counterclaim which the User may have or assert against the Issuer,
the Trustee, the Bank or any other person.
This Note is subject to optional, extraordinary optional and mandatory
prepayment, in whole or in part, upon the terms and conditions set forth in
Article VI of the Agreement. Any optional or extraordinary optional prepayment
is also subject to satisfaction of any applicable notice, deposit or other
requirements set forth in the Agreement or the Indenture.
Whenever an Event of Default under Section 7.1 of the Agreement shall
have occurred, the unpaid principal amount of and any premium and accrued
interest on this Note may be declared or may become due and payable as provided
in Section 7.2 of the Agreement; provided that any annulment of a declaration of
acceleration with respect to the Bonds under the Indenture shall also constitute
an annulment of any corresponding declaration with respect to this Note.
IN WITNESS WHEREOF, the User has signed this Note as of the date first
above written.
CCIR OF TEXAS CORP.
By: _______________________________
Its: ______________________________
C-3
<PAGE> 41
EXHIBIT D
STATEMENT NO. __ REQUESTING DISBURSEMENT OF FUNDS
FROM PROJECT FUND PURSUANT TO SECTION 3.4 OF THE
LOAN AGREEMENT BETWEEN THE CAPITAL INDUSTRIAL
DEVELOPMENT CORPORATION AND CCIR OF TEXAS CORP.
Pursuant to Section 3.4 of the Loan Agreement (the "Agreement") between
the Capital Industrial Development Corporation (the "Issuer") and CCIR of Texas
Corp. (the "User") dated as of January 1, 1998, the undersigned Authorized User
Representative hereby requests and authorizes The Huntington National Bank, as
trustee (the "Trustee"), as depository of the Project Fund created by the
Indenture, as defined in the Agreement, to pay to the User or to the person(s)
listed on the Disbursement Schedule attached hereto out of the moneys on deposit
in the Project Fund the aggregate sum of $___________, to pay such person(s) or
to reimburse the User in full, as indicated in the Disbursement Schedule, for
advances, payments and expenditures made by it in connection with the items
listed in the Disbursement Schedule.
In connection with the foregoing request and authorization, the
undersigned hereby certifies that:
(a) Each item for which disbursement is requested hereunder is properly
payable out of the Project Fund in accordance with the terms and conditions of
the Agreement and none of those items has formed the basis for any disbursement
heretofore made from the Project Fund;
(b) Each such item is or was necessary in connection with the
acquisition, renovation, construction, equipping or installation of the property
comprising the Project, as defined in the Agreement;
(c) This statement and all exhibits hereto, including the Disbursement
Schedule, shall be conclusive evidence of the facts and statements set forth
herein and shall constitute full warrant, protection and authority to the
Trustee for its actions taken pursuant hereto; and
(d) This statement constitutes the approval of the User of each
disbursement hereby requested and authorized.
D-1
<PAGE> 42
IN WITNESS WHEREOF, the Authorized User Representative has set his hand
as of the ____ day of ____________.
_______________________________
Authorized User
Representative
Consented to by:
Bank One, Arizona, NA.
By:____________________________
Title:_________________________
D-2
<PAGE> 1
Exhibit 10.4
BOND PLACEMENT AGREEMENT
Relating to
$6,000,000
Capital Industrial Development Corporation
Adjustable Rate Industrial
Revenue Bonds, Series 1998
(CCIR of Texas Corp. Project)
Dated as of
February 10, 1998
<PAGE> 2
BOND PLACEMENT AGREEMENT
This BOND PLACEMENT AGREEMENT is dated as of February 10, 1998, by and
among the CAPITAL INDUSTRIAL DEVELOPMENT CORPORATION, a nonstock, nonprofit
industrial development corporation existing under the laws of the State of Texas
(the "Issuer"), CCIR OF TEXAS CORP., a Texas corporation (the "Borrower"), and
BANC ONE CAPITAL CORPORATION, an Ohio corporation, as placement agent (the
"Agent").
1. Background.
(a) The Issuer proposes to issue $6,000,000 in aggregate
principal amount of Capital Industrial Development Corporation
Adjustable Rate Industrial Revenue Bonds, Series 1998 (CCIR of Texas
Corp. Project) (the "Bonds") and to loan the proceeds of the Bonds to
the Borrower to finance costs of acquiring, constructing and installing
the Borrower's manufacturing facility and related office facility,
including certain machinery and equipment (collectively, the
"Project"), to be located in Austin, Travis County, Texas.
(b) The Bonds will mature on October 1, 2009, subject to prior
redemption pursuant to mandatory optional redemption requirements set
forth in the Letter of Credit Agreement (as hereinafter defined) and
other provisions described in the Offering Memorandum (as hereinafter
defined). The initial interest rate on the Bonds, effective from the
date of their initial delivery through February 18, 1998, shall be
3.50% per annum. The Bonds will be issued pursuant to a resolution (the
"Bond Resolution") adopted on January 27, 1998 by the Board of
Directors of the Issuer (the "Issuing Authority"), and will be secured
under a Trust Indenture (the "Indenture"), dated as of January 1, 1998,
between the Issuer and The Huntington National Bank, as trustee (the
"Trustee") for the holders of the Bonds. The Bonds will be payable from
the Revenues, as defined in the Indenture and as defined in a Loan
Agreement (the "Agreement"), dated as of January 1, 1998, between the
Issuer and the Borrower, pursuant to which the Issuer will loan the
proceeds of the Bonds to the Borrower for the purposes of financing
costs of the Project. The loan to the Borrower will be evidenced by the
execution and delivery by the Borrower to the Trustee of a promissory
note (the "Note") in the amount of $6,000,000. The proceeds of the
Bonds will be applied as provided in the Indenture and the Agreement.
The principal of and up to 45 days interest (at the maximum
<PAGE> 3
interest rate of 10%) on, and certain purchase price payments relating
to, the Bonds also will be secured by an irrevocable letter of credit
(the "Letter of Credit"), dated as of the date of initial delivery of
the Bonds, to be issued by Bank One, Arizona, NA, a national banking
association (the "Bank"), in favor of the Trustee. Pursuant to a Loan
Agreement between the Bank and Continental Circuits Corp., including
the Assumption Agreement (the "Letter of Credit Agreement") dated
February __, 1998 among the Bank and the Borrower, the Borrower will
agree to reimburse the Bank for amounts drawn on the Letter of Credit.
The Borrower's obligations under the Letter of Credit Agreement will be
secured by a security agreement and certain other collateral documents
(the "Bank Security Documents"). Pursuant to the Indenture, holders of
the Bonds initially will have certain options to tender Bonds for
purchase, which tendered Bonds will be purchased with funds from the
remarketing of the Bonds or drawings on the Letter of Credit, as
provided in the Indenture.
(c) It is intended that the Project and the Bonds will conform
with the provisions of Development Corporation Act of 1979, as amended,
Article 5190.6, Vernon's Texas Civil Statutes, as amended (the "Act"),
that the proceeds of the Bonds will be expended so that the interest on
the Bonds will not be includable in gross income for the purposes of
federal income taxation, and that the Bonds may be purchased by the
original purchasers without registration of any security under the
Securities Act of 1933, as amended (the "Securities Act"), or
qualification of any indenture under the Trust Indenture Act of 1939
(the "Trust Indenture Act").
(d) To induce the Issuer to enter into this Bond Placement
Agreement and to issue and deliver the Bonds, the Borrower has entered
into this Bond Placement Agreement.
(e) To provide for the remarketing of the Bonds pursuant to
the terms of the Indenture, the Borrower and the Agent, as Remarketing
Agent, will enter into a Remarketing Agreement dated as of January 1,
1998 (the "Remarketing Agreement").
(f) Pursuant to the Indenture and the Letter of
Representations as defined therein, the Bonds are being issued in
book-entry only form, and the parties acknowledge that,
2
<PAGE> 4
where appropriate, references herein to Bonds shall mean Beneficial
Ownership Interests, as defined in the Indenture.
2. Placement, Sale and Closing.
(a) Subject to the terms and conditions and in reliance upon
the representations, warranties and agreements set forth herein, the
Agent hereby agrees to use its best efforts to privately place on
behalf of the Issuer and the Borrower all (but not less than all) of
the Bonds as contemplated herein. The purchase price for the Bonds
shall be $6,000,000. As compensation for its services in placing the
Bonds, the Borrower shall pay a fee of 1% of such purchase price of the
Bonds to the Agent, such fee, together with the expenses described in
Section 10 hereof, to be payable by wire transfer in immediately
available funds on the Closing Date (as defined below).
(b) The Borrower has delivered or shall cause to be delivered
to the Agent copies of the Preliminary Offering Memorandum dated
February 3, 1998 relating to the Bonds (the "Preliminary Offering
Memorandum") and copies of the final Offering Memorandum relating to
the Bonds substantially in the form of the Preliminary Offering
Memorandum, with such changes as may be approved by the Agent (the
"Offering Memorandum") in quantities and at times sufficient to enable
the Agent to comply with the rules of the Municipal Securities
Rulemaking Board and the Securities and Exchange Commission. The
Borrower hereby approves the use and distribution by the Agent to
persons who may be interested in the purchase of the Bonds of the
Preliminary Offering Memorandum and the Offering Memorandum, and hereby
authorizes the Agent to use and distribute the Preliminary Offering
Memorandum and the Offering Memorandum, and copies of the Indenture and
all other documents, including without limitation the Letter of Credit
and related documents, to be executed in connection with the placement
and sale of the Bonds.
(c) Except as may be inconsistent with the provisions of this
Bond Placement Agreement, the Agent covenants and agrees to use its
best efforts to cause the purchase of all (but not less than all) of
the Bonds at the price or prices set forth in the Offering Memorandum
and to send to each original
3
<PAGE> 5
purchaser thereof a copy of the Offering Memorandum concurrently with
or prior to sending to such purchaser a final written confirmation of
the sale. Further, the Agent agrees not to use the Offering Memorandum
for the purpose of marketing the Bonds subsequent to receiving written
notice from the Issuer, the Bank or the Borrower which (i) states that
the Offering Memorandum contains an untrue statement of a material fact
or omits to state a material fact, and (ii) specifically identifies the
material fact or omission, provided that upon the amendment of the
Offering Memorandum to the satisfaction of the party delivering the
notice pursuant hereto, the Agent may, subject to the continuing
obligations contained herein, resume use of the amended Offering
Memorandum in marketing the Bonds. The Agent shall market the Bonds
only to "accredited investors", as defined in Rule 501(a) of Regulation
D promulgated under the Securities Act, without making a public
offering of the Bonds and at a minimum investment of $100,000.
(d) At 10:00 a.m. eastern standard time on February 11, 1998,
or at such earlier or later time or date as shall be agreed by the
Issuer, the Bank, the Borrower and the Agent (such time and date being
herein referred to as the "Closing Date"), the Issuer will issue and
deliver the Bonds in definitive form (being one Bond in the aggregate
principal amount of $6,000,000 registered in the name of CEDE & CO.),
duly executed by the Issuer and authenticated by the Trustee (or
Authenticating Agent if an entity separate from the Trustee is acting
as an authenticating agent) as provided for in the Indenture; and the
Agent shall arrange for the purchase price of the Bonds to be paid by
the original purchasers as set forth in paragraphs (a) and (c) of this
section by wire transfer in immediately available funds to an account
specified by the Trustee, for the account of the Issuer (such delivery
and payment being herein referred to as the "Closing"). The Bonds shall
be made available to the Trustee a reasonable time before the Closing
Date for purposes of inspection, packaging and authentication. The
Trustee shall deliver the Bonds to the Depository Trust Company in New
York, New York at least 24 hours in advance of the Closing Date,
provided that such Bonds shall not be released to the purchasers
thereof until the purchase price therefor has been paid. Concurrently
with and as a condition to the Closing,
4
<PAGE> 6
the Issuer will execute and deliver the Agreement and the Indenture at
the offices of McCall, Parkhurst & Horton L.L.P.
in Austin, Texas.
(e) Each of the parties hereto represents and agrees that it
has not knowingly participated in and will not knowingly participate
in, and is not aware of, any offering or sale of any tax-exempt
obligations (other than the Bonds) (i) which has been, is being or will
be conducted during the period commencing 15 days prior to the date
hereof and ending 15 days after the Closing Date, (ii) which has been,
is being or will be paid from the same source of funds as the Bonds,
determined without regard to guarantees from unrelated parties, and
(iii) which was, is being or will be made pursuant to the same plan of
financing. For purposes of the foregoing sentence, tax-exempt
obligations issued pursuant to the same plan of financing means
tax-exempt obligations (other than the Bonds) issued to finance a
single facility or related facilities. The Agent further represents
that it will not knowingly offer or place any of the Bonds hereunder to
or with any holder or group of holders that has purchased, is
purchasing or will purchase any obligations sold pursuant to an
offering which satisfies the conditions in clauses (i) and (ii) of the
first sentence of this paragraph.
(f) The parties hereto acknowledge that, in order to
facilitate the timely purchase of the Bonds at the Closing by the
original purchasers, the Agent may, but shall not be obligated to,
advance its own funds on behalf of such original purchasers.
3. Issuer's Representations and Warranties. The Issuer makes the
following representations and warranties:
(a) The Issuer is a nonstock, nonprofit industrial development
corporation existing under the laws of the State of Texas and has full
power and authority under the Act, among other things, (i) to issue
revenue bonds, such as the Bonds, and to make the proceeds of such
Bonds available to persons such as the Borrower for the purposes
described in the Indenture and the Agreement, payable from and secured
by a pledge of the Revenues, and (ii) to secure such Bonds in the
manner contemplated by the Indenture.
5
<PAGE> 7
(b) The Issuer has full legal right, power and authority (i)
to adopt the Bond Resolution and enter into this Bond Placement
Agreement, the Indenture, the Letter of Representations (as defined in
the Indenture) and the Agreement, (ii) to issue, sell and deliver the
Bonds as provided herein, and (iii) to carry out and consummate all
other transactions contemplated by each of the aforesaid documents, and
the Issuer has complied with all provisions of applicable law,
including the Act, in all matters relating to such transactions, except
that no representation is made by the Issuer as to compliance with
applicable federal or state securities laws.
(c) The Issuer has duly authorized (i) the issuance, sale and
delivery of the Bonds upon the terms set forth herein and in the
Indenture, (ii) the execution, delivery and due performance of this
Bond Placement Agreement, the Bonds, the Indenture and the Agreement,
and (iii) the taking of any and all such actions as may be required on
the part of the Issuer to carry out, give effect to and consummate the
transactions contemplated by such instruments.
(d) The Bond Resolution has been duly adopted by the Issuing
Authority and is in full force and effect. This Bond Placement
Agreement when executed and delivered constitutes, and the Indenture
and the Agreement, when executed and delivered, will constitute legal,
valid and binding obligations of the Issuer, enforceable in accordance
with their respective terms, except that enforceability may be limited
by laws relating to bankruptcy, reorganization or other similar laws
affecting the rights of creditors, by the exercise of judicial
discretion in accordance with general principles of equity, and by
matters of public policy.
(e) When duly authenticated by the Trustee, delivered to the
Depository (as defined in the Indenture) and paid for by the original
purchasers at the Closing in accordance with the provisions of this
Bond Placement Agreement, the Bonds will have been duly authorized,
executed, issued and delivered and will constitute legal, valid and
binding special, limited obligations of the Issuer in conformity with
the laws of the State of Texas, including the Act, will be entitled to
the benefit and security of the Agreement and the Indenture, and
6
<PAGE> 8
will be enforceable in accordance with their terms, except that
enforceability may be limited by laws relating to bankruptcy,
reorganization or other similar laws affecting the rights of creditors.
(f) Neither the adoption of the Bond Resolution, the execution
and delivery of this Bond Placement Agreement, the Bonds, the Indenture
or the Agreement, nor the consummation of the transactions contemplated
therein or the compliance with the provisions thereof, will conflict
with, or constitute on the part of the Issuer a violation of, or a
breach of or default under, any statute, indenture, mortgage,
commitment, note or other agreement or instrument to which the Issuer
is a party or by which it is bound, or under any provision of the Texas
Constitution or under any existing law, rule, regulation, resolution,
charter, judgment, order or decree to which the Issuer is subject,
except that no representation is made by the Issuer as to compliance
with applicable federal or state securities laws.
(g) Other than the Indenture and the Agreement, the Issuer has
not entered into any contract or arrangement of any kind which might
give rise to any lien or encumbrance on the Revenues.
(h) To the best of the Issuer's knowledge, there is no action,
suit, proceeding, inquiry or investigation, at law or in equity, before
or by any court, public board or body, pending or threatened against
the Issuer, which in any way questions the powers of the Issuer
referred to in paragraph (a) above, or the validity of any proceedings
taken by the Issuer in connection with the issuance of the Bonds, or
wherein an unfavorable decision, ruling or finding would materially
adversely affect the transactions contemplated by, or the validity or
enforceability of, the Bond Legislation, the Indenture, the Agreement,
the Bonds or this Bond Placement Agreement.
(i) The Issuer hereby ratifies and authorizes the distribution
and use of the Preliminary Offering Memorandum and the Offering
Memorandum. The information contained in the Preliminary Offering
Memorandum and the Offering Memorandum under the caption "THE ISSUER"
was or will be, as of their
7
<PAGE> 9
respective dates, and as of the Closing Date will be, true and correct
and complete in all material respects. Except for the information under
the caption "THE ISSUER", the Issuer has not provided any of the
information contained in the Preliminary Offering Memorandum or the
Offering Memorandum. The Issuer is not responsible for and does not
certify as to the accuracy or sufficiency of the disclosure made
therein or any of the information provided by the Borrower, the Bank,
the Agent or any other person.
(j) Any certificate relating to the Bonds signed by the Issuer
and delivered to McCall, Parkhurst & Horton ("Bond Counsel"), the
original purchasers or the Agent at or before the Closing Date shall be
deemed a representation and warranty by the Issuer to Bond Counsel, the
original purchasers and the Agent, as to the truth of the statements
therein contained.
(k) The Issuer has not been notified of any listing or
proposed listing by the Internal Revenue Service to the effect that the
Issuer is a bond issuer whose arbitrage certifications may not be
relied on.
4. Borrower's Representations and Warranties. The Borrower makes the
following representations and warranties:
(a) The Borrower is a corporation, duly organized and validly
existing in good standing under the laws of the State of Texas, and has
full legal right, power and authority to own the Borrower's properties
and conduct the Borrower's business. The Borrower has full legal right,
power and authority to execute and deliver this Bond Placement
Agreement, the Note, the Bank Security Documents, the Agreement, the
Letter of Credit Agreement and the Remarketing Agreement, to authorize
the distribution and use of the Preliminary Offering Memorandum and the
Offering Memorandum, to provide for the acquisition, construction,
equipping, installation, operation and management of the Project, and
to take any and all such action as may be required on its part to carry
out, give effect to and consummate the transactions contemplated by
this Bond Placement Agreement, the Agreement, the Remarketing Agreement
and the Letter of Credit Agreement.
8
<PAGE> 10
(b) The Borrower has duly authorized, executed and delivered
this Bond Placement Agreement, and on the Closing Date will have duly
authorized, executed and delivered the Note, the Agreement, the Bank
Security Documents, the Remarketing Agreement and the Letter of Credit
Agreement, and has taken or will take all such action as may be
required on the part of the Borrower to carry out, give effect to and
consummate the transactions contemplated by each of such documents.
This Bond Placement Agreement constitutes, and the Note, the Bank
Security Documents, the Agreement, the Remarketing Agreement and the
Letter of Credit Agreement, when executed and delivered, will
constitute legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms, except that
enforceability may be limited by laws relating to bankruptcy,
reorganization or other similar laws affecting the rights of creditors
or by equitable principles which may affect the availability of
specific performance or other equitable remedies.
(c) Neither the execution and delivery of this Bond Placement
Agreement, the Note, the Agreement, the Bank Security Documents, the
Remarketing Agreement or the Letter of Credit Agreement, nor the
consummation of the transactions contemplated therein or the compliance
with the provisions thereof, will conflict with, or constitute on the
part of the Borrower a violation of, or a breach of or default under,
the Borrower's articles of incorporation or bylaws or any material
indenture, mortgage, commitment, note or other agreement or instrument
to which the Borrower is a party or by which the Borrower is bound, or
any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Borrower or any of its activities or
properties. All consents, approvals, authorizations and orders of
governmental or regulatory authorities which are required for the
Borrower's execution and delivery of, consummation of the transactions
contemplated by and compliance with the provisions of this Bond
Placement Agreement, the Note, the Bank Security Documents, the
Agreement, the Remarketing Agreement and the Letter of Credit Agreement
have been obtained.
(d) There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court,
9
<PAGE> 11
public board or body, pending or, to the best of the knowledge of the
Borrower, threatened, against the Borrower, or the actions taken or
contemplated to be taken by the Borrower, nor, to the best of the
knowledge of the Borrower, is there any basis therefor, which
reasonably would be expected to materially adversely affect the
business, financial condition or operations of the Borrower, or the
transactions contemplated by, or the validity or enforceability of,
this Bond Placement Agreement, the Note, the Bank Security Documents,
the Agreement, the Remarketing Agreement or the Letter of Credit
Agreement, or which would in any way jeopardize the tax-exempt status
of the interest on the Bonds.
(e) No event has occurred and no condition exists which, upon
issuance of the Bonds, would constitute (or with the giving of notice
or lapse of time, or both, would constitute) an Event of Default under
the Agreement or the Letter of Credit Agreement.
(f) The Borrower is not in violation of any provisions of, or
in default under, its articles of incorporation or bylaws or any
statute, indenture, mortgage, commitment, note or other agreement or
instrument to which it is a party or by which it is bound, or any
order, rule, regulation or decision of any court or governmental agency
or body having jurisdiction over it or any of its activities or
properties, which violation would materially and adversely affect its
business or financial condition.
(g) The Borrower hereby ratifies and authorizes the
distribution and use of the Preliminary Offering Memorandum and the
Offering Memorandum. The information contained in the Preliminary
Offering Memorandum and the Offering Memorandum (except for the
information and statements under the captions "THE ISSUER" and "PRIVATE
PLACEMENT OF BONDS", the information and statements under the caption
"THE BONDS - Book Entry Only System" and matters relating thereto, and
the information and statements in the Appendix thereto, as to which the
Borrower makes no representations) was or will be, as of their
respective dates, and as of the Closing Date will be, true, correct and
complete in all material respects, and the Preliminary Offering
Memorandum and the Offering Memorandum do not and will not contain any
untrue or misleading statement of
10
<PAGE> 12
a material fact or omit to state any material fact necessary to make
the statements therein, in light of the circumstances under which they
are made, not misleading.
(h) The Borrower will furnish such information, execute such
instruments, and cooperate with the Agent as the Agent may reasonably
request in order for the Agent (i) to qualify the Bonds, or perfect an
exemption from registration, for offer and sale of the Bonds under the
Blue Sky or other securities laws and regulations of such states and
other jurisdictions of the United States as the Agent may designate,
and (ii) to determine the eligibility of the Bonds for investment under
the laws of such states and other jurisdictions, and the Borrower will
use its best effort to continue such exemption or qualification in
effect so long as required for distribution of the Bonds.
(i) Any certificate signed by any officer of the Borrower and
delivered to the Issuer, Bond Counsel, the original purchasers of the
Bonds, the Agent or the Bank at or before the Closing Date shall be
deemed a representation and warranty by the Borrower to the Issuer,
Bond Counsel, the original purchasers of the Bonds, the Agent and the
Bank as to the truth of the statements therein contained.
5. Covenants of the Issuer. The Issuer covenants that it will observe
all covenants of the Issuer in the Indenture and the Agreement and will not
issue or sell any bonds or obligations other than the Bonds (or any Additional
Bonds issued pursuant to the Indenture), the principal of, premium, if any, and
interest on which are payable in whole or in part from the Revenues or are to be
secured by any lien on, or pledge of, the Revenues.
6. Covenants of the Borrower. The Borrower covenants as follows:
(a) The Borrower will apply the proceeds of the Bonds as
provided in and subject to all of the terms and provisions of the
Agreement and will observe all covenants of the Borrower in such
instrument.
(b) The Borrower will take such action as may be
reasonably requested to facilitate the timely consummation of
11
<PAGE> 13
the transactions contemplated by this Bond Placement Agreement.
(c) The Borrower will notify the Issuer, the Agent and the
Bank of any material adverse change in the business, properties or
financial condition of the Borrower occurring before the Closing Date.
(d) The Borrower will not take any action or permit any action
to be taken on its behalf or cause or permit any circumstance within
its control to arise or continue, if such action would adversely affect
the excludability from gross income for federal income tax purposes of
the interest on the Bonds.
7. Conditions to the Obligations of the Agent. The obligation of the
Agent to cause payment for the Bonds on the Closing Date shall be subject, at
the option of the Agent, to the accuracy in all material respects of the
representations and warranties on the part of the Issuer and the Borrower
contained herein as of the date hereof and as of the Closing Date, to the
accuracy in all material respects of the statements of the Issuer, the Bank, and
the Borrower made in any certificates or other documents furnished pursuant to
the provisions hereof, to the performance by the Issuer and the Borrower of
their respective obligations to be performed hereunder at or prior to the
Closing Date and to the following additional conditions:
(a) At the Closing Date, the Indenture, the Letter of
Representations, the Agreement, the Note, the Bank Security Documents,
the Letter of Credit Agreement and the Letter of Credit shall have been
duly authorized, executed and delivered by the respective parties
thereto, and the Offering Memorandum shall have been delivered to the
Agent, and none of the foregoing agreements shall have been amended,
modified or supplemented so as to materially affect the content
thereof, except as may have been agreed to in writing by the Agent, and
there shall have been taken in connection therewith, with the issuance
of the Bonds, and with the transactions contemplated thereby and by
this Bond Placement Agreement, all such actions as Kephart & Fisher,
counsel to the Agent ("Agent's Counsel"), reasonably shall deem to be
necessary and appropriate;
12
<PAGE> 14
(b) At the Closing Date, the Offering Memorandum shall not
have been amended, modified or supplemented, except as may have been
agreed to in writing by the Agent;
(c) At or prior to the Closing Date, no event shall have
occurred or information become known which, in the reasonable judgment
of the Agent, makes untrue in any material respect any statement or
information contained in the Offering Memorandum or has the effect that
the Offering Memorandum contains any untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(d) At or prior to the Closing Date, the Agent shall have
received an original or copies of the following documents, in each case
satisfactory in form and substance to the Agent and in each case
conforming in all material respects with any description thereof
contained in the Offering Memorandum:
(i) The Indenture, the Letter of Representations, the
Agreement, the Bonds, the Letter of Credit Agreement, the
Letter of Credit, the Bank Security Documents, the Remarketing
Agreement and the Note, each duly executed and delivered by
the respective parties thereto, with such amendments,
modifications or supplements as may have been agreed to in
writing by the Agent;
(ii) The opinions of Jenkens & Gilchrist and Quarles &
Brady, counsel to the Borrower, dated the Closing Date, in
substantially the form attached hereto as Exhibits A and B,
respectively;
(iii) The opinion of Streich Lang, P.A., counsel to the
Bank, dated the Closing Date, in substantially the form
attached hereto as Exhibit C;
(iv) The opinions of McCall, Parkhurst & Horton, Bond
Counsel, and supplemental opinions of Bond Counsel, each dated
the Closing Date, in substantially the forms attached hereto
as Exhibits D and E, respectively;
13
<PAGE> 15
(v) The opinions of Kephart & Fisher, Agent's Counsel,
dated the Closing Date, in substantially the form attached
hereto as Exhibits F and G;
(vi) A certificate, dated the Closing Date, signed by a
duly authorized officer of the Bank, in substantially the form
attached hereto as Exhibit H;
(vii) A certificate, dated the Closing Date, signed by a
duly authorized official of the Issuer, in form satisfactory
to the Agent and the Agent's Counsel, to the effect that the
representations and warranties of the Issuer set forth in
Section 3 hereof are true, correct and complete on the date
thereof;
(viii) A certificate, dated the Closing Date, signed by a
duly authorized officer of the Borrower, in form satisfactory
to the Agent and the Agent's Counsel, to the effect that the
representations and warranties of the Borrower set forth in
Section 4 hereof are true, correct and complete on the date
thereof; and
(ix) Such additional legal opinions, certificates,
proceedings, instruments and other documents as the Agent or
Agent's Counsel may reasonably request to evidence compliance
by the Bank, the Trustee or the Borrower with legal
requirements of closing, and to certify the truth and
accuracy, as of the Closing Date, of the representations of
the Issuer and the Borrower contained herein and the due
performance or satisfaction by the Issuer and the Borrower at
or prior to such time of all agreements then to be performed
and all conditions then to be satisfied by each of them.
(e) Between the date hereof and the Closing Date, legislation
shall not have been enacted by the Congress or be actively considered
for enactment by Congress, or recommended to the Congress for passage
by the President of the United States, or introduced to either house of
the Congress, nor a decision rendered by any court of competent
jurisdiction, or the Tax Court of the United States, nor any order,
ruling, regulation or official statement made by the United States
Treasury Department or the Internal Revenue Service, with the
14
<PAGE> 16
purpose or effect of imposing federal income taxation upon revenues or
other income of the character derived by the Issuer under the Agreement
or upon the interest to be paid on the Bonds or on bonds of the general
character of the Bonds.
(f) Between the date hereof and the Closing Date, legislation
shall not have been enacted by the Congress or be actively considered
for enactment by Congress, or recommended to the Congress for enactment
by the President of the United States, or introduced or favorably
reported for passage to either house of the Congress, and neither a
decision, order or decree of a court of competent jurisdiction, nor an
order, ruling, regulation or official statement of or on behalf of the
Securities and Exchange Commission shall have been rendered or made,
with the purpose or effect that the issuance, offering or sale of the
Bonds or any related security or obligations of the general character
of the Bonds or any related security as contemplated hereby, or the
execution and delivery of the Indenture, is or would be in violation of
any provision of, or is or would be subject to registration or
qualification requirements under, the Securities Act or the Trust
Indenture Act.
(g) Between the date hereof and the Closing Date, there shall
not have occurred any action by the Comptroller of the Currency, the
Federal Reserve Board, the Federal Deposit Insurance Corporation, or
any governmental agency or court which calls into question and validity
or enforceability of
the Letter of Credit.
(h) No event shall have occurred or fact exist which makes
untrue, incorrect or inaccurate, in any material respect as of the time
the same purports to speak, any statement or information contained in
the Offering Memorandum, or which is not reflected in the Offering
Memorandum but should be reflected therein as of the time and for the
purpose for which the Offering Memorandum is to be used in order to
make the statements and information contained therein not misleading in
any material respect as of such time.
(i) None of the following shall have occurred: (i)
additional material restriction not in force as of the date hereof
shall have been imposed upon trading in securities
15
<PAGE> 17
generally by any governmental authority or by any national securities
exchange or such trading shall have been suspended; (ii) the New York
Stock Exchange or other national securities exchange, or the National
Association of Securities Dealers, Inc. or other national securities
association, or the Municipal Securities Rulemaking Board or other
similar national self-regulatory rule-making board, or any governmental
authority, shall impose, as to the Bonds or similar obligations, any
material restrictions not now in force, or increase materially those
now in force, with respect to the extension of credit by, or change in
the net capital requirements of, underwriters; (iii) a general banking
moratorium shall have been declared by federal, New York, Arizona or
Ohio authorities; or (iv) a war involving the United States of America,
whether or not declared, or any other national or international
calamity or crisis, or a financial crisis, shall have occurred, the
effect of which, in the judgment of the Agent, would make it
impracticable to market the Bonds or would materially and adversely
affect the ability of the Agent to enforce contracts for the sale of
the Bonds.
(j) All matters relating to this Bond Placement Agreement, the
Offering Memorandum, the Bonds, the Bond Resolution, the Indenture, the
Letter of Representations, the Agreement, the Note, the Bank Security
Documents, the Letter of Credit, the Letter of Credit Agreement and the
consummation of the transactions contemplated by this Bond Placement
Agreement and the Offering Memorandum, shall be reasonably satisfactory
to and subject to the approval of the Agent.
If the conditions to the Agent's obligations contained in this Bond
Placement Agreement are not satisfied or if the Agent's obligations shall be
terminated for any reason permitted herein, this Bond Placement Agreement shall,
at the option of the Agent, terminate and neither the Agent, the Issuer, nor the
Borrower shall have any further obligations hereunder, except as provided in
Section 10 with respect to the payment of certain expenses.
8. No Pecuniary Liability of Issuer. No provision, covenant, or
agreement contained in this Bond Placement Agreement, and no obligation herein
imposed upon the Issuer, or the breach thereof, shall constitute the debt or
indebtedness of the Issuer or the
16
<PAGE> 18
State of Texas or any political subdivision thereof within the meaning of any
Texas constitutional provision or statutory limitation or shall constitute or
give rise to a pecuniary liability of the Issuer or the State of Texas or any
political subdivision thereof or a charge against its general credit or taxing
powers. In making the agreements, provisions and covenants set forth in this
Bond Placement Agreement, the Issuer has not obligated itself, except to the
extent that the Issuer is authorized to act pursuant to Texas law and except
with respect to the Revenues. The Issuer and any of its officials, officers or
employees shall have no monetary liability arising out of the obligations of the
Issuer hereunder or in connection with any covenant, representation or warranty
made by the Issuer herein, and neither the Issuer nor its officials shall be
obligated to pay any amounts in connection with the transactions contemplated
hereby other than from Revenues or other moneys received from the Borrower.
9. Survival of Representations, Warranties, Covenants, Agreements and
Indemnities. All representations, warranties, covenants, agreements and
indemnities contained in this Bond Placement Agreement, or contained in the
certificates of members, officials, partners or officers of the Issuer or of the
Borrower submitted pursuant hereto, shall remain operative and in full force and
effect, regardless of any investigation by or on behalf of the Agent or any
person controlling the Agent, and shall survive delivery of the Bonds to the
Agent and payment therefor by the original purchasers.
10. Expenses. All reasonable costs and expenses incident to the
performance of the Issuer's, the Agent's, and the Borrower's obligations in
connection with the authorization, issuance and sale of the Bonds shall be paid
by the Borrower including fees and expenses of the Issuer, including reasonable
fees and expenses of its counsel, fees and expenses of the Bank, including
reasonable fees and expenses of its counsel, fees and expenses of the Trustee,
reasonable fees and expenses of Bond Counsel and reasonable fees and expenses of
the Agent's Counsel. All such costs and expenses shall be paid by the Borrower
whether or not the Bonds are actually issued and sold. To the extent statements
for such costs and expenses are available on the Closing Date, the Borrower
shall pay such costs and expenses on the Closing Date.
17
<PAGE> 19
11. Indemnification.
(a) General. The Agent and the Borrower (each, an
"Indemnifying Party") each covenants and agrees to indemnify the other
parties hereto and their respective directors, council members,
officers, partners, trustees, representatives and employees and each
person, if any, who controls any of such persons within the meaning of
Section 20 of the Securities Exchange Act (collectively, the
"Indemnified Parties") for, and to hold each Indemnified Party harmless
against, all liabilities, claims, costs, losses and expenses (including
without limitation, to the extent permitted by law, reasonable
attorneys' fees and expenses), imposed upon or asserted against the
Indemnified Parties:
(i) Under any statute or regulation, at law, in
equity or otherwise, insofar as those liabilities, claims,
costs, losses and expenses arise out of or are based upon any
untrue statement or alleged untrue statement of a material
fact with reference to the information referred to in Section
11(c) hereof contained in the Preliminary Offering Memorandum,
the Offering Memorandum, or any amendment thereof or
supplement thereto, or any other sales material used by the
Agent (provided that the Indemnifying Party shall have
approved in writing the use of such sales material), or which
arise out of or are based upon any omission or alleged
omission to state therein with reference to such information a
material fact which is required to be stated therein or which
is necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading;
(ii) Pursuant to any action, claim or proceeding brought
in connection with any of the foregoing; and
(iii) To the extent of the aggregate amount paid in
settlement of any actions, claims or proceedings, commenced or
threatened, based upon any untrue statement, alleged untrue
statement, omission or alleged omission described above, if
the settlement is effected with the written consent of the
Indemnifying Party;
18
<PAGE> 20
and (unless the Indemnifying Party assumes the defense of the
applicable claim, suit, action or proceeding pursuant to paragraph (b)
below) shall reimburse any legal or other expenses incurred reasonably
by any Indemnified Party in connection with investigating and defending
any liability, claim, cost, loss, expense, action or proceeding
described above; provided, nothing herein shall require the
Indemnifying Party to pay for any losses, claims, damages, liabilities
or expenses resulting from the negligence or the willful misconduct of
an Indemnified Party, if such Indemnified Party is the Agent or the
Borrower or the respective members, directors, officers, partners,
trustees, representatives and employees or controlling persons of the
Agent or the Borrower. At the request and the expense of the
Indemnifying Party, each Indemnified Party shall cooperate in making
any investigation and defense of any action, claim or proceeding and
shall assert appropriately the rights, privileges and defenses which
are available to the Indemnified Party in connection therewith.
(b) Procedure. The Indemnified Party shall, in the event of
any claim, suit, action or proceeding against it in respect of which
indemnity may be sought on account of any indemnity agreement by the
Indemnifying Parties contained herein, promptly give written notice
thereof to the appropriate Indemnifying Parties. When such notice is
given, the Indemnifying Party shall be entitled to participate at its
own expense in the defense of, or if it so elects, to assume the
defense of, such claim, suit, action or proceeding, in which event such
defense shall be conducted by counsel chosen by the Indemnifying Party,
but if the Indemnifying Party shall elect not to assume such defense,
it shall reimburse such Indemnified Party or Parties for the reasonable
fees and expenses of any counsel retained by them. The foregoing
notwithstanding, in the event that the Indemnifying Party shall assume
such defense and any Indemnified Party or Parties shall be advised by
independent legal counsel that counsel selected by the Indemnifying
Party is not fully and adequately protecting such party or parties and
representing the interests of such party or parties, any such
Indemnified Party or Parties shall have the right to conduct its or
their own defense against any such claim, suit, action or proceeding in
addition to or in lieu of any defense conducted by the
19
<PAGE> 21
Indemnifying Party, and the Indemnifying Party shall indemnify and hold
harmless such Indemnified Party or Parties against and from any and all
suits, claims, damages, liabilities or expenses whatsoever (including
reasonable fees and expenses of counsel selected by such Indemnified
Party or Parties) incurred by and arising out of or in connection with
any such claim, suit, action or proceeding. An Indemnifying Party shall
not be liable for the settlement of any claim, suit, action or
proceeding effected without its consent, which consent shall not be
withheld unreasonably.
(c) Indemnified Information. The information as to which
each Indemnifying Party hereto indemnifies the Indemnified
Parties is as follows:
(i) The Borrower as Indemnifying Party: the entire
Preliminary Offering Memorandum and the entire Offering
Memorandum, with the exception of the information set forth in
(ii) below; and
(ii) The Agent as Indemnifying Party: information
in the section of the Preliminary Offering Memorandum and
the Offering Memorandum captioned "PRIVATE PLACEMENT OF
BONDS".
12. Parties in Interest. This Bond Placement Agreement is made solely
for the benefit of the Agent, the Issuer, the Borrower and their respective
successors and assigns, and the Indemnified Parties, and no other person,
partnership, association or corporation shall acquire or have any rights under
or by virtue of this Bond Placement Agreement.
13. Notices. Any notice or other communication to be given
to any party to this Bond Placement Agreement may be given by
delivering the same in writing at the respective addresses set
forth below:
Issuer: Capital Industrial Development Corporation
P. O. Box 1748
5th Floor, Stokes Building
Austin, Texas 78767
Attn: Darwin McKee, President
20
<PAGE> 22
Borrower: CCIR of Texas Corp.
c/o Continental Circuits Corp.
3502 East Roeser Road
Phoenix, Arizona 85040
Attn: Mr. Steve Walters
Agent: Banc One Capital Corporation
150 East Gay Street
Columbus, Ohio 43215
Attn: Mr. Thomas L. Whitman
14. Severability. If any provisions of this Bond Placement Agreement
shall be held or deemed to be or shall, in fact, be inoperative, invalid or
unenforceable as applied in any particular case in any jurisdiction or
jurisdictions or in all jurisdictions because it conflicts with any provisions
of any constitution, statute, rule or public policy, or any other reason, such
circumstance shall not have the effect of rendering the provision in question
inoperative or unenforceable in any other case or circumstance, or of rendering
any other provision or provisions of this Bond Placement Agreement invalid,
inoperative or unenforceable to any extent whatever.
15. Applicable Law. This Bond Placement Agreement shall be
governed by and construed in accordance with the laws of the State
of Texas.
[Remainder of page left blank intentionally]
21
<PAGE> 23
16. Counterparts. This Bond Placement Agreement may be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
CAPITAL INDUSTRIAL DEVELOPMENT
CORPORATION
By: /s/ Darwin McKee
-------------------------------------
Its: President
------------------------------------
BANC ONE CAPITAL CORPORATION,
as Agent
By: /s/ Thomas Whitman
-------------------------------------
Senior Vice President
CCIR OF TEXAS CORP.
By: /s/ Joseph G. Anderson
-------------------------------------
Its: Vice President and Secretary
------------------------------------
22
<PAGE> 1
Exhibit 10.5
ASSUMPTION AGREEMENT
BY THIS ASSUMPTION AGREEMENT (the "Agreement") made and entered into as of
the 11th day of February, 1998, CCIR OF TEXAS CORP., whose address is 3502 East
Roeser Road Phoenix, Arizona 85040 (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.
<PAGE> 2
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.
CCIR OF TEXAS CORP., a Texas corporation
By /s/ Joseph G. Anderson
------------------------------------------
Its Vice President and Secretary
----------------------------
ADDED BORROWER
<PAGE> 1
Exhibit 10.6
CUSTODY, PLEDGE AND SECURITY AGREEMENT
CUSTODY, PLEDGE AND SECURITY AGREEMENT, dated as of January 1, 1998 (the
"Pledge Agreement"), made by and among CCIR OF TEXAS CORP., a Texas corporation
(the "Pledgor"), THE HUNTINGTON NATIONAL BANK (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, CAPITAL INDUSTRIAL DEVELOPMENT CORPORATION (the "Issuer") has
issued $6,000,000 of its Adjustable Rate Industrial Development Revenue Bonds
(CCIR of Texas Corp. Project) Series 1998 (the "Bonds") under a Trust Indenture,
dated as of January 1, 1998 (the "Indenture"), between the Issuer and THE
HUNTINGTON NATIONAL BANK, 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 a Bond Letter of
Credit (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 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
<PAGE> 2
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 the
Remarketing Reimbursement Fund.
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 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.
-2-
<PAGE> 3
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 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
-3-
<PAGE> 4
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
(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
-4-
<PAGE> 5
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, 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
-5-
<PAGE> 6
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.
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.
-6-
<PAGE> 7
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: CCIR OF TEXAS CORP.
3502 East Roeser Road
Phoenix, Arizona 85040
Custodian: THE HUNTINGTON NATIONAL BANK
Huntington Center, HC 1112
41 South High Street
Columbus, Ohio 43287
Attention: Corporate Trust Department
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 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.
-7-
<PAGE> 8
(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.
CCIR OF TEXAS CORP., a Texas corporation
By: /s/ Joseph G. Andersen
--------------------------------------
Name: Joseph G. Andersen
------------------------------------
Its: Vice President and Secretary
-------------------------------------
PLEDGOR
BANK ONE, ARIZONA, NA, a national banking
association
By: /s/ Steve Reinhart
--------------------------------------
Name: Steve Reinhart
------------------------------------
Its: Vice President
-------------------------------------
BANK
-8-
<PAGE> 9
THE HUNTINGTON NATIONAL BANK
By: /s/ Candada Moore
--------------------------------------
Its: Vice President
---------------------------------
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.
THE HUNTINGTON NATIONAL BANK
By: /s/ Candada Moore
--------------------------------------
Its: Vice President
---------------------------------
-9-
<PAGE> 1
Exhibit 10.9
AMENDMENT NO. 1 DATED AS OF MARCH 13, 1998 TO
AGREEMENT AND PLAN OF MERGER
WHEREAS, Hadco Corporation, a Massachusetts corporation ("Parent"),
Hadco Acquisition Corp. II, a Delaware corporation and a direct wholly-owned
subsidiary of Parent ("Sub"), and Continental Circuits Corp., a Delaware
corporation (the "Company") have entered into an Agreement and Plan of Merger,
dated as of February 16, 1998 (the "Agreement");
WHEREAS, the parties to the Agreement desire to amend and supplement
the agreement in certain respects as set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS. Capitalized terms used herein and not defined
shall have the respective meanings set forth in the Agreement.
SECTION 2. AMENDMENT. Exhibit A of the Agreement shall be amended to
read in its entirety as follows:
Exhibit A
The capitalized terms used in this Exhibit A shall have the respective
meanings given to such terms in the Agreement and Plan of Merger, dated as of
February 16, 1998, among Hadco Corporation, Hadco Acquisition Corp. II and
Continental Circuits Corp. (the "Merger Agreement") to which this Exhibit A is
attached.
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Sub shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Sub's obligation to pay for or return tendered Shares promptly after
expiration or termination of the Offer), to pay for any Shares tendered, and may
postpone the acceptance for payment or, subject to the restriction referred to
above, payment for any Shares tendered, and may amend (subject to Section 1.1(b)
of the Merger Agreement) or terminate the Offer (whether or not any Shares have
theretofore been purchased or paid for) if, (i) there has not been validly
tendered and not withdrawn prior to the time the Offer shall otherwise expire a
number of Shares which constitutes at least 90% of the Shares outstanding on a
fully-diluted basis on the date of purchase ("on a fully-diluted basis" having
the following meaning, as of any date: the number of Shares outstanding,
together with Shares the Company may be then required to issue pursuant to
obligations outstanding at that date under stock option, stock purchase or other
benefit plans or otherwise); (ii) all material regulatory and related approvals
have not been obtained prior to the
A-1
<PAGE> 2
expiration of the Offer or made on terms reasonably satisfactory to Sub; (iii)
any applicable waiting periods under the HSR Act shall not have expired or been
terminated prior to the expiration of the Offer; or (iv) at any time on or after
the date of the Merger Agreement and before the expiration of the Offer, such
Shares any of the following events shall occur:
(A) There shall have been threatened, instituted or pending any action,
proceeding, application or counterclaim by or before any court or governmental,
regulatory or administrative agency, authority or tribunal, domestic, foreign or
supranational (other than actions, proceedings, applications or counterclaims
filed or initiated by Sub), which (i) seeks to challenge the acquisition by Sub
of the Shares, restrain, prohibit or delay the making or consummation of the
Offer or the Merger or any other merger or business combination involving Sub or
any of its affiliates and the Company or any of its subsidiaries, prohibit the
performance of any of the contracts or other agreements entered into by Sub or
any of its affiliates in connection with the acquisition of the Company or the
Shares, or obtain any material damages in connection with any of the foregoing,
(ii) seeks to make the purchase of or payment for, some or all of the Shares
pursuant to the Offer, the Merger or otherwise, illegal, (iii) seeks to impose
limitations on the ability of Sub or the Company or any of their respective
affiliates or subsidiaries effectively to acquire or hold, or requiring Sub, the
Company or any of their respective affiliates or subsidiaries to dispose of or
hold separate, any portion of the assets or the business of Sub or its
affiliates or the Company or its subsidiaries, or impose limitations on the
ability of Sub, the Company or any of their respective affiliates or
subsidiaries to continue to conduct, own or operate all or any portion of their
businesses and assets as heretofore conducted, owned or operated, (iv) seeks to
impose or may result in material limitations on the ability of Sub or any of its
affiliates to exercise full rights of ownership of the Shares purchased by them,
including, without limitation, the right to vote the Shares purchased by them on
all matters properly presented to the stockholders of the Company, or the right
to vote any shares of capital stock of any subsidiary directly or indirectly
owned by the Company, (v) is reasonably likely to result in a material
diminution in the benefits expected to be derived by Sub as a result of the
transactions contemplated by the Offer, including the Merger, (vi) seeks to
impose voting, procedural, price or other requirements in addition to those
under Delaware Law and federal securities laws (each as in effect on the date of
the Offer to Purchase) or any material condition to the Offer in any such case
which is unacceptable (in its reasonable judgment) to Sub or (vii) challenges or
adversely and materially affects the financing of the Offer;
(B) There shall have been formally proposed, sought, promulgated,
enacted, entered or made applicable to the Offer or the Merger or enforced by
any domestic, foreign or supranational government or any governmental,
administrative or regulatory authority or agency or by any court or tribunal,
domestic, foreign or supranational, any statute, rule, regulation, judgment,
decree, order or injunction that might result in any of the consequences
referred to in clauses (i) through (vii) of paragraph (A) above;
(C) There shall have occurred any of the following which, in the good
faith judgment of the Parent and Sub, make it inadvisable to proceed with the
Offer and acceptance for payment of, and payment for, the Shares (1) any general
suspension of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market in the United
States, (2) the declaration of a banking moratorium or any suspension of
payments in respect of banks in
A-2
<PAGE> 3
the United States, (3) the commencement of a war, armed hostilities or other
international or national calamity, directly or indirectly involving the United
States, (4) any limitations (whether or not mandatory) imposed by any
governmental authority on, or any event which might have material adverse
significance with respect to, the nature or extension of credit or further
extension of credit by banks or other lending institutions, (5) any significant
adverse change in the equity or debt markets in the United States which shall be
continuing as of the expiration of the Offer, or (6) in the case of any of the
foregoing, a material acceleration or worsening thereof;
(D) The representations and warranties of the Company contained in the
Merger Agreement (without giving effect to any "Material Adverse Effect",
"materiality" or similar qualifications contained therein) shall not be true and
correct in all material respects (for purpose of this clause, a failure of the
representations and warranties to be true and correct in all material respects
shall mean a failure or series of failures the result of which impairs the value
of the Company or could reasonably be expected to impair the value of the
Company by more than $3,000,000 as of the date of the consummation of the Offer
as though made on and as of such date except (1) for changes specifically
permitted by the Merger Agreement and (2) that those representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date;
(E) The obligations of the Company contained in the Merger Agreement
(without giving effect to any "Material Adverse Effect", "materiality" or
similar qualifications contained therein) shall not have been performed or
complied with in all material respects by the Company;
(F) The Merger Agreement shall have been terminated in accordance with
its terms;
(G) Prior to the purchase of Shares pursuant to the Offer, an
Acquisition Proposal for the Company exists and the Board shall have withdrawn
or materially modified or changed (including by amendment of the Schedule 14D-9)
in a manner adverse to Sub its recommendation of the Offer, the Merger Agreement
or the Merger;
(H) Any person or group (other than Parent and Sub) shall have entered
into a definitive agreement or agreement in principle with the Company with
respect to a merger, consolidation or other business combination with the
Company; or
(I) The Company shall have suffered a material adverse change in its
business, operations, assets or condition (financial or otherwise).
The foregoing conditions are for the sole benefit of Sub and its
affiliates and may be asserted by Sub regardless of the circumstances (other
than any action or inaction by Parent, Sub or any of their affiliates) giving
rise to any such condition or may be waived by Sub, in whole or in part, from
time to time in its sole discretion, except as otherwise provided in the
Agreement. The failure by Sub at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right and may be asserted at any time and from time to
time. Any reasonable determination by Sub concerning any of the events described
herein shall be final and binding.
A-3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
HADCO CORPORATION
By: /s/ Timothy P. Losik
-------------------------------------
Name: Timothy P. Losik
-------------------------------------
Title: Senior Vice President
-------------------------------------
HADCO ACQUISITION CORP. II
By: /s/ Timothy P. Losik
-------------------------------------
Name: Timothy P. Losik
-------------------------------------
Title: Vice President, Treasurer & Secretary
-------------------------------------
CONTINENTAL CIRCUITS CORP.
By: /s/ Frederick G. McNamee III
-------------------------------------
Name: Frederick G. McNamee III
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
A-4
<PAGE> 1
Exhibit 11
CONTINENTAL CIRCUITS CORPORATION
STATEMENT RE: COMPUTATION OF NET INCOME PER SHARE
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Six Months Ended
January 31 February 2, January 31, February 2,
------------------------------- -------------------------------
1998 1997 1998 1997
------- ------ ------- ------
<S> <C> <C> <C> <C>
Basic:
Average Shares Outstanding 7,267 7,206 7,262 7,200
Net Income (loss) $(2,638) $1,817 $ (324) $3,250
======= ====== ======= ======
Net income (loss) per share $ (0.36) $ 0.25 $ (0.04) $ 0.45
======= ====== ======= ======
Diluted:
Average Shares Outstanding 7,267 7,206 7,262 7,200
Net effect of dilutive stock options--based on
the treasury stock method using average
market price 183 226 238 228
------- ------ ------- ------
Diluted Shares 7,450 7,432 7,500 7,428
Net Income (loss) $(2,638) $1,817 $ (324) $3,250
======= ====== ======= ======
Net income (loss) per share * $ (0.36) $ 0.24 $ (0.04) $ 0.44
======= ====== ======= ======
</TABLE>
* The anti-dilutive impact of additional shares is not reflected on reported
loss per share per SFAS 128.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S FORM 10Q FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 180
<SECURITIES> 0
<RECEIVABLES> 20,318
<ALLOWANCES> 168
<INVENTORY> 13,081
<CURRENT-ASSETS> 35,065
<PP&E> 114,652
<DEPRECIATION> 50,774
<TOTAL-ASSETS> 102,283
<CURRENT-LIABILITIES> 18,236
<BONDS> 29,375
0
0
<COMMON> 73
<OTHER-SE> 52,092
<TOTAL-LIABILITY-AND-EQUITY> 102,283
<SALES> 69,650
<TOTAL-REVENUES> 69,650
<CGS> 58,763
<TOTAL-COSTS> 58,763
<OTHER-EXPENSES> 8,916
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 734
<INCOME-PRETAX> 1,222
<INCOME-TAX> 1,546
<INCOME-CONTINUING> (324)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (324)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
